<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number: 000-24565
GLOBAL CROSSING LTD.
(Exact name of registrant as specified in its charter)
BERMUDA 98-0189783
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
WESSEX HOUSE
45 REID STREET
HAMILTON HM12, BERMUDA
(Address of principal executive offices)
(441) 296-8600
(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, $0.01 par value each, of the registrant's common stock
outstanding as of November 8, 1999: 794,770,468 shares, including 22,033,758
treasury shares.
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
For The Quarter Ended September 30, 1999
INDEX
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Statements of Operations................ 3
Business Segment Information................................... 5
Condensed Consolidated Balance Sheets.......................... 6
Condensed Consolidated Statements of Cash Flows................ 7
Condensed Consolidated Statements of Comprehensive Income...... 9
Notes to Condensed Consolidated Financial Statements........... 10
Management's Discussion and Analysis of Financial Condition and
Item 2. Results of Operations.......................................... 15
Item 3. Quantitative and Qualitative Disclosures about Market Risk..... 23
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................. 24
Item 2. Changes in Securities and Use of Proceeds..................... 24
Item 3. Defaults Upon Senior Securities............................... 24
Item 4. Submission of Matters to A Vote of Security Holders........... 25
Item 5. Other Information............................................. 26
Item 6. Exhibits and Reports on Form 8-K.............................. 26
</TABLE>
2
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
GLOBAL CROSSING LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 1999 and 1998
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended Nine Months Ended
------------------ -------------------
1999 1998 1999 1998
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
REVENUES.............................. $255,110 $117,693 $623,573 $ 218,949
-------- -------- -------- ---------
EXPENSES:
Cost of sales....................... 129,014 49,238 279,307 90,438
Operations, administration and
maintenance........................ 16,016 8,182 41,885 10,652
General and administrative.......... 28,839 8,087 73,344 16,936
Sales and marketing................. 13,205 6,342 36,462 13,655
Network development................. 5,819 2,919 15,572 7,234
Stock related expense............... 12,535 9,660 38,609 33,058
Depreciation and amortization....... 12,170 72 16,370 545
Goodwill amortization............... 3,758 -- 3,758 --
Provision for doubtful accounts..... 20,528 1,199 24,211 2,211
Termination of advisory services
agreement.......................... -- -- -- 139,669
-------- -------- -------- ---------
241,884 85,699 529,518 314,398
-------- -------- -------- ---------
OPERATING INCOME (LOSS)............... 13,226 31,994 94,055 (95,449)
EQUITY IN INCOME (LOSS) OF
AFFILIATES........................... 71 (1,037) (5,471) (1,037)
OTHER INCOME (EXPENSE):
Interest income..................... 13,996 9,587 45,663 14,260
Interest expense.................... (35,084) (17,984) (81,538) (25,660)
Other income, net................... 223,661 -- 215,982 --
-------- -------- -------- ---------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES, CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE AND
EXTRAORDINARY ITEM................... 215,870 22,560 268,691 (107,886)
Provision for income taxes.......... (80,016) (7,331) (110,055) (16,332)
-------- -------- -------- ---------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE AND
EXTRAORDINARY ITEM................... 135,854 15,229 158,636 (124,218)
Cumulative effect of change in
accounting principle, net of income
tax benefit........................ -- -- (14,711) --
-------- -------- -------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM................................. 135,854 15,229 143,925 (124,218)
Extraordinary loss on retirement of
debt............................... (14,865) -- (14,865) (19,709)
-------- -------- -------- ---------
NET INCOME (LOSS)..................... 120,989 15,229 129,060 (143,927)
Preferred stock dividends........... (14,071) -- (41,313) (8,306)
Redemption of preferred stock....... -- -- -- (34,140)
-------- -------- -------- ---------
NET INCOME (LOSS) APPLICABLE TO COMMON
SHAREHOLDERS......................... $106,918 $ 15,229 $ 87,747 $(186,373)
======== ======== ======== =========
</TABLE>
See accompanying notes to these unaudited condensed consolidated financial
statements.
3
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 1999 and 1998
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------ ------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET INCOME (LOSS) PER
COMMON SHARE:
Income (loss) applicable
to common shareholders
before cumulative effect
of change in accounting
principle and
extraordinary item
Basic................... $ 0.30 $ 0.04 $ 0.28 $ (0.49)
=========== =========== =========== ===========
Diluted................. $ 0.27 $ 0.04 $ 0.28 $ (0.49)
=========== =========== =========== ===========
Cumulative effect of
change in accounting
principle
Basic................... $ -- $ -- $ (0.04) $ --
=========== =========== =========== ===========
Diluted................. $ -- $ -- $ (0.04) $ --
=========== =========== =========== ===========
Extraordinary loss on
retirement of debt
Basic................... $ (0.04) $ -- $ (0.04) $ (0.06)
=========== =========== =========== ===========
Diluted................. $ (0.03) $ -- $ (0.04) $ (0.06)
=========== =========== =========== ===========
Net Income (loss)
applicable to common
shareholders
Basic................... $ 0.26 $ 0.04 $ 0.21 $ (0.55)
=========== =========== =========== ===========
Diluted................. $ 0.24 $ 0.04 $ 0.21 $ (0.55)
=========== =========== =========== ===========
Shares used in computing
income (loss) per share
Basic................... 412,672,234 369,616,680 412,224,517 341,371,856
=========== =========== =========== ===========
Diluted................. 447,517,642 385,090,682 423,967,291 341,371,856
=========== =========== =========== ===========
</TABLE>
See accompanying notes to these unaudited condensed consolidated financial
statements.
4
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
As of and For the Three and Nine Months Ended September 30, 1999 and 1998
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------- -----------------------
1999 1998 1999 1998
----------- ---------- ----------- ----------
CARRIER SERVICES:
<S> <C> <C> <C> <C>
REVENUES.................. $ 170,374 $ 117,693 $ 538,837 $ 218,949
=========== ========== =========== ==========
OPERATING INCOME.......... $ 38,293 $ 50,681 $ 186,368 $ 98,296
=========== ========== =========== ==========
TOTAL ASSETS............ $ 2,390,168 $ 969,901 $ 2,390,168 $ 969,901
=========== ========== =========== ==========
INSTALLATION AND
MAINTENANCE:
REVENUES.................. $ 84,736 $ -- $ 84,736 $ --
=========== ========== =========== ==========
OPERATING INCOME.......... $ 7,287 $ -- $ 7,287 $ --
=========== ========== =========== ==========
TOTAL ASSETS............ $ 1,245,640 $ -- $ 1,245,640 $ --
=========== ========== =========== ==========
CORPORATE OPERATIONS AND
OTHER:
OPERATING LOSS............ $ (32,354) $ (18,687) $ (99,600) $ (193,745)
=========== ========== =========== ==========
TOTAL ASSETSa........... $11,699,918 $1,085,012 $11,699,918 $1,085,012
=========== ========== =========== ==========
CONSOLIDATED:
REVENUES.................. $ 255,110 $ 117,693 $ 623,573 $ 218,949
=========== ========== =========== ==========
OPERATING INCOME (LOSS)... $ 13,226 $ 31,994 $ 94,055 $ (95,449)
=========== ========== =========== ==========
TOTAL ASSETS............ $15,335,726 $2,054,913 $15,335,726 $2,054,913
=========== ========== =========== ==========
</TABLE>
Footnotes
a Total assets for Corporate Operations and Other includes the assets of
Frontier as of September 30, 1999.
See accompanying notes to these unaudited condensed consolidated financial
statements.
5
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
September December 31,
30, 1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current assets:
Cash and investments............................. $ 257,266 $ 806,593
Restricted cash and investments.................. 61,903 77,190
Accounts receivable, net of allowance for
doubtful accounts of $84,211 as of September 30,
1999 and $4,233 as of December 31, 1998......... 623,170 71,195
Other assets and prepaid costs................... 166,597 21,637
----------- ----------
Total current assets........................... 1,108,936 976,615
Restricted cash and investments.................... 297,088 367,600
Accounts receivable................................ 56,520 43,315
Capacity available for sale........................ 466,274 574,849
Property, plant and equipment, net................. 2,075,609 5,500
Construction in progress........................... 2,072,769 428,207
Goodwill, net...................................... 8,439,758 --
Investment in affiliates........................... 224,960 177,334
Other assets....................................... 593,812 65,757
----------- ----------
Total assets................................... $15,335,726 $2,639,177
=========== ==========
LIABILITIES:
Current liabilities:
Accrued construction costs....................... $ 181,353 $ 129,081
Accounts payable and accrued liabilities......... 818,265 31,990
Accrued interest and preferred dividends......... 76,657 14,428
Deferred revenue................................. 81,733 44,197
Income taxes payable............................. 182,156 15,604
Current portion of long term debt................ 6,128 6,393
Current portion of obligations under inland
services agreements
and capital leases.............................. 16,933 14,572
----------- ----------
Total current liabilities...................... 1,363,225 256,265
Long term debt..................................... 3,854,255 1,066,093
Deferred revenue................................... 112,681 25,325
Obligations under inland services agreements and
capital leases.................................... 139,588 24,520
Deferred credits and other......................... 147,729 9,654
----------- ----------
Total liabilities.............................. 5,617,478 1,381,857
----------- ----------
MANDATORILY REDEEMABLE PREFERRED STOCK:
5,000,000 shares issued and outstanding, $100
liquidation
preference per share (net of unamortized issuance
costs of $14,353
as of September 30, 1999 and $17,000 as of
December 31, 1998)................................ 485,647 483,000
----------- ----------
SHAREHOLDERS' EQUITY:
Common stock, 3,000,000,000 shares authorized,
par value $.01, 789,930,720 and 432,776,246
shares issued as of September 30, 1999 and
December 31, 1998, respectively................. 7,899 4,328
Treasury stock, 22,033,758 shares................ (209,415) (209,415)
Other shareholders' equity....................... 9,393,120 1,067,470
Retained earnings (accumulated deficit).......... 40,997 (88,063)
----------- ----------
9,232,601 774,320
----------- ----------
Total liabilities and shareholders' equity..... $15,335,726 $2,639,177
=========== ==========
</TABLE>
See accompanying notes to these unaudited condensed consolidated balance
sheets.
6
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1999 and 1998
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- ---------
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income (loss).................................... $ 129,060 $(143,927)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Cumulative effect of change in accounting
principle......................................... 14,711 --
Equity in loss of affiliates....................... 5,471 1,037
Depreciation and amortization...................... 20,128 545
Non-cash portion of US West termination agreement.. (103,384) --
Termination of Advisory Services Agreement......... -- 135,000
Stock related expenses............................. 38,611 33,058
Extraordinary loss on retirement of debt........... 14,865 19,709
Deferred income taxes.............................. 12,353 --
Provision for doubtful accounts.................... 24,211 2,211
Other.............................................. (6,486) --
Changes in operating assets and liabilities........ 200,765 37,728
----------- ---------
Net cash provided by operating activities........ 350,305 85,361
----------- ---------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Cash paid for construction in progress and capacity
available for sale.................................. (1,068,912) (287,421)
Acquisitions, net of cash acquired................... (787,269) --
Investment in affiliates............................. (12,741) (6)
Loans to affiliates.................................. (22,833) --
Purchases of property, plant and equipment........... (59,424) --
----------- ---------
Net cash used in investing activities............ (1,951,179) (287,427)
----------- ---------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net.......... 7,368 392,599
Proceeds from issuance of senior notes............... -- 796,231
Proceeds from long term debt......................... 2,509,083 202,816
Repayment of long term debt.......................... (1,485,074) --
Retirement of 1997 issued senior notes............... -- (159,750)
Redemption of 1997 issued preferred stock............ -- (134,372)
Preferred dividends.................................. (41,313) --
Financing costs...................................... (82,728) (32,232)
Cash reimbursement to certain shareholders........... -- (7,047)
(Increase) decrease in restricted cash and cash
equivalents......................................... 144,211 (366,538)
----------- ---------
Net cash provided by financing activities........ 1,051,547 691,707
----------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS... (549,327) 489,641
CASH AND CASH EQUIVALENTS, beginning of period......... 806,593 1,453
----------- ---------
CASH AND CASH EQUIVALENTS, end of period............... $ 257,266 $ 491,094
=========== =========
</TABLE>
See accompanying notes to these unaudited condensed consolidated financial
statements.
7
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1999 and 1998
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- ---------
<S> <C> <C>
SUPPLEMENTAL INFORMATION ON NON-CASH INVESTING
ACTIVITIES:
Costs incurred for construction in progress and
capacity available for sale......................... $(1,127,731) $(398,376)
(Increase) decrease in accrued construction costs.... 52,272 (34,651)
Increase in accrued interest......................... -- 27,020
Amortization of deferred finance costs............... 6,547 6,607
(Increase) decrease in obligations under capital
leases.............................................. -- (179)
PCG Warrants......................................... -- 112,158
----------- ---------
Cash paid for construction in progress and capacity
available for sale.................................. $(1,068,912) $(287,421)
=========== =========
Non-cash purchases of property, plant and equipment.. $ (38,300) $ --
=========== =========
Investment in affiliate.............................. $ -- $(163,146)
PCG Warrants......................................... -- 163,140
----------- ---------
$ -- $ (6)
=========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid and capitalized........................ $ 77,988 $ 28,632
=========== =========
Interest paid (net of capitalized interest).......... $ 41,234 $ 23
=========== =========
Cash paid for taxes.................................. $ 11,369 $ 4,904
=========== =========
Changes in operating assets and liabilities:
Accounts receivable................................ $ (49,961) $ (64,961)
Capacity available for sale........................ 108,575 (192,635)
Capacity available for sale and transferred from
construction in progress.......................... 60,963 238,554
Other assets and prepaid costs..................... (134,355) (33,962)
Deferred revenue................................... 53,460 45,335
Accounts payable and accrued liabilities........... 93,567 15,919
Income taxes payable............................... 85,578 2,110
Obligations under inland services agreements....... (17,062) 18,049
Deferred credits and other......................... -- 9,319
----------- ---------
$ 200,765 $ 37,728
=========== =========
Detail of acquisitions:
Assets acquired.................................... $11,647,010 $ --
Liabilities assumed................................ (3,097,457) --
----------- ---------
Common stock issued................................ $ 8,549,553 $ --
=========== =========
Net cash paid for acquisitions..................... $ 787,269 $ --
Cash acquired in acquisitions...................... 121,131 --
----------- ---------
Cash paid for acquisition, including transaction
fees.............................................. $ 908,400 $ --
=========== =========
</TABLE>
See accompanying notes to these unaudited condensed consolidated financial
statements.
8
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Nine Months Ended September 30, 1999 and 1998
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended Nine Months Ended
---------------- ------------------
1999 1998 1999 1998
-------- ------- -------- ---------
<S> <C> <C> <C> <C>
NET INCOME (LOSS)......................... $120,989 $15,229 $129,060 $(143,927)
FOREIGN CURRENCY TRANSLATION GAIN......... 26,996 -- 17,772 --
-------- ------- -------- ---------
COMPREHENSIVE INCOME (LOSS)............... $147,985 $15,229 $146,832 $(143,927)
======== ======= ======== =========
</TABLE>
See accompanying notes to these unaudited condensed consolidated financial
statements.
9
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
(1) Organization and Background
Global Crossing Ltd. (together with its consolidated subsidiaries, GCL or
the Company) is building and offering services over the world's first global
fiber optic network, consisting of 92,700 announced route miles and serving
four continents, 26 countries and more than 170 major cities. Upon completion
of our currently announced systems, our network, telecommunications and
Internet product offerings will be available to over 80% of the world's
international communications traffic. The systems completed or under
development by the Company will form a state-of-the-art interconnected
worldwide high capacity fiber optic network including: Atlantic Crossing-1 (AC-
1) and Atlantic Crossing-2 (AC-2), undersea systems connecting the United
States and Europe; Pacific Crossing (PC-1), an undersea system connecting the
United States and Japan; East Asia Crossing (EAC), an undersea system
connecting several countries in Asia; North American Crossing (NAC), formerly
part of Frontier, a terrestrial system connecting several major cities in the
United States; Mid Atlantic Crossing (MAC), an undersea system connecting the
eastern United States and the Caribbean; Pan American Crossing (PAC), a
primarily undersea system connecting the western United States, Mexico, Panama,
Venezuela and the Caribbean; South American Crossing (SAC), an undersea and
terrestrial system connecting the major cities of South America to MAC, PAC and
the rest of the Global Crossing Network; Pan European Crossing (PEC), primarily
a terrestrial system connecting 25 European cities to AC-1; and GAL, a
terrestrial system connecting a number of cities in Japan to PC-1. The Company
is in the process of developing several new undersea and terrestrial cable
systems and evaluating other business development opportunities which will
complement its Global Crossing Network.
(2) Basis of Presentation
The accompanying unaudited interim condensed consolidated financial
statements as of September 30, 1999 and for the three and nine months ended
September 30, 1999 and 1998, include the accounts of Global Crossing Ltd. and
its subsidiaries. All material inter-company balances and transactions have
been eliminated. The unaudited interim condensed consolidated financial
statements reflect all adjustments, consisting of normal recurring items, which
are, in the opinion of management, necessary to present a fair statement of the
results of the interim period presented. The results of operations for any
interim period are not necessarily indicative of results for the full year.
These condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United States.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
The accompanying unaudited condensed consolidated financial statements do
not include all footnotes and certain financial presentation normally required
under generally accepted accounting principles. Therefore, these financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Company's Annual Report on Form 10-K, for the
fiscal year ended December 31, 1998.
(3) Acquisitions
Global Marine Acquisition
On July 2, 1999, the Company acquired the Global Marine business of Cable &
Wireless Plc in a transaction valued at approximately $870 million, consisting
of a combination of cash and assumed
10
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
(Unaudited)
indebtedness. Global Marine currently provides services, including maintenance
under a number of long-term contracts, to cables built by more than 100
carriers and is the world's largest undersea cable installation and maintenance
company with a fleet of 13 cable ships, representing approximately 33 percent
of the world's total, 21 submersible vehicles and 1,200 employees servicing
approximately 35 percent of the world's undersea cable miles. Global Crossing
initially financed the acquisition with committed bank financing in the amount
of $600 million and the remainder with cash on hand.
Frontier Corporation Merger
On September 28, 1999, the Company announced the consummation of the merger
of GCF Acquisition Corp., a New York corporation and a wholly owned subsidiary
of Global Crossing ("Merger Sub"), with and into Frontier Corporation,
resulting in Frontier becoming a wholly owned subsidiary of Global Crossing.
Under the terms of the amended merger agreement for the Frontier
transaction, Frontier shareholders received 2.05 Global Crossing common shares
for each outstanding common share of Frontier Corporation, for a total of
approximately 355 million shares. Upon the effectiveness of the merger, the
then outstanding and unexercised options exercisable for shares of Frontier
Corporation common stock were converted into options exercisable for an
aggregate of approximately 25 million shares of Global Crossing common stock,
having the same terms and conditions as the Frontier Corporation options,
except that the exercise price and the number of shares issuable upon exercise
were divided and multiplied, respectively, by 2.05. The purchase price of $10.3
billion assumes a Global Crossing stock price of $22 15/16 per share, the
average closing price of Global Crossing common stock from September 1, 1999
through September 3, 1999, and includes long term debt, accrued interest, and
Frontier Corporation options assumed by Global Crossing. For accounting
purposes, the merger with Global Crossing is deemed to have occurred as of the
close of business on September 30, 1999.
Pro Forma Results
In connection with the Frontier merger and the Global Marine Systems
acquisition (together, the Acquisitions), the Company has tentatively
considered the carrying value of the acquired assets to approximate their fair
value, with all of the excess of such acquisition costs being attributable to
goodwill. The Company is in the process of fully evaluating the assets acquired
and, as a result, the purchase price allocation among the tangible and
intangible assets acquired (and their related useful lives, including goodwill)
may change. The initial evaluation of goodwill anticipated a useful life of 40
years. Upon the completion of the final evaluation, expected to be completed in
the fourth quarter of 1999, it is possible that the estimated useful life of
goodwill could be less than 40 years.
11
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
(Unaudited)
The Acquisitions are being accounted for under the purchase method of
accounting for business combinations. Following are the unaudited pro forma
results of the Company, Frontier and Global Marine Systems assuming the
acquisitions had been completed at the beginning of each of the periods
presented:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------- ------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues..................... $ 929,069 $ 863,397 $ 2,792,625 $ 2,366,592
=========== =========== =========== ===========
Income (loss) applicable to
common shareholders......... $ 30,125 $ 13,527 $ (18,781) $ (192,347)
=========== =========== =========== ===========
Income (loss) applicable to
common shareholders before
cumulative effect of change
in accounting principles and
extraordinary items......... $ 44,990 $ 13,527 $ 10,795 $ (170,883)
=========== =========== =========== ===========
Income (loss) per common
share:
Income (loss) applicable to
common shareholders
Basic...................... $ 0.04 $ 0.02 $ (0.02) $ (0.28)
=========== =========== =========== ===========
Diluted.................... $ 0.04 $ 0.02 $ (0.02) $ (0.28)
=========== =========== =========== ===========
Income (loss) applicable to
common shareholders before
cumulative effect of change
in accounting principles and
extraordinary items
Basic...................... $ 0.06 $ 0.02 $ 0.01 $ (0.25)
=========== =========== =========== ===========
Diluted.................... $ 0.06 $ 0.02 $ 0.01 $ (0.25)
=========== =========== =========== ===========
Shares used in computing
income (loss) per share
Basic...................... 767,199,234 719,842,780 765,496,917 690,761,556
=========== =========== =========== ===========
Diluted.................... 815,677,142 743,217,482 781,656,220 690,761,556
=========== =========== =========== ===========
</TABLE>
(4) New Accounting Standards
As a result of Financial Accounting Standards Board (FASB) Interpretation
No. 43, "Real Estate Sales, an interpretation of FASB Statement No. 66" (FIN
43), which became effective July 1, 1999, certain sales of capacity may no
longer be recognized as revenue at the time the circuits are activated. We
believe that our sales of subsea capacity will continue to be recognized as
revenue upon activation of those circuits, because we believe that subsea
capacity contracts meet the conditions for sales type lease accounting.
Beginning July 1, 1999, revenues from the sale of terrestrial backhaul circuits
are being amortized over the terms of the contracts. The result was a deferral
of $16 million of revenue related to terrestrial backhaul circuits activated
during the third quarter. Previously, these circuits would have been recognized
as current revenue. This deferral in revenue recognition has no impact on cash
flow. We note that accounting practice and authoritative guidance on this
subject are still evolving, with resolution expected within the next several
months.
With our acquisition of Frontier completed, services are now expected to be
a significant source of revenue on each of our systems. Therefore, beginning
October 1, 1999, we initiated service contract accounting for our subsea
systems. Under service contract accounting, the investment in both subsea and
terrestrial systems will be
12
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
(Unaudited)
depreciated over their economic lives, and revenues related to service
contracts will be recognized over the terms of the contracts. However, revenues
and costs related to the sale of indefeasible rights of use for subsea circuits
will continue to be recognized upon activation when appropriate. If we had
adopted service contract accounting effective January 1, 1999, there would not
have been a material impact on our results of operations during the year.
In June 1999, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 137, "Accounting for Derivative Instruments and Hedging Activities--
Deferral of the Effective Date of SFAS No. 133" which deferred SFAS No. 133's
effective date to fiscal quarters beginning after June 15, 2000. This statement
standardizes the accounting for derivatives and hedging activities and requires
that all derivatives be recognized in the statement of financial position as
either assets or liabilities at fair value. Changes in the fair value of
derivatives that do not meet the hedge accounting criteria are to be reported
in earnings. Adoption of this standard is not expected to have a material
effect on the Company's financial position, results of operations or cash
flows.
(5) Net Income (Loss) Applicable to Common Shareholders
Basic Earnings Per Share (EPS) is computed by dividing net income (loss)
available to common shareholders by the weighted average number of common
shares outstanding for the period. The weighted average number of common shares
outstanding totaled 412,672,234 and 369,616,680 for the three months ended
September 30, 1999 and 1998, respectively. The weighted average number of
common shares outstanding totaled 412,224,517 and 341,371,856 for the nine
months ended September 30, 1999 and 1998, respectively. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted. The dilutive effect of the
assumed exercise of stock options and convertible securities were 34,845,408
and 11,742,774 for the three and nine months ended September 30, 1999,
respectively. The dilutive effect of the assumed exercise of stock options and
convertible securities were 15,474,002 for the three months ended September 30,
1998. The dilutive effect of the assumed exercise of stock options and
convertible securities were anti-dilutive for the nine months ended September
30, 1998, respectively.
(6) Shareholders' Equity
Stock Option Plan. During the three months ended September 30, 1999, the
Company granted stock options for an aggregate of 21,094,227 shares of common
stock under the Company's 1998 Stock Incentive Plan, primarily relating to
Frontier and Global Marine Systems employees. On September 30, 1999, stock
options covering 79,306,662 shares of common stock were outstanding. Details of
the Company's 1998 Stock Incentive Plan are included in the Company's Annual
Report on Form 10-K, for the fiscal year ended December 31, 1998.
(7) Segment Information
The Company is a provider of Internet and long distance telecommunications
facilities and related services supplying its customers with global "point-to-
point" connectivity and, through its Global Marine Systems subsidiary,
providing cable maintenance and installation services. In addition to its
corporate functions, the Company is engaged in two business segments worldwide
and derives its revenues from customers located in the following geographic
regions: the Americas, Europe and Asia Pacific. The Company also maintains
long-lived assets in these regions; however, the majority of these assets are
in international waters.
13
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
(Unaudited)
(8) Concentration of Risks
During the three months ended September 30, 1999, there were two customers
that accounted for 16% and 16% of total revenues, respectively. In addition,
the Company derives all of its revenues from companies in the Internet and long
distance telecommunications industry and, as a result, has concentration of
credit risk in this industry.
(9) Reclassifications
Certain prior year amounts have been reclassified in the condensed
consolidated financial statements for consistent presentation.
(10) Significant Events
Asia Global Crossing
On September 8, 1999, the Company announced the establishment, together with
Softbank Corp. and Microsoft Corporation, of a new joint venture company called
Asia Global Crossing that will own EAC. Upon formation of Asia Global Crossing,
anticipated to be completed by the end of 1999, the Company will contribute to
the venture its 58% ownership in PC-1 as well as its development rights in EAC.
Softbank and Microsoft will each contribute $175 million in cash to Asia Global
Crossing. In addition, Softbank and Microsoft have committed to make a total of
at least $200 million in Global Crossing network capacity purchases over a
three-year period, expected to be utilized primarily on PC-1 and EAC. Softbank
and Microsoft have also agreed to use Asia Global Crossing's network in the
region, subject to specific conditions.
(11) Subsequent Events
Hutchison Global Crossing joint venture
On November 15, 1999, Global Crossing entered into an agreement with
Hutchison Whampoa Limited ("Hutchison") pursuant to which Global Crossing and
Hutchison agreed to form a joint venture to pursue fixed-line telecommunications
and Internet opportunities in Hong Kong. The joint venture, to be called
Hutchison Global Crossing, will be owned in equal parts by Global Crossing and
Hutchison. In exchange for its 50 percent interest, Hutchison agreed to
contribute to the joint venture its existing building-to-building fixed-line
telecommunications network in Hong Kong and certain Internet-related assets
currently held by Hutchison Telecommunications Limited. In exchange for its 50
percent interest, Global Crossing will contribute to the joint venture
international telecommunications capacity rights on the Global Crossing Network
valued at $200 million, $50 million in cash, as well as know how related to
Internet data centers. In addition, Global Crossing will issue to Hutchison $400
million aggregate liquidation preference of 6 3/8% cumulative preferred stock
convertible into common stock of Global Crossing.
Racal Telecom Acquisition
On October 11, 1999, the Company entered into an agreement to acquire Racal
Telecom, a group of wholly owned subsidiaries of Racal Electronics Plc, for
approximately $1.65 billion in cash. Racal Telecom owns one of the most
extensive fiber telecommunications networks in the UK consisting of
approximately 4,650 route miles of fiber laid alongside railway lines and
reaching more than 2,000 cities and towns. This network would be linked to PEC
and monitored by the Company's network operations center in London, which
opened September 16, 1999. The Company expects to complete this transaction by
the end of 1999.
14
<PAGE>
6 3/8% Cumulative Convertible Preferred Stock
On November 5, 1999, GCL issued 10,000,000 shares of its 6 3/8% Cumulative
Convertible Preferred Stock (Preferred Stock) with a liquidation preference of
$100 per share in a transaction pursuant to Rule 144A under the Securities Act
of 1933, as amended. Each share of Preferred Stock may be converted, at the
option of the holder, into 2.2222 shares of GCL common stock, resulting in a
conversion price of $45 per share of common stock received. The Company
received net proceeds of $970 million in the transaction.
$2 Billion Senior Notes
On November 12, 1999, Global Crossing Holdings announced that it is in the
process of completing an offering of $1.1 billion in aggregate principal amount
of its Senior Notes Due 2009, and $0.9 billion in aggregate principal amount of
its Senior Notes Due 2006. The senior notes will be guaranteed by Global
Crossing Ltd. The senior notes are expected to be issued on November 19, 1999,
subject to market conditions.
14--1
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
(Unaudited)
The net proceeds from the offerings will be used by Global Crossing Holdings
primarily to refinance existing indebtedness consisting of term loans and
revolving loans under its corporate credit facility. The senior notes have not
been registered under the Securities Act of 1933, as amended, and will be
offered and sold pursuant to applicable exemptions from the registration
requirements under that Act.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations for the Three Months Ended September 30, 1999 and
September 30, 1998
Revenues. During the three months ended September 30, 1999, revenues
increased $137 million (117%) to $255 million from $118 million during the
three months ended September 30, 1998. The increase is due to carrier services
revenue increasing $53 million to $170 million during the three months ended
September 30, 1999 from $118 million during the three months ended September
30, 1998. Installation and maintenance revenue provided by Global Marine
Systems during the three months ended September 30, 1999 of $85 million,
compared to unaudited pro forma revenues during the three months ended
September 30, 1998 of $87 million.
Cost of sales. For the three months ended September 30, 1999 and 1998, the
Company recognized $129 million and $49 million, respectively, in cost of
sales. The increase in cost of sales is primarily due to installation and
maintenance cost of sales relating to Global Marine Systems of $58 million
during the three months ended September 30, 1999. During the three months ended
September 30, 1999 and 1998, carrier services cost of capacity sold was $71
million and $49 million, respectively.
Non-cash cost of undersea capacity sold was $66 million and $42 million
during the three months ended September 30, 1999 and 1998, respectively. During
the three months ended September 30, 1999, the Company calculated costs of
undersea capacity sold for AC-1 based on the ratio of the period's actual
revenue to total expected future revenues given a minimum projected sales
capacity of 1024 circuits (512 circuits in 1998) times the construction cost of
the system. This calculation of cost of sales matches costs with the relative
value of each sale.
Since the AC-1 system became operational, the Company has offered its
capacity pursuant to sales agreements that qualify for sales type lease
accounting. Under this method, revenues and cost of capacity sold are
recognized in the period the rights and obligations of ownership transfer to
the purchaser and the cost of the AC-1 system has been recorded as Capacity
Available for Sale. (See note 4 to condensed consolidated financial
statements.)
Operations, administration and maintenance (OA&M). The Company incurred OA&M
costs of $16 million and $8 million during the three months ended September 30,
1999 and 1998, respectively. On September 16, 1999, the Company opened its
network operations center in London. The Company has entered into agreements
relating to operations, administration and maintenance which limits the
Company's total OA&M expense for each of its systems.
General and administrative. General and administrative expenses totaled $29
million and $8 million during the three months ended September 30, 1999 and
1998, respectively, and was comprised principally of salaries, employee
benefits and recruiting fees reflecting the Company's staffing for multiple
systems, travel, professional fees, insurance costs and occupancy costs.
Sales and marketing. During the three months ended September 30, 1999, the
Company incurred sales and marketing expenses of $13 million, including
commissions to TSSL of $7 million incurred on revenues recognized during this
period. During the three months ended September 30, 1998, the Company incurred
sales
15
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
(Unaudited)
and marketing costs of $6 million, including commissions to TSSL of $3 million
incurred on revenues recognized during this period. The increase from 1998 was
due to additions in headcount, occupancy costs, plus marketing costs,
commissions paid and other promotional expenses to support the Company's rapid
growth.
Network development. The Company incurred network development costs during
the three months ended September 30, 1999 and 1998 of $6 million and $3
million, respectively. These amounts are comprised principally of salaries and
professional fees.
Stock related expense. The Company recognized $13 million and $10 million of
stock compensation expense during the three months ended September 30, 1999 and
1998, respectively, relating to options issued under its Stock Incentive Plan,
plus certain stock related expense related to stock options and rights to
purchase stock awarded to consultants, accounted for under SFAS No. 123.
Depreciation and amortization. For the three months ended September 30, 1999
and 1998, the Company incurred depreciation and amortization of $12 million and
$0.1 million, respectively.
Goodwill amortization. For the three months ended September 30, 1999, the
Company incurred goodwill amortization in connection with the acquisition of
Global Marine Systems of $4 million. Preliminary Goodwill associated with the
Global Marine Systems acquisition is currently being amortized over a 40-year
life.
Provision for doubtful accounts. For the three months ended September 30,
1999 and 1998, the Company recorded a provision for doubtful accounts of $21
million and $1 million, respectively. The increase is due to additional
reserves required during the third quarter.
Equity in income (loss) of affiliates. For the three months ended September
30, 1999 and 1998, the Company recorded equity in income of affiliates of $0.1
million and a loss of $1 million, respectively. The increase is primarily due
to additional affiliate income from Global Marine Systems' affiliates, offset
by equity losses in the PC-1 and GAL joint ventures.
Interest income. The Company earned interest income of $14 million and $10
million in the three months ended September 30, 1999 and 1998, respectively.
Such interest income represents earnings on cash raised from financings and on
CPA deposits.
Interest expense. During the three months ended September 30, 1999, the
Company incurred $55 million in interest costs, including the amortization of
finance costs and debt discount. Of this amount, the Company capitalized to
construction in progress interest of $20 million, and expensed $35 million.
During the three months ended September 30, 1998, the Company incurred $31
million in interest costs, including the amortization of finance costs and debt
discount. Of this amount, the Company capitalized to construction in progress
interest of $13 million, and expensed $18 million.
Other income, net. During the three months ended September 30, 1999, other
income, net was comprised primarily of a $210 million termination fee paid by
US West, Inc. in connection with the termination of its merger agreement with
the Company, net of related expenses.
Provision for income taxes. The income tax provision of $80 million and $7
million for the three months ended September 30, 1999 and 1998, respectively,
provides for taxes on profits earned from capacity sales, installation and
maintenance and OA&M revenues where subsidiaries of the Company have a presence
in taxable jurisdictions.
16
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
(Unaudited)
Extraordinary loss on retirement of debt. In July 1999, the Company
recognized an extraordinary loss resulting from the payoff of existing debt in
connection with the issuance of its $3 billion Senior Secured Credit Facility,
comprising of a write-off of $15 million of unamortized deferred financing
costs.
Net income. During the three months ended September 30, 1999, the Company
reported a net income of $121 million compared to a net income of $15 million
in the three months ended September 30, 1998.
Preferred stock dividends. Preferred stock dividends for the three months
ended September 30, 1999 and 1998 were $14 million and none, respectively.
Net income (loss) applicable to common shareholders. During the three months
ended September 30, 1999, the Company reported net income applicable to common
shareholders of $107 million, resulting primarily from $223 million of other
income, net. During the three months ended September 30, 1998, the Company
reported net income applicable to common shareholders of $15 million.
Results of Operations for the Nine Months Ended September 30, 1999 and
September 30, 1998
Revenues. During the nine months ended September 30, 1999, revenues
increased $405 million (185%) to $624 million from $219 million during the
three months ended September 30, 1998. The increase is due to carrier services
revenue increasing $320 million to $539 million during the nine months ended
September 30, 1999 from $219 million during the nine months ended September 30,
1998 and installation and maintenance revenue provided by Global Marine Systems
of $85 million during the nine months ended September 30, 1999.
Cost of sales. For the nine months ended September 30, 1999 and 1998, the
Company recognized $279 million and $90 million, respectively, in cost of
sales. The increase in cost of sales is primarily due to installation and
maintenance cost of sales relating to Global Marine Systems of $58 million
during the nine months ended September 30, 1999. During the nine months ended
September 30, 1999 and 1998, carrier services cost of capacity sold was $221
million and $90 million, respectively. Non-cash cost of undersea capacity sold
was $181 million and $74 million during the nine months ended September 30,
1999 and 1998, respectively.
Operations, administration and maintenance (OA&M). The Company incurred OA&M
costs of $42 million and $11 million during the nine months ended September 30,
1999 and 1998, respectively. On September 16, 1999, the Company opened its
network operations center in London. The Company has entered into agreements
relating to operations, administration and maintenance which limits the
Company's total OA&M expense for each of its systems.
General and administrative. General and administrative expenses totaled $73
million during the nine months ended September 30, 1999 and were comprised
principally of salaries, employee benefits and recruiting fees reflecting the
Company's staffing for multiple systems, travel, professional fees, insurance
costs and occupancy costs. During the nine months ended September 30, 1998, the
Company incurred general and administrative costs of $17 million.
Sales and marketing. During the nine months ended September 30, 1999, the
Company incurred sales and marketing expenses of $36 million, including
commissions to TSSL of $24 million incurred on revenues recognized during this
period. During the nine months ended September 30, 1998, the Company incurred
sales
17
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
(Unaudited)
and marketing costs of $14 million, including commissions to TSSL of $8 million
incurred on revenues recognized during this period. The increase from 1998 was
due to additions in headcount, occupancy costs, plus marketing costs,
commissions paid and other promotional expenses to support the Company's rapid
growth.
Network development. The Company incurred network development costs during
the nine months ended September 30, 1999 and 1998 of $16 million and $7
million, respectively. These amounts are comprised principally of salaries and
professional fees.
Stock related expense. The Company recognized $39 million and $33 million of
stock compensation expense during the nine months ended September 30, 1999 and
1998, respectively, relating to options issued under its Stock Incentive Plan,
plus certain stock related expense related to stock options and rights to
purchase stock awarded to consultants and a key executive, accounted for under
SFAS No. 123.
Depreciation and amortization. For the nine months ended September 30, 1999
and 1998, the Company incurred depreciation and amortization of $16 million and
$0.5 million, respectively.
Goodwill amortization. For the nine months ended September 30, 1999, the
Company incurred goodwill amortization in connection with the acquisition of
Global Marine Systems of $4 million. Preliminary Goodwill associated with the
Global Marine Systems acquisition is currently being amortized over a 40-year
life.
Provision for doubtful accounts. For the nine months ended September 30,
1999 and 1998, the Company recorded a provision for doubtful accounts of $24
million and $2 million, respectively. The increase is due to additional
reserves required during the third quarter.
Termination of advisory services agreement. n connection with the
development and construction of AC-1, the Company entered into an advisory
services agreement with PCG Telecom Services LLC, an affiliate, providing for
the payment by the Company of an advisory fee of 2% of the gross revenues of
ACL over a 25 year term. The Company's Board of Directors also approved similar
advisory fees and authorized the Company to enter into similar agreements with
respect to other cable systems under development by the Company. In June 1998,
the Company acquired the rights of the persons entitled to the fees payable
under these agreements in consideration for the issuance to those persons of
shares of the Company's common stock, which had an aggregate value of $135
million, and the cancellation of approximately $3 million owed the Company
under a related advance agreement. In addition, the Company recognized
approximately $2 million of advisory fees incurred prior to termination of the
contract.
Equity in loss of affiliates. For the nine months ended September 30, 1999
and 1998, the Company recorded equity in loss of affiliates of $5 million and a
loss of $1 million, respectively. The increase is primarily due to equity
losses in the PC-1 and GAL joint ventures, partially offset by affiliate income
from Global Marine Systems' affiliates.
Interest income. The Company earned interest income of $46 million and $14
million in the nine months ended September 30, 1999 and 1998, respectively.
This interest income represents earnings on cash raised from financings and on
CPA deposits.
Interest expense. During the nine months ended September 30, 1999, the
Company incurred $117 million in interest costs, including the amortization of
finance costs and debt discount. Of this amount, the Company capitalized to
construction in progress interest of $35 million, and expensed $82 million.
18
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
(Unaudited)
During the nine months ended September 30, 1998, the Company incurred $63
million in interest costs, including the amortization of finance costs and debt
discount. Of this amount, the Company capitalized to construction in progress
interest of $37 million, and expensed $26 million.
Other income, net. During the nine months ended September 30, 1999, other
income, net was comprised primarily of a $210 million termination fee paid by
US West, Inc. in connection with the termination of its merger agreement with
the Company, net of related expenses and a $4 million gain on sale of
securities available for sale, partially offset by a $10 million loss on a
foreign currency forward contract in connection with the Global Marine
acquisition and $2 million in professional fees associated with a consent
solicitation to amend the terms of Global Crossing Holdings' outstanding Senior
Notes.
Provision for income taxes. The income tax provision of $110 million and $16
million for the nine months ended September 30, 1999 and 1998, respectively,
provides for taxes on profits earned from capacity sales, installation and
maintenance and OA&M revenues where subsidiaries of the Company have a presence
in taxable jurisdictions.
Cumulative effect of change in accounting principle. The Company adopted
Statement of Position 98-5 (SOP 98-5), "Reporting on the Cost of Start-Up
Activities," issued by the American Institute of Certified Public Accountants,
during the three months ended March 31, 1999. SOP 98-5 requires that certain
start-up expenditures previously capitalized during system development must now
be expensed. The Company incurred a one-time charge during the three months
ended March 31, 1999 of $15 million (net of tax benefit) that represents start-
up costs incurred and capitalized during previous periods.
Extraordinary loss on retirement of debt. In July 1999, the Company
recognized an extraordinary loss resulting from the payoff of existing debt in
connection with the commencement of its $3 billion Senior Secured Credit
Facility, comprising of a write-off of $15 million of unamortized deferred
financing costs. During May 1998, the Company recognized an extraordinary loss
of $20 million in connection with the repurchase of Global Telesystems
Holdings's outstanding senior notes, comprising of a premium of $10 million and
a write-off of $10 million of unamortized deferred financing costs.
Net income (loss). During the nine months ended September 30, 1999 the
Company reported a net income of $129 million compared to a net loss of $144
million in the nine months ended September 30, 1998.
Preferred stock dividends. Preferred stock dividends for the nine months
ended September 30, 1999 and 1998, were $41 million and $8 million,
respectively.
Redemption of preferred stock. The redemption of Global Telesystems
Holdings' outstanding preferred stock occurred in June 1998 and resulted in a
$34 million charge against equity. This amount was comprised of a $16 million
redemption premium and a write-off of $18 million of unamortized discount and
issuance costs. The redemption premium and write-off of unamortized discount
and issuance costs are treated as a deduction to arrive at net loss applicable
to common shareholders in the consolidated statements of operations.
Net loss applicable to common shareholders. During the nine months ended
September 30, 1999, the Company reported net income applicable to common
shareholders of $88 million, resulting primarily from $216 million of other
income, net, partially offset by $41 million of dividends on preferred stock
and $15 million resulting from a cumulative effect of change in accounting
principle. During the nine months ended
19
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
(Unaudited)
September 30, 1998, the Company reported net loss applicable to common
shareholders of $186 million, resulting in a large part from $140 million in
costs associated with the termination of the advisory service agreement and $34
million of redemption of Global Telesystems Holdings' outstanding preferred
stock.
Liquidity and Capital Resources
On July 2, 1999, Global Crossing entered into a $3 billion senior secured
corporate credit facility with a group of several lenders and The Chase
Manhattan Bank as administrative agent. The initial proceeds under the facility
were used to refinance outstanding balances under the AC-1 and MAC project
finance facilities, to refinance balances under a vendor financing arrangement
with Lucent, to refinance debt used for the purchase of the Global Marine
business from Cable & Wireless and for general corporate purposes. As of
September 30, 1999, the Company had a remaining unused balance of $1.3 billion
under the senior secured corporate credit facility.
Global Crossing anticipates the Racal acquisition costs to be approximately
$1.65 billion. The acquisition cost is expected to be financed with a $675
million secured bank facility at Racal (non-recourse to the Company), with the
remaining amount to be financed with proceeds from the recently issued issuance
of its Preferred Stock or through other corporate financing.
Global Crossing initially financed the approximately $870 million Global
Marine acquisition, which was completed in July 1999, with approximately $600
million in committed bank financing and the remainder with cash on hand. This
initial indebtedness was refinanced through borrowings under Global Crossing's
senior secured corporate credit facility.
Global Crossing estimates the total cost of developing and deploying AC-2,
PC-1, MAC, PAC, SAC, PEC and GAL to be approximately $5,095 million, excluding
costs of potential future upgrades and the amounts capitalized with respect to
warrants issued in exchange for the rights to construct PC-1, MAC and PAC. This
total is comprised of $750 million for AC-2, $1,200 million for PC-1, $295
million for MAC, $580 million for PAC, $1,130 million for SAC, $950 million for
PEC and $190 million for GAL. PC-1 will be financed by total equity investments
of $400 million of which Global Crossing expects to provide approximately $231
million, with the remaining $800 million of estimated costs to be financed
through non-recourse project indebtedness at the PC-1 level. Global Crossing
has financed its 49% interest in GAL through cash on hand to date, and intends
to finance additional system costs through limited or non-recourse debt to be
raised at the GAL level. The remaining system costs for MAC and PAC will be
financed either through bank indebtedness under Global Crossing's senior
secured corporate credit facility or through other corporate financing.
The construction costs for PEC (including costs of acquiring dark fiber) are
estimated to be $950 million, a portion of which was paid from the proceeds of
the December 1998 issuance by Global Crossing Holdings of 10 1/2% Senior
Exchangeable Preferred Stock (the "GCH Preferred Stock"). Global Crossing also
raised capital required to finance this system through a combination of
commercial bank borrowings, vendor financing and sales of dark fiber. Financing
to complete the system is expected to be obtained from the corporate credit
facility, Preferred Stock or other corporate financing.
The Company has extended financing to customers in connection with certain
CPAs. The financing terms provide for installment payments of up to four years.
The Company believes that its extension of financing to its customers will not
have a material effect on the Company's liquidity.
20
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
(Unaudited)
Cash provided by operating activities was $350 million for the nine months
ended September 30, 1999 and $85 million for the nine months ended September
30, 1998, and principally represents cash received from deposits and payments
for activated capacity pursuant to signed CPAs, plus interest income received,
less sales and marketing, network development and general and administrative
expenses paid.
Cash used in investing activities was $1,951 million and $287 million for
the nine months ended September 30, 1999 and 1998, respectively and represents
cash paid for construction in progress, purchases of property, plant and
equipment and cash investments in affiliates.
Cash provided by financing activities was $1,052 million for the nine months
ended September 30, 1999 and primarily represents borrowings under the senior
secured corporate facility, partially offset by repayments of borrowings under
long term debt. Cash provided by financing activities was $692 million for the
nine months ended September 30, 1998 and primarily relates to proceeds from the
issuance of senior notes and borrowings under long term debt, less the increase
in the restricted cash and cash equivalents, retirement of old senior notes and
redemption of preference shares.
Inflation
Management does not believe that its business is impacted by inflation to a
significantly different extent than the general economy.
Year 2000 Compliance
The Company believes that its computer information systems are Year 2000
(Y2K) compliant. The Company has established a Y2K compliance task force. The
task force has identified no potential material adverse effect on the two core
components of the Company's services: (1) transmission of capacity and (2)
management and maintenance of the transmission paths. The Company's anticipated
worst case scenario is failure of the Network Operations Center. In the event
the worst case scenario occurs management of the network can be performed at
the terminal stations with the network element managers or at the equipment
bays with the craft interface terminal, in each case at minimal additional
cost.
The Company is also subject to external forces that generally affect
industry and commerce, such as utility, transportation or other infrastructure
failures and interruptions. In addition to reviewing the Company's own systems,
the Company is submitting requests to third party service providers to obtain
information as to their compliance efforts. The Company has received assurances
from major suppliers, TSSL and Lucent, stating Y2K compliance status of their
respective systems regarding AC-1 (the Company's only active system at this
time). In addition, the Company received assurance from Alcatel Submarine
Networks, a supplier to MAC and SAC, that Alcatel is also Y2K compliant. In the
event that any of the Company's material third party service providers do not
successfully and timely achieve Y2K compliance, the Company's business or
operations could be adversely affected. The Company is developing contingency
plans to address any potential Y2K compliance failure due to significant third
party failures, although no such failure is expected. To date, response from
material third party service providers has not shown any of them to be non-
compliant with Y2K readiness plans.
The Company believes that costs of addressing Y2K compliance will not have a
material adverse impact on the Company's financial condition or results of
operations.
21
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
(Unaudited)
Euro Conversion
On January 1, 1999, a single currency called the Euro was introduced in
Europe. Eleven of the fifteen member countries of the European Union agreed to
adopt the Euro as their common legal currency on that date. Fixed conversion
rates between these countries' existing currencies (legacy currencies) and the
Euro were established as of that date. The legacy currencies are scheduled to
remain legal tender in these participating countries between January 1, 1999
and January 1, 2002 (not later than July 1, 2002). During this transition
period, parties may settle transactions using either the Euro or a
participating country's legacy currency.
As most of the Company's sales and expenditures are denominated in United
States dollars, management does not believe that the Euro conversion will have
a material adverse impact on the business or financial condition. The Company
does not expect the cost of system modifications to be material and the Company
will continue to evaluate the impact of the Euro conversion.
Information Regarding Forward-Looking Statements
The Company has included "forward-looking statements" throughout this
quarterly report filed on Form 10-Q. These forward-looking statements describe
management's intentions, beliefs, expectations or predictions for the future.
The Company uses the words "believe," "anticipate," "expect," "intend" and
similar expressions to identify forward-looking statements. Such forward-
looking statements are subject to a number of risks, assumptions and
uncertainties that could cause the Company's actual results to differ
materially from those projected in such forward-looking statements. These
risks, assumptions and uncertainties include:
. the Company's ability to complete systems within currently estimated time
frames and budgets,
. the Company's ability to compete effectively in a rapidly evolving and
price competitive marketplace,
. changes in the nature of telecommunications regulation in the United
States and other countries,
. changes in the Company's business strategy,
. the successful integration of newly-acquired businesses, and
. the impact of technological change.
This list is only an example of some of the risks, uncertainties and
assumptions that may affect the Company's forward-looking statements. The
Company undertakes no obligation to update any forward-looking statements made
by it.
22
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
(Unaudited)
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
The table below provides information about the Company's market sensitive
financial instruments and constitutes a "forward-looking statement." The
Company's major market risk exposure is changing interest rates. The Company's
policy is to manage interest rates through use of a combination of fixed and
floating rate debt. Interest rate swaps may be used to adjust interest rate
exposures when appropriate, based upon market condition.
<TABLE>
<CAPTION>
Fair Value
1999 2000 2001 2002 2003 Thereafter Total Sept. 30, 1999
Expected maturity dates ------- ------ ------ ------- ------- ---------- ---------- --------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Debt
US$ denominated
Variable Rate.......... $ -- $ -- $ -- $37,000 $79,000 $1,967,598 $2,083,598 $2,083,598
Average interest
rates............... 7.8% 7.8% 7.8%
Fixed Rate............. 813 90,577 74,658 43,205 83,991 2,014,099 2,307,343 2,299,093
Average interest
rates............... 8.8% 8.8% 8.8% 8.8% 8.8% 8.8%
Obligations Under ISAs
and Capital Leases:
US$ denominated......... 7,796 5,784 1,703 1,231 1,187 21,850 39,551 39,551
Average interest
rates--fixed.......... 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Sterling, German Mark
and Dutch Guilder
denominated............ 31,367 12,718 12,316 12,706 8,914 271,796 349,817 349,817
Average interest
rates--fixed.......... 12.2% 12.2% 12.2% 12.2% 12.2% 12.2%
Derivative Instruments
US$ denominated
Interest rate swap--
fixed
Contract notional
amount.............. 800,000 -- -- -- -- -- 800,000 (4,160)
Fixed conversion
rate.............. 6.4%
</TABLE>
Foreign Currency Risk
For those subsidiaries using the U.S. dollar as their functional currency,
translation adjustments are recorded in the accompanying condensed consolidated
statements of operations. None of the Company's translation adjustments were
material as of and for the three months ended September 30, 1999 and 1998.
For those subsidiaries not using the U.S. dollar as their functional
currency, assets and liabilities are translated at exchange rates in effect at
the balance sheet date and income and expense accounts at average exchange
rates during the period. Resulting translation adjustments are recorded
directly to a separate component of shareholders' equity. As of and for the
three and nine months ended September 30, 1999, the Company incurred a foreign
currency translation gain of $27 million and $18 million, respectively. As of
and for the three and nine months ended September 30, 1998, the Company
incurred no foreign currency translation gain or loss.
23
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
(Unaudited)
Part II. Other Information
Item 1. Legal Proceedings
On June 25, 1999, Frontier Corporation, a wholly-owned subsidiary of Global
Crossing Ltd., was served with a summons and complaint in a lawsuit commenced
in the New York State Supreme Court, Monroe County by a Frontier shareholder
alleging that Frontier and its Board of Directors had breached their fiduciary
duties to shareholders by endorsing a definitive merger agreement with the
Company without having adequately considered an alternative merger proposal
made by Qwest Communications International, Inc. The lawsuit has been framed as
a purported class action brought on behalf of all shareholders of Frontier and
seeks unstated compensatory damages and injunctive relief compelling Frontier's
board to evaluate Frontier's suitability as a merger partner, to enhance
Frontier's value as a merger candidate, to engage in discussions with Qwest
about possible business combinations, to act independently to protect the
interests of Frontier shareholders, and to ensure that no conflicts of interest
exist which would prevent maximizing value to shareholders. In July 1999, three
additional lawsuits were also commenced against Frontier in the New York State
Supreme Court on behalf of a number of individual shareholders seeking
essentially identical relief. All four lawsuits are being consolidated into a
single proceeding pending in Rochester New York. The Company believes the
asserted claims are without merit and is defending itself vigorously.
On July 12, 1999, Frontier was served with a summons and complaint in a
lawsuit commenced in New York State Supreme Court, New York County by a
Frontier shareholder alleging that Frontier and its board breached their
fiduciary duties by failing to obtain the highest possible acquisition price
for Frontier in the definitive merger agreement with the Company. The action
has been framed as a purported class action and seeks compensatory damages and
injunctive relief. The claims against Frontier are asserted in the same action
as similar but separate claims against US West, Inc. The Company will seek to
sever the claims against it from the action involving US West and to
consolidate those claims with the action pending in Rochester. The Company
believes the asserted claims are without merit and is defending itself
vigorously.
Item 2. Changes in Securities and Use of Proceeds
During August 1998, the Company completed an initial public offering of its
common stock (File No. 333-53393; effective date August 13, 1998) for which the
Company received net proceeds of approximately $391 million. Through September
30, 1999, the Company has used substantially all of these proceeds for (i)
equity investments of approximately $75 million for MAC, $136 million for PEC,
$13 million for GAL and $119 million for PAC and (ii) $48 million for general
corporate purposes.
Item 3. Defaults Upon Senior Securities
Not applicable.
24
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
(Unaudited)
Item 4. Submission of Matters to a Vote of Security Holders
The Annual General Meeting of Shareholders of the Company was held on
September 22, 1999 and was reconvened on October 14, 1999. All of the Director
nominees were elected at the Annual General Meeting pursuant to Proposal No. 5.
The names of the nominees and the results of the voting were as follows:
<TABLE>
<CAPTION>
Shares
Nominee Shares For Withheld
------- ----------- --------
<S> <C> <C>
Gary Winnick............................................ 393,270,921 268,966
Lodwrick M. Cook........................................ 392,971,289 568,599
Thomas J. Casey......................................... 393,271,735 268,153
Jack M. Scanlon......................................... 393,273,629 266,259
Robert Annunziata....................................... 393,278,278 261,610
David L. Lee............................................ 393,271,585 268,303
Barry Porter............................................ 393,271,203 268,685
Abbott L. Brown......................................... 393,280,588 259,300
Jay R. Bloom............................................ 393,264,919 274,968
William E. Conway....................................... 393,275,554 264,334
Dean C. Kehler.......................................... 393,272,639 267,248
Geoffrey J.W. Kent...................................... 393,272,576 267,312
Bruce Raben............................................. 393,005,246 534,641
Michael R. Steed........................................ 392,985,777 554,111
Hillel Weinberger....................................... 393,259,472 280,416
Joseph P. Clayton....................................... 393,274,556 265,332
Eric Hippeau............................................ 393,271,977 267,910
Douglas H. McCorkindale................................. 393,271,790 268,098
James F. McDonald....................................... 393,275,084 264,804
</TABLE>
Each of the other Proposals submitted for Shareholder approval at the Annual
General Meeting was approved. The results of the voting were as follows:
<TABLE>
<CAPTION>
Shares Broker
Proposal Number and Description Shares For Against Abstentions Non-Votes
------------------------------- ----------- ---------- ----------- ----------
<C> <S> <C> <C> <C> <C>
1. Increase authorized share
capital to $30,200,000... 368,019,479 7,118,758 147,104 18,254,545
2. Issue shares of common
stock in the merger with
Frontier Corp............ 374,876,104 297,942 112,468 18,253,373
3. Amend and restate bye-
laws (other than 34(2),
63, 130 and 148)......... 325,522,650 46,540,295 3,222,396 18,254,545
4. Amend and restate bye-
laws 34(2), 63, 130 and
148...................... 327,028,258 45,967,690 3,276,269 17,267,670
6. Increase the number of
authorized shares under
the 1998 Global Crossing
Ltd. Stock Incentive Plan
to 90,000,000............ 320,246,265 53,900,870 1,138,206 18,254,545
7. Ratify the compensation
plan for outside
directors................. 366,500,901 7,769,022 1,015,418 18,254,545
8. Ratify appointment of
Arthur Andersen & Co. as
independent auditors for
1999 and approve the
authority of the Board of
Directors to determine
their remuneration....... 393,138,047 244,858 156,982 --
</TABLE>
25
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
(Unaudited)
Item 5. Other Information
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<C> <S>
2.1 Sale Agreement, made on October 10, 1999, between Controls and
Communications Limited, The Racal Corporation, Racal Electronics Plc and
the Registrant (incorporated by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K filed on October 21, 1999 (the
"October 21, 1999 8-K")).
3.1 Memorandum of Increase of Share Capital of the Registrant dated
September 27, 1999 (filed herewith).
3.2 Bye-laws of the Registrant as in effect on October 14, 1999 (filed
herewith).
3.3 Certificate of Designations of 6 -3/8% Cumulative Convertible Preferred
Stock of the Registrant dated November 5, 1999 (filed herewith).
10.1 Lease made as of October 1, 1999 between North Crescent Realty V, LLC and
Global Crossing Development Company (filed herewith).
10.2 Form of Non-Qualified Stock Option Agreement as in effect on September
30, 1999 (filed herewith).
10.3 Frontier Corporation Supplemental Retirement Savings Plan as amended and
restated effective January 1, 1996 (incorporated by reference to Exhibit
10.13 to Frontier Corporation's Annual Report on Form 10-K filed March
28, 1997).
10.4 Amendment No. 1, effective March 16, 1999, to Frontier Corporation
Supplemental Retirement Savings Plan (incorporated by reference to
Exhibit 10.2 to Frontier Corporation's Quarterly Report on Form 10-Q
filed August 3, 1999).
10.5 Amendment No. 2, dated September 21, 1999, to Frontier Corporation
Supplemental Retirement Savings Plan (filed herewith).
10.6 Executive Contract dated March 25, 1996 between Robert L. Barrett and
Frontier Corporation (incorporated by reference to Exhibit 10.25 to
Frontier Corporation's Quarterly Report on Form 10-Q filed May 14, 1996).
10.7 Amendment dated May 1, 1999 to Executive Contract between Robert L.
Barrett and Frontier Corporation (filed herewith).
10.8 Executive Contract dated January 1, 1998 between Joseph P. Clayton and
Frontier Corporation (incorporated by reference to Exhibit 10.22 to
Frontier Corporation's Annual Report on Form 10-K filed March 26, 1998).
10.9 Amendment dated May 1, 1999 to Executive Contract between Joseph P.
Clayton and Frontier Corporation (filed herewith).
27.1 Financial Data Schedule (filed herewith).
</TABLE>
26
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
(Unaudited)
(b) Reports on Form 8-K.
During the quarter ended September 30, 1999, Global Crossing Ltd. filed the
following Current Reports on Form 8-K:
1. Current Report on Form 8-K dated July 2, 1999 (date of earliest event
reported), filed on July 16, 1999, for the purpose of reporting, under Item
2, the acquisition of the Global Marine business of Cable & Wireless plc.
2. Current Report on Form 8-K dated July 18, 1999 (date of earliest
event reported), filed on July 20, 1999, for the purpose of reporting,
under Item 5, the execution of the termination agreement with U S WEST,
Inc.
3. Current Report on Form 8-K dated September 2, 1999 (date of earliest
event reported), filed on September 3, 1999, for the purpose of reporting,
under Item 5, the execution of Amendment No. 2 to the Agreement and Plan of
Merger with Frontier Corporation.
4. Current Report on Form 8-K dated September 8, 1999 (date of earliest
event reported), filed on September 10, 1999, for the purpose of reporting,
under Item 5, the execution of an agreement to establish a new joint
venture called Asia Global Crossing with Softbank Corp. and Microsoft
Corporation.
5. Current Report on Form 8-K dated September 28, 1999 (date of earliest
event reported), filed on September 30, 1999, for the purpose of reporting,
under Item 2, the consummation of the merger of a wholly-owned subsidiary
of Global Crossing Ltd. with Frontier Corporation.
27
<PAGE>
SIGNATURE
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.
Global Crossing Ltd.,
a Bermuda corporation
By: /s/ Dan J. Cohrs
-----------------------------------
Dan J. Cohrs
Senior Vice President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
November 15, 1999
28
<PAGE>
EXHIBIT 3.1
FORM NO. 7a Registration No. 24644
[SEAL]
BERMUDA
CERTIFICATE OF DEPOSIT OF
MEMORANDUM OF INCREASE OF SHARE CAPITAL
THIS IS TO CERTIFY that a Memorandum of Increase of Share Capital
of
Global Crossing Ltd.
--------------------
was delivered to the Registrar of Companies on the 27th day of September, 1999
in accordance with section 45(3) of the Companies Act 1981 ("the Act").
Given under my hand and seal of the REGISTRAR OF COMPANIES this 5th day of
October, 1999.
[SIGNATURE]
for Acting Registrar of Companies
[SEAL]
Capital prior to increase: US$ 6,000,000.00
Amount of increase: US$24,200,000.00
Present Capital: US$30,200,000.00
<PAGE>
EXHIBIT 3.2
B Y E - L A W S
of
GLOBAL CROSSING LTD.
I HEREBY CERTIFY that the within written amended and restated Bye-Laws are a
true copy of the Bye-Laws of Global Crossing Ltd. as adopted by the Shareholders
at the Adjournment of the 1999 Annual General Meeting of the Company held on
14th October, 1999 in substitution of the Bye-laws adopted on 22nd September,
1999.
Resident Secretary
<PAGE>
I N D E X
---------
BYE-LAW SUBJECT PAGE
- ------- ------- ----
1 Interpretation 1-6
2 Registered Office 6
3-4 Share Rights 6,7
5-6 Modification of Rights 8,9
7-9 Shares 9,10
10-13 Certificates 10,11
14-17 Lien 11-13
18-23 Calls on Shares 14,15
24-30 Forfeiture of Shares 15-17
31-32 Register of Shareholders 17
33 Register of Directors and Officers 17
34-37 Transfer of Shares 18-21
38-41 Transmission of Shares 21,22
42-44 Increase of Capital 23
45-46 Alteration of Capital 23,24
47-48 Reduction of Capital 24,25
49 General Meetings and Written Resolutions 25,26
50-52 Notice of General Meetings 26,27
53 General Meetings at more than one place 27,28
54-60 Proceedings at General Meetings 28-30
61-71 Voting 30-35
72-77 Proxies and Corporate Representatives 36-38
78-84 Appointment and Removal of Directors 38-42
85 Resignation and Disqualification of Directors 42
86-89 Alternate Directors 42,43
<PAGE>
BYE-LAW SUBJECT
- ------- ------- PAGE
----
90 Directors' Fees and Additional
Remuneration and Expenses
91 Directors' Interests 44
92-94 Powers and Duties of the Board 45
95 Gratuities, Pensions and Insurance 45-48
96-99 Delegation of the Board's Powers 48
100-111 Proceedings of the Board 49-51
112 Officers 51-54
113-115 Executive Directors 54
116 Minutes 55
117-118 Secretary and Resident Representative 56
119 The Seal 56
120-126 Dividends and Other Payments 57
127 Reserves 57-60
128-129 Capitalisation of Profits 60
130 Record Dates 60,61
131-133 Accounting Records 61
134 Audit 62
135-137 Service of Notices and Other Documents 62
138 Destruction of Documents 63,64
139 Untraced Shareholders 64,65
140 Winding Up 65-67
141-145 Indemnity 67
146 Amalgamation 68-70
147 Continuation 70
148 Alteration of Bye-Laws 70,71
71,72
<PAGE>
B Y E - L A W S
of
GLOBAL CROSSING LTD.
INTERPRETATION
1. (1) In these Bye-Laws unless the context otherwise requires: -
"Affiliates or affiliates" means any other person directly or
indirectly controlling, controlled by or under direct or
indirect common control with any other person. For purposes of
this definition, "control" (including, with correlative
meanings, the terms "controlling" "controlled by" and "under
common control with"), as used with respect to any person,
shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or
policies of such person, whether through the ownership of
voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting stock of a
person shall be deemed to be control;
"Bermuda" means the Islands of Bermuda;
"Board" means the Board of Directors of the Company or the
Directors present at a meeting of Directors at which there is
a quorum;
"CIBC" means Global Crossing Ltd., LDC, Canadian Imperial Bank
of Commerce, CIBC Wood Gundy Capital (SFC) Inc., CIBC WG
Argosy Fund 3 L.P., Co-Investment Merchant Fund LLC, CIBC
Capital Partners (Cayman) No. 1, any Affiliates of Canadian
Imperial Bank of Commerce and all Permitted Transferees (as
defined in the Stockholders Agreement) of each of the
foregoing;
<PAGE>
"the Code" means the United States Internal Revenue Code of
1986, as amended from time to time;
"common shares" means all the authorised common shares of par
value US$0.01 each in the capital of the Company;
"the Companies Acts" means every Bermuda statute from time to
time in force concerning companies insofar as the same applies
to the Company;
"Company" means the company incorporated in Bermuda under the
name of Global Crossing Holdings Ltd. (but now named Global
Crossing Ltd.) on 18 March, 1998;
"Continental" means Continental Casualty Company, Continental
Casualty Company on behalf of its subaccount Designated High
Yield, Global Crossing Trust 1998 and Global Crossing
Partners;
"Controlled Shares" in reference to any Shareholder means:
(i) all common shares directly, indirectly, or
constructively owned by such Shareholders within the
meaning of Section 958 of the Code and the Treasury
regulations promulgated thereunder; and
(ii) all common shares directly or indirectly owned as a
result of voting power held or shared by any Person
or "group" of Persons within the meaning of Section
13(d) of the Exchange Act (the "13(d) Formula").
For the purposes of the application of the 13(d) Formula only,
"Person" means any individual, firm, partnership, company,
limited liability company, association or other entity or any
"group" of Persons with respect to the exercise of voting
power within the meaning of Section 13(d) of the Exchange Act;
"the Exchange Act" means the United States Securities Exchange
Act of 1934 as amended, and the rules and regulations
promulgated thereunder;
2
<PAGE>
"Fair Market Value" means, with respect to a repurchase of any
Shares in accordance with these Bye-Laws, (i) if such Shares
are listed on a United States national securities exchange,
the average closing sale price of such Shares on such
exchange, or, if such Shares are listed on more than one such
exchange, the average closing sale price of the Shares on the
principal securities exchange on which such Shares are then
traded, or, if such Shares are not then listed on a United
States national securities exchange but are traded in the
over-the-counter market, the average of the latest bid and
asked quotations for such Shares in such market, in each case
for the last five trading days immediately preceding the day
on which notice of the repurchase of such Shares is sent
pursuant to these Bye-Laws or (ii) if no such closing sales
prices or quotations are available because such Shares are not
publicly traded or otherwise, the fair value of such Shares as
determined by one independent nationally recognised investment
banking firm chosen by the Company and reasonably satisfactory
to the Shareholder whose shares are to be so repurchased by
the Company. The calculation of the Fair Market Value of the
Shares made by such appointed investment banking firm shall be
final and the fees and expenses stemming from such calculation
shall be borne by the Company or its assignee, as the case may
be. The Fair Market Value of any interest in Shares other than
sole, direct ownership shall be determined by the Company on
the basis of the Fair Market Value of the related Shares;
"GKW" means GKW Unified Holdings, LLC;
"MR Co." means MR Co. Inc.;
"Officer" means a person appointed by the Board pursuant to
Bye-Law 112 of these Bye-Laws and shall not include an auditor
of the Company;
"Pacific Capital" means Pacific Capital Group Inc.;
3
<PAGE>
"paid up" means paid up or credited as paid up;
"Register" means the Register of Shareholders of the Company;
"Registered Office" means the registered office for the time
being of the Company;
"Repurchase Price" means, with respect to any Shares (or
interest therein), the lesser of (x) the Fair Market Value of
such Shares (or interest therein) on the date the Company
sends the Repurchase Notice and (y) the price paid for such
Shares (or interest therein) by the Shareholder whose Shares
(or interest therein) are to be repurchased, less, in each
case, an amount equal to the amount of all dividends received
or receivable on, or in respect of, such Shares by such
Shareholder;
"Resident Representative" means the person (or, if permitted
in accordance with the Companies Acts, the company) appointed
to perform the duties of resident representative set out in
the Companies Acts and includes any assistant or deputy
Resident Representative appointed by the Board to perform any
of the duties of the Resident Representative;
"Resolution" means a resolution of the Shareholders or, where
required, of a separate class or separate classes of
Shareholders, adopted either in general meeting or by written
resolution, in accordance with the provisions of these
Bye-Laws;
"Seal" means the common seal of the Company and includes any
duplicate thereof;
"Secretary" includes a temporary or assistant or deputy
Secretary and any person appointed by the Board to perform any
of the duties of the Secretary;
"Shares" means all shares in the capital of the Company
whether preferred or common;
"Shareholder" means a shareholder or member of the Company;
4
<PAGE>
"Stock Exchange" means The Nasdaq National Stock Market, The
Bermuda Stock Exchange or any other stock exchange on which
shares of the Company may be listed from time to time;
"Stockholder Agreement" means the Stockholders Agreement dated
12 August, 1998 and entered into among the Company, CIBC,
Pacific Capital, GKW, Continental, Winnick and MR Co. and the
other parties thereto;
"Specified Place" means the place, if any, specified in the
notice of any meeting of the shareholders, or adjourned
meeting of the shareholders, at which the chairman of the
meeting shall preside;
"these Bye-Laws" means these Bye-Laws in their present form or
as from time to time amended;
"United States person" means (i) an individual who is a
citizen or resident of the United States of America, its
territories or possessions and all areas subject to its
jurisdiction including the Commonwealth of Puerto Rico
("United States"), (ii) a corporation or partnership created
or organised in or under the laws of the United States or any
political subdivision thereof, (iii) an estate, the income of
which is subject to United States federal income taxation
regardless of its source, and (iv) a trust which is subject to
the supervision of a court within the United States and the
control of United States Fiduciary as described in Section
7701(a)(30) of the Code; and "Winnick" means Gary Winnick.
(2) For the purposes of these Bye-Laws a corporation shall be
deemed to be present in person if its representative duly
authorised pursuant to the Companies Acts is present.
(3) Words importing only the singular number include the plural
number and vice versa.
(4) Words importing only the masculine gender include the feminine
and neuter genders respectively.
5
<PAGE>
(5) Words importing persons include companies or associations or
bodies of persons, whether corporate or un-incorporate.
(6) Reference to writing shall include typewriting, printing,
lithography, photography and other modes of representing or
reproducing words in a legible and non-transitory form.
(7) Any words or expressions defined in the Companies Acts in
force at the date when these Bye-Laws or any part thereof are
adopted shall bear the same meaning in these Bye-Laws or such
part (as the case may be).
(8) In these Bye-Laws, (a) powers of delegation shall not be
restrictively construed but the widest interpretation shall be
given thereto, (b) the word "Board" in the context of the
exercise of any power contained in these Bye-Laws includes any
committee consisting of one or more Directors, any Director
holding executive office and any local or divisional Board,
manager or agent of the Company to which or, as the case may
be, to whom the power in question has been delegated, (c) no
power of delegation shall be limited by the existence of any
other power of delegation, and (d) except where expressly
provided by the terms of delegation, the delegation of a power
shall not exclude the concurrent exercise of that power by any
other body or person who is for the time being authorised to
exercise it under these Bye-Laws or under another delegation
of the powers.
REGISTERED OFFICE
2. The Registered Office shall be at such place in Bermuda as the Board
shall from time to time appoint.
6
<PAGE>
SHARE RIGHTS
3. (1) Subject to any special rights conferred on the holders of any
share or class of shares, any share in the Company may be
issued with or have attached thereto such preferred, deferred,
qualified or other special rights or such restrictions,
whether in regard to dividends, voting, return of capital or
otherwise, as the Company may by Resolution determine or, if
there has not been any such determination or so far as the
same shall not make specific provision, as the Board may
determine.
(2) If the Company creates, pursuant to Bye-Law 3(1) or otherwise,
any new class or series of voting shares, the Company shall
"impose voting restrictions on any such new class or series of
shares as though such class or series of shares were
additional common shares subject to Bye-Law 63.
4. (1) Subject to the Companies Acts, any preference shares may, with
the sanction of a resolution of the Board, be issued on terms:
(a) that they are to be redeemed on the happening of a
specified event or on a given date; and/or,
(b) that they are liable to be redeemed at the option
of the Company; and/or,
(c) if authorised by the memorandum/Incorporating Act of
the Company, that they are liable to be redeemed at
the option of the holder.
The terms and manner of redemption shall be provided for in
such resolution of the Board and shall be attached to but
shall not form part of these Bye-Laws.
(2) The Board may, at its discretion and without the sanction of a
Resolution, authorise the purchase by the Company of its own
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shares, of any class, at any price (whether at par or above or
below par), and so that any shares to be so purchased may be
selected in any manner whatsoever, upon such terms as the
Board may in its discretion determine; PROVIDED ALWAYS that
such purchase is effected in accordance with the provisions of
the Companies Acts.
MODIFICATION OF RIGHTS
5. Subject to the Companies Acts and except as otherwise set forth in
these Bye-Laws, all or any of the special rights for the time being
attached to any class of common shares for the time being issued may
from time to time (whether or not the Company is being wound up) be
altered or abrogated with the sanction of a resolution passed at a
separate general meeting of the holders of common shares of that class,
voting in person or by proxy and representing at least a majority of
the votes cast by holders of common shares of that class at such
separate general meeting. To any such separate general meeting, all the
provisions of these Bye-Laws as to general meetings of the Company
shall mutatis mutandis apply, but so that the necessary quorum shall be
two or more persons holding or representing by proxy shares of the
relevant class representing a majority of the votes that may be cast by
all holders of shares of that class, that every holder of shares of the
relevant class shall be entitled on a poll to the number of votes for
every such share held by him determined in accordance with Bye-Laws 62
and 63 and that any holder of shares of the relevant class present in
person or by proxy may demand a poll; provided, however, that if the
Company or a class of common shares shall have only one Shareholder,
one Shareholder present in person or by proxy shall constitute the
necessary quorum. Subject to the Companies Acts and except as otherwise
set forth in these Bye-Laws, all or any of the special rights for the
time being attached to any class or series of preferred shares for the
time being issued may from time to time (whether or
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not the Company is being wound up) be altered or abrogated with the
requisite consent or vote of the holders of such class or series as
will be set forth in a schedule to the Bye-Laws relating to such class
or series at the time when such class or series is issued.
6. For the purposes of this Bye-Law, unless otherwise expressly provided
by the rights attached to any shares or class of shares, those rights
shall be deemed to be altered by the reduction of the capital paid up
on those shares otherwise than by a purchase or redemption by the
Company of its own shares and by the allotment of other shares ranking
in priority for payment of a dividend or in respect of capital or which
confer on the holders voting rights more favourable than those
conferred by such first mentioned shares but shall not otherwise be
deemed to be altered by the creation or issue of further shares ranking
pari passu therewith or by the purchase or redemption by the Company of
any of its own shares.
SHARES
7. Subject to the provisions of these Bye-Laws, the unissued shares of the
Company (whether forming part of the original capital or any increased
capital) shall be at the disposal of the Board, which may offer, allot,
grant options over or otherwise dispose of them to such persons, at
such times and for such consideration and upon such terms and
conditions as the Board may determine.
8. The Board may in connection with the issue of any shares exercise all
powers of paying commission and brokerage conferred or permitted by
law. Subject to the provisions of the Companies Acts, any such
commission or brokerage may be satisfied by the payment of cash or by
the allotment of fully or partly paid shares or partly in one way and
partly in the other.
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9. Except as ordered by a court of competent jurisdiction or as required
by law or as specifically provided in these Bye-Laws, no person shall
be recognised by the Company as holding any share upon trust and the
Company shall not be bound by or required in any way to recognise (even
when having notice thereof) any equitable, contingent, future or
partial interest in any share or any interest in any fractional part of
a share or (except only as otherwise provided in these Bye-Laws, or by
law) any other right in respect of any share except an absolute right
to the entirety thereof in the registered holder.
CERTIFICATES
10. The preparation, issue and delivery of certificates shall be governed
by the Companies Acts. In the case of a share held jointly by several
persons, delivery of a certificate to one of several joint holders
shall be sufficient delivery to all.
11. If a share certificate is defaced, lost or destroyed it may be replaced
without fee but on such terms (if any) as to evidence and indemnity and
to payment of the costs and out of pocket expenses of the Company in
investigating such evidence and preparing such indemnity as the Board
may think fit and, in case of defacement, on delivery of the old
certificate to the Company.
12. All certificates for share or loan capital or other securities of the
Company (other than letters of allotment, scrip certificates and other
like documents) shall, except to the extent that the terms and
conditions for the time being relating thereto otherwise provide, be
issued under the Seal. The Board may by resolution determine, either
generally or in any particular case, that any signatures on any such
certificates need not be autographic but may be affixed to such
certificates by some mechanical means or may be printed
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thereon or that such certificates need not be signed by any persons, or
may determine that a representation of the Seal may be printed on any
such certificates.
13. Nothing in these Bye-Laws shall prevent title to any securities of the
Company from being evidenced and/or transferred without a written
instrument in accordance with regulations made from time to time in
this regard under the Companies Acts, and the Board shall have power to
implement any arrangements which it may think fit for such evidencing
and/or transfer which accord with those regulations.
LIEN
14. The Company shall have a first and paramount lien on every share (not
being a fully paid share) for all monies, whether presently payable or
not, called or payable, at a date fixed by or in accordance with the
terms of issue of such share in respect of such share. The Company's
lien on a share shall extend to all dividends payable thereon. The
Board may at any time, either generally or in any particular case,
waive any lien that has arisen or declare any share to be wholly or in
part exempt from the provisions of this Bye-Law.
15. The Company may sell, in such manner as the Board may think fit, any
share on which the Company has a lien but no sale shall be made unless
some sum in respect of which the lien exists is presently payable nor
until the expiration of 14 days after a notice in writing, stating and
demanding payment of the sum presently payable and giving notice of the
intention to sell in default of such payment, has been served on the
holder for the time being of the share.
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16. The net proceeds of sale by the Company of any shares on which it has a
lien shall be applied in or towards payment or discharge of the debt or
liability in respect of which the lien exists so far as the same is
presently payable, and any residue shall (subject to a like lien for
debts or liabilities not presently payable as existed upon the share
prior to the sale) be paid to the person who was the holder of the
share immediately before such sale. For giving effect to any such sale
the Board may authorise some person to transfer the share sold to the
purchaser thereof. The purchaser shall be registered as the holder of
the share and he shall not be bound to see to the application of the
purchase money, nor shall his title to the share be affected by any
irregularity or invalidity in the proceedings relating to the sale.
17. Whenever any law for the time being of any country, state or place
imposes or purports to impose any immediate or future or possible
liability upon the Company to make any payment or empowers any
government or taxing authority or government official to require the
Company to make any payment in respect of any shares registered in any
of the Company's registers as held either jointly or solely by any
Shareholder or in respect of any dividends, bonuses or other monies due
or payable or accruing due or which may become due or payable to such
Shareholder by the Company on or in respect of any shares registered as
aforesaid or for or on account or in respect of any Shareholder and
whether in consequence of:-
(a) the death of such Shareholder;
(b) the non-payment of any income tax or other tax by such
Shareholder;
(c) the non-payment of any estate, probate, succession,
death, stamp, or other duty by the executor or
administrator of such Shareholder or by or out of his
estate;
(d) any other act or thing;
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in every such case (except to the extent that the rights conferred upon
holders of any class of shares render the Company liable to make
additional payments in respect of sums withheld on account of the
foregoing):-
(i) the Company shall be fully indemnified by such Shareholder or
his executor or administrator from all liability;
(ii) the Company shall have a lien upon all dividends and other
monies payable in respect of the shares registered in any of
the Company's registers as held either jointly or solely by
such Shareholder for all monies paid or payable by the Company
in respect of such shares or in respect of any dividends or
other monies as aforesaid thereon or for or on account or in
respect of such Shareholder under or in consequence of any
such law together with interest at the rate of fifteen percent
per annum thereon from the date of payment to date of
repayment and may deduct or set off against such dividends or
other monies payable as aforesaid any monies paid or payable
by the Company as aforesaid together with interest as
aforesaid;
(iii) the Company may recover as a debt due from such Shareholder or
his executor or administrator wherever constituted any monies
paid by the Company under or in consequence of any such law
and interest thereon at the rate and for the period aforesaid
in excess of any dividends or other monies as aforesaid then
due or payable by the Company; and
(iv) the Company may if any such money is paid or payable by it
under any such law as aforesaid refuse to register a transfer
of any shares by any such Shareholder or his executor or
administrator until such money and interest as aforesaid is
set off or deducted as aforesaid or in case the same exceeds
the amount of any such dividends or other
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<PAGE>
monies as aforesaid then due or payable by the Company until
such excess is paid to the Company.
Subject to the rights conferred upon the holders of any class of
shares, nothing herein contained shall prejudice or affect any right or
remedy which any law may confer or purport to confer on the Company and
as between the Company and every such Shareholder as aforesaid, his
executor, administrator and estate wheresoever constituted or situate,
any right or remedy which such law shall confer or purport to confer on
the Company shall be enforceable by the Company.
CALLS ON SHARES
18. The Board may from time to time make calls upon the Shareholders in
respect of any monies unpaid on their shares (whether on account of the
par value of the shares or by way of premium) and not by the terms of
issue thereof made payable at a date fixed by or in accordance with
such terms of issue, and each Shareholder shall (subject to the Company
serving upon him at least fourteen days notice specifying the time or
times and place of payment) pay to the Company at the time or times and
place so specified the amount called on his shares. A call may be
revoked or postponed as the Board may determine.
19. A call may be made payable by instalments and shall be deemed to have
been made at the time when the resolution of the Board authorising the
call was passed.
20. The joint holders of a share shall be jointly and severally liable to
pay all calls in respect thereof.
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21. If a sum called in respect of the share shall not be paid before or on
the day appointed for payment thereof the person from whom the sum is
due shall pay interest on the sum from the day appointed for the
payment thereof to the time of actual payment at such rate as the Board
may determine, but the Board shall be at liberty to waive payment of
such interest wholly or in part.
22. Any sum which, by the terms of issue of a share, becomes payable on
allotment or at any date fixed by or in accordance with such terms of
issue, whether on account of the nominal amount of the share or by way
of premium, shall for all the purposes of these Bye-Laws be deemed to
be a call duly made, notified and payable on the date on which, by the
terms of issue, the same becomes payable and, in case of non-payment,
all the relevant provisions of these Bye-Laws as to payment of
interest, forfeiture or otherwise shall apply as if such sum had become
payable by virtue of a call duly made and notified.
23. The Board may on the issue of shares differentiate between the
allottees or holders as to the amount of calls to be paid and the times
of payment.
FORFEITURE OF SHARES
24. If a Shareholder fails to pay any call or instalment of a call on the
day appointed for payment thereof, the Board may at any time thereafter
during such time as any part of such call or instalment remains unpaid
serve a notice on him requiring payment of so much of the call or
instalment as is unpaid, together with any interest which may have
accrued.
25. The notice shall name a further day (not being less than 14 days from
the date of the notice) on or before which, and the place where, the
payment required by the notice is to be made and shall state that, in
the event of non-
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<PAGE>
payment on or before the day and at the place appointed, the shares in
respect of which such call is made or instalment is payable will be
liable to be forfeited. The Board may accept the surrender of any share
liable to be forfeited hereunder and, in such case, references in these
Bye-Laws to forfeiture shall include surrender.
26. If the requirements of any such notice as aforesaid are not complied
with, any share in respect of which such notice has been given may at
any time thereafter, before payment of all calls or instalments and
interest due in respect thereof has been made, be forfeited by a
resolution of the Board to that effect. Such forfeiture shall include
all dividends declared in respect of the forfeited shares and not
actually paid before the forfeiture.
27. When any share has been forfeited, notice of the forfeiture shall be
served upon the person who was before forfeiture the holder of the
share; but no forfeiture shall be in any manner invalidated by any
omission or neglect to give such notice as aforesaid.
28. A forfeited share shall be deemed to be the property of the Company and
may be sold, re-offered or otherwise disposed of either to the person
who was, before forfeiture, the holder thereof or entitled thereto or
to any other person upon such terms and in such manner as the Board
shall think fit, and at any time before a sale, re-allotment or
disposition the forfeiture may be cancelled on such terms as the Board
may think fit.
29. A person whose shares have been forfeited shall thereupon cease to be a
Shareholder in respect of the forfeited shares but shall,
notwithstanding the forfeiture, remain liable to pay to the Company all
monies which at the date of forfeiture were presently payable by him to
the Company in respect of the shares with interest thereon at such rate
as the Board may determine from
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<PAGE>
the date of forfeiture until payment, and the Company may enforce
payment without being under any obligation to make any allowance for
the value of the shares forfeited.
30. An affidavit in writing that the deponent is a Director of the Company
or the Secretary and that a share has been duly forfeited on the date
stated in the affidavit shall be conclusive evidence of the facts
therein stated as against all persons claiming to be entitled to the
share. The Company may receive the consideration (if any) given for the
share on the sale, re-allotment or disposition thereof and the Board
may authorise some person to transfer the share to the person to whom
the same is sold, re-allotted or disposed of, and he shall thereupon be
registered as the holder of the share and shall not be bound to see to
the application of the purchase money (if any) nor shall his title to
the share be affected by any irregularity or invalidity in the
proceedings relating to the forfeiture, sale, re-allotment or disposal
of the share.
REGISTER OF SHAREHOLDERS
31. The Company shall establish and maintain the Register in the manner
prescribed by the Companies Acts. Unless the Board otherwise
determines, the Register shall be open to inspection in the manner
prescribed by the Companies Acts between 9.00 a.m. and 5.00 p.m. in
Bermuda, on every working day. Unless the Board so determines, no
Shareholder or intending Shareholder shall be entitled to have entered
in the Register any indication of any trust or any equitable,
contingent, future or partial interest in any share or any interest in
any fractional part of a share and if any such entry exists or is
permitted by the Board it shall not be deemed to abrogate any of the
provisions of Bye-Law 9.
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32. Subject to the provisions of the Companies Acts, the Company may keep
one or more overseas or branch registers in any place, and the Board
may make, amend and revoke any such regulations as it may think fit
respecting the keeping of such registers.
REGISTER OF DIRECTORS AND OFFICERS
33. The Company shall establish and maintain a register of the Directors
and Officers of the Company as required by the Companies Acts. The
register of Directors and Officers shall be open to inspection in the
manner prescribed by the Companies Acts between 9:00 a.m. and 5:00 p.m.
in Bermuda on every working day.
TRANSFER OF SHARES
34. (1) Subject to the Companies Acts, to the provisions of
Bye-Laws 34(2) and 34(3) and to such of the restrictions
contained in these Bye-Laws as may be applicable, any
Shareholder may transfer all or any of his shares by an
instrument of transfer in the usual common form or in any
other form which the Board may approve.
(2) Any transfer of shares (or any interest therein) that results
in (i) any Shareholder (regardless of whether such Shareholder
is a natural person) (other than Pacific Capital, GKW, CIBC,
Continental or MR Co., or their Affiliates or, solely upon a
foreclosure on the Shares constituting collateral for a loan,
any bona fide third party lender to any of them) beneficially
owning (within the provisions of Section 13(d) of the Exchange
Act), directly or indirectly, Controlled Shares in excess of
the Maximum Percentage of the outstanding common
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shares of the Company, or (ii) in the case of any Shareholder
who is a natural person, any such Shareholder beneficially
owning, directly, indirectly or constructively (within the
meaning of Section 544 of the Code and Treasury Regulations
promulgated thereunder) common shares in excess of the Maximum
Percentage of the outstanding common shares of the Company, in
either case without the approval of a majority of the members
of the Board and without the approval of a majority of the
votes cast by Shareholders at a General Meeting called to
approve that transfer, shall not be registered in the share
register of the Company and shall be void and of no effect.
(3) The restrictions on transfer authorised or imposed by these
Bye-Laws shall not be imposed in any circumstances in a way
that would interfere with the settlement of trades or
transactions entered into through the facilities of a Stock
Exchange; provided, however, that the Company may decline to
register transfers in accordance with these Bye-Laws and
resolutions of the Board after a settlement has taken place.
(4) For the purposes of this Bye-Law 34, "Maximum Percentage"
means (x) in the case of a natural person, 5% measured by vote
or value, and (y) in the case of any Shareholder (other than a
natural person) or any group (as used in Section 13(d) of the
Exchange Act), 9.5% measured by vote or value.
(5) Subject to Section 42(A) of the Companies Act 1981, upon the
occurrence of any transfer or purported transfer of Shares (or
any interest therein) in violation of Bye-Law 34(2), the
Company will have the option, but not the obligation, to
repurchase from the transferee all or part of such Shares (or
interest therein) for immediately available funds in an amount
equal to the Repurchase Price; provided that the Board will
use its best efforts to exercise this option equally among
similarly situated Shareholders (to the extent
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possible under the circumstances). The Company may assign its
repurchase right to a third party or parties including the
other Shareholders, with the consent of such assignee. Each
Shareholder shall be bound by the determination by the Company
to repurchase or assign its right to repurchase such Shares
(or interest therein) and, if so required by the Company shall
sell the number of Shares (or interest therein) that the
Company requires to sell.
(6) In the event that the Company or its assignee(s) determines to
repurchase any such shares (or interest therein), the Company
shall provide each Shareholder concerned with written notice
of such determination ("Repurchase Notice") at least seven (7)
calendar days prior to such repurchase or such shorter period
as each such Shareholder may authorise, specifying the date on
which any such Shares (or interest therein) are to be
repurchased and the Repurchase Price. The Company may revoke
the Repurchase Notice at any time before it (or its assignee)
pays for the Shares (or interest therein). Neither the Company
nor its assignee(s) shall be obliged to give general notice to
the Shareholders of any intention to purchase or the
conclusion of any purchase of Shares (or interest therein).
Payment of the Repurchase Price by the Company of its
assignee(s) shall be by wire transfer and made at a closing to
be held no less than seven (7) calendar days after receipt of
the Repurchase Notice by the Shareholder.
35. The instrument of transfer of a share shall be signed by or on behalf
of the transferor and where any share is not fully-paid, the transferee
and the transferor shall be deemed to remain the holder of the share
until the name of the transferee is entered in the Register in respect
thereof. All instruments of transfer when registered may be retained by
the Company. The Board may, in its absolute discretion and without
assigning any reason therefor,
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decline to register any transfer of any share which is not a fully-paid
share.
The Board may also decline to register any transfer unless:-
(1) the instrument of transfer is duly stamped and lodged with the
Company, at such place as the Board shall appoint for the
purpose, accompanied by the certificate for the shares (if any
has been issued) to which it relates, and such other evidence
as the Board may reasonably require to show the right of the
transferor to make the transfer;
(2) the instrument of transfer is in respect of only one class of
share; and
(3) all applicable consents, authorisations, permissions or
approvals of any governmental body or agency in Bermuda, the
United States or any other applicable jurisdiction required to
be obtained prior to such transfer shall have been obtained.
Subject to any directions of the Board from time to time in force, the
Secretary may exercise the powers and discretions of the Board under
this Bye-Law and Bye-Law 36.
36. If the Board declines to register a transfer it shall, within ten (10)
days after the date on which the instrument of transfer was lodged,
send to the transferor and the transferee notice of such refusal.
37. A fee may be charged by the Company for registering any transfer,
probate, letters of administration, certificate of death or marriage,
power of attorney, distringas or stop notice, order of court or other
instrument relating to or affecting the title to any share, or
otherwise making an entry in the Register relating to any share.
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TRANSMISSION OF SHARES
38. In the case of the death of a Shareholder, the survivor or survivors,
where the deceased was a joint holder, and the estate representative,
where he was sole holder, shall be the only person recognised by the
Company as having any title to his shares; but nothing herein contained
shall release the estate of a deceased holder (whether the sole or
joint) from any liability in respect of any share held by him solely or
jointly with other persons. For the purpose of this Bye-Law, estate
representative means the person to whom probate or letters of
administration has or have been granted in Bermuda or, failing any such
person, such other person as the Board may in its absolute discretion
determine to be the person recognised by the Company for the purpose of
this Bye-Law.
39. Any person becoming entitled to a share in consequence of the death of
a Shareholder or otherwise by operation of applicable law may, subject
to Bye-Laws 34 and 35, and subject as hereafter provided and upon such
evidence being produced as may from time to time be required by the
Board as to his entitlement, either be registered himself as the holder
of the share or elect to have some person nominated by him registered
as the transferee thereof. If the person so becoming entitled elects to
be registered himself, he shall deliver or send to the Company a notice
in writing signed by him stating that he so elects. If he shall elect
to have his nominee registered, he shall signify his election by
signing an instrument of transfer of such share in favour of his
nominee. All the limitations, restrictions and provisions of these Bye-
Laws relating to the right to transfer and the registration of transfer
of shares shall be applicable to any such notice or instrument of
transfer as aforesaid as if the death of the Shareholder or other event
giving rise to the transmission had not occurred and the notice or
instrument of transfer was an instrument of transfer signed by such
Shareholder.
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40. A person becoming entitled to a share in consequence of the death of a
Shareholder or otherwise by operation of applicable law shall (upon
such evidence being produced as may from time to time be required by
the Board as to his entitlement) be entitled to receive and may give a
discharge for any dividends or other monies payable in respect of the
share, but he shall not be entitled in respect of the share to receive
notices of or to attend or vote at general meetings of the Company or,
save as aforesaid, to exercise in respect of the share any of the
rights or privileges of a Shareholder until he shall have become
registered as the holder thereof. The Board may at any time give notice
requiring such person to elect either to be registered himself or to
transfer the share and, if the notice is not complied with within sixty
days, the Board may thereafter withhold payment of all dividends and
other monies payable in respect of the shares until the requirements of
the notice have been complied with.
41. Subject to any directions of the Board from time to time in force, the
Secretary may exercise the powers and discretions of the Board under
Bye-Laws 38, 39 and 40.
INCREASE OF CAPITAL
42. The Company may from time to time increase its capital by such sum to
be divided into shares of such par value as the Company by Resolution
shall prescribe.
43. The Company may, by the Resolution increasing the capital, direct that
the new shares or any of them shall be offered in the first instance
either at par or at a premium or (subject to the provisions of the
Companies Acts) at a discount to all the holders for the time being of
shares of any class or classes
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in proportion to the number of such shares held by them respectively or
make any other provision as to the issue of the new shares.
44. Except as otherwise determined by the Company (but subject always to
Bye-Law 3(2)), the new shares shall be subject to all the provisions of
these Bye-Laws with reference to lien, the payment of calls,
forfeiture, transfer, transmission and otherwise.
ALTERATION OF CAPITAL
45. The Company may from time to time by Resolution:-
(1) divide its shares into several classes and attach thereto
respectively any preferential, deferred, qualified or special
rights, privileges or conditions;
(2) consolidate and divide all or any of its share capital into
shares of larger par value than its existing shares;
(3) sub-divide its shares or any of them into shares of smaller
par value than is fixed by its memorandum, so, however, that
in the sub-division the proportion between the amount paid and
the amount, if any, unpaid on each reduced share shall be the
same as it was in the case of the share from which the reduced
share is derived;
(4) make provision for the issue and allotment of shares which do
not carry any voting rights;
(5) cancel shares which, at the date of the passing of the
resolution in that behalf, have not been taken or agreed to be
taken by any person, and diminish the amount of its share
capital by the amount of the shares so cancelled; and
(6) change the currency denomination of its share capital.
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Where any difficulty arises in regard to any division, consolidation,
or sub-division under this Bye-Law, the Board may settle the same as it
thinks expedient and, in particular, may arrange for the sale of the
shares representing fractions and the distribution of the net proceeds
of sale in due proportion amongst the Shareholders who would have been
entitled to the fractions, and for this purpose the Board may authorise
some person to transfer the shares representing fractions to the
purchaser thereof, who shall not be bound to see to the application of
the purchase money nor shall his title to the shares be affected by any
irregularity or invalidity in the proceedings relating to the sale.
46. Subject to the Companies Acts and to any confirmation or consent
required by law or these Bye-Laws, the Company may by Resolution from
time to time convert any preference shares into redeemable preference
shares.
REDUCTION OF CAPITAL
47. Subject to the Companies Acts, its memorandum and any confirmation or
consent required by law or these Bye-Laws, the Company may from time to
time by Resolution authorise the reduction of its issued share capital
or any share premium or contributed surplus account in any manner.
48. In relation to any such reduction, the Company may by Resolution
determine the terms upon which such reduction is to be effected
including in the case of a reduction of part only of a class of shares,
those shares to be affected.
GENERAL MEETINGS AND WRITTEN RESOLUTIONS
49. (1) The Board shall convene, and the Company shall hold, general
meetings as Annual General Meetings in accordance with the
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requirements of the Companies Acts at such times and places as
the Board shall appoint. The Board or the Chairman or Co-
Chairman of the Board may, whenever each thinks fit, and
shall, when requisitioned by shareholders pursuant to the
provisions of the Companies Acts, convene general meetings
other than Annual General Meetings which shall be called
Special General Meetings.
(2) Except in the case of the removal of auditors and Directors,
anything which may be done by resolution of the Company in
general meeting or by resolution of a meeting of any class of
the Shareholders of the Company may, without a meeting and
without any previous notice being required, be done by
resolution in writing, signed by all of the Shareholders or
their proxies, or in the case of a Shareholder that is a
corporation (whether or not a company within the meaning of
the Companies Acts) on behalf of such Shareholder, being all
of the Shareholders of the Company who at the date of the
resolution in writing would be entitled to attend a meeting
and vote on the resolution. Such resolution in writing may be
signed by, or in the case of a Shareholder that is a
corporation (whether or not a company within the meaning of
the Companies Acts), on behalf of, all the Shareholders of the
Company, or any class thereof, in as many counterparts as may
be necessary.
(3) For the purposes of this Bye-Law, the date of the resolution
in writing is the date when the resolution is signed by, or in
the case of a Shareholder that is a corporation (whether or
not a company within the meaning of the Companies Acts), on
behalf of, the last Shareholder to sign and any reference in
any enactment to the date of passing of a resolution is, in
relation to a resolution in writing made in accordance with
this section, a reference to such date.
(4) A resolution in writing made in accordance with this Bye-Law
is as valid as if it had been passed by the Company in general
meeting or,
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if applicable, by a meeting of the relevant class of
Shareholders of the Company, as the case may be. A resolution
in writing made in accordance with this section shall
constitute minutes for the purposes of the Companies Acts and
these Bye-Laws.
NOTICE OF GENERAL MEETINGS
50. An Annual General Meeting shall be called by not less than 30 days
notice in writing, and a Special General Meeting shall be called by not
less than 10 days notice in writing. The notice shall specify the
place, day and time of the meeting and the nature of the business to be
considered. Notice of every General Meeting shall be given in any
manner permitted by Bye-Laws 135 and 136 to all Shareholders other than
such as, under the provisions of these Bye-Laws or the terms of issue
of the shares they hold, are not entitled to receive such notice from
the Company and to each Director, and to any Resident Representative
who or which has delivered a written notice upon the Registered Office
requiring that such notice be sent to him or it.
51. The accidental omission to give notice of a meeting or (in cases where
instruments of proxy are sent out with the notice) the accidental
omission to send such instrument of proxy to, or the non-receipt of
notice of a meeting or such instrument of proxy by, any person entitled
to receive such notice shall not invalidate the proceedings at that
meeting.
52. A Shareholder present, either in person or by proxy, at any meeting of
the Company or of the holders of any class of shares in the Company
shall be deemed to have received notice of the meeting and, where
requisite, of the purposes for which it was called.
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GENERAL MEETINGS AT MORE THAN ONE PLACE
53. (1) The provisions of this Bye-Law shall apply if any general
meeting is convened at or adjourned to more than one place.
(2) The notice of any meeting or adjourned meeting may specify the
Specified Place and the Board shall make arrangements for
simultaneous attendance and participation at other places
(whether adjoining the Specified Place or in a different and
separate place or places altogether or otherwise) by
Shareholders, provided that persons attending at any
particular place shall be able to see and hear and be seen and
heard (whether by audio visual links or otherwise howsoever
enabling the same) by persons attending at the other places at
which the meeting is convened.
(3) The Board may from time to time make such arrangements for the
purpose of controlling the level of attendance at any such
place (whether involving the issue of tickets or the
imposition of some means of selection or otherwise) as they
shall in their absolute discretion consider appropriate, and
may from time to time vary any such arrangements or make new
arrangements in place of them, provided that a Shareholder who
is not entitled to attend, in person or by proxy, at any
particular place shall be entitled so to attend at one of the
other places; and the entitlement of any Shareholder so to
attend the meeting or adjourned meeting at such place shall be
subject to any such arrangements as may be for the time being
in force and by the notice of meeting or adjourned meeting
stated to apply to the meeting.
(4) For the purposes of all other provisions of these Bye-Laws any
such meeting shall be treated as being held at the Specified
Place.
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(5) If a meeting is adjourned to more than one place, notice of
the adjourned meeting shall be given notwithstanding any other
provision of these Bye-Laws.
PROCEEDINGS AT GENERAL MEETINGS
54. No business shall be transacted at any general meeting unless a quorum
is present when the meeting proceeds to business, but the absence of a
quorum shall not preclude the appointment, choice or election of a
chairman which shall not be treated as part of the business of the
meeting. Save as otherwise provided by these Bye-Laws, at least two
Shareholders present in person or by proxy and entitled to vote and
holding shares representing more than 50% of the votes that may be cast
by all holders of shares shall be a quorum for all purposes; provided,
however, that if the Company or a class of Shareholders shall have only
one Shareholder, one Shareholder present in person or by proxy shall
constitute the necessary quorum.
55. If within five minutes (or such longer time as the chairman of the
meeting may determine to wait) after the time appointed for the
meeting, a quorum is not present, the meeting, if convened on the
requisition of Shareholders, shall be dissolved. In any other case, it
shall stand adjourned to such other day and such other time and place
as the chairman of the meeting may determine and at such adjourned
meeting two Shareholders present in person or by proxy and entitled to
vote and holding shares representing more than 50% of the votes that
may be cast by all holders of shares shall be a quorum, provided that
if the Company or a class of Shareholders shall have only one
Shareholder, one Shareholder present in person or by proxy shall
constitute the necessary quorum. The Company shall give not less than 7
days notice of any meeting adjourned through want of a quorum and such
notice shall state that the sole Shareholder or, if more than one, two
Shareholders present
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in person or by proxy and entitled to vote and holding shares
representing more than 50% of the votes that may be cast by all holders
of shares shall be a quorum. If at the adjourned meeting a quorum is
not present within fifteen minutes after the time appointed for holding
the meeting, the meeting shall be dissolved.
56. A meeting of the Shareholders or any class thereof may be held by means
of such telephone, electronic or other communication facilities as
permit all persons participating in the meeting to communicate with
each other simultaneously and instantaneously and participation in such
a meeting shall constitute presence in person at such meeting.
57. The Resident Representative, if any, upon giving the notice referred to
in Bye-Law 50 above, shall be entitled to attend any general meeting of
the Company and each Director shall be entitled to attend and speak at
any general meeting of the Company.
58. The Chairman or Co-Chairman (if any) of the Board or, in their absence,
the President or Chief Executive Officer shall preside as chairman at
every general meeting. If there is no such Chairman or Co-Chairman or
President or Chief Executive Officer, or if at any meeting none of the
Chairman, Co-Chairman, Chief Executive Officer or President is present
within five minutes after the time appointed for holding the meeting,
or if neither of them is willing to act as chairman, the Directors
present shall choose one of their number to act or if one Director only
is present he shall preside as chairman if willing to act. If no
Director is present, or if each of the Directors present declines to
take the chair, the persons present and entitled to vote on a poll
shall elect one of their number to be chairman.
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59. The chairman of the meeting may, with the consent of any meeting at
which a quorum is present (and shall if so directed by the meeting),
adjourn the meeting from time to time and from place to place but no
business shall be transacted at any adjourned meeting except business
which might lawfully have been transacted at the meeting from which the
adjournment took place. In addition, the chairman may adjourn the
meeting to another time and place without such consent if it appears to
him that it is likely to be impracticable to hold or continue that
meeting because of the number of members wishing to attend who are not
present. When a meeting is adjourned for three months or more or for an
indefinite period, at least seven clear days' notice shall be given of
the adjourned meeting as in the case of an original meeting.
60. Save as expressly provided by these Bye-Laws, it shall not be necessary
to give any notice of an adjournment or of the business to be
transacted at an adjourned meeting.
VOTING
61. If an amendment shall be proposed to any resolution under consideration
but shall in good faith be ruled out of order by the chairman of the
meeting, the proceedings on the substantive resolution shall not be
invalidated by any error in such ruling. With the consent of the
chairman of the meeting, an amendment may be withdrawn by its proposer
before it is voted upon.
62. Save where a greater percentage is required by the Companies Acts or
these Bye-Laws, any question proposed for consideration at any General
Meeting shall be decided on by a simple majority of votes cast at such
meeting; provided, however, that a resolution to remove any director
pursuant to Bye-Law 85 must be approved by the vote of at least a
majority of all issued and outstanding capital shares of the Company
eligible to vote thereon.
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63. (1) Subject to Bye-Law 63(2) and to the limitations imposed by
the Board on voting under Bye-law 130, and subject to any
rights or restrictions attached to any class of shares, at any
meeting of the Company, each Shareholder present in person or
by proxy shall vote on a poll and shall be entitled on a poll
to one vote for each share held by him.
(2) In the case of a Shareholder who is an Over-the-Threshold
Shareholder as defined below, each issued common share
constituting a part of the Controlled Shares of such
Shareholder held by such Shareholder shall, in the context of
a particular meeting of shareholders, confer only a fraction
of a vote according to the following formula (the "Cut-back
Formula"): AV multiplied by the applicable percentage set
forth in the definition of "Maximum Vote" divided by CS.
Where; "AV" is the aggregate number of issued and
outstanding common shares represented at the
applicable meeting (without regard to any
limitation on the number of votes any such
shares may cast).
"CS" is the number of Controlled Shares of
such Shareholder.
In determining the votes allocable to common
shares beneficially owned by CIBC, the
preceding formula shall be applied to all of
the common shares beneficially owned by
persons constituting a part of CIBC, in the
aggregate. In determining the votes
allocable to common shares beneficially
owned by any member of a group (within the
meaning of
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Section 13(d) of the Exchange Act), the
preceding formula shall be applied to all of
the common shares beneficially owned by
persons constituting a part of the group, in
the aggregate. Any person (a "Related
Holder") who owns Controlled Shares which
are deemed to be owned directly, indirectly
or constructively (within the meaning of
Section 958 of the Code and the Treasury
Regulations promulgated thereunder) by one
or more Over-the-Threshold Shareholders
shall have the vote allocable to such
Controlled Shares held by the Related Holder
reduced, in a manner consistent with this
Bye-Law 63(2), so as to prevent the
Over-the-Threshold Shareholders from having
voting power greater than the Maximum Vote
applicable to such Over-the-Threshold
Shareholders.
A number of votes equal to the excess (the
"Re-allocable Votes") of (i) the number of
votes that could have been cast by the
Controlled Shares held by all
Over-the-Threshold Shareholders if the
Cut-back Formula were not applicable over
(ii) the number of votes that may be cast by
such Controlled Shares after application of
the Cut-back Formula shall be reallocated
among the common shares that are (a)
represented at the applicable meeting, (b)
not included in such Controlled Shares and
(c) not held by other Over-the-Threshold
Shareholders in accordance with the
following formula (the "Reallocation
Formula"):
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RV
---------------
AV-ACS
Where: "RV" is the Re-allocable Votes
"AV" is used in the manner defined in the
Cut-back Formula
"ACS" is the aggregate number of Controlled
Shares of all Over-the-Threshold
Shareholders
If the application of the Reallocation
Formula causes any Shareholder to become an
Over-the-Threshold Shareholder, the Cut-back
Formula shall be applied to such
Shareholder's Controlled Shares (taking into
account the additional votes of such shares
after the application of the Reallocation
Formula), and the Cut-back Formula and the
Reallocation Formula shall continue to be
applied until there are no
Over-the-Threshold Shareholders.
(3) The Board shall have the power and authority to make all
determinations that may be required to effectuate the
provisions of this Bye-Law, including any required
determination of the number of Shares that may be deemed to be
held by any Shareholder, and such determinations shall be
conclusive in the absence of manifest error. All record and
beneficial owners of Shares (and all potential transferees of
Shares) shall be deemed to have agreed, by virtue of their
ownership thereof, to provide to the Board, at such times and
in such detail as the Board may reasonably request, any
information that the Board may require in order to make such
determinations.
(4) The following definitions shall apply for the purposes of this
Bye-Law:
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"Maximum Vote" means (x) in the case of all
Shareholders other than CIBC, 9.5% of the total votes
cast by holders of common shares of the Company in
connection with any matter being voted on and (y) in
the case of CIBC in the aggregate, 20% of the total
votes cast by holders of common shares of the Company
in connection with any matter being voted on.
An "Over-the-Threshold Shareholder" for the purposes
of this Bye-Law is a Shareholder in respect of whom,
by virtue of their holding of Controlled Shares
would, upon giving effect to the principle that
holders of common shares shall have one vote for each
common share so registered, have greater than the
Maximum Vote.
64. At any general meeting, a resolution put to the vote of the meeting
shall be decided on a poll.
65. On a poll, votes may be cast either personally or by proxy.
66. A person entitled to more than one vote on a poll need not use all his
votes or cast all the votes he uses in the same way.
67. In the case of an equality of votes, the chairman of such meeting shall
not be entitled to a second or casting vote and the resolution shall
fail.
68. In the case of joint holders of a share, the vote of the senior who
tenders a vote, whether in person or by proxy, shall be accepted to the
exclusion of the votes of the other joint holders, and for this purpose
seniority shall be
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determined by the order in which the names stand in the Register in
respect of the joint holding.
69. A Shareholder who is a patient for any purpose of any statute or
applicable law relating to mental health or in respect of whom an order
has been made by any Court having jurisdiction for the protection or
management of the affairs of persons incapable of managing their own
affairs may vote, whether on a show of hands or on a poll, by his
receiver, committee, curator bonis or other person in the nature of a
receiver, committee or curator bonis appointed by such Court and such
receiver, committee, curator bonis or other person may vote on a poll
by proxy, and may otherwise act and be treated as such Shareholder for
the purpose of general meetings.
70. No Shareholder shall, unless the Board otherwise determines, be
entitled to vote at any general meeting unless all calls or other sums
presently payable by him in respect of shares in the Company have been
paid.
71. If:
(1) any objection shall be raised to the qualification of any
voter; or,
(2) any votes have been counted which ought not to have been
counted or which might have been rejected; or,
(3) any votes are not counted which ought to have been counted,
the objection or error shall not vitiate the decision of the meeting or
adjourned meeting on any resolution unless the same is raised or
pointed out at the meeting or, as the case may be, the adjourned
meeting at which the vote objected to is given or tendered or at which
the error occurs. Any objection or error shall be referred to the
chairman of the meeting and shall only vitiate the decision of the
meeting on any resolution if the chairman decides that the same may
have affected the decision of the meeting. The decision of the chairman
on such matters shall be final and conclusive.
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PROXIES AND CORPORATE REPRESENTATIVES
72. The instrument appointing a proxy shall be in writing under the hand of
the appointor or of his attorney authorised by him in writing or, if
the appointor is a corporation, either under its seal or under the hand
of an officer, attorney or other person authorised to sign the same.
73. Any Shareholder may appoint a standing proxy or (if a corporation)
representative by depositing at the Registered Office, or at such place
or places as the Board may otherwise specify for the purpose, a proxy
or (if a corporation) an authorisation and such proxy or authorisation
shall be valid for all general meetings and adjournments thereof or,
resolutions in writing, as the case may be, until notice of revocation
is received at the Registered Office, or at such place or places as the
Board may otherwise specify for the purpose. Where a standing proxy or
authorisation exists, its operation shall be deemed to have been
suspended at any general meeting or adjournment thereof at which the
Shareholder is present or in respect to which the Shareholder has
specially appointed a proxy or representative. The Board may from time
to time require such evidence as it shall deem necessary as to the due
execution and continuing validity of any such standing proxy or
authorisation and the operation of any such standing proxy or
authorisation shall be deemed to be suspended until such time as the
Board determines that it has received the requested evidence or other
evidence satisfactory to it. A person so authorised as a representative
of a corporation shall be entitled to exercise the same power on behalf
of the grantor of the authority as the grantor could exercise if it
were an individual Shareholder of the Company and the grantor shall for
the purposes of these Bye-Laws be deemed to be present in person at any
such meeting if a person so authorised is present at it.
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<PAGE>
74. Subject to Bye-Law 73, the instrument appointing a proxy together with
such other evidence as to its due execution as the Board may from time
to time require, shall be delivered at the Registered Office (or at
such place or places as may be specified in the notice convening the
meeting or in any notice of any adjournment or, in either case or the
case of a written resolution, in any document sent therewith) not less
than 24 hours or such other period as the Board may determine, prior to
the holding of the relevant meeting or adjourned meeting at which the
person named in the instrument proposes to vote or, in the case of a
poll taken subsequently to the date of a meeting or adjourned meeting,
before the time appointed for the taking of the poll, or, in the case
of a written resolution, prior to the effective date of the written
resolution and in default the instrument of proxy shall not be treated
as valid.
75. Instruments of proxy shall be in any common form or in such other form
as the Board may approve and the Board may, if it thinks fit, send out
with the notice of any meeting or any written resolution forms of
instruments of proxy for use at that meeting or in connection with that
written resolution. The instrument of proxy shall be deemed to confer
authority to demand or join in demanding a poll and to vote on any
amendment of a written resolution or amendment of a resolution put to
the meeting for which it is given as the proxy thinks fit. The
instrument of proxy shall unless the contrary is stated therein be
valid as well for any adjournment of the meeting as for the meeting to
which it relates.
76. A vote given in accordance with the terms of an instrument of proxy
shall be valid notwithstanding the previous death or unsoundness of
mind of the principal, or revocation of the instrument of proxy or of
the authority under which it was executed, provided that no intimation
in writing of such death,
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<PAGE>
insanity or revocation shall have been received by the Company at the
Registered Office (or such other place as may be specified for the
delivery of instruments of proxy in the notice convening the meeting or
other documents sent therewith) one hour at least before the
commencement of the meeting or adjourned meeting, or the taking of the
poll, or the day before the effective date of any written resolution at
which the instrument of proxy is used.
77. Subject to the Companies Acts, the Board may at its discretion waive
any of the provisions of these Bye-Laws related to proxies or
authorisations and, in particular, may accept such verbal or other
assurances as it thinks fit as to the right of any person to attend and
vote on behalf of any Shareholder at general meetings or to sign
written resolutions.
APPOINTMENT AND REMOVAL OF DIRECTORS
78. (1) At the date of adoption of these Bye-Laws, the Board shall
consist of the following persons: -
Jay R. Bloom
Abbott L. Brown
William E. Conway
Lodwrick Cook
Dean C. Kehler
Geoffrey J.W. Kent
David L. Lee
Jay R. Levine
Toshiaki Ogasawara
William D. Phoenix
Barry Porter
Bruce Raben
Jack M. Scanlon
Michael R. Steed
Hillel Weinberger
Gary Winnick
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<PAGE>
(2) [Intentionally Left Blank]
(3) Each of Abbott Brown, William Conway, Jay Levine, William
Phoenix and Barry Porter are hereby designated as "A"
Directors for the purposes of this Bye-Law. Each of Lodwrick
Cook, Jeffrey Kent, David Lee, Bruce Raben, and Jack Scanlon
are hereby designated "B" Directors, and each of Jay Bloom,
Dean Kehler, Toshiaki Ogasawara, Michael Steed, Hillel
Weinberger and Gary Winnick are hereby designated as "C"
Directors. The Board of Directors shall from time to time by
resolution determine the number of A Directors, B Director and
C Directors.
(4) Upon the resignation or removal of a Director, if any new
Director shall be appointed to the Board they shall be
designated to fill the vacancy arising and shall, for the
purposes of these Bye-Laws, constitute a member of the class
represented by the person that they replaced. If there are
more than two vacancies on the Board, then the Shareholders or
the Directors, when appointing a person to fill a vacancy,
shall designate the class of director they shall belong to by
the resolution appointing such person.
79. (1) The A Directors shall serve initially until the conclusion
of the Annual General Meeting of the Company held in the
calendar year 2000, at which consideration is made of
financial statements for the period ending 31 December 1999,
and thereafter shall serve for a three-year terms, concluding
at the third Annual General Meeting after his appointment or
reappointment.
(2) The B Directors shall serve initially until the conclusion of
the Annual General Meeting of the Company held in the calendar
year
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2001, at which consideration is made of financial statements
for the period ending 31 December 2000, and thereafter shall
serve for a three-year terms, concluding at the third Annual
General Meeting after his appointment or reappointment.
(3) The C Directors shall serve initially until the conclusion of
the Annual General Meeting of the Company held in the calendar
year 2002, at which consideration is made of financial
statements for the period ending December 31, 2001, and
thereafter shall serve for a three-year terms, concluding at
the third Annual General Meeting after his appointment or
reappointment.
80. If the Company, at the meeting at which a Director retires by rotation
or otherwise, does not fill the vacancy, the retiring Director shall,
if willing to act, be deemed to have been reappointed unless at the
meeting it is resolved not to fill the vacancy or unless a resolution
for the reappointment of the Director is put to the meeting and lost.
81. No person shall be appointed a Director, unless:-
(a) In the case of an Annual or Special General Meeting, such
person is recommended by the Board; or
(b) In the case of an Annual General Meeting, not less than 120
nor more than 150 days before the date of the Company's proxy
statement released to Shareholders in connection with the
prior year's Annual General Meeting, notice executed by a
Shareholder (not being the person to be proposed) has been
received by the Secretary of the Company of the intention to
propose such person for appointment, setting forth as to each
person whom the Shareholder proposes to nominate for election
or re-election as a Director (i) the name, age, business
address and residence address of such person,
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(ii) the principal occupation or employment of such person,
(iii) the class, series and number of shares of the Company
which are beneficially owned by such person, (iv) particulars
which would, if he were so appointed, be required to be
included in the Company's register of Directors and Officers
and (v) all other information relating to such person that is
required to be disclosed in solicitations for proxies for the
election of Directors pursuant to the Rules and Regulations of
the Securities and Exchange Commission under Section 14 of the
Securities Exchange Act of 1934 of the United States of
America, as amended, together with notice executed by such
person of his willingness to serve as a Director if so
elected; provided, however, that no Shareholder shall be
entitled to propose any person to be appointed, elected or re-
elected Director at any Special General Meeting.
82. Except as otherwise required by the Companies Acts, the appointment of
any person proposed as a Director shall be effected by a separate
resolution voted on at a General Meeting pursuant to Bye-Law 62 herein.
83. All Directors (other then the initial Directors set forth herein), upon
election or appointment, must provide written acceptance of their
appointment, in such form as the Board may think fit, by notice in
writing to the Registered Office within 30 days of their appointment.
84. The Company may by Resolution determine (i) the minimum number of
Directors, which shall be not less than 11 and which is hereby set at
11 until such number is amended by a further Resolution and (ii) the
maximum number of Directors, which shall not be more than 20 and which
is hereby set at 20 until such number is amended by a further
Resolution, and any vacancies on the Board shall be deemed casual
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vacancies for the purposes of these Bye-Laws. Without prejudice to the
power of the Company by Resolution in pursuance of any of the
provisions of these Bye-Laws to appoint any person to be a Director,
the Board, so long as a quorum of Directors remains in office, shall
have power at any time and from time to time to appoint any individual
to be a Director so as to fill a casual vacancy. A Director so
appointed shall hold office only until the next following Annual
General Meeting and shall not be taken into account in determining the
Directors who are to retire by rotation at the meeting. If not
reappointed at such Annual General Meeting, he shall vacate office at
the conclusion thereof.
85. The Shareholders may in a Special General Meeting called for that
purpose remove a Director provided notice of any such meeting shall be
served upon the Director concerned not less than 14 days before the
meeting and he shall be entitled to be heard at that meeting. Any
vacancy created by the removal of a Director at a Special General
Meeting may be filled at the Meeting by the election of another
Director in his place or, in the absence of any such election, by the
Board.
RESIGNATION AND DISQUALIFICATION OF DIRECTORS
86. The office of a Director shall be vacated upon the happening of any of
the following events:
(1) if he resigns his office by notice in writing delivered to the
Registered Office or tendered at a meeting of the Board;
(2) if he becomes of unsound mind or a patient for any purpose of
any statute or applicable law relating to mental health and
the Board resolves that his office is vacated;
(3) if he becomes bankrupt under the laws of any country or
compounds with his creditors;
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(4) if he is prohibited by law from being a Director;
(5) if he ceases to be a Director by virtue of the Companies Acts
or these Bye-Laws or is removed from office pursuant to these
Bye-Laws;
(6) he shall for more than six consecutive months have been absent
without permission of the Board from meetings of the Board
held during that period and his Alternate Director (if any)
shall not during such period have attended in his stead and
the Board resolves that his office be vacated; or
(7) after the initial term he is requested to resign in writing by
not less than three quarters of the other Directors. In
calculating the number of Directors who are required to make
such a request to the Director, (i) there shall be excluded
any Alternate Director appointed by him acting in his capacity
as such; and (ii) a Director and any Alternate Director
appointed by him and acting in his capacity as such shall
constitute a single Director for this purpose, so that the
signature of either shall be sufficient.
ALTERNATE DIRECTORS
87. Any Director (other than an Alternate Director) may appoint any other
Director, or any other person approved by resolution of the Board and
willing to act, to be an Alternate Director and may remove from office
an Alternate Director so appointed by him. Any appointment or removal
of an Alternate Director by a Director shall be effected by depositing
a notice of appointment or removal with the Secretary at the Registered
Office, signed by such Director, and such appointment or removal shall
become effective on the date of receipt by the Secretary. Any Alternate
Director may also be removed by resolution of the Board. An Alternate
Director may also be a Director in his own right and may act as
alternate to more than one Director.
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88. An Alternate Director shall cease to be an Alternate Director:-
(a) if his appointor ceases to be a Director; but, if a Director
retires by rotation or otherwise but is reappointed or deemed
to have been reappointed at the meeting at which he retires,
any appointment of an Alternate Director made by him which was
in force immediately prior to his retirement shall continue
after his reappointment;
(b) on the happening of any event which, if he were a Director,
would cause him to vacate his office as Director;
(c) if he is removed from office pursuant to Bye-Law 85; or
(d) if he resigns his office by notice to the Company.
89. An Alternate Director shall be entitled to receive notices of all
meetings of Directors, to attend, be counted in the quorum and vote at
any such meeting at which any Director to whom he is alternate is not
personally present, and generally to perform all the functions of any
Director to whom he is alternate in his absence.
90. Every person acting as an Alternate Director shall (except as regards
powers to appoint an alternate and remuneration) be subject in all
respects to the provisions of these Bye-Laws relating to Directors and
shall alone be responsible to the Company for his acts and defaults and
shall not be deemed to be the agent of or for any Director for whom he
is alternate. An Alternate Director may be paid expenses and shall be
entitled to be indemnified by the Company to the same extent mutatis
mutandis as if he were a Director. Every person acting as an Alternate
Director shall have one vote for each Director for whom he acts as
alternate (in addition to his own vote if he is also a Director). The
signature of an Alternate Director to any resolution in writing of the
Board or a committee of the Board shall, unless
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the terms of his appointment provides to the contrary, be as effective
as the signature of the Director or Directors to whom he is alternate.
DIRECTORS' FEES AND
ADDITIONAL REMUNERATION AND EXPENSES
91. The ordinary remuneration of the Directors who do not hold executive
office for their services (excluding amounts payable under any other
provision of these Bye-Laws) shall be such amount as the Board may from
time to time by resolution determine and in the absence of a
determination to the contrary such fees shall be deemed to accrue from
day to day. Subject thereto, each such Director shall be paid a fee
(which shall be deemed to accrue from day to day) at such rate as may
from time to time be determined by the Board. Each Director may be paid
his reasonable travel, hotel and incidental expenses in attending and
returning from meetings of the Board or committees constituted pursuant
to these Bye-Laws or General Meetings and shall be paid all expenses
properly and reasonably incurred by him in the conduct of the Company's
business or in the discharge of his duties as a Director. Any Director
who, by request, goes or resides abroad for any purposes of the Company
or who performs services which in the opinion of the Board go beyond
the ordinary duties of a Director may be paid such extra remuneration
(whether by way of salary, commission, participation in profits or
otherwise) as the Board may determine, and such extra remuneration
shall be in addition to any remuneration provided for by or pursuant to
any other Bye-Law.
DIRECTORS' INTERESTS
92. (1) A Director may hold any other office or place of profit with
the Company (except that of auditor) in conjunction with his
office of
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Director for such period and upon such terms as the Board may
determine, and may be paid such extra remuneration therefor
(whether by way of salary, commission, participation in
profits or otherwise) as the Board may determine, and such
extra remuneration shall be in addition to any remuneration
provided for by or pursuant to any other Bye-Law.
(2) A Director may act by himself or his firm in a professional
capacity for the Company (otherwise than as auditor) and he or
his firm shall be entitled to remuneration for professional
services as if he were not a Director.
(3) Subject to the provisions of the Companies Acts, a Director
may notwithstanding his office be a party to, or otherwise
interested in, any transaction or arrangement with the Company
or in which the Company is otherwise interested; and be a
director or other officer of, or employed by, or a party to
any transaction or arrangement with, or otherwise interested
in, any body corporate promoted by the Company or in which the
Company is interested. The Board may also cause the voting
power conferred by the shares in any other company held or
owned by the Company to be exercised in such manner in all
respects as it thinks fit, including the exercise thereof in
favour of any resolution appointing the Directors or any of
them to be directors or officers of such other company, or
voting or providing for the payment of remuneration to the
directors or officers of such other company.
(4) So long as, where it is necessary, he declares the nature of
his interest at the first opportunity at a meeting of the
Board or by writing to the Directors as required by the
Companies Acts, a Director shall not by reason of his office
be accountable to the Company for any benefit which he derives
from any office or employment to which these Bye-Laws allow
him to be appointed or
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from any transaction or arrangement in which these Bye-Laws
allow him to be interested, and no such transaction or
arrangement shall be liable to be avoided on the ground of any
interest or benefit.
(5) A Director who has disclosed his interest in a transaction or
arrangement with the Company, or in which the Company is
otherwise interested, may be counted in the quorum and vote at
any meeting at which such transaction or arrangement is
considered by the Board; provided that, notwithstanding the
foregoing, (i) when the Board is considering a resolution to
fill a vacancy on the Board or (ii) the Board is voting on a
resolution for the nomination or recommendation of the slate
of Directors as required under Bye-Law 81, Gary Winnick, so
long as he is a Director, shall not be entitled to vote on any
of such resolutions and may not be counted in the quorum of
the meeting.
(6) Subject to the Companies Acts and any further disclosure
required thereby, a general notice to the Directors by a
Director or Officer declaring that he is a director or officer
or has an interest in a person and is to be regarded as
interested in any transaction or arrangement made with that
person, shall be a sufficient declaration of interest in
relation to any transaction or arrangement so made.
(7) For the purposes of these Bye-Laws, without limiting the
generality of the foregoing, a Director is deemed to have an
interest in a transaction or arrangement with the Company if
he is the holder of or beneficially interested in five per
cent or more of any class of the equity share capital of any
body corporate (or any other body corporate through which his
interest is derived) or of the voting rights available to
members of the relevant body corporate with which the Company
is proposing to enter into a transaction or arrangement,
provided that there shall be disregarded any shares held by
such Director as bare or custodian trustee and in which he has
no
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beneficial interest, any shares comprised in a trust in
which the Director's interest is in reversion or remainder if
and so long as some other person is entitled to receive the
income thereof, and any shares comprised in an authorised unit
trust in which the Director is only interested as a unit
holder. For the purposes of this Bye-Law, an interest of a
person who is connected with a Director shall be treated as an
interest of the Director.
POWERS AND DUTIES OF THE BOARD
93. Subject to the provisions of the Companies Acts and these Bye-Laws and
to any directions given by the Company by Resolution, the Board shall
manage the business of the Company and may pay all expenses incurred in
promoting and incorporating the Company and may exercise all the powers
of the Company. No alteration of these Bye-Laws and no such direction
shall invalidate any prior act of the Board which would have been valid
if that alteration had not been made or that direction had not been
given. The powers given by this Bye-Law shall not be limited by any
special power given to the Board by these Bye-Laws and a meeting of the
Board at which a quorum is present shall be competent to exercise all
the powers, authorities and discretions for the time being vested in or
exercisable by the Board.
94. The Board may exercise all the powers of the Company to borrow money
and to mortgage or charge all or any part of the undertaking, property
and assets (present and future) and uncalled capital of the Company and
to issue debentures and other securities, whether outright or as
collateral security for any debt, liability or obligation of the
Company or of any other persons.
95. All cheques, promissory notes, drafts, bills of exchange and other
instruments, whether negotiable or transferable or not, and all
receipts for
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money paid to the Company shall be signed, drawn, accepted, endorsed or
otherwise executed, as the case may be, in such manner as the Board
shall from time to time by resolution determine.
GRATUITIES, PENSIONS AND INSURANCE
96. (1) The Board may (by establishment of or maintenance of schemes
or otherwise) provide benefits, whether by the payment of
gratuities or pensions or by insurance or otherwise, for any
past or present Director or employee of the Company or any of
its subsidiaries or any body corporate associated with, or any
business acquired by, any of them, and for any member of his
family (including a spouse and a former spouse) or any person
who is or was dependent on him, and may (as well before as
after he ceases to hold such office or employment) contribute
to any fund and pay premiums for the purchase or provision of
any such benefit.
(2) Without prejudice to the provisions of Bye-Laws 141 and 142,
the Board shall have the power to purchase and maintain
insurance for or for the benefit of any persons who are or
were at any time Directors, Officers, or employees of the
Company, or of any other Company which is its holding company
or in which the Company or such holding company has any
interest whether direct or indirect or which is in any way
allied to or associated with the Company, or of any subsidiary
undertaking of the Company or any such other company, or who
are or were at any time trustees of any pension fund in which
employees of the Company or any such other company or
subsidiary undertaking are interested, including (without
prejudice to the generality of the foregoing) insurance
against any liability incurred by such persons in respect of
any act or omission in the actual or purported execution or
discharge of their duties or in the
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exercise or purported exercise of their powers or otherwise in
relation to their duties, powers or offices in relation to the
Company or any such other company, subsidiary undertaking or
pension fund.
(3) No Director or former Director shall be accountable to the
Company or the Shareholders for any benefit provided pursuant
to this Bye-Law and the receipt of any such benefit shall not
disqualify any person from being or becoming a Director of the
Company.
DELEGATION OF THE BOARD'S POWERS
97. The Board may by power of attorney appoint any company, firm or person
or any fluctuating body of persons, whether nominated directly or
indirectly by the Board, to be the attorney or attorneys of the Company
for such purposes and with such powers, authorities and discretions
(not exceeding those vested in or exercisable by the Board under these
Bye-Laws) and for such period and subject to such conditions as it may
think fit, and any such power of attorney may contain such provisions
for the protection and convenience of persons dealing with any such
attorney and of such attorney as the Board may think fit, and may also
authorise any such attorney to sub-delegate all or any of the powers,
authorities and discretions vested in him.
98. The Board may entrust to and confer upon any Director, Officer or,
without prejudice to the provisions of Bye-Law 99, other individual any
of the powers exercisable by it upon such terms and conditions with
such restrictions as it thinks fit, and either collaterally with, or to
the exclusion of, its own powers, and may from time to time revoke or
vary all or any of such powers but no person dealing in good faith and
without notice of such revocation or variation shall be affected
thereby.
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99. The Board may delegate any of its powers, authorities and discretions
to committees, consisting of such person or persons (whether a member
or members of its body or not) as it thinks fit. Any committee so
formed shall, in the exercise of the powers, authorities and
discretions so delegated, and in conducting its proceedings conform to
any regulations which may be imposed upon it by the Board. If no
regulations are imposed by the Board the proceedings of a committee
with two or more members shall be, as far as is practicable, governed
by the Bye-Laws regulating the proceedings of the Board.
PROCEEDINGS OF THE BOARD
100. The Board may meet for the despatch of business, adjourn and otherwise
regulate its meetings as it thinks fit. Questions arising at any
meeting shall be determined by the affirmative vote of a majority of
the Directors then in office. In the case of an equality of votes the
motion shall be deemed to have been lost. A Director may, and the
Secretary on the requisition of a Director shall, at any time summon a
meeting of the Board.
101. Notice of a meeting of the Board shall be deemed to be duly given to a
Director if it is given to him personally or by word of mouth or sent
to him by post, cable, telex, telecopier or other mode of representing
or reproducing words in a legible and non-transitory form at his last
known address or any other address given by him to the Company for this
purpose. A Director may retrospectively waive the requirement for
notice of any meeting by consenting in writing to the business
conducted at the meeting.
102. (1) The quorum necessary for the transaction of the business
of the Board may be fixed by the Board and, unless so fixed at
any other number, shall be two individuals. Any Director who
ceases to be a
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Director at a meeting of the Board may continue to be present
and to act as a Director and be counted in the quorum until
the termination of the meeting if no other Director objects
and if otherwise a quorum of Directors would not be present.
(2) The Resident Representative shall, upon delivering written
notice of an address for the purposes of receipt of notice, to
the Registered Office, be entitled to receive notice of,
attend and be heard at, and to receive minutes of all meetings
of the Board.
103. So long as a quorum of Directors remains in office, the continuing
Directors may act notwithstanding any vacancy in the Board but, if no
such quorum remains, the continuing Directors or a sole continuing
Director may act only for the purpose of calling a general meeting.
104. The Chairman or Co-Chairman (or President) or, in his absence, the
Deputy Chairman or Co-Chairman (or Vice-President), shall preside as
chairman at every meeting of the Board. If at any meeting the Chairman
or Deputy Chairman (or the President or Vice-President) is not present
within five minutes after the time appointed for holding the meeting,
or is not willing to act as chairman, the Directors present may choose
one of their number to be chairman of the meeting.
105. The meetings and proceedings of any committee consisting of two or more
members shall be governed by the provisions contained in these Bye-Laws
for regulating the meetings and proceedings of the Board so far as the
same are applicable and are not superseded by any regulations imposed
by the Board.
106. A resolution in writing signed by all the Directors for the time being
entitled to receive notice of a meeting of the Board or by all the
members of a
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committee for the time being shall be as valid and effectual as a
resolution passed at a meeting of the Board or, as the case may be, of
such committee duly called and constituted. Such resolution may be
contained in one document or in several documents in the like form each
signed by one or more of the Directors or members of the committee
concerned.
107. A meeting of the Board or a committee appointed by the Board may be
held by means of such telephone, electronic or other communication
facilities as permit all persons participating in the meeting to
communicate with each other simultaneously and instantaneously and
participation in such a meeting shall constitute presence in person at
such meeting. Such a meeting shall be deemed to take place where the
largest group of those participating in the meeting is physically
assembled, or, if there is no such group, where the chairman of the
meeting then is. The word "meeting" in these Bye-Laws shall be
construed accordingly.
108. All acts done by the Board or by any committee or by any person acting
as a Director or member of a committee or any person duly authorised by
the Board or any committee, shall, notwithstanding that it is
afterwards discovered that there was some defect in the appointment of
any member of the Board or such committee or person acting as aforesaid
or that they or any of them were disqualified or had vacated their
office, be as valid as if every such person had been duly appointed and
was qualified and had continued to be a Director, member of such
committee or person so authorised.
109. The Company may by Resolution suspend or relax to any extent, either
generally or in respect of any particular matter, any provision of
these Bye-Laws prohibiting a Director from voting at a meeting of the
Board or of a committee of the Board, or ratify any transaction not
duly authorised by reason of a contravention of any such provisions.
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110. Where proposals are under consideration concerning the appointment
(including fixing or varying the terms of appointment) of two or more
Directors to offices or employments with the Company or any body
corporate in which the Company is interested, the proposals may be
divided and considered in relation to each Director separately and in
such cases each of the Directors concerned (if not debarred from
voting) provision of paragraph 5 of Bye-Law 97 shall be entitled to
vote and be counted in the quorum in respect of each resolution except
that concerning his own appointment.
111. If a question arises at a meeting of the Board or a committee of the
Board as to the entitlement of a Director to vote or be counted in a
quorum, the question may, before the conclusion of the meeting, be
referred to the chairman of the meeting and his ruling in relation to
any Director other than himself shall be final and conclusive except in
a case where the nature or extent of the interests of the Director
concerned have not been fairly disclosed. If any such question arises
in respect of the chairman of the meeting, it shall be decided by
resolution of the Board (on which the chairman shall not vote) and such
resolution will be final and conclusive except in a case where the
interests of the chairman have not been fairly disclosed.
OFFICERS
112. The Officers of the Company shall include a President and a Vice-
President or a Chairman and Co-Chairman and a Deputy Chairman who shall
be Directors and shall be elected by the Board as soon as possible
after the statutory meeting and each Annual General Meeting. In
addition, the Board may appoint any person whether or not he is a
Director to hold such office as
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the Board may from time to time determine. Any person elected or
appointed pursuant to this Bye-Law shall hold office for such period
and upon such terms as the Board may determine and the Board may revoke
or terminate any such election or appointment. Any such revocation or
termination shall be without prejudice to any claim for damages that
such Officer may have against the Company or the Company may have
against such Officer for any breach of any contract of service between
him and the Company which may be involved in such revocation or
termination. Save as provided in the Companies Acts or these Bye-Laws,
the powers and duties of the Officers of the Company shall be such (if
any) as are determined from time to time by the Board.
EXECUTIVE DIRECTORS
113. Subject to the provisions of the Companies Acts, the Board may appoint
one or more of its body to be the holder of any executive office
(except that of auditor) under the Company and may enter into any
agreement or arrangement with any Director for his employment by the
Company or for the provision by him of any services outside the scope
of the ordinary duties of a Director. Any such appointment, agreement
or arrangement may be made upon such terms, including terms as to
remuneration, as the Board determines, and any remuneration which is so
determined may be in addition to or in lieu of any ordinary
remuneration as a Director. The Board may revoke or vary any such
appointment but without prejudice to any rights or claims which the
person whose appointment is revoked or varied may have against the
Company by reason thereof.
114. Any appointment of a Director to an executive office shall terminate if
he ceases to be a Director but without prejudice to any rights or
claims which he may have against the Company by reason of such cesser.
A Director
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appointed to an executive office shall not ipso facto cease to be a
Director if his appointment to such executive office terminates.
115. The emoluments of any Director holding executive office for his
services as such shall be determined by the Board, and may be of any
description, and (without limiting the generality of the foregoing) may
include admission to or continuance of membership of any scheme
(including any share acquisition scheme) or fund instituted or
established or financed or contributed to by the Company for the
provision of pensions, life assurance or other benefits for employees
or their dependants, or the payment of a pension or other benefits to
him or his dependants on or after retirement or death, apart from
membership or any such scheme or fund.
MINUTES
116. The Board shall cause minutes to be made and books kept for the purpose
of recording -
(1) all appointments of Officers made by the Board;
(2) the names of the Directors and other persons (if any) present at
each meeting of the Board and of any committee;
(3) all proceedings at meetings of the Company, of the holders of any
class of shares in the Company, of the Board and of committees
appointed by the Board or the Shareholders;
(4) all proceedings of its managers (if any).
Shareholders shall only be entitled to see the register of Directors
and Officers, the Register, the financial information provided for in
Bye-Law 132 and the minutes of meetings of the Shareholders of the
Company.
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SECRETARY AND RESIDENT REPRESENTATIVE
117. The Secretary (including one or more deputy or assistant secretaries)
and, if required, the Resident Representative, shall be appointed by
the Board at such remuneration (if any) and upon such terms as it may
think fit and any Secretary and Resident Representative so appointed
may be removed by the Board. The duties of the Secretary and the duties
of the Resident Representative shall be those prescribed by the
Companies Acts together with such other duties as shall from time to
time be prescribed by the Board.
118. A provision of the Companies Acts or these Bye-Laws requiring or
authorising a thing to be done by or to a Director and the Secretary
shall not be satisfied by its being done by or to the same person
acting both as Director and as, or in the place of, the Secretary.
THE SEAL
119. (1) The Seal shall consist of a circular metal device with the
name of the Company around the outer margin thereof and the
country and year of incorporation across the centre thereof.
Should the Seal not have been received at the Registered
Office in such form at the date of adoption of this Bye-Law
then, pending such receipt, any document requiring to be
sealed with the Seal shall be sealed by affixing a red wafer
seal to the document with the name of the Company, and the
country and year of incorporation type written across the
centre thereof.
(2) The Board shall provide for the custody of every Seal. A Seal
shall only be used by authority of the Board or of a committee
constituted by the Board. Subject to these Bye-Laws, any
instrument to which a Seal is affixed shall be signed by
either two Directors, or by the
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Secretary and one Director, or by the Secretary or by any one
person whether or not a Director or Officer, who has been
authorised either generally or specifically to affirm the use
of a Seal; provided that the Secretary or a Director may affix
a Seal over his signature alone to authenticate copies of
these Bye-Laws, the minutes of any meeting or any other
documents requiring authentication.
DIVIDENDS AND OTHER PAYMENTS
120. The Board may from time to time declare dividends or distributions out
of contributed surplus to be paid to the Shareholders according to
their rights and interests including such interim dividends as appear
to the Board to be justified by the position of the Company. The Board,
in its discretion, may determine that any dividend shall be paid in
cash or shall be satisfied, subject to Bye-Law 128, in paying up in
full shares in the Company to be issued to the Shareholders credited as
fully paid or partly paid or partly in one way and partly the other.
The Board may also pay any fixed cash dividend which is payable on any
shares of the Company half yearly or on such other dates, whenever the
position of the Company, in the opinion of the Board, justifies such
payment.
121. Except insofar as the rights attaching to, or the terms of issue of,
any share otherwise provide:-
(1) all dividends or distributions out of contributed surplus may
be declared and paid according to the amounts paid up on the
shares in respect of which the dividend or distribution is
paid, and an amount paid up on a share in advance of calls may
be treated for the purpose of this Bye-Law as paid-up on the
share;
(2) dividends or distributions out of contributed surplus may be
apportioned and paid pro rata according to the amounts paid-up
on
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the shares during any portion or portions of the period in
respect of which the dividend or distribution is paid.
122. The Board may deduct from any dividend, distribution or other monies
payable to a Shareholder by the Company on or in respect of any shares
all sums of money (if any) presently payable by him to the Company on
account of calls or otherwise in respect of shares of the Company.
123. No dividend, distribution or other monies payable by the Company on or
in respect of any share shall bear interest against the Company.
124. Any dividend, distribution or interest, or part thereof payable in
cash, or any other sum payable in cash to the holder of shares may be
paid by cheque or warrant sent through the post addressed to the holder
at his address in the Register or, in the case of joint holders,
addressed to the holder whose name stands first in the Register in
respect of the shares at his registered address as appearing in the
Register or addressed to such person at such address as the holder or
joint holders may in writing direct. Every such cheque or warrant
shall, unless the holder or joint holders otherwise direct, be made
payable to the order of the holder or, in the case of joint holders, to
the order of the holder whose name stands first in the Register in
respect of such shares, and shall be sent at his or their risk and
payment of the cheque or warrant by the bank on which it is drawn shall
constitute a good discharge to the Company. Any one of two or more
joint holders may give effectual receipts for any dividends,
distributions or other monies payable or property distributable in
respect of the shares held by such joint holders.
125. Any dividend or distribution out of contributed surplus unclaimed for a
period of six years from the date of declaration of such dividend or
distribution shall be forfeited and shall revert to the Company and the
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payment by the Board of any unclaimed dividend, distribution, interest
or other sum payable on or in respect of the share into a separate
account shall not constitute the Company a trustee in respect thereof.
126. The Board may also, in addition to its other powers, direct payment or
satisfaction of any dividend or distribution out of contributed surplus
wholly or in part by the distribution of specific assets, and in
particular of paid-up shares or debentures of any other company, and
where any difficulty arises in regard to such distribution or dividend
the Board may settle it as it thinks expedient, and in particular, may
authorise any person to sell and transfer any fractions or may ignore
fractions altogether, and may fix the value for distribution or
dividend purposes of any such specific assets and may determine that
cash payments shall be made to any Shareholders upon the footing of the
values so fixed in order to secure equality of distribution and may
vest any such specific assets in trustees as may seem expedient to the
Board provided that such dividend or distribution may not be satisfied
by the distribution of any partly paid shares or debentures of any
company without the sanction of a Resolution.
RESERVES
127. The Board may, before recommending or declaring any dividend or
distribution out of contributed surplus, set aside such sums as it
thinks proper as reserves which shall, at the discretion of the Board,
be applicable for any purpose of the Company and pending such
application may, also at such discretion, either be employed in the
business of the Company or be invested in such investments as the Board
may from time to time think fit. The Board may also without placing the
same to reserve carry forward any sums which it may think it prudent
not to distribute.
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CAPITALIZATION OF PROFITS
128. The Board may, from time to time, resolve to capitalise all or any part
of any amount for the time being standing to the credit of any reserve
or fund which is available for distribution or to the credit of any
share premium account and accordingly that such amount be set free for
distribution amongst the Shareholders or any class of Shareholders who
would be entitled thereto if distributed by way of dividend and in the
same proportions, on the footing that the same be not paid in cash but
be applied either in or towards paying up amounts for the time being
unpaid on any shares in the Company held by such Shareholders
respectively or in payment up in full of unissued shares, debentures or
other obligations of the Company, to be allotted and distributed
credited as fully paid amongst such Shareholders, or partly in one way
and partly in the other, provided that for the purpose of this Bye-Law,
a share premium account may be applied only in paying up of unissued
shares to be issued to such Shareholders credited as fully paid and
provided further that any sum standing to the credit of a share premium
account may only be applied in crediting as fully paid shares of the
same class as that from which the relevant share premium was derived.
129. Where any difficulty arises in regard to any distribution under the
last preceding Bye-Law, the Board may settle the same as it thinks
expedient and, in particular, may authorise any person to sell and
transfer any fractions or may resolve that the distribution should be
as nearly as may be practicable in the correct proportion but not
exactly so or may ignore fractions altogether, and may determine that
cash payments should be made to any Shareholders in order to adjust the
rights of all parties, as may seem expedient to the Board. The Board
may appoint any person to sign on behalf of the persons entitled to
participate in the distribution any contract
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necessary or desirable for giving effect thereto and such appointment
shall be effective and binding upon the Shareholders.
RECORD DATES
130. Notwithstanding any other provisions of these Bye-Laws, the Company may
by Resolution or the Board may fix any date as the record date for any
dividend, distribution, allotment or issue and for the purpose of
identifying the persons entitled to receive notices of, and entitled to
vote at, General Meetings or entitled to express consent to corporate
action in writing without a meeting. Any such record date may be on or
at any time (i) not more than 60 days before any date on which such
dividend, distribution, allotment or issue is declared, paid or made,
(ii) not more than 60 days nor less than 10 days before the date of any
such meetings and (iii) not more than 10 days after the date on which
the resolution fixing the record date for a shareholder action by
written consent is adopted by the Board.
ACCOUNTING RECORDS
131. The Board shall cause to be kept accounting records sufficient to give
a true and fair view of the state of the Company's affairs and to show
and explain its transactions, in accordance with the Companies Acts.
132. The records of account shall be kept at the Registered Office or at
such other place or places as the Board thinks fit, and shall at all
times be open to inspection by the Directors; PROVIDED that if the
records of account are kept at some place outside Bermuda, there shall
be kept at an office of the Company in Bermuda such records as will
enable the Directors to ascertain with reasonable accuracy the
financial position of the Company at the end of each three month
period. No Shareholder (other than an Officer of the
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Company) shall have any right to inspect any accounting record or book
or document of the Company except as conferred by law or authorised by
the Board or by Resolution.
133. A copy of every balance sheet and statement of income and expenditure,
including every document required by law to be annexed thereto, which
is to be laid before the Company in general meeting, together with a
copy of the auditors' report, shall be sent to each person entitled
thereto in accordance with the requirements of the Companies Acts.
AUDIT
134. Save and to the extent that an audit is waived in the manner permitted
by the Companies Acts, auditors shall be appointed and their duties
regulated in accordance with the Companies Acts, any other applicable
law and such requirements not inconsistent with the Companies Acts as
the Board may from time to time determine.
SERVICE OF NOTICES AND OTHER DOCUMENTS
135. Any notice or other document (including a share certificate) may be
served on or delivered to any Shareholder by the Company either
personally or by sending it through the post (by airmail where
applicable) in a pre-paid letter addressed to such Shareholder at his
address as appearing in the Register or by delivering it to or leaving
it at such registered address. In the case of joint holders of a share,
service or delivery of any notice or other document on or to one of the
joint holders shall for all purposes be deemed as sufficient service on
or delivery to all the joint holders. Any notice or other document if
sent by post shall be deemed to have been served or delivered seven
days after it was put in the post, and in proving such service or
delivery, it shall be
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sufficient to prove that the notice or document was properly addressed,
stamped and put in the post. In counting the period of notice that may
be served on or delivered to any Shareholder by the Company pursuant to
these Bye-laws, the date of posting and the date of receipt of the
applicable notice shall be included in such period of notice.
136. Any notice of a general meeting of the Company shall be deemed to be
duly given to a Shareholder, or other person entitled to it, if it is
sent to him by cable, telex, telecopier or other mode of representing
or reproducing words in a legible and non-transitory form at his
address as appearing in the Register or any other address given by him
to the Company for this purpose. Any such notice shall be deemed to
have been served twenty-four hours after its despatch.
137. Any notice or other document delivered, sent or given to a Shareholder
in any manner permitted by these Bye-Laws shall, notwithstanding that
such Shareholder is then dead or bankrupt or that any other event has
occurred, and whether or not the Company has notice of the death or
bankruptcy or other event, be deemed to have been duly served or
delivered in respect of any share registered in the name of such
Shareholder as sole or joint holder unless his name shall, at the time
of the service or delivery of the notice or document, have been removed
from the Register as the holder of the share, and such service or
delivery shall for all purposes be deemed as sufficient service or
delivery of such notice or document on all persons interested (whether
jointly with or as claiming through or under him) in the share.
DESTRUCTION OF DOCUMENTS
138. The Company shall be entitled to destroy all instruments of transfer of
shares which have been registered, and all other documents on the basis
of
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which any entry is made in the Register, at any time after the
expiration of six years from the date of registration thereof and all
dividends mandates or variations or cancellations thereof and
notifications of change of address at any time after the expiration of
two years from the date of recording thereof and all share certificates
which have been cancelled at any time after the expiration of one year
from the date of cancellation thereof and all paid dividends, warrants
and cheques at any time after the expiration of one year from the date
of actual payment thereof and all instruments of proxy which have been
used for the purpose of a poll at any time after the expiration of one
year from the date of such use and all instruments of proxy which have
not been used for the purpose of a poll at any time after one month
from the end of the meeting to which the instrument of proxy relates
and at which no poll was demanded. It shall conclusively be presumed in
favour of the Company that every entry in the Register purporting to
have been made on the basis of an instrument of transfer or other
document so destroyed was duly and properly made, that every instrument
of transfer so destroyed was a valid and effective instrument duly and
properly registered, that every share certificate so destroyed was a
valid and effective certificate duly and properly cancelled and that
every other document hereinbefore mentioned so destroyed was a valid
and effective document in accordance with the recorded particulars
thereof in the books or records of the Company, provided always that:-
(a) the provisions aforesaid shall apply only to the destruction
of a document in good faith and without notice of any claim
(regardless of the parties thereto) to which the document
might be relevant;
(b) nothing herein contained shall be construed as imposing upon
the Company any liability in respect of the destruction of any
such document earlier than as aforesaid or in any other
circumstances which would not attach to the Company in the
absence of this Bye-Law; and
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(c) references herein to the destruction of any document include
references to the disposal thereof in any manner.
UNTRACED SHAREHOLDERS
139. (1) The Company shall be entitled to sell at the best price
reasonably obtainable, or if the shares are listed on a Stock
Exchange to purchase at the trading price on the date of
purchase, the shares of a Shareholder or the shares to which a
person is entitled by virtue of transmission on death,
bankruptcy, or otherwise by operation of law if and provided
that:-
(a) during the period of 12 years prior to the date of
the publication of the advertisements referred to in
paragraph (b) below (or, if published on different
dates, the first thereof) at least three dividends in
respect of the shares in question have been declared
and all dividends, warrants and cheques which have
been sent in the manner authorised by these Bye-Laws
in respect of the shares in question have remained
uncashed; and
(b) the Company shall as soon as practicable after expiry
of the said period of 12 years have inserted
advertisements both in a national daily newspaper and
in a newspaper circulating in the area of the last
known address of such Shareholder or other person
giving notice of its intention to sell or purchase
the shares; and
(c) during the said period of 12 years and the period of
three months following the publication of the said
advertisements the Company shall have received no
indication either of the whereabouts or of the
existence of such Shareholder or person; and
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(d) if the shares are listed on a Stock Exchange, notice
shall have been given to the relevant department of
such Stock Exchange of the Company's intention to
make such sale or purchase prior to the publication
of advertisements.
If during any 12-year period referred to in paragraph (a)
above, further shares have been issued in right of those held
at the beginning of such period or of any previously issued
during such period and all the other requirements of this
Bye-Law (other than the requirement that they be in issue for
12 years) have been satisfied in regard to the further shares,
the Company may also sell or purchase the further shares.
(2) To give effect to any such sale or purchase, the Board may
authorise some person to execute an instrument of transfer of
the shares sold or purchased to, or in accordance with the
directions of, the purchaser and an instrument of transfer
executed by that person shall be as effective as if it had
been executed by the holder of, or person entitled by
transmission to, the shares. The transferee of any shares sold
shall not be bound to see to the application of the purchase
money, nor shall his title to the shares be affected by any
irregularity in, or invalidity of, the proceedings in
reference to the sale.
(3) The net proceeds of sale or purchase of shares shall belong to
the Company which, for the period of six years after the
transfer or purchase, shall be obliged to account to the
former Shareholder or other person previously entitled as
aforesaid for an amount equal to such proceeds and shall enter
the name of such former Shareholder or other person in the
books of the Company as a creditor for such amount. No trust
shall be created in respect of the debt, no interest shall be
payable in respect of the same and the Company shall not be
required to account for any money earned on the net proceeds,
which
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may be employed in the business of the Company or invested in
such investments as the Board from time to time thinks fit.
After the said six-year period has passed, the net proceeds of
share shall become the property of the Company, absolutely,
and any rights of the former Shareholder or other person
previously entitled as aforesaid shall terminate completely.
WINDING UP
140. If the Company shall be wound up, the liquidator may, with the sanction
of a Resolution of the Company and any other sanction required by the
Companies Acts, divide amongst the Shareholders in specie or kind the
whole or any part of the assets of the Company (whether they shall
consist of property of the same kind or not) and may for such purposes
set such values as he deems fair upon any property to be divided as
aforesaid. Following settlement by the liquidator of the liabilities of
the Company, the remaining assets of the Company shall be distributed
to the Shareholders pro rata their shareholdings. The liquidator may,
--------
with the like sanction, vest the whole or any part of such assets in
trustees upon such trust for the benefit of the contributories as the
liquidator, with the like sanction, shall think fit, but so that no
Shareholder shall be compelled to accept any shares or other assets
upon which there is any liability.
INDEMNITY
141. Subject to the proviso below, every Director, Officer, member of a
committee constituted under Bye-Law 99 and any Resident Representative
of the Company shall be indemnified out of the funds of the Company
against all liabilities, loss, damage or expense (including but not
limited to liabilities under contract, tort and statute or any
applicable foreign law or
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regulation and all reasonable legal and other costs and expenses
properly payable) incurred or suffered by him as such Director,
Officer, committee member or Resident Representative and the indemnity
contained in this Bye-Law shall extend to any person acting as a
Director, Officer, committee member or Resident Representative in the
reasonable belief that he has been so appointed or elected
notwithstanding any defect in such appointment or election; PROVIDED
ALWAYS that the indemnity contained in this Bye-Law shall not extend to
any matter which would render it void pursuant to the Companies Acts.
142. Every Director, Officer, member of a committee duly constituted under
Bye-Law 99 or Resident Representative of the Company shall be
indemnified out of the funds of the Company against all liabilities
incurred by him as such Director, Officer, committee member or Resident
Representative in defending any proceedings, whether civil or criminal,
in which judgement is given in his favour, or in which he is acquitted,
or in connection with any application under the Companies Acts in which
relief from liability is granted to him by the court.
143. To the extent that any Director, Officer, member of a committee duly
constituted under Bye-Law 99 or Resident Representative is entitled to
claim an indemnity pursuant to these Bye-Laws in respect of amounts
paid or discharged by him, the relative indemnity shall take effect as
an obligation of the Company to reimburse the person making such
payment or effecting such discharge.
144. Each Shareholder and the Company agree to waive any claim or right of
action he or it may at any time have, whether individually or by or in
the right of the Company, against any Director, Officer or member of a
committee duly constituted under Bye-Law 99 on account of any action
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taken by such Director, Officer or member of a committee or the failure
of such Director, Officer or member of a committee to take any action
in the performance of his duties with or for the Company; PROVIDED
HOWEVER that such waiver shall not apply to any claims or rights of
action arising out of the fraud of such Director, Officer or member of
a committee duly constituted under Bye-Law 99 or to recover any gain,
personal profit or advantage to which such Director, Officer or member
of a committee duly constituted under Bye-Law 99 is not legally
entitled.
145. Subject to the Companies Acts, expenses incurred in defending any civil
or criminal action or proceeding for which indemnification is required
pursuant to Bye-Laws 141 and 142 shall be paid by the Company in
advance of the final disposition of such action or proceeding upon
receipt of an undertaking by or on behalf of the indemnified party to
repay such amount if it shall ultimately be determined that the
indemnified party is not entitled to be indemnified pursuant to Bye-
Laws 142 and 143 provided that no monies shall be paid hereunder unless
payment of the same shall be authorised in the specific case upon a
determination that indemnification of the Director or officer would be
proper in the circumstances because he has met the standard of conduct
which would entitle him to the indemnification thereby provided and
such determination shall be made:
(a) by the Board, by a majority vote at a meeting duly constituted
by a quorum of Directors not party to the proceedings or
matter with regard to which the indemnification is, or would
be, claimed; or
(b) in the case such a meeting cannot be constituted by lack of a
disinterested quorum, by independent legal counsel in a
written opinion; or
(c) by a majority vote of the Shareholders.
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Each Shareholder of the Company, by virtue of its acquisition and
continued holding of a share, shall be deemed to have acknowledged and
agreed that the advances of funds may be made by the Company as
aforesaid, and when made by the Company under this Bye-Law 145 are made
to meet expenditures incurred for the purpose of enabling such
Director, Officer, or member of a committee duly constituted under
Bye-Law 99 to properly perform his or her duties as an officer of the
Company.
AMALGAMATION
146. Any Resolution proposed for consideration at any general meeting to
approve the amalgamation of the Company with any other company,
wherever incorporated, shall require the approval of a simple majority
of votes cast at such meeting and the quorum for such meeting shall be
that required in Bye-Law 54 and a poll may be demanded in respect of
such Resolution in accordance with the provisions of Bye-Law 64.
CONTINUATION
147. Subject to the Companies Act, the Shareholders may by Resolution
approve the discontinuation of the Company in Bermuda and the
continuation of the Company in a jurisdiction outside Bermuda. The
Shareholders, having resolved to approve the discontinuation of the
Company, may by Resolution further resolve not to proceed with any
application to discontinue the Company in Bermuda or may vary such
application as they see fit.
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ALTERATION OF BYE-LAWS
148. (1) These Bye-Laws may be amended, from time to time, by
resolution of the Board, subject to approval by Resolution at
a General Meeting of the Shareholders.
(2) The vote or consent of the holders of 75% of the outstanding
capital shares of the Company entitled to vote and the
approval of a majority of the Board shall be required to
effect:-
(a) any amendments to the provisions of Bye-Laws 3, 34,
62, 63, 85, 86, 91, 92, 141 and this Bye-Law 148,
provided that if the provisions of Bye-Law 3, 34 or
63 are so amended or the Board and Shareholders upon
receipt of a written request for approval approve, by
an actual vote as described in Bye-Law 34(2), an
otherwise prohibited transfer under Bye-Law 34(2),
the Company will indemnify each holder of shares who
becomes subject to treatment as a "United States
shareholder" for purposes of Section 951 et. seq. of
the Code as a result of such amendment from and
against any and all losses, costs, damages,
liabilities and expenses arising out of, directly or
indirectly, such treatment. Notwithstanding the
foregoing provisions of Bye-Law 148(2)(a), in no
event shall the Company have any indemnity obligation
under this Bye-Law with respect to any transfer of
shares for which approval was required (whether or
not granted) pursuant to Bye-Law 34(2) to any holder
of shares who either (i) received such shares in
connection with such transfer or (ii) voted in favour
of such transfer; and
(b) any amendment to the maximum or minimum number of
Directors specified in Bye-Law 84.
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EXHIBIT 3.3
Schedule to the Bye-Laws
of Global Crossing Ltd.
CERTIFICATE OF DESIGNATIONS
OF
6 3/8 % CUMULATIVE CONVERTIBLE PREFERRED STOCK
The terms of the authorized 6 3/8 % Convertible Preferred
Stock (the "Preferred Stock) of Global Crossing Ltd., a company incorporated
under the laws of Bermuda (the "Company"), shall be as set forth below in this
Schedule to the Bye-Laws of the Company (this "Schedule").
(a) Designation. (i) There are hereby authorized 11,500,000
shares of Preferred Stock as designated by the Board of Directors of the
Company. Each share of Preferred Stock will have a liquidation preference of
$100 (the "Liquidation Preference").
(ii) All shares of Preferred Stock redeemed, purchased,
exchanged, converted or otherwise acquired by the Company shall be retired and
canceled and, upon the taking of any action required by applicable law, shall be
restored to the status of authorized but unissued shares of preferred stock of
the Company, without designation as to series, and may thereafter be reissued.
(b) Currency. All shares of Preferred Stock shall be
denominated in United States currency, and all payments and distributions
thereon or with respect thereto shall be made in United States currency. All
references herein to "$" or "dollars" refer to United States currency.
(c) Ranking. The Preferred Stock shall, with respect to
dividend rights and rights upon liquidation, winding up or dissolution, rank
junior to (i) each other class or series of capital stock of the Company, other
than (A) the Common Stock of the Company and any other class or series of
capital stock of the Company which by its terms ranks junior to the Preferred
Stock, as to which the Preferred Stock shall rank prior and (B) any other class
or series of capital stock of the Company which by its terms ranks on a parity
with the Preferred Stock, as to which the Preferred Stock shall rank on a parity
or (ii) other equity interests in the Company, in each case, including, without
limitation, warrants, rights, calls or options exercisable for or convertible
into such capital stock or equity interests, except as provided in the last
sentence of this paragraph (c). All equity securities of the Company to which
the Preferred Stock ranks prior (whether with respect to dividends or upon
liquidation, winding up, dissolution or otherwise), including the Common Stock
of the Company, are collectively referred to herein as the "Junior Stock". All
equity securities of the Company to which the Preferred Stock ranks on a parity
(whether with respect to dividends or upon liquidation, winding up, dissolution
or otherwise) are collectively referred to herein as the "Parity Stock". All
equity securities of the Company to which the Preferred Stock ranks junior
<PAGE>
(whether with respect to dividends or upon liquidation, winding up, dissolution
or otherwise) are collectively referred to herein as the "Senior Stock". The
respective definitions of Junior Stock, Parity Stock and Senior Stock shall also
include any warrants, rights, calls or options exercisable for or convertible
into any Junior Stock, Parity Stock or Senior Stock, as the case may be.
(d) Dividends. (i) The holders of shares of Preferred Stock
shall be entitled to receive, when, as and if declared by the Board of Directors
of the Company out of funds legally available therefor, dividends on the shares
of Preferred Stock, cumulative from the first date of issuance of any such
shares (the "Initial Issuance Date"), at a rate per annum of 6 % of the
Liquidation Preference per share, payable in cash, subject to paragraph (d)(vi).
Dividends on the shares of Preferred Stock shall be payable quarterly in equal
amounts (subject to paragraph (d)(v) hereunder with respect to shorter periods,
including the first such period with respect to newly issued shares of Preferred
Stock) in arrears on February 1, May 1, August 1 and November 1 of each year, or
if any such date is not a Business Day, on the next succeeding Business Day
(each such date, a "Dividend Payment Date", and each such quarterly period, a
"Dividend Period"), in preference to and in priority over dividends on any
Junior Stock. Such dividends shall be paid to the holders of record of the
shares of Preferred Stock as they appear on the applicable Record Date. As used
herein, the term "Record Date" means, with respect to the dividends payable on
February 1, May 1, August 1 and November 1 of each year, January 15, April 15,
July 15 and October 15, of each year, respectively, or such other record date,
not more than 60 days and not less than 10 days preceding the applicable
Dividend Payment Date, as shall be fixed by the Board of Directors of the
Company. Dividends on the shares of Preferred Stock shall be fully cumulative
and shall accrue (whether or not declared and whether or not there are funds of
the Company legally available for the payment of dividends) from the Issuance
Date (or the last Dividend Payment Date for which dividends were paid, as the
case may be) based on a 360-day year comprised of twelve 30-day months. Accrued
and unpaid dividends for any past Dividend Period and dividends in connection
with any optional redemption may be declared and paid at any time, without
reference to any Dividend Payment Date, to holders of record on such date, not
more than 45 days prior to the payment thereof, as may be fixed by the Board of
Directors of the Company.
(ii) No dividend shall be declared or paid or set apart for
payment or other distribution declared or made, whether in cash, obligations or
shares of capital stock of the Company or other property, directly or
indirectly, upon any shares of Junior Stock or Parity Stock, nor shall any
shares of Junior Stock or Parity Stock be redeemed, repurchased or otherwise
acquired for consideration by the Company through a sinking fund or otherwise,
unless all accrued and unpaid dividends through the most recent Dividend Payment
Date (whether or not such dividends have been declared and whether or not there
are funds of the Company legally available for the payment of dividends) on the
shares of Preferred Stock and any Parity Stock have been or contemporaneously
are declared and paid in full; provided, however, that, notwithstanding any
provisions in this subparagraph (ii) to the contrary, the Company shall be
entitled to (a) declare and pay dividends on shares of Junior Stock payable
solely in shares of Junior Stock and on shares of Parity Stock payable solely in
shares of Parity Stock or Junior Stock, or in each case by an increase in the
liquidation preference of the Junior Stock or Parity Stock and (b) redeem,
repurchase or otherwise acquire Junior Stock or Parity Stock in exchange for
consideration consisting of Parity Stock or Junior Stock, in the case of Parity
Stock, or of Junior Stock, in the case of Junior Stock.
<PAGE>
When dividends are not paid in full, as aforesaid, upon the shares of Preferred
Stock, all dividends declared on the Preferred Stock and any other Parity Stock
shall be declared and paid either (A) pro rata so that the amount of dividends
so declared on the shares of Preferred Stock and each such other class or
series of Parity Stock shall in all cases bear to each other the same ratio as
accrued dividends on the shares of Preferred Stock and such class or series of
Parity Stock bear to each other or (B) on another basis that is at least as
favorable to the holders of the Preferred Stock entitled to receive such
dividends.
(iii) Any dividend payment made on the Preferred Stock shall
first be credited against the dividends accrued with respect to the earliest
Dividend Period for which dividends have not been paid.
(iv) All dividends paid with respect to shares of Preferred
Stock pursuant to this paragraph (d) shall be paid pro rata to the holders
entitled thereto.
(v) Dividends (or cash amounts equal to accrued and unpaid
dividends) payable on the Preferred Stock for any period shorter than six months
shall be computed on the basis of the actual number of days elapsed (in a 30-day
month) since the applicable Dividend Payment Date or from the Issuance Date with
respect to newly issued shares, as applicable, and based on a 360-day year of
twelve 30-day months. No interest shall accrue or be payable in respect of
unpaid dividends.
(vi) The Company shall have the option to pay all or any part
of a dividend by delivering shares of Common Stock, par value $0.01 per share,
of the Company (the "Common Stock"), to the transfer agent for the Preferred
Stock (the "Transfer Agent"). In such case, the Company shall be obligated to
deliver to the Transfer Agent a number of shares of Common Stock which, when
resold by the Transfer Agent, shall result in net cash proceeds sufficient to
pay the applicable dividend in cash to the holders of shares of Preferred Stock.
If the proceeds of any resale of shares of Common Stock do not result in
sufficient cash proceeds to pay a dividend, the Company shall promptly provide
cash to the Transfer Agent in an amount equal to the difference between the
amount of the applicable dividend and the proceeds of such sale. All shares of
Common Stock that the Company may deliver to the Transfer Agent as provided in
this subparagraph (vi) shall be registered under the Securities Act of 1933, as
amended.
(e) Liquidation Preference. (i) Upon any voluntary or
involuntary liquidation, dissolution or winding up of the Company or a reduction
or decrease in the Company's capital stock resulting in a distribution of assets
to the holders of any class or series of the Company's capital stock, each
holder of shares of Preferred Stock shall be entitled to payment out of the
assets of the Company available for distribution of an amount equal to the then
effective Liquidation Preference per share of Preferred Stock held by such
holder, plus all accumulated and unpaid dividends therein to the date of such
liquidation, dissolution, winding up or reduction or decrease in capital stock,
before any distribution is made on any Junior Stock, including, without
limitation, Common Stock of the Company. After payment in full of the then
effective Liquidation Preference and all accumulated and unpaid dividends to
which holders of shares of Preferred Stock are entitled, such holders shall not
be entitled to any further participation in any distribution of assets
<PAGE>
of the Company. If, upon any voluntary or involuntary liquidation, dissolution
or winding up of the Company or a reduction or decrease in the Company's capital
stock, the amounts payable with respect to shares of Preferred Stock and all
other Parity Stock are not paid in full, the holders of shares of Preferred
Stock and the holders of the Parity Stock shall share equally and ratably in any
distribution of assets of the Company in proportion to the full liquidation
preference and all accumulated and unpaid dividends to which each such holder is
entitled.
(ii) Neither the voluntary sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other consideration) of all
or substantially all of the property or assets of the Company nor the
consolidation, merger or amalgamation of the Company with or into any
corporation or the consolidation, merger or amalgamation of any corporation with
or into the Company shall be deemed to be a voluntary or involuntary
liquidation, dissolution or winding up of the Company or a reduction or decrease
in the capital stock of the Company.
(iii) No funds are required to be set aside to protect the
Liquidation Preference of the shares of Preferred Stock, although such
Liquidation Preference will be substantially in excess of the par value of the
shares of the Preferred Stock.
(f) Redemption. Shares of Preferred Stock shall be redeemable
by the Company as provided below.
(i) Optional Redemption After the Initial Redemption Date. The
shares of Preferred Stock shall not be redeemable prior to November 1, 2004 (the
"Initial Redemption Date"). After the Initial Redemption Date, the shares of
Preferred Stock shall be subject to redemption at any time at the option of the
Company, in whole or in part, at a price (the "Redemption Price"), payable in
cash, equal to the percentage set forth below of the Liquidation Preference per
share for redemption during the 12-month periods beginning on the Initial
Redemption Date or the annual anniversaries thereof indicated below, plus in
each case an amount equal to accrued and unpaid dividends thereon (whether or
not declared and whether or not there are funds of the Company legally available
for the payment of dividends) to the date fixed for redemption.
Period Redemption Price
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2004 103.1875%
2005 102.5500%
2006 101.9125%
2007 101.2750%
2008 100.6375%
2009 and thereafter 100.0000%
(ii) Optional Tax Redemption. The shares of Preferred Stock
shall be subject to redemption at the option of the Company or a successor
corporation at any time, in whole or in part, at a Redemption Price equal to
100% of the then effective Liquidation Preference thereof, plus all accumulated
and unpaid dividends thereon to the redemption date if, as a result of any
change in or amendment to any laws, regulations or rulings promulgated
thereunder of (A)
<PAGE>
Bermuda or any political subdivision or governmental authority thereof or
therein having the power to tax, (B) any jurisdiction, other than the United
States, from or through which payment on the shares of Preferred Stock is
made by the Company or a successor corporation or its paying agent in its
capacity as such or any political subdivision or governmental authority thereof
or therein having the power to tax or (C) any other jurisdiction, other than the
United States, in which the Company or a successor corporation is organized or
any political subdivision or governmental authority thereof or therein having
the power to tax or any change in the official application or interpretation of
such laws, regulations or rulings or any change in the official application or
interpretation of, or any execution of or amendment to, any treaty or treaties
affecting taxation to which such jurisdiction (or such political subdivision or
taxing authority) is party (each, a "Change in Tax Law"), which becomes
effective on or after the date hereof, the Company or a successor corporation is
or would be required on the next succeeding Dividend Payment Date to pay
Additional Amounts (as defined below) with respect to the shares of Preferred
Stock, and the payment of such Additional Amounts cannot be avoided by the use
of any reasonable measures available to the Company or a successor corporation.
In addition, the shares of Preferred Stock shall be subject to
redemption at the option of the Company at any time, in whole or in part, at a
Redemption Price equal to 100% of the then effective Liquidation Preference
thereof, plus all accumulated and unpaid dividends thereon to the redemption
date, if the person formed by a consolidation, merger or amalgamation of the
Company or into which the Company is consolidated, merged or amalgamated or to
which the Company conveys, transfers or leases its properties and assets
substantially as an entirety is required, as a consequence of such
consolidation, merger, amalgamation, conveyance, transfer or lease and as a
consequence of a Change in Tax Law occurring after the date of such
consolidation, merger, amalgamation, conveyance, transfer or lease, to pay
Additional Amounts in respect of any tax, assessment or governmental charge
imposed on any holder of shares of Preferred Stock.
(iii) Payment of Additional Amounts. If any deduction or
withholding for any present or future taxes, assessments or other governmental
charges of (x) Bermuda or any political subdivision or governmental authority
thereof or therein having power to tax, (y) any jurisdiction, other than the
United States, from or through which payment on the shares of Preferred Stock is
made by the Company or a successor corporation, or its paying agent in its
capacity as such or any political subdivision or governmental authority thereof
or therein having the power to tax or (z) any other jurisdiction, other than the
United States, in which the Company or a successor corporation is organized, or
any political subdivision or governmental authority thereof or therein having
the power to tax shall at any time be required by such jurisdiction (or any such
political subdivision or taxing authority) in respect of any amounts to be paid
by the Company or a successor corporation with respect to the shares of
Preferred Stock, the Company or a successor corporation will pay to each holder
of shares of Preferred Stock as additional dividends, such additional amounts
(collectively, the "Additional Amounts") as may be necessary in order that the
net amounts paid to such holder of such shares of Preferred Stock who, with
respect to any such tax, assessment or other governmental charge, is not
resident in, or a citizen of, such jurisdiction, after such deduction or
withholding, shall be not less than the amount specified in such shares of
Preferred Stock to which such holder is entitled; provided, however, that the
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Company or a
<PAGE>
successor corporation shall not be required to make any payment of Additional
Amounts for or on account of:
(A) any tax, assessment or other governmental charge that
would not have been imposed but for (a) the existence of any present or
former connection between such holder (or between a fiduciary, settlor,
beneficiary, member or shareholder of, or possessor of a power over,
such holder, if such holder is an estate, trust, partnership, limited
liability company or corporation) and the taxing jurisdiction or any
political subdivision or territory or possession thereof or area
subject to its jurisdiction, including, without limitation, such holder
(or such fiduciary, settlor, beneficiary, member, shareholder or
possessor) being or having been a citizen or resident thereof or being
or having been present or engaged in a trade or business therein or
having or having had a permanent establishment therein, (b) the
presentation of shares of Preferred Stock (where presentation is
required) for payment on a date more than 30 days after (x) the date on
which such payment became due and payable or (y) the date on which
payment thereof is duly provided for, whichever occurs later, or (c)
the presentation of shares of Preferred Stock for payment in Bermuda or
any political subdivision thereof or therein, unless such shares of
Preferred Stock could not have been presented for payment elsewhere;
(B) any estate, inheritance, gift, sales, transfer, personal
property or similar tax, assessment or other governmental charge;
(C) any tax, assessment or other governmental charge that is
payable otherwise than by withholding from payment of the Liquidation
Preference of or any dividends on the shares of Preferred Stock;
(D) any tax, assessment or other governmental charge that is
imposed or withheld by reason of the failure by the holder or the
beneficial owner of the shares of Preferred Stock to comply with a
request of the Company addressed to the holder (a) to provide
information, documents or other evidence concerning the nationality,
residence or identity of the holder or such beneficial owner or (b) to
make and deliver any declaration or other similar claim (other than a
claim for refund of a tax, assessment or other governmental charge
withheld by the Company) or satisfy any information or reporting
requirements, which, in the case of (a) or (b), is required or imposed
by a statute, treaty, regulation or administrative practice of the
taxing jurisdiction as a precondition to exemption from all or part of
such tax, assessment or other governmental charge; or
(E) any combination of items (A), (B), (C) and (D) above;
nor shall Additional Amounts be paid with respect to any payment of the
Liquidation Preference of or dividends on any shares of Preferred Stock to any
holder who is a fiduciary or partnership or limited liability company or other
beneficial owner of shares of Preferred Stock to the extent such payment would
be required by the laws of (x) Bermuda or any political subdivision or
governmental authority thereof or therein having the power to tax, (y) any
jurisdiction, other than the United States, from or through which payment on the
shares of Preferred Stock is made by the
<PAGE>
Company or a successor corporation, or its paying agent in its capacity as such
or any political subdivision or governmental authority thereof or therein having
the power to tax or (z) any other jurisdiction, other than the United States, in
which the Company or a successor corporation is organized, or any political
subdivision or governmental authority thereof or therein having the power to tax
to be included in the income for tax purposes of a beneficiary or settlor with
respect to such fiduciary or a member of such partnership, limited liability
company or beneficial owner who would not have been entitled to such Additional
Amounts had it been the holder of such shares of Preferred Stock.
The Company shall provide the Transfer Agent with the official
acknowledgment of the relevant taxing authority (or, if such acknowledgment is
not available, a certified copy thereof) evidencing the payment of the
withholding taxes, if any, by the Company. Copies of such documentation shall be
made available to the holders of the shares of Preferred Stock or the Transfer
Agent, as applicable, upon request therefor.
All references herein to dividends on the shares of Preferred
Stock shall include any Additional Amounts payable by the Company in respect of
such shares of Preferred Stock.
(iv) Whenever shares of Preferred Stock are to be redeemed
pursuant to this paragraph (f), a notice of such redemption shall be mailed,
addressed to each holder, by overnight mail, postage prepaid, or delivered to
each holder of the shares to be redeemed at such holder's address as the same
appears on the stock transfer books of the company. Such notice shall be mailed
to be delivered not less than 30 days and nor more than 60 days prior to the
date fixed for redemption. Each such notice shall state: (A) the date fixed for
redemption; (B) the number of shares of Preferred Stock to be redeemed; (C) the
Redemption Price and the amount of dividends accrued and unpaid through the date
fixed for redemption; (D) the place or places where such shares of Preferred
Stock are to be surrendered for payment of the Redemption Price; and (E) that
dividends on the shares to be redeemed will cease to accrue on such date fixed
for redemption unless the Company shall default in the payment of the Redemption
Price. If fewer than all shares of Preferred Stock held by a holder are to be
redeemed, the notice mailed to such holder shall specify the number of shares to
be redeemed from such holder.
Notice having been given as provided in the preceding
paragraph, and if on or before the redemption date specified in such notice, an
amount in cash sufficient to redeem in full on the redemption date and at the
applicable Redemption Price (together with an amount equal to accrued and unpaid
dividends thereon (whether or not declared and whether or not there are funds of
the Company legally available for the payment of dividends) to such redemption
date) and all shares of Preferred Stock called for redemption shall have been
set apart and deposited in trust so as to be available for such purpose and only
for such purpose, or shall have been paid to the holders thereof then effective
as of the close of business on such redemption date, and unless there shall be a
subsequent default in the payment of the Redemption Price plus accrued and
unpaid dividends, the shares of Preferred Stock so called for redemption shall
cease to accrue dividends, and such shares shall no longer be deemed to be
outstanding and shall have the status of authorized but unissued shares of
preferred stock of the Company, undesignated as to series, and all rights of the
holders thereof, as such, as shareholders of the Company (except the right to
receive from the
<PAGE>
Company the Redemption Price and an amount equal to any accrued and unpaid
dividends (whether or not declared and whether or not there are funds of the
Company legally available for the payment of dividends) to such redemption date)
shall cease. Upon surrender in accordance with such notice of the certificates
for any shares so redeemed (properly endorsed or assigned for transfer, if the
notice shall so state), such shares shall be redeemed by the Company at the
Redemption Price as set forth above. In case fewer than all of the shares
represented by any such certificate are redeemed, a new certificate of like
terms and having the same date of original issuance shall be issued representing
the unredeemed shares without cost to the holder thereof.
(v) In the event that fewer than all of the shares of
Preferred Stock are to be redeemed pursuant to this paragraph (f), the Company
shall call for redemption shares of Preferred Stock pro rata among the holders,
based on the number of shares of Preferred Stock held by each holder (with
adjustments to avoid fractional shares), except that the Company may redeem all
of the shares of Preferred Stock held by any holders of fewer than 100 shares of
Preferred Stock (or all the shares of Preferred Stock held by holders who would
hold less than 100 shares of Preferred Stock as a result of such redemption).
Any redemption for which shares are called for redemption on a pro rata basis
shall comply with this subparagraph (v).
(g) Voting Rights. Except as required by applicable Bermuda
law and as may otherwise be provided herein or in any amendment hereto, the
holders of shares of Preferred Stock shall not be entitled to any voting rights
as shareholders of the Company except as follows:
(i) The affirmative vote of the holders of at least a majority
of the outstanding shares of Preferred Stock, voting with holders of
shares of all other series of preferred stock affected in the same way
as a single class, in person or by proxy, at a special or annual
meeting called for the purpose, or by written consent in lieu of a
meeting, shall be required to amend, repeal or change any provisions of
this Schedule in any manner which would adversely affect, alter or
change the powers, preferences or special rights of the Preferred Stock
and any such securities affected in the same way; provided, however,
that the creation, authorization or issuance of any other class or
series of capital stock or the increase or decrease in the amount of
authorized capital stock of any such class or series or of the
Preferred Stock, or any increase, decrease or change in the par value
of any class or series of capital stock (including the Preferred
Stock), shall not require the consent of the holders of the Preferred
Stock and shall not be deemed to affect adversely, alter or change the
powers, preferences and special rights of the shares of Preferred
Stock. With respect to any matter on which the holders are entitled to
vote as a separate class, each share of Preferred Stock shall be
entitled to one vote.
(ii) If at any time the equivalent of six quarterly dividends
payable on the shares of Preferred Stock are accrued and unpaid
(whether or not consecutive and whether or not declared), the holders
of all outstanding shares of Preferred Stock and any Parity Stock or
Senior Stock having similar voting rights then exercisable, voting
separately as a single class without regard to series, shall be
entitled to elect at the next annual meeting of the shareholders of the
Company two directors to serve until all dividends accumulated and
unpaid on any such voting shares have been paid or declared and funds
set aside to provide
<PAGE>
for payment in full. In exercising any such vote, each outstanding
share of Preferred Stock shall be entitled to one vote, excluding
shares held by the Company or any entity controlled by the Company,
which shares shall have no vote.
(h) Conversion. (i) Each share of Preferred Stock shall be
convertible at any time and from time to time at the option of the holder
thereof into fully paid and nonassessable shares of Common Stock. The number of
shares of Common Stock deliverable upon conversion of a share of Preferred
Stock, adjusted as hereinafter provided, is referred to herein as the
"Conversion Ratio". The Conversion Ratio as of the Issuance Date shall be 2.2222
and shall equal the ratio the nominator of which shall be the Liquidation
Preference and the denominator of which shall be the Conversion Price. The
Conversion Price shall be $45.00, subject to adjustment from time to time as
provided in paragraph (i).
(ii) Conversion of shares of Preferred Stock may be effected
by any holder upon the surrender to the Company at the principal office of the
Company or at the office of the Transfer Agent, as may be designated by the
Board of Directors of the Company, of the certificate or certificates for such
shares of Preferred Stock to be converted accompanied by a written notice
stating that such holder elects to convert all or a specified whole number of
such shares in accordance with the provisions of this paragraph (h) and
specifying the name or names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. In case such notice shall
specify a name or names other than that of such holder, such notice shall be
accompanied by payment of all transfer taxes payable upon the issuance of shares
of Common Stock in such name or names. Other than such taxes, the Company shall
pay any documentary, stamp or similar issue or transfer taxes that may be
payable in respect of any issuance or delivery of shares of Common Stock upon
conversion of shares of Preferred Stock pursuant hereto. As promptly as
practicable after the surrender of such certificate or certificates and the
receipt of such notice relating thereto and, if applicable, payment of all
required transfer taxes (or the demonstration to the satisfaction of the Company
that such taxes have been paid), the Company shall deliver or cause to be
delivered (x) certificates representing the number of validly issued, fully paid
and nonassessable full shares of Common Stock to which the holder (or the
holder's transferee) of shares of Preferred Stock being converted shall be
entitled and (y) if less than the full number of shares of Preferred Stock
evidenced by the surrendered certificate or certificates is being converted, a
new certificate or certificates, of like tenor, for the number of shares
evidenced by such surrendered certificate or certificates less the number of
shares being converted. Such conversion shall be deemed to have been made at the
close of business on the date of giving such notice and of such surrender of the
certificate or certificates representing the shares of Preferred Stock to be
converted so that the rights of the holder thereof as to the shares being
converted shall cease except for the right to receive shares of Common Stock and
accrued and unpaid dividends with respect to the shares of Preferred Stock being
converted, in each case in accordance herewith, and the person entitled to
receive the shares of Common Stock shall be treated for all purposes as having
become the record holder of such shares of Common Stock at such time.
(iii) If a holder of shares of Preferred Stock exercises
conversion rights under paragraph (h)(i), upon delivery of the shares for
conversion, such shares shall cease to accrue dividends pursuant to paragraph
(d) as of the end of the day immediately preceding the date of
<PAGE>
such delivery, but such shares shall continue to be entitled to receive all
accrued dividends which such holder is entitled to receive through the last
preceding Dividend Payment Date unless such conversion follows a call for
redemption by the Company in which case pro rata dividends shall also be payable
through the date immediately preceding such delivery, in each case as if such
holder continued to hold such shares of Preferred Stock. Any such accrued and
unpaid dividends shall be payable by the Company as and when such dividends are
paid to any remaining holders or, if none, on the date which would have been the
next succeeding Dividend Payment Date had there been remaining holders or such
later time at which the Company believes it has adequate available capital under
applicable law to make such a payment. Notwithstanding the foregoing, shares of
Preferred Stock surrendered for conversion (other than after notice of
redemption has been given with respect to such shares) after the close of
business on any record date for the payment of dividends declared and prior to
the opening of business on the Dividend Payment Date relating thereto must be
accompanied by a payment in cash of an amount equal to the dividend declared in
respect of such shares.
(iv) In case any shares of Preferred Stock are to be redeemed
pursuant to paragraph (f), such right of conversion shall cease and terminate,
as to the shares of Preferred Stock to be redeemed, at the close of business on
the Business Day immediately preceding the date fixed for redemption unless the
Company shall default in the payment of the Redemption Price therefor, as
provided herein.
(v) Notwithstanding anything herein to the contrary, but
subject to the provisions of paragraph (h)(iii) and to paragraph (i), upon
conversion, no payment or adjustment shall be made by the Company to any holder
of shares of Preferred Stock surrendered for conversion in respect of any
accrued and unpaid dividends on the shares of Preferred Stock surrendered for
conversion.
(vi) In connection with the conversion of any shares of
Preferred Stock, no fractions of shares of Common Stock shall be issued, but in
lieu thereof, the Company shall pay a cash adjustment in respect of such
fractional interest in an amount equal to (x) such fractional interest
multiplied by the Liquidation Preference per share, divided by (y) the
Conversion Price. If more than one share of Preferred Stock shall be surrendered
for conversion by the same holder at the same time, the number of full shares of
Common Stock issuable on conversion thereof shall be computed on the basis of
the total number of shares of Preferred Stock so surrendered.
(vii) The Company shall at all times reserve and keep
available, free from preemptive rights, for issuance upon the conversion of
shares of Preferred Stock such number of its authorized but unissued shares of
Common Stock as will from time to time be sufficient to permit the conversion of
all outstanding shares of Common Stock if necessary to permit the conversion of
all outstanding shares of Preferred Stock. Prior to the delivery of any
securities which the Company shall be obligated to deliver upon conversion of
the Preferred Stock, the Company shall comply with all applicable federal and
state laws and regulations which require action to be taken by the Company. All
shares of Common Stock delivered upon conversion of the Preferred Stock will
upon delivery be duly and validly issued and fully paid and nonassessable, free
of all liens and charges and not subject to any preemptive rights.
<PAGE>
(i)(i) The Conversion Price shall be subject to adjustment
from time to time as follows:
(A) Stock Splits and Combinations. In case the Company shall
at any time or from time to time after the Issuance Date (a) subdivide or split
the outstanding shares of Common Stock, (b) combine or reclassify the
outstanding shares of Common Stock into a smaller number of shares or (c) issue
by reclassification of the shares of Common Stock any shares of capital stock of
the Company, then, and in each such case, the Conversion Price in effect
immediately prior to such event or the record date therefor, whichever is
earlier, shall be adjusted so that the holder of any shares of Preferred Stock
thereafter surrendered for conversion shall be entitled to receive the number of
shares of Common Stock or other securities of the Company which such holder
would have owned or have been entitled to receive after the occurrence of any of
the events described above, had such shares of Preferred Stock been surrendered
for conversion immediately prior to the occurrence of such event or the record
date therefor, whichever is earlier. An adjustment made pursuant to this
subparagraph (A) shall become effective at the close of business on the day upon
which such corporate action becomes effective. Such adjustment shall be made
successively whenever any event listed above shall occur.
(B) Stock Dividends in Common Stock. In case the Company shall
at any time or from time to time after the Issuance Date pay a dividend or make
a distribution in shares of Common Stock on any class of capital stock of the
Company other than dividends or distributions of shares of Common Stock or other
securities with respect to which adjustments are provided in paragraph (i)(A)
above, and the total number of shares constituting such dividend or distribution
shall exceed 25% of the total number of shares of Common Stock outstanding at
the close of business on the record date fixed for determination of shareholders
entitled to receive such dividend or distribution, the Conversion Price shall be
adjusted so that the holder of each share of Preferred Stock shall be entitled
to receive upon conversion thereof, the number of shares of Common Stock
determined by multiplying (1) the applicable Conversion Price by (2) a fraction,
the numerator of which shall be the number of shares of Common Stock theretofore
outstanding and the denominator of which shall be the sum of such number of
shares and the total number of shares issued in such dividend or distribution.
In case the total number of shares constituting such dividend or distribution
shall not exceed 25% of the total number of shares of Common Stock outstanding
at the close of business on the record date fixed for such dividend or
distribution, such shares of Common Stock shall be considered to be issued at
the time of any such next succeeding dividend or other distribution in which the
number of shares of Common Stock issued, together with the number of shares
issued in all previous such dividends and distributions, shall exceed such 25%.
(C) Issuance of Rights or Warrants. In case the Company shall
issue to all holders of Common Stock rights or warrants expiring within 45 days
entitling such holders to subscribe for or purchase Common Stock at a price per
share less than the Current Market Price (as defined below), the Conversion
Price in effect immediately prior to the close of business on the record date
fixed for determination of shareholders entitled to receive such rights or
warrants shall be reduced by multiplying such Conversion Price by a fraction,
the numerator of which is the sum of the
<PAGE>
number of shares of Common Stock outstanding at the close of business on such
record date and the number of shares of Common Stock that the aggregate 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 of
which is the sum of the number of shares of Common Stock outstanding at the
close of business on such record date and the number of additional shares of
Common Stock so offered for subscription or purchase. For purposes of this
subparagraph (C), the issuance of rights or warrants to subscribe for or
purchase securities convertible into Common Stock shall be deemed to be the
issuance of rights or warrants to purchase the Common Stock into which such
securities are convertible at an aggregate offering price equal to the sum of
the aggregate offering price of such securities and the minimum aggregate amount
(if any) payable upon conversion of such securities into Common Stock. Such
adjustment shall be made successively whenever any such event shall occur.
(D) Distribution of Indebtedness, Securities or Assets. In
case the Company shall distribute to all holders of Common Stock (whether by
dividend or in a merger, amalgamation or consolidation or otherwise) evidences
of indebtedness, shares of capital stock of any class or series, other
securities, cash or assets (other than Common Stock, rights or warrants referred
to in subparagraph (C) above or a dividend payable exclusively in cash and other
than as a result of a Fundamental Change (as defined below)), the Conversion
Price in effect immediately prior to the close of business on the record date
fixed for determination of shareholders entitled to receive such distribution
shall be reduced by multiplying such Conversion Price by a fraction, the
numerator of which is the Current Market Price on such record date less the fair
market value (as determined by the Board of Directors of the Company, whose
determination in good faith shall be conclusive) of the portion of such
evidences of indebtedness, shares of capital stock, other securities, cash and
assets so distributed applicable to one share of Common Stock and the
denominator of which is the Current Market Price. Such adjustment shall be made
successively whenever any such event shall occur.
(E) Fundamental Changes. In case any transaction or event
(including, without limitation, any merger, consolidation, sale of assets,
tender or exchange offer, reclassification, compulsory share exchange or
liquidation) shall occur in which all or substantially all outstanding Common
Stock is converted into or exchanged for stock, other securities, cash or assets
(each, a "Fundamental Change"), the holder of each share of Preferred Stock
outstanding immediately prior to the occurrence of such Fundamental Change shall
have the right upon any subsequent conversion to receive (but only out of
legally available funds, to the extent required by applicable law) the kind and
amount of stock, other securities, cash and assets that such holder would have
received if such share had been converted immediately prior thereto.
(ii) Anything in this section (i) to the contrary
notwithstanding, the Company shall not be required to give effect to any
adjustment in the Conversion Price unless and until the net effect of one or
more adjustments (each of which shall be carried forward until counted toward
adjustment), determined as above provided, shall have resulted in a change of
the Conversion Price by at least 1%, and when the cumulative net effect of more
than one adjustment so determined shall be to change the Conversion Price by at
least 1%, such change in the Conversion Price shall thereupon be given effect.
In the event that, at any time as a result of the provisions of this
<PAGE>
paragraph (i), the holder of shares of Preferred Stock upon subsequent
conversion shall become entitled to receive any shares of capital stock of the
Company other than Common Stock, the number of such other shares so receivable
upon conversion of shares of Preferred Stock shall thereafter be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions contained herein.
(iii) There shall be no adjustment of the Conversion Price in
case of the issuance of any stock of the Company in a merger, reorganization,
acquisition, reclassification, recapitalization or other similar transaction
except as set forth in this paragraph (i).
(iv) In any case in which this paragraph (i) requires that an
adjustment as a result of any event become effective from and after a record
date, the Company may elect to defer until after the occurrence of such event
(A) issuing to the holder of any shares of Preferred Stock converted after such
record date and before the occurrence of such event the additional shares of
Common Stock issuable upon such conversion over and above the shares issuable on
the basis of the conversion price in effect immediately prior to adjustment and
(B) paying to such holder any amount in cash in lieu of a fractional share of
Common Stock.
(v) If the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to shareholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the number of shares of Common
Stock issuable upon exercise of the right of conversion granted by this
paragraph (i) or in the Conversion Price then in effect shall be required by
reason of the taking of such record.
(vi) The Board of Directors of the Company shall have the
power to resolve any ambiguity or correct any error in this paragraph (i), and
its action in so doing shall be final and conclusive.
(j) Notwithstanding anything herein to the contrary, if the
Company is reorganized such that the Common Stock is exchanged for the Common
Stock of a new entity ("Newco"), the Common Stock of which is traded on the
National Association of Securities Dealers, Inc. Automated Quotation System or
another recognized securities exchange, then the Company, by notice to the
holders of the Preferred Stock but without any required consent on their part,
shall have the option to cause the exchange of the shares of Preferred Stock for
preferred stock of Newco having the same terms and conditions as set forth
herein, provided that, in the event that Newco is not solely incorporated as a
Bermuda company or in the event the Newco share structure is not identical to
that of the Company, the rights attaching to the preferred stock of Newco may be
adjusted so as to comply with the local law of the country of incorporation of
Newco or the new share structure of Newco. If the Company exercises such option,
the Company shall indemnify each holder of shares of Preferred Stock if an
exchange described in this paragraph (j) would, under then applicable United
States Federal income tax law, result in the recognition of tax by such holder;
provided, however, that the Company shall not be obligated to indemnify any
holder for any payments described under subparagraphs (f)(ii) and (f)(iii),
unless and to the extent provided in such subparagraphs.
<PAGE>
(k) Change in Control Put Right. (i) If a Change in Control
occurs with respect to the Company, each holder of shares of Preferred Stock
shall have the right to require the Company to purchase all or any part of such
holder's shares of Preferred Stock at a purchase price in cash equal to 100% of
the Liquidation Preference of such shares, plus all accumulated and unpaid
dividends on such shares to the date of purchase. Within 30 days following such
Change in Control, the Company shall mail a notice to each holder of shares of
preferred stock describing the transaction or transactions that constitute such
Change in Control and offering to purchase such holder's shares of Preferred
Stock on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed.
(ii) The Company shall comply with the requirements of Rule
14e-1 under the Securities Exchange Act of 1934, as amended, and any other
securities laws and regulations to the extent such laws and regulations are
applicable in connection with the purchase of Preferred Stock as a result of a
Change in Control with respect to the Company. To the extent that the provisions
of any securities laws or regulations conflict with any of the provisions of
this paragraph (k), the Company shall comply with the applicable securities laws
and regulations and shall be deemed not to have breached its obligations under
this paragraph (k).
(iii) On the date scheduled for payment of shares of Preferred
Stock tendered to the Company for repurchase as provided in this paragraph (k),
the Company shall, to the extent lawful, (a) accept for payment all shares of
Preferred Stock properly tendered, (b) deposit with the Transfer Agent an amount
equal to the purchase price of the shares of Preferred Stock so tendered and (c)
deliver or cause to be delivered to the Transfer Agent shares of Preferred Stock
so accepted together with an officers' certificate stating the aggregate
Liquidation Preference of the shares of Preferred Stock being purchased by the
Company. The Transfer Agent shall promptly mail or deliver to each holder of
shares of Preferred Stock so tendered the applicable payment for such shares of
Preferred Stock, and the Transfer Agent shall promptly countersign and mail or
deliver, or cause to be transferred by book-entry, to each holder new shares of
Preferred Stock equal in Liquidation Preference to any unpurchased portion of
the shares of Preferred Stock surrendered, if any. The Company shall publicly
announce the results of its offer on or as soon as practicable after the payment
date for the purchase of shares of Preferred Stock in connection with a Change
in Control of the Company.
(iv) The Company shall not be required to make an offer to
purchase any shares of Preferred Stock upon the occurrence of a Change in
Control of the Company if a third party makes such offer in the manner, at the
times and otherwise in compliance with the requirements described in this
paragraph (k) and purchases all shares of Preferred Stock validly tendered and
not withdrawn.
<PAGE>
(v) The right of the holders of shares of Preferred Stock
described in this paragraph (k) shall be subject to the obligation of Global
Crossing Holdings Ltd., a company incorporated under the laws of Bermuda
("Global Crossing Holdings"), to:
(a) repay its debt obligations in full under the Credit Agreement,
dated as of July 2, 1999, among the Company, Global Crossing Holdings, The
Chase Manhattan Bank and the other parties named therein, as amended or
supplemented from time to time; and
(b) offer to purchase and purchase all of its outstanding 9 %
Senior Notes Due 2008 that have been tendered for purchase in connection
with a Change in Control of the Company.
In addition, the right of the holders of shares of Preferred
Stock described in this paragraph (k) shall be subject to the repurchase or
repayment of the Company's future indebtedness, which the Company shall be
required to repurchase or repay in connection with a Change in Control of the
Company.
When the Company shall have satisfied the obligations set
forth above in this subparagraph (v) and, subject to the legal availability of
funds for such purpose, the Company shall purchase all shares of Preferred Stock
tendered for purchase by the Company upon a Change in Control of the Company
pursuant to this paragraph (k).
(l) The shares of Preferred Stock and the shares of Common
Stock into which the shares of Preferred Stock shall be convertible shall have
the registration rights set forth in the Registration Rights Agreement, dated
November 5, 1999, among the Company and the Initial Purchasers (as defined
therein).
(m) Transfer Restrictions. (i) The shares of Preferred
Stock shall bear the following legend:
"THE SHARES OF PREFERRED STOCK, WITH LIQUIDATION PREFERENCE
$100 PER SHARE, OF THE COMPANY REPRESENTED BY THIS CERTIFICATE
MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER
THE ACT."
(ii) The shares of Common Stock issuable upon conversion of
the shares of Preferred Stock shall bear the following legend:
"THE SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE, OF THE
COMPANY REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED OR
SOLD IN THE UNITED STATES ABSENT REGISTRATION
<PAGE>
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND
ANY APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE ACT."
(n) Certain Definitions. As used in this Schedule, the
following terms shall have the following meanings, unless the context otherwise
requires:
"Affiliate" of any person means any other person who, directly
or indirectly, Controls, is under common Control or is Controlled by such other
person. For purposes of this definition, "Control" (including, with correlative
meanings, the terms "controlling," "controlled by" and "under common control
with"), as used with respect to any person, shall mean the power, directly or
indirectly, to direct or cause the direction of the management or policies of
such person, whether through the ownership of voting securities, by contract or
otherwise; provided that beneficial ownership of 10% or more of the Voting Stock
of a person shall be deemed to be Control.
"Business Day" means any day other than a Saturday, Sunday or
a United States federal or Bermuda holiday.
"Change in Control" means, with respect to the Company, the
occurrence of any of the following: (i) any "person" (as such term is unused in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), other than a Permitted Holder, is or becomes the beneficial
owner, directly or indirectly, of 35% or more of the Voting Stock (measured by
voting power rather than number of shares) of the Company, and the Permitted
Holders own, in the aggregate, a lesser percentage of the total Voting Stock
(measured by voting power rather than by number of shares) of the Company than
such person and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the board of
directors of the Company (for the purposes of this clause, such other person
shall be deemed to "beneficially own" any Voting Stock of a specified
corporation held by a parent corporation if such other person beneficially owns,
directly or indirectly, more than 35% of the Voting Stock (measured by voting
power rather than by number of shares) of such parent corporation and the
Permitted Holders beneficially own, directly or indirectly, in the aggregate a
lesser percentage of Voting Stock (measured by voting power rather than by
number of shares) of such parent corporation and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the board of directors of such parent corporation), (ii)
during any period of two consecutive years, Continuing Directors cease for any
reason to constitute a majority of the Board of Directors of the Company, (iii)
the Company consolidates or merges with or into any other person, other than a
consolidation or merger (a) of the Company into Global Crossing Holdings or
Global Crossing Holdings into the Company, or the Company with or into a
Subsidiary of the Company or (b) pursuant to a transaction in which the
outstanding Voting Stock of the Company is changed into or exchanged for cash,
securities or other property with the effect that the beneficial owners of the
outstanding Voting Stock of the Company immediately prior to such transaction,
beneficially own, directly or indirectly, more than 35% of the Voting Stock
(measured by voting power rather than number of shares) of the surviving
<PAGE>
corporation immediately following such transaction or (iv) the sale, transfer,
conveyance or other disposition (other than by way of merger or consolidation),
in one or a series of related transactions, of all or substantially all of the
assets of the Company and its Subsidiaries, taken as a whole, to any person
other than a Subsidiary of the Company or a Permitted Holder or a person more
than 50% of the Voting Stock (measured by voting power rather than by number of
shares) of which is owned, directly or indirectly, following such transaction or
transactions by the Permitted Holders; provided, however, that sales, transfers,
conveyances or other dispositions in the ordinary course of business of capacity
on cable systems owned, controlled or operated by the Company or any Subsidiary
or of telecommunications capacity or transmission rights acquired by the Company
or any Subsidiary for use in its business, including, without limitation, for
sale, lease, transfer, conveyance or other disposition to any customer of the
Company or any Subsidiary shall not be deemed a disposition of assets for
purposes of this clause (iv).
"Continuing Directors" means individuals who at the beginning
of the period of determination constituted the Board of Directors of the
Company, together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the Company
was approved by a vote of at least a majority of the directors of the Company
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved or is
designee of any one of the Permitted Holders or any combination thereof or was
nominated or elected by any such Permitted Holder(s) or any of their designees.
"Current Market Price" means, with respect to any event set
forth in paragraph (i) herein, as applicable, the average of the daily closing
prices for the five consecutive trading days selected by the Board of Directors
of the Company commencing not more than 20 trading days before, and ending not
later than the date of such event and the date immediately preceding the record
date fixed in connection with such event.
"Permitted Holder" means Pacific Capital Group, Inc. and CIBC
Oppenheimer Corp., and their respective Affiliates.
"Subsidiary" means, with respect to any person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of capital stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such person or one or more of the other Subsidiaries of that person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such person or a Subsidiary of such
person or (b) the only general partners of which are such person or of one or
more Subsidiaries of such person (or any combination thereof).
"Voting Stock" of any person as of any date means the capital
stock of such person that is at the time entitled to vote in the election of the
Board of Directors of such person.
(o) Headings. The headings of the paragraphs of this Schedule
are for convenience of reference only and hall not define, limit or affect any
of the provisions hereof.
<PAGE>
(p) Bye-Laws. This Schedule shall be attached to the Bye-Laws
of the Company and shall become incorporated in such Bye-Laws.
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designation to be duly signed on its behalf on this 5th day of November, 1999.
GLOBAL CROSSING LTD., a company incorporated
under the laws of Bermuda,
by ___________________________________
Name:
Title:
<PAGE>
EXHIBIT 10.1
LEASE
by and between
NORTH CRESCENT REALTY V, LLC,
a Delaware limited liability company
AS LANDLORD
and
GLOBAL CROSSING DEVELOPMENT COMPANY,
a Delaware corporation
AS TENANT
Dated: October 1, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C> <C>
1. Lease of Premises........................................................................................1
-----------------
1.1 Lease. ........................................................................................1
-----
1.2 Common Areas, Project and Building Size.........................................................1
---------------------------------------
1.3 Construction and Operation of Project...........................................................2
-------------------------------------
2. Purpose..................................................................................................2
-------
2.1 Use.............................................................................................2
---
2.2 Limitation on Uses..............................................................................3
------------------
2.3 Compliance with Permits.........................................................................4
-----------------------
2.4 Payment of Additional Premium...................................................................4
-----------------------------
3. Term.....................................................................................................4
----
3.1 Commencement Date...............................................................................4
-----------------
3.2 Acceptance of Premises..........................................................................5
----------------------
3.3 Commencement Prior to Project Completion........................................................6
----------------------------------------
3.4 Renewal Terms...................................................................................6
-------------
3.5 First Floor Cancellation Option.................................................................8
-------------------------------
4. Basic Rent; Security Deposit.............................................................................8
----------------------------
4.1 Basic Rent......................................................................................8
----------
4.2 Partial Months..................................................................................9
--------------
4.3 No Offset.......................................................................................9
---------
4.4 Security Deposit................................................................................9
----------------
4.5 Rental Escalations.............................................................................10
------------------
5. Rent Adjustments........................................................................................10
----------------
5.1 Operating Expenses and Real Property Taxes.....................................................10
------------------------------------------
5.2 Real Property Taxes............................................................................16
-------------------
5.3 Payment........................................................................................17
-------
5.4 Lease Year; Proration..........................................................................18
---------------------
6. Parking Rights..........................................................................................18
--------------
6.1 Tenant's Parking Rights........................................................................18
-----------------------
6.2 Off-Site Parking...............................................................................20
----------------
7. Utilities and Services..................................................................................20
----------------------
7.1 Landlord Obligations...........................................................................20
--------------------
7.2 Access.........................................................................................23
------
7.3 Extraordinary Services.........................................................................24
----------------------
7.4 Interruption in Utility Services...............................................................24
--------------------------------
8. Alterations.............................................................................................26
-----------
8.1 Restriction on Alterations.....................................................................26
--------------------------
8.2 Removal and Surrender of Fixtures and Tenant...................................................29
--------------------------------------------
8.3 Standard Window Covering.......................................................................30
------------------------
8.4 Arbitration of Disputes........................................................................30
-----------------------
9. Maintenance and Repairs.................................................................................30
-----------------------
9.1 Tenant's Obligations...........................................................................30
--------------------
9.2 Landlord's Obligations.........................................................................30
----------------------
9.3 Failure to Repair..............................................................................31
-----------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
10. Tax on Tenant's Personal Property and Tenant Improvements...............................................31
---------------------------------------------------------
10.1 Personal Property Taxes........................................................................31
-----------------------
10.2 Tax on Leasehold Improvements..................................................................31
-----------------------------
10.3 Exclusion from Real Property Taxes.............................................................32
----------------------------------
11. Insurance; Waiver of Subrogation........................................................................32
--------------------------------
11.1 Liability Insurance............................................................................32
-------------------
11.2 Property Insurance.............................................................................32
------------------
11.3 Policy Requirements............................................................................33
-------------------
11.4 Landlord's Requirements........................................................................33
-----------------------
11.5 Waiver of Subrogation..........................................................................34
---------------------
12. Damage or Destruction...................................................................................34
---------------------
12.1 Damage to Premises.............................................................................34
------------------
12.2 Damage to Project..............................................................................35
-----------------
12.3 Abatement; Termination.........................................................................36
----------------------
12.4 Limitations....................................................................................37
-----------
12.5 Damage During Last Years.......................................................................37
------------------------
12.6 Agreement Governs..............................................................................38
-----------------
13. Eminent Domain..........................................................................................38
--------------
13.1 Taking.........................................................................................38
------
13.2 Temporary Taking...............................................................................40
----------------
14. Assignment/Subleasing...................................................................................40
---------------------
14.1 Limitation.....................................................................................40
----------
14.2 Notice of Intent to Assign or Sublet...........................................................41
------------------------------------
14.3 Landlord's Options.............................................................................41
------------------
14.4 Conditions for Landlord's Consent to Subleases.................................................41
----------------------------------------------
14.5 Transfer Premium...............................................................................42
----------------
14.6 No Release of Tenant's Obligations.............................................................43
----------------------------------
14.7 Transfer is Assignment.........................................................................43
----------------------
14.8 Assumption of Obligations......................................................................43
-------------------------
14.9 Recapture Rights...............................................................................43
----------------
14.10 Related Entities...............................................................................44
----------------
14.11 Preapproved Sublease...........................................................................44
--------------------
15. Landlord's Reserved Rights..............................................................................44
--------------------------
15.1 Right of Entry.................................................................................44
--------------
15.2 Building and Common Areas......................................................................45
-------------------------
15.3 Intentionally Omitted..........................................................................45
---------------------
15.4 Excavation.....................................................................................45
----------
15.5 Development of Other Improvements..............................................................46
---------------------------------
15.6 Incorporation of Other Improvements............................................................46
-----------------------------------
16. Indemnification and Limitation on Liability.............................................................47
-------------------------------------------
16.1 Indemnity of Landlord..........................................................................47
---------------------
16.2 Tenant's Assumption of Risk and Waiver.........................................................48
--------------------------------------
16.3 Survival; No Release of Insurers...............................................................48
---------------------------------
17. Definitions of Landlord.................................................................................48
-----------------------
18. Subordination...........................................................................................49
-------------
18.1 Subordination..................................................................................49
-------------
18.2 Attornment.....................................................................................49
----------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
18.3 Notice from Tenant.............................................................................50
------------------
19. Estoppel Certificates...................................................................................50
---------------------
20. Surrender of Premises and Removal of Property...........................................................51
---------------------------------------------
20.1 No Merger......................................................................................51
----------
20.2 Surrender of Premises..........................................................................51
---------------------
20.3 Disposal of Property...........................................................................51
--------------------
20.4 Fixtures and Improvements......................................................................51
-------------------------
21. Holding Over............................................................................................52
------------
22. Defaults and Remedies...................................................................................52
---------------------
22.1 Defaults by Tenant.............................................................................52
------------------
22.2 Landlord's Remedies............................................................................54
-------------------
Re-Entry Not Termination.......................................................................56
------------------------
22.4 Right of Landlord to Injunction; Cumulative Remedies...........................................56
----------------------------------------------------
22.5 Definition of Tenant...........................................................................56
--------------------
22.6 Defaults by Landlord...........................................................................57
--------------------
23. Bankruptcy..............................................................................................57
----------
24. Interest on Tenant's Obligations; Late Charges..........................................................57
----------------------------------------------
24.1 Interest.......................................................................................57
--------
24.2 Late Charge....................................................................................58
-----------
25. Quiet Enjoyment.........................................................................................58
---------------
26. Rentable Area...........................................................................................59
-------------
26.1 Computation of Rentable Area...................................................................59
----------------------------
26.2 Building Common Areas..........................................................................59
---------------------
26.3 Premises and Project Rentable Area.............................................................59
----------------------------------
27. Examination of Lease....................................................................................59
--------------------
28. Rules and Regulations...................................................................................59
---------------------
29. No Directory Board; Signage; Project Identity...........................................................60
---------------------------------------------
29.1 Directory Board....................................................................................60
---------------
29.2 Signage; Projection Identification.................................................................60
----------------------------------
30. Fair Market Rental Rate Arbitration; Definition.........................................................61
-----------------------------------------------
30.1 Arbitration of Rate............................................................................61
-------------------
30.2 Fair Market Rental Rate.......................................................................612
-----------------------
31. Covenant Against Liens..................................................................................63
----------------------
32. Consents; Good Faith....................................................................................63
--------------------
32.1 Consents.......................................................................................63
--------
32.2 Good Faith.....................................................................................64
----------
33. General Provisions......................................................................................64
------------------
33.1 No Waiver......................................................................................64
---------
33.2 Landlord's Right to Perform....................................................................65
---------------------------
33.3 Terms; Headings................................................................................65
---------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
33.4 Entire Agreement...............................................................................65
----------------
33.5 Successors and Assigns.........................................................................65
----------------------
33.6 Notices........................................................................................65
-------
33.7 Severability...................................................................................66
------------
33.8 Time of Essence................................................................................66
---------------
33.9 Governing Law..................................................................................66
-------------
33.10 Attorneys' Fees................................................................................66
---------------
33.11 Light and Air..................................................................................67
-------------
33.12 Execution by Corporation.......................................................................67
------------------------
33.13 Force Majeure..................................................................................67
-------------
33.14 Limitation on Liability........................................................................67
-----------------------
33.15 Development of Project.........................................................................68
----------------------
34. Arbitration.............................................................................................68
-----------
35. Guaranty................................................................................................70
--------
36. No Brokers..............................................................................................70
----------
37. Gym and Cafeteria.......................................................................................70
-----------------
38. Storage Space; Equipment Room...........................................................................71
-----------------------------
</TABLE>
<PAGE>
TABLE OF EXHIBITS
Exhibit A Description of Premises
Exhibit B Description of Project
Exhibit C Memorandum of Commencement Date
Exhibit D Intentionally Omitted
Exhibit E Cleaning Specifications
Exhibit F Security Specifications
Exhibit G Non-Disturbance, Attornment and Subordination Agreement
Exhibit H Building and Project Rules and Regulations
Exhibit I Parking Garage Rules and Regulations
Exhibit J Guaranty of Lease
<PAGE>
THIS LEASE is made and entered into as of October 1, 1999, by and between
NORTH CRESCENT REALTY V, LLC, a Delaware limited liability company ("Landlord")
and GLOBAL CROSSING DEVELOPMENT COMPANY, a Delaware corporation ("Tenant").
1. Lease of Premises.
-----------------
0.1 Lease. Landlord hereby leases to Tenant, and Tenant
-----
hereby leases from Landlord, those certain premises (the "Premises") shown on
Exhibit "A" attached hereto in Building B at 360 North Crescent Drive, Beverly
- -----------
Hills, California (the "Building"). The Building is part of an office campus on
that certain land (the "Land") at 360 North Crescent Drive and 9370 Santa Monica
Boulevard, as more specifically described on Exhibit "B" attached hereto.
-----------
Exhibit "A" attached hereto includes a floor plan for each floor of the Premises
- -----------
setting forth the Rentable Area on each floor of the Premises. The parties
estimate that the square footage of the Rentable Area of the Premises is 86,408
square feet. Such estimate is subject to final adjustment pursuant to Article
26. The Land, the Building, a subterranean parking garage located on the Land
and a parking garage located at 375 North Crescent Drive, Beverly Hills,
California (the "Garage"), (the parking facilities on levels B-1 and B-2, and
the Garage, are collectively referred to as the "Parking Garages"), all other
improvements and plazas now or hereafter constructed on the Land, except
improvements which tenants may remove therefrom pursuant to the terms of their
respective leases, and all rights and easements appurtenant to and benefitting
the Land, the Building, the Parking Garages, and the plazas and improvements
constructed on the land, are collectively referred to herein as the "Project."
0.2 Common Areas, Project and Building Size.
---------------------------------------
(a) Tenant shall have the non-exclusive right, in common with others,
to use the "Common Areas" (defined in Section 1.2(b) below) in and adjacent to
the Project, subject to subsection (c) below and to such rules and regulations
--------------
as may from time to time be adopted by Landlord in accordance with and subject
to the Rules Requirements. Landlord may, from time to time, increase, decrease,
or change the elements, portions, location and dimension of the Common Areas,
the Project, and/or the Rentable Area of the Project, the Building or any other
structure located within the Project subject to the limitations of Sections 15.5
-------------
and 15.6, provided, however, that Landlord shall maintain the Project at all
----
times during the Term in accordance with the highest category of premiere,
first-class office building projects in the Golden Triangle area and on Maple
Drive in Beverly Hills, California.
(b) The term "Common Areas" as used herein shall be deemed to mean and
refer to all portions of the Project and the Land which have been improved or
made available by Landlord for
1
<PAGE>
the use or benefit of more than one tenant of the Project, as may be changed by
Landlord in its sole discretion from time to time subject to Section 1.2(a)
above, and shall include, without limitation, parking areas, ramps and driveways
(including those designated for the exclusive use of tenants of the Project),
courtyards, sidewalks, service corridors, landscaped areas, drinking fountains,
interior public lobbies and corridors, public restrooms, elevators and
stairways, and other similar facilities and areas. Furthermore, the Common Areas
shall include, without limitation, the first floor lobby of the Building, the
freight elevator located on Level B-1 of the Building and the path of travel to
such freight elevator, the path of travel to the gym described in Article 37
hereof and the path of travel to the cafeteria described in Article 37 hereof.
"Common Areas" shall not include any restrooms located on a floor that is not
occupied by Tenant. Further and notwithstanding any of the foregoing, the term
"Common Areas" shall not be deemed to include any of the foregoing described
areas if any such areas are within the Premises as shown on the floor plans
attached hereto as Exhibit "A" or any other tenant's premises.
-----------
(c) Notwithstanding any other provision of this Lease, the term
"Premises" shall not include the exterior faces of exterior walls, elevators and
elevator wells or shafts, Building stairwells, fan rooms, mechanical rooms,
pipes, ducts, conduits, wires and appurtenant fixtures servicing other parts of
the Project either exclusively or in common with the Premises or the roof of any
Building or any access to such roof.
0.3 Construction and Operation of Project. Landlord shall have the sole
-------------------------------------
judgment and discretion to determine the architecture, design, appearance,
construction, workmanship, materials and equipment with respect to the
construction and methods of operation of the Project; provided, however, that
Landlord shall operate and maintain the Project at all times during the Term as
a first-class office project in accordance with the standards for the highest
category of premiere, first-class office building projects in the Golden
Triangle area and on Maple Drive in Beverly Hills, California.
1. Purpose
-------
1.1 Use. Subject to the limitations set forth in Section 2.2, the
--- -----------
Premises shall be used by Tenant only for general office uses, and services and
storage incidental to such uses, for a network operating center installed and
operated in accordance with the provisions of this Lease, and, to the extent
reflected on the final architectural plans for the Premises prepared by Gensler
& Associates (the "Final Plans"), for computer rooms, all in keeping with the
character of the highest category of premiere first-class office building
projects in the Golden Triangle area and on Maple Drive in Beverly Hills,
California, and for no other purpose without the prior written consent of
Landlord. The Premises shall not be used for filming or production of motion
pictures or television programs, a
2
<PAGE>
medical practice, modeling, print or film advertising, personnel or counseling
agency (other than firms engaged in high-level executive placement), training
center (except for training of Tenant's employees and customers necessarily
incidental to Tenant's business), retail sales operation, showroom, classroom,
testing center or non-incidental storage.
1.2 Limitation on Uses. Tenant shall not use or occupy the Premises, or
------------------
permit the use or occupancy of the Premises, in any manner or for any purpose
which: (a) would violate any provision of this Lease, or any applicable federal,
state or local law, statute, rule, regulation or ordinance of any governmental
authority, including, without limitation, those with respect to hazardous or
toxic materials ("Laws"); (b) would violate the provisions of any applicable
governmental permit or currently recorded document; (c) except for uses
expressly permitted by Section 2.1, would materially adversely affect or render
more expensive any fire or other insurance maintained by Landlord for the
Building or any of its contents, or cause a cancellation of any insurance
policy; (d) exceeds the floor load capacity of the floor on which the Premises
are located; (e) might impair or interfere with any of the services and systems
of the Building, including without limitation, the Building's electrical,
mechanical, structural, plumbing, sprinkler, fire, life safety, vertical
transportation, security, heating, ventilating and air conditioning systems
(collectively, the "Building Systems and Service Facilities"); (f) would injure
or annoy, or obstruct or materially interfere with the rights of, other tenants
or occupants of the Project or impair the appearance of the Building and/or
Project or be materially prejudicial to the business or reputation of Landlord
or the Project; or (g) is not compatible with a first-class office building.
Further, Tenant's business machines and mechanical equipment shall be installed,
maintained and used by Tenant so as to eliminate unreasonable or unusual
vibration and noise that may be transmitted to the Building structure or beyond
the Premises. If reasonably necessary, Landlord may prescribe the weight and
position of all safes, files and heavy equipment in the Premises or on the
floors of the Premises so as to distribute properly their weight. Tenant shall
reimburse Landlord for the reasonable cost of any structural engineering
required to determine whether the load capacity of each floor accommodates
Tenant's requirements. Tenant covenants and agrees not to suffer, permit,
introduce or maintain in, on or about any portion of the Premises, any asbestos,
polycholorinated biphenyls, or any other hazardous or toxic materials, wastes
and substances which are defined, determined or identified as such (including
petroleum products if they are defined, determined or identified as such) in any
Laws (whether now existing or hereafter enacted or promulgated) or any judicial
or administrative interpretation of any thereof, including any judicial or
administrative orders or judgments, except that Tenant shall be permitted to use
any such regulated substances which are typically and customarily used in the
highest category of premiere, first-class office building projects during the
Term or so long as such use by Tenant is in compliance with all Laws
3
<PAGE>
and is in compliance with all other provisions of this Lease. The uses of the
Premises expressly permitted under this Lease do not violate any currently
recorded document affecting the Project.
1.3 Compliance with Permits. If any governmental license or permit is
-----------------------
required by Tenant for the lawful conduct of any business or other activity
carried on by Tenant in the Premises, or the use by Tenant of any balconies, and
if the failure by Tenant to have such license or permit would interfere with
Tenant's right to occupy the Premises or any part thereof, or otherwise
adversely affect Landlord, Tenant shall procure and maintain such license or
permit, and submit a copy of such license or permit for inspection by Landlord,
and comply at all times with all terms and conditions thereof. This Lease shall
be subject to all Laws from time to time governing or regulating the use,
occupancy or possession of the Premises. Without limiting the generality of the
foregoing, Tenant shall be solely responsible for determining whether Tenant's
intended use of the Premises will comply with Laws, including, but not limited
to, those Laws relating to use, occupancy and zoning. Without limiting Tenant's
obligation to pay all business license taxes or fees imposed on Tenant, Landlord
shall reasonably assist Tenant, without having to incur any out-of-pocket costs,
in minimizing any such business license taxes or fees first assessed against
Tenant following the Commencement Date.
1.4 Payment of Additional Premium. Tenant shall, within thirty (30) days
-----------------------------
following demand by Landlord, reimburse Landlord for any additional premium
charged for any insurance policy maintained by Landlord by reason of Tenant's
installation and/or operation of a network operating center or Tenant's failure
to comply with the provisions of Sections 2.2 and 2.3 and for any other costs
------------ ---
and expenses reasonably incurred by Landlord in enforcing the provisions of this
Article 2; provided, however, that before demanding such reimbursement for
- ---------
additional insurance premiums, Landlord shall first give Tenant notice of the
activity by Tenant which violates either Section 2.2 or 2.3 and which may cause
----------- ---
Landlord to incur such increased insurance premiums, and Tenant shall not be
liable for the payment of such increased insurance premiums if it ceases such
specified activity within thirty (30) days after such notice from Landlord.
Other than possible increases in connection with the installation and/or
operation of a network operating center, Landlord does not presently anticipate
that the uses of the Premises expressly permitted under this Lease will cause
any significant increase in the insurance premiums currently paid by Landlord
for the Project on a per square foot of Rentable Area basis.
2. Term.
----
2.1 Commencement Date. The term of this Lease (the "Term") shall
-----------------
commence on the date (the "Commencement Date") which is the later of: (a)
October 4, 1999, or (b) the date of issuance of a temporary certificate of
occupancy for the Premises by the City
4
<PAGE>
of Beverly Hills, and shall terminate one hundred twenty (120) months after the
Commencement Date, unless sooner terminated pursuant hereto or extended pursuant
to Section 3.4. Promptly following the Commencement Date, Landlord and Tenant
shall confirm the Commencement Date and the expiration date of the Term by
executing and delivering a Memorandum of Commencement Date ("Memorandum")
substantially in the form attached hereto as Exhibit "C".
-----------
2.2 Acceptance of Premises.
----------------------
(a) By entering into possession of the Premises or any part thereof
and except for such matters as Tenant shall specify to Landlord in writing
within sixty (60) days thereafter, Tenant shall be conclusively deemed to have
accepted the Premises and to have agreed that the Premises are in satisfactory
condition and in full compliance with the requirements of this Lease as of the
date of such possession, except for (i) latent defects and (ii) minor details of
construction, decoration and mechanical adjustments. Landlord shall, promptly
upon receiving notice from Tenant of any defects or deficiencies in the work
conducted pursuant to the Final Plans, repair or correct the same in such manner
as shall not cause unreasonable interference to Tenant in its use of the
Premises, provided that (except in the case of latent defects) Tenant gives such
notice to Landlord within sixty (60) days following Tenant entering into
occupancy. Landlord (a) shall have no responsibility to correct, or liability
with respect to, any defects in any portion of any tenant improvements installed
by a contractor of Tenant, and (b) shall be responsible for repair of and liable
for latent defects in the improvements to the Premises installed by Landlord's
contractors, subject to applicable statutes of limitation. Landlord
acknowledges that Landlord shall pay Tenant the balance of a tenant improvement
allowance in the amount of $40.00 per rentable square foot of Floors 1, 2 and 3
of the Premises and $20.00 per rentable square foot of Level B-1 of the
Premises, a portion of which allowance has been funded by Landlord prior to the
date of this Lease.
(b) If Landlord and Tenant disagree as to the Commencement Date of
this Lease, the date maintained by Landlord to be the Commencement Date shall be
binding on the parties unless and until the matter is resolved by arbitration
pursuant to Article 34. Tenant acknowledges that neither Landlord nor any agent
----------
of Landlord has made any representation or warranty, except as otherwise
expressly provided in this Lease, with respect to the Project (including the
Premises and the Building), including without limitation, any representation or
warranty with respect to the suitability or fitness of the Project (including
the Premises and the Building), or any portion thereof, for the conduct of
Tenant's business.
(c) To Landlord's knowledge, as of the date of this Lease, the
Premises are in compliance in all material respects with all existing laws,
rules, regulations, ordinances and orders of all applicable federal, state, city
and other governmental
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authorities in effect as of the date of this Lease (collectively, "Laws"),
including, without limitation, (i) the Americans' with Disabilities Act, 42
U.S.C. 12102 et seq. and (ii) all Laws with respect to building, fire and health
codes, environmental protection and sanitation and pollution control. Landlord
has received no notice of, and has no knowledge of, any condition currently or
previously existing on the Premises or any portion thereof which may give rise
to any violation of any existing law applicable to the Premises if it were
disclosed to the authorities having jurisdiction over the Premises.
(d) Landlord has not received any communication (written or oral),
whether from a governmental authority or third party that alleges that Landlord
is not in full compliance with any applicable environmental law. To Landlord's
knowledge, there is no environmental claim pending or threatened with regard to
the Premises or the Project.
2.3 Commencement Prior to Project Completion. Tenant agrees that the
----------------------------------------
Commencement Date may occur prior to the completion of portions of the Project,
including without limitation, Building A, the plazas and landscaping, prior to
the completion of those portions of the Parking Garages which are not necessary
in order to provide parking rights to Tenant in accordance with Section 6.1, and
-----------
prior to completion of any other portion of the Project.
2.4 Renewal Terms.
-------------
(a) Provided (i) Tenant is not in material default under this Lease
(after any applicable notice and lapse of applicable cure periods), and (ii)
Tenant has not assigned this Lease or subleased any portion of the Premises
(other than to a Related Entity), as of the date of exercise or the commencement
of the renewal term ("Renewal Term Commencement Date"), Tenant shall have the
option to renew this Lease ("Renewal Option") for the entire Premises then
leased by Tenant (but not for a portion of the Premises), for two (2) successive
periods of five (5) years each ("Renewal Terms"), exercisable as follows:
(1) If Tenant is interested in renewing this Lease, Tenant may
deliver written notice thereof ("Renewal Interest Notice") to Landlord at
least twelve (12) months prior to the expiration of the initial Term of
this Lease as to the first Renewal Term or at least twelve (12) months
prior to the expiration of the prior Renewal Term, as to a subsequent
Renewal Option.
(2) Within thirty (30) days following receipt of Tenant's Renewal
Interest Notice, Landlord shall give Tenant notice (the "Rental Notice") of
its determination of the Fair Market Rental Rate for the Premises to be
effective as of the Renewal Term Commencement Date.
(3) (A) If Tenant desires to renew the Lease at
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the Fair Market Rental Rate set forth in Landlord's Rental Notice,
Tenant shall give Landlord written notice thereof (an "Undisputed
Renewal Notice") before the date (the "Outside Date") that is the
later of: (i) thirty (30) days after the date of Landlord's Rental
Notice, and (ii) ten (10) months prior to the expiration of the Term.
If Tenant timely delivers the Undisputed Renewal Notice, the Term
shall be extended for the period equal to the Renewal Term and as of
the Renewal Term Commencement Date, the rental payable hereunder shall
be the Fair Market Rental Rate set forth in the Rental Notice.
(B) If Tenant desires to renew the Lease but disputes
Landlord's determination of the Fair Market Rental Rate for the
Premises, then Tenant shall give Landlord written notice thereof (a
"Disputed Renewal Notice") before the Outside Date. If Tenant timely
delivers the Disputed Renewal Notice, the Term shall be extended for
the period equal to the Renewal Term and the Fair Market Rental Rate
shall be determined pursuant to the appraisal procedure set forth in
Section 30.1 hereof. In the event that such appraisal procedure has
not resulted in a final determination of the Fair Market Rental Rate
on or before the Renewal Term Commencement Date, then Tenant shall
continue to pay the rent as in effect on the day prior to the Renewal
Term Commencement Date (adjusted in accordance with Section 4.5) until
such final determination is made. Within thirty (30) days after such
final determination, Tenant shall pay to Landlord the positive
difference, or Landlord shall refund to Tenant the negative
difference, between the amount of rent Tenant has actually paid and
the final determination of the Fair Market Rental Rate as applicable
to the period retroactive to the Renewal Term Commencement Date.
(C) If Tenant does not deliver an Undisputed Renewal Notice
or a Disputed Renewal Notice within thirty (30) days after the date of
Landlord's Rental Notice, then Tenant's Renewal Option (and any
subsequent Renewal Options) shall automatically expire as of such
thirtieth day.
Notwithstanding the foregoing subsections (1), (2) and (3), if Tenant fails to
timely deliver the Renewal Interest Notice, Tenant shall have the right,
exercisable at any time prior to the Outside Date for the initial Term or for
the first Renewal Term, as the case may be, to deliver written notice to
Landlord that Tenant desires to renew the Lease for the succeeding Renewal Term.
If Tenant timely delivers such notice, then within thirty (30) days thereafter,
Landlord shall deliver to Tenant Landlord's determination of the Fair Market
Rental Rate for the Premises to be effective as of the Renewal Term Commencement
Date. Upon the expiration of the Term, the Lease shall then be automatically
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extended for the period equal to the Renewal Term and as of the Renewal Term
Commencement Date, the rental payable hereunder shall automatically be adjusted
to the Fair Market Rental Rate determined by Landlord pursuant to the preceding
sentence.
(b) It is expressly understood that Landlord has the right to commence
marketing and, subject to Section 15.1, showing the Premises or any portion
------------
thereof to prospective tenants, subject to Section 15.1 hereof, up to twelve
(12) months prior to the expiration of the initial Term of this Lease or twelve
(12) months prior to the expiration of any Renewal Term as to which Tenant has
exercised the Renewal Option (provided that Landlord shall not commit to lease
any portion of the Premises to a third party until the last date for Tenant to
give the Renewal Notice).
(c) The Basic Rent during each Renewal Term shall be adjusted in
accordance with the provisions of Article 5 (subject to any adjustment of the
---------
Base Operating Expenses and Real Property Taxes as set forth in Landlord's
notice of the Notice Date Rental).
(d) The Renewal Option set forth in this Section 3.4 is personal to
-----------
Tenant and may not be assigned, transferred or conveyed to any party, except in
connection with an assignment of the Lease in its entirety to a Related Entity
of Tenant (as defined in Section 14.10). Nothing in this Section 3.4(d) shall
------------- --------------
require Tenant to be in occupancy of the Premises as a condition to the exercise
of the Renewal Option.
2.5 First Floor Cancellation Option. At any time between the
-------------------------------
Commencement Date and that date which is six (6) months therefrom, provided that
Tenant is not in material default hereunder, Tenant shall have the option (the
"First Floor Cancellation Option") to terminate this Lease with respect to Floor
1 of Building B (the "First Floor") by providing Landlord written notice (the
"First Floor Cancellation Notice") of Tenant's election so to do. Provided that
Tenant properly and timely exercises the First Floor Cancellation Option, then
from and after that date which is thirty (30) days from Landlord's receipt of
the First Floor Cancellation Notice, this Lease shall be deemed amended to
exclude from the definition of Premises the First Floor. From and after such
date, Basic Rent and Tenant's pro rata share of Operating Expenses and Real
Property Taxes and Tenant's share of parking spaces in the Garage and on Level
B-2 of the Building shall be proportionately reduced. Thereafter, Tenant shall
reimburse Landlord, within fifteen (15) days of Tenant's receipt from Landlord
of a statement therefor (the "Cancellation Cost Statement"), for all of the
costs and expenses reasonably incurred by Landlord to prepare the First Floor
for multi-tenant use (the "Cancellation Costs"). Tenant's obligation promptly to
pay the Cancellation Costs shall be deemed rent for all purposes under this
Lease.
30 Basic Rent; Security Deposit.
----------------------------
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3.1 Basic Rent. Subject to adjustment in accordance with Section 4.5
---------- -----------
hereof, Tenant shall pay to Landlord Basic Rent for the Premises in the
following amounts per square foot of Rentable Area per month, without limiting
the Additional Rent payable by Tenant:
For Floor B-1: $2.00
----
For Floors 1, 2 and 3: $3.50
----
3.2 Partial Months. If the Term begins on a day other than the first
--------------
day of a calendar month, or ends on a day other than the last day of a calendar
month, Basic Rent for such beginning or ending month shall be prorated based
upon a fraction, the numerator of which fraction shall be the number of days in
such month occurring during, or before or after, the Term, and the denominator
of which shall be thirty (30).
3.3 No Offset. The Basic Rent, together with any rent adjustments
---------
pursuant to Article 5 and all other adjustments made or sums due from Tenant
---------
hereunder ("Additional Rent"), shall be paid to Landlord, on the first day of
every month of the Term, without deduction or offset of any kind, in advance and
without demand (except as otherwise herein expressly provided) in lawful money
of the United States of America at the Office of the Building at the Project or
to such other person and/or location as Landlord may from time to time designate
in writing. The Basic Rent and Additional Rent and other amounts due and payable
by Tenant hereunder are sometimes referred to herein collectively as the "rent."
The obligation to pay rent shall commence on the Commencement Date and the first
month's rent, together with the Security Deposit, shall be payable on such date.
3.4 Security Deposit. Tenant will pay Landlord, upon execution of this
----------------
Lease by Tenant, cash or wired funds or in the form of a stand-by letter of
credit, in form and substance reasonably satisfactory to Landlord, in the amount
of Six Hundred Thousand Dollars ($600,000) ("Security Deposit") as security for
the full and faithful performance of each of the terms hereof by Tenant.
Landlord shall keep the Security Deposit separate from its general funds.
Provided that Tenant does not commit a default under this Lease, Tenant shall be
entitled to interest, to the extent actually earned, on the Security Deposit. If
Tenant defaults with respect to any provision of this Lease, including but not
limited to the provisions relating to the payment of rent, Landlord may, but
shall not be required to, following notice thereof to Tenant, use, apply or
retain all or any part of the Security Deposit for the payment of any rent or
any other sum in default, or for the payment of any other amount which Landlord
may spend or become obligated to spend by reason of Tenant's default or to
compensate Landlord for any other loss or damage which Landlord may suffer by
reason of Tenant's default, including without limitation, reasonable costs and
reasonable attorneys' fees incurred by Landlord to recover possession of the
Premises upon a default by Tenant hereunder. If any portion of said Security
Deposit is so used or applied,
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Tenant shall, within fifteen (15) days after demand therefor, deposit cash with
Landlord in an amount sufficient to restore the Security Deposit to its original
amount and Tenant's failure to do so shall constitute a default hereunder by
Tenant. If Tenant shall fully and faithfully perform every provision of this
Lease to be performed by it, the Security Deposit or any balance thereof shall
be returned to Tenant (or, at Landlord's option, to the last assignee of
Tenant's interest hereunder) within thirty (30) days following the later of
expiration of the original Term (or earlier termination of the Term, other than
as a result of Tenant's default), and surrender of possession of the Premises to
Landlord.
3.5 Rental Escalations. Commencing on the first (1st) anniversary of
------------------
the Commencement Date, and every annual anniversary thereafter, the Basic Rent
shall be increased pursuant to the provisions of this Section 4.5 by the lesser
-----------
of (i) the CPI Increase (as hereinafter defined) or (ii) four percent (4%). The
CPI Increase shall mean the percentage by which the CPI Index as of August 1 in
the year the adjustment is made exceeds the CPI Index as of August 1 in the
immediately preceding year. The CPI Index shall mean the Consumer Price Index
for All Urban Consumers for the Los Angeles-Riverside-Orange County Area (1982
to 1984 = 100) as published by the United States Department of Labor, Bureau of
Labor Statistics.
40 Rent Adjustments.
----------------
4.1 Operating Expenses and Real Property Taxes.
------------------------------------------
(a) Tenant shall pay as Additional Rent for each Lease Year (as
defined in Section 5.5) during the Term an amount equal to Tenant's "pro rata
-----------
share" of the excess of the amount of Operating Expenses and Real Property Taxes
for such Lease Year over the Operating Expenses and Real Property Taxes for
calendar year 2000 ("Base Year Amount"). Tenant's "pro rata share" share shall
be determined by a fraction, the numerator of which is the number of square feet
of Rentable Area in the Premises as set forth in Section 26.3 and the
denominator of which is the number of square feet of Rentable Area in the
Project as set forth in Section 26.3, unless otherwise expressly set forth
herein. "Operating Expenses and Real Property Taxes" means the sum of the
Operating Expenses and Real Property Taxes for the relevant Lease Year, as each
such term is defined in this Article 5.
---------
(b) Any costs or expenses for services or utilities in excess of
those required by this Lease to be supplied by Landlord, not otherwise included
in Operating Expenses, and which are attributable directly to Tenant's use or
occupancy of the Premises, shall be paid in full by Tenant as Additional Rent on
the next date for payment of Basic Rent which is at least twenty (20) days after
the date Landlord bills Tenant therefor.
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(c) "Operating Expenses" shall mean the total of all costs, expenses
and disbursements incurred or paid by Landlord (other than Real Property Taxes)
in connection with the ownership, management, operation, maintenance (including
cleaning, protecting and servicing the Project) and repair, replacement and
restoration of the Project (including, without limitation, the Common Areas and
the Parking Garages). Landlord shall, to the extent Landlord deems necessary or
appropriate, allocate Operating Expenses for the entire Project to different
buildings in the Project in such a manner as Landlord may reasonably determine
to reasonably reflect the actual utilization of utilities, services, and
materials by the tenants in the Project. Operating Expenses shall include,
without limitation, (i) the cost of providing, managing, operating, maintaining
and repairing air conditioning, sprinkler, fire and life safety, electrical,
water, steam, heating, mechanical, ventilation, elevator systems and all
utilities and the cost of supplies, tools and equipment purchased and
maintenance and service contracts entered into in connection therewith; (ii) the
cost of repairs (including but not limited to roof repairs; provided that the
replacement of all or substantially all of the roof shall be a capital
expenditure and not an Operating Expense), general maintenance, cleaning,
landscaping, gardening, trash removal, telephone service and equipment, light
bulbs, tube and ballast replacement, supplies, security and other protection
services; (iii) the cost of fire, extended coverage, boiler, sprinkler,
apparatus, public liability, property damage, rent, earthquake and other
insurance customarily carried by landlords of the highest category of premiere,
first-class office building projects in the Golden Triangle area and on Maple
Drive in Beverly Hills, California; (iv) wages, salaries and other labor costs
including taxes, insurance, retirement, medical and other employment benefits,
including, without limitation, such costs for a parking system manager for the
Project (if any) (provided that if a parking system manager is not employed at
the Project during calendar year 2000 but is employed thereafter, then, with
respect to any year in which the parking system manager is employed at the
Project, the Base Year Amount used for the calculation of Tenant's pro rata
share of Operating Expenses shall be equitably adjusted as if such parking
manager had worked for a comparable period during calendar year 2000); (v) fees,
charges and other costs, including management fees (including the management fee
payable to the Project manager not to exceed three percent (3%) of the gross
receipts of the Project on an annual basis), reasonable consulting fees,
reasonable legal fees and reasonable accounting fees of all independent
contractors engaged by Landlord or reasonably charged by Landlord (at a rate no
higher than that which would be charged by an independent contractor) if
Landlord performs such management services in connection with the Project; (vi)
the cost of supplying, replacing and cleaning employee uniforms; (vii) the fair
market rental value of Landlord's and the property manager's offices and storage
areas in the Building, provided said offices and storage areas are devoted to
the management, operation, maintenance or repair of the Project and shall not
exceed 1,000 square feet of
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Rentable Area; (viii) the cost of business taxes and licenses relating solely to
the operation of the Project; (ix) fees, charges or assessments imposed by any
federal, state or local government for fire and police protection, trash
removal, community services, or other similar services (whether directly or
through a special assessment district) which do not constitute Real Property
Taxes; (x) any charges which are payable by Landlord pursuant to a service
agreement with the City of Beverly Hills under a special assessment district or
pursuant to any other lawful means; (xi) the costs of contesting the validity or
applicability of any governmental enactment which would increase Operating
Expenses; (xii) depreciation of the cost of acquiring or the rental expense of
personal property used in the maintenance, operation and repair of the Project;
(xiii) all costs of management, operation, maintenance and repair of the Parking
Garages; (xiv) the costs of providing janitorial and life safety alarm services;
and (xv) any other expenses of any kind whatsoever reasonably incurred for
managing, operating, maintaining and repairing the Project. Operating Expenses
shall also include "Capital Improvement Amortization." "Capital Improvement
Amortization" shall mean the amount determined by multiplying the actual cost,
including actual financing costs, of each Capital Improvement acquired by
Landlord by the constant annual percentage required to fully amortize such cost
over the useful life of the Capital Improvement (as reasonably determined by
Landlord at the time of acquisition). The Capital Improvement Amortization shall
be allocated and included in Operating Expenses in accordance with generally
accepted accounting and management practices; provided that the amount of
Capital Improvement Amortization charged to Tenant for Cost Saving Capital
Improvements shall not exceed the amount by which the Operating Expenses
otherwise allocable to Tenant are reduced as a result of such Cost Saving
Capital Improvements. "Capital Improvements" shall mean any equipment, device or
other improvement acquired or installed subsequent to the date of this Lease (i)
to achieve economies in the operation, maintenance and repair of the Building or
such relevant portion of the Project ("Cost Saving Capital Improvement"), (ii)
to comply with any Laws, controls or (to the extent generally complied with by
landlords in comparable projects) guidelines, as more particularly described in
Section 7.4, or (iii) to comply with any other governmental requirement with
- -----------
respect to the Buildings or any such relevant portion of the Project, including
without limitation, fire, health, safety or construction requirements, if the
cost thereof is capitalized on the books of Landlord in accordance with
generally accepted accounting and management practices.
For purposes of computing rent adjustments pursuant to this Section 5.1,
-----------
Operating Expenses for the entire Project shall be allocated and charged to
Tenant in accordance with generally accepted accounting and management
practices. Operating Expenses shall be adjusted, including for calendar year
2000, to reflect one hundred percent (100%) occupancy of the Project during any
period in which the Project is not one hundred percent (100%)
12
<PAGE>
occupied. Operating Expenses for calendar year 2000 shall be adjusted to reflect
the cost of any repair warranty that is incurred in calendar year 2001 that (A)
was not incurred in calendar year 2000, and (B) would have been incurred in
calendar year 2000 but for contractor's warranties obtained by Landlord in
connection with the buildout of the Project. Landlord shall have the right, from
time to time, to allocate some or all of the Operating Expenses for the Project
among different portions, such as office or retail portions or separate
buildings, of the Project ("Cost Pools"), in accordance with generally accepted
accounting and management practices. The Operating Expenses within each such
Cost Pool shall be allocated and charged to the tenants within such Cost Pool as
an amount per square foot of Rentable Area, based on the total Rentable Area
within such Cost Pool. The Operating Expenses for the Project (or only those
Operating Expenses allocable to the Cost Pool of the Project which includes the
tenants of such space, if such an allocation is made) shall be allocated and
charged to tenants based on the Rentable Area of the Project (or based on the
Rentable Area of such Cost Pool if such an allocation of Operating Expenses is
made). No specific item of expense shall be included more than once in Operating
Expenses, Real Property Taxes, or Capital Improvement Amortization.
Notwithstanding any other provision hereof, Operating Expenses shall not
include the following:
(1) The cost of repair to the Buildings, including the Premises, to
the extent Landlord is entitled to be, and is, reimbursed for the cost of the
repairs by insurance carried by Landlord or any third party or by a warranty or
service contract;
(2) Marketing costs including leasing commissions, attorneys' fees in
connection with the negotiation and preparation of letters, deal memos, letters
of intent, leases, subleases and/or assignments, space planning costs, and other
costs and expenses incurred in connection with the lease, sublease and/or
assignment negotiations and transactions with present or prospective tenants
(including Tenant) or other occupants of the Buildings;
(3) Costs, including permit, license and inspection costs, incurred
with respect to the installation of improvements made for other tenants or
occupants in the Buildings or incurred in renovating or otherwise improving,
decorating, painting or redecorating vacant space for other tenants or occupants
of the Buildings;
(4) The cost of utilities charged directly to individual tenants
(including Tenant) and costs of other services charged to tenants (including
Tenant);
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(5) The cost of painting and decorating or otherwise improving the
Premises, any vacant space, or premises of other tenants;
(6) Except as specifically provided otherwise in this Article 5,
---------
amortization and depreciation of the Buildings and other real property
structures in the Project;
(7) Interest, points and fees on debt or amortization payments on any
real property mortgages or deeds of trust and ground lease payments;
(8) Legal and other related expenses associated with the enforcement
of leases or the securing or defense of Landlord's title to the Land, the
Buildings or other portions of the Project;
(9) Advertising and public relations costs (such as promotional
events) incurred directly for leasing individual space in the Buildings or other
portions of the Project;
(10) Landlord's general corporate overhead and general administrative
expenses not related to the operation of the Project (such as fees and costs in
connection with the sale or refinancing of the Project) and all compensation to
executives, officers or partners of Landlord or to persons who are executives or
officers of partners of Landlord or to any other person at or above the level of
building manager, other than the building manager of the Buildings or Project;
(11) Any compensation paid to clerks, attendants or other persons in
commercial concessions operated by Landlord or by others;
(12) All items and services for which Tenant or any other tenant in
the Buildings is obligated to reimburse Landlord and all items and services
supplied selectively to any tenant without reimbursement, provided that, any
item or service supplied selectively to Tenant at Tenant's request shall be paid
for by Tenant;
(13) The costs of (i) payroll for clerks, attendants and other
persons, (ii) bookkeeping, (iii) parking insurance, (iv) parking management
fees, (v) Parking Garage restriping, (vi) tickets, and (vii) uniforms, for the
Parking Garages and any off-site parking facility made a part of the Project
pursuant to Section 6.2;
-----------
(14) Costs of capital improvements to the Buildings and other portions
of the Project in excess of $5,000 or other capital expenditures in excess of
$5,000 other than the Capital Improvement Amortization;
(15) Costs of repairs or modifications to the Buildings or Premises
due to Landlord's failure, if any, to
14
<PAGE>
construct the Buildings and Premises in full compliance with all governmental
regulations, ordinance and laws effective at the time of construction;
(16) The cost of any political or charitable donations or
contributions, and trade association dues and Landlord's convention costs;
(17) Interest, fines or penalties assessed as a result of Landlord's
failure to make payments in a timely manner, unless such failure is reasonable
under the circumstances except to the extent any such payment is deferred by
Landlord to avoid being paid in 2000 as part of the Base Year Amount;
(18) Costs of complying with Laws in effect on the date hereof
relating to hazardous materials or substances ("Hazardous Materials") which are
incurred (A) to remove or remediate Hazardous Materials used or released on the
Project in the course of the original construction of the Project, or (B) as a
result of the presence of Hazardous Materials in the soil or groundwater under
the Project on or before the date of execution of this Lease or (C) as a result
of the violation of any such Laws by any other tenant in the Project. All other
costs and expenses associated with the compliance with Laws relating to all
Hazardous Materials shall be included as Operating Expenses, or to the extent
that such compliance constitutes a Capital Improvement, such costs shall be
payable by Tenant to Landlord as Capital Improvement Amortization under this
Lease, amortized over the remaining useful life of the Building;
(19) Costs of purchasing, installing and replacing art work in the
Building or elsewhere in the Project;
(20) Except for making repairs or keeping permanent systems in
operation while repairs are being made, rentals and other related expenses
incurred in leasing air conditioning systems, elevators or other equipment
ordinarily considered to be of a capital nature, except equipment not affixed to
the Buildings which is used in providing janitorial or similar services;
(21) Any bad debt loss, rent loss or reserves for bad debts or rent
loss;
(22) Except to the extent specifically provided otherwise in the
Lease, and except as to the management fees payable to Landlord or its
subdivisions or affiliates, the overhead and profit increments paid to Landlord,
or to any subdivision or affiliate of Landlord, for goods and/or services in the
Building, to the extent such overhead and profit increments exceed the costs of
comparable, first-class, high quality goods and/or services, delivered or
rendered by unaffiliated third parties of comparable reputation, stature,
experience and quality to Landlord, on a competitive basis;
15
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(23) Costs for which Landlord has been compensated by a management
fee;
(24) Increase in premiums for insurance carried by Landlord pursuant
to this Lease, which such increase is caused by use of the Project by Landlord
or any other tenant of Landlord which is hazardous on account of fire or
otherwise or premiums for any insurance carried by Landlord which is not
customarily carried by other reasonably prudent landlords in comparable first-
class office buildings;
(25) Any costs, fines or penalties incurred directly as a result of
violations by Landlord of any Laws or other requirement of any governmental
authority.
In light of the fact that a portion of the Base Operating Expense and Real
Property Taxes is the Base Year Amount, Landlord shall not reduce insurance
coverages in 2000 (to the extent the costs thereof are charged to Tenant as
Operating Expenses) for the purpose of reducing the insurance costs included in
the Operating Expenses for calendar year 2000 below the amount that such
expenses are projected by Landlord to be in 2001. Furthermore, Landlord shall
not intentionally or knowingly reduce any Operating Expenses in calendar year
2000 for the purpose of artificially inflating Tenant's pro rata share of
Operating Expense increases in subsequent years.
4.2 Real Property Taxes. "Real Property Taxes" means all taxes,
-------------------
assessments (special or otherwise) and charges levied upon or with respect to
the Project and ad valorem taxes on personal property used in connection
-- -------
therewith. Real Property Taxes shall include, without limitation, any tax, fee
or excise on the act of entering into this Lease or any other lease of space in
the Project, on the occupancy of Tenant or any other tenant of the Project, the
rent hereunder or in connection with the business of owning and/or renting space
in the Project which are now or hereafter levied, assessed or imposed against
Landlord by the United States of America, the State of California or any
political subdivision, public corporation, district or other political or public
entity, and shall also include any other tax, assessment, fee or excise, however
described (whether general or special, ordinary or extraordinary, foreseen or
unforeseen), to the extent it may be levied, assessed or imposed in lieu of, as
a substitute, in whole or in part, for or as an addition to, any other Real
Property Taxes. Landlord may pay any such special assessments in installments
when allowed by law, in which case Real Property Taxes shall include any
interest charged thereon. In recognition of the decrease in the level and
quality of governmental services and amenities as a result of Proposition 13,
Real Property Taxes shall also include any private assessments or the Building's
contribution towards a private cost-sharing agreement for the purpose of
augmenting or improving the quality of service and amenities normally provided
by governmental agencies, provided that Tenant shall not be responsible for any
share of any such assessments or contribution
16
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voluntarily assumed by Landlord unless Tenant has given its prior approval
thereof, such approval not to be unreasonably withheld in light of Landlord's
obligation and desire to operate the Project in a manner consistent with the
highest category of premiere, first class office building projects in the Golden
Triangle area and on Maple Drive in Beverly Hills, California. Real Property
Taxes shall also include reasonable legal fees, costs and disbursements incurred
in connection with proceedings to contest, determine or reduce Real Property
Taxes, but shall exclude any such costs otherwise included in Operating
Expenses, any taxes paid directly by Tenant pursuant to Sections 10.1 and 10.2
----------------------
and any penalties assessed against the Project or Landlord as a result of
Landlord's failure to timely pay any installment of Real Property Taxes when due
(except where such failure is caused by the failure of Tenant to pay timely its
share of such Real Property Taxes in accordance with this Lease). Real Property
Taxes shall not include income, franchise, transfer, inheritance, estate, or
capital stock taxes, unless and, to the extent, due to a change in the method of
taxation, any of such taxes are levied, assessed or imposed against Landlord in
lieu of, as a substitute, in whole or in part, for or as an addition to, any
other tax which would otherwise constitute a Real Property Tax. At all times
(including calendar year 2000 if applicable) prior to the assessment of the
Project on a fully completed basis, Real Property Taxes shall be adjusted to
reflect the amount which Real Property Taxes would be if the Project were
assessed on a fully completed and occupied basis. For purposes of computing
rent adjustments pursuant to this Article 5, Real Property Taxes shall be
---------
allocated and charged to Tenant in accordance with generally accepted accounting
and management practices and expressed as an amount per square foot of Rentable
Area, provided that at all times all Real Property Taxes are allocated to all
portions of the Rentable Area of the Project. Notwithstanding any other
provision hereof, parking revenue taxes shall not be included in Real Property
Taxes or Operating Expenses.
4.3 Payment. Prior to the commencement of each Lease Year, or as soon
-------
thereafter as possible (except for the first Lease Year), Landlord shall furnish
to Tenant a statement ("Landlord's Statement") containing Landlord's reasonable
estimate of the Operating Expenses and Real Property Taxes and Capital
Improvement Amortization (collectively, "Project Expenses") for such Lease Year
and a calculation of the Additional Rent, if any, payable by Tenant for such
Lease Year pursuant to this Article 5 on the basis of such estimate. If the
---------
Lease Year is a full year, Tenant shall pay to Landlord one-twelfth (1/12th) of
the amount of said Additional Rent on each monthly rent payment date during such
year (commencing on January 1) until further adjustment pursuant to this Section
-------
5.3. If the Lease Year is a partial year, Tenant shall pay to Landlord on each
- ---
monthly rent payment date in such partial year an amount equal to said
Additional Rent (for such partial Lease Year) divided by the number of months in
said partial Lease Year. If Landlord's Statement is furnished after the start of
the Lease Year, then on the next monthly rent
17
<PAGE>
payment date which is at least thirty (30) days after Tenant's receipt of
Landlord's Statement, Tenant shall pay the entire portion of the Additional Rent
attributable to portions of the Lease Year prior to such date. Landlord may
reasonably adjust Tenant's monthly rent payments under this Article 5 up to one
---------
time during the Lease Year to reflect the then current or estimated Project
Expenses and actual expenditures made during the elapsed portion of the Lease
Year. Within 180 days following each Lease Year, Landlord shall furnish to
Tenant a statement prepared or attested by an independent public accountant
selected by Landlord showing the actual Project Expenses during the previous
Lease Year, and Landlord shall compute any charge or credit to Tenant necessary
to adjust rent previously paid by Tenant to reflect the actual Project Expenses.
If such statement and computation reveal an underpayment, Tenant shall pay to
Landlord an amount equal to such underpayment (whether or not this Lease has
expired or been terminated) on the next date for payment of Basic Rent which is
at least twenty (20) days after Landlord's Statement, and if such statement and
computation show an overpayment, Landlord shall credit the next monthly rental
payment of Tenant, or, if the Term has expired, refund the overpayment to Tenant
within thirty (30) days after expiration of the Term. Tenant shall have the
right, at its expense, to cause a firm of certified public accountants or a firm
that provides operating expense review services selected by Tenant (or Tenant's
own in-house certified public accountant, who may be assisted by other advisors
of Tenant) (provided that in no event may any such firm or advisor be
compensated on any basis determined by a percentage of the savings effectuated
by such accountant or advisor) to conduct an audit of Landlord's Statement of
Project Expenses and the calculation of Tenant's Additional Rent for each Lease
Year provided that such audit must be commenced within two (2) years after
receipt of Landlord's reconciliation statement for the relevant Lease Year; if
such audit reveals that the Project Expenses were overstated in Landlord's
Statement, Landlord shall promptly refund the overcharge revealed by the audit
to Tenant and if the audit reveals an overstatement of Project Expenses in
Landlord's Statement by more than three percent (3%), then Landlord shall also
reimburse Tenant for the actual reasonable out-of-pocket costs of the audit paid
by Tenant within thirty (30) days after presentation of a statement therefor by
Tenant.
4.4 Lease Year; Proration. "Lease Year" shall mean the whole or partial
---------------------
calendar year commencing on the Commencement Date and ending on December 31 of
the year in which the Commencement Date occurs, and all subsequent calendar
years within the Term. The amount of Additional Rent payable by Tenant under
this Article 5 for any partial month shall be prorated on a daily basis within
that month.
50 Parking Rights.
--------------
5.1 Tenant's Parking Rights.
-----------------------
18
<PAGE>
(a) Tenant shall be provided with and shall rent, subject to Section
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6.1(b), for the entire Term of this Lease, ten (10) passes for parking spaces on
- ------
level B-1 of the Building and Tenant's pro rata share of the parking spaces on
level B-2 of the Building. Further, Tenant shall be entitled to rent passes for
its pro rata share of the parking spaces in the Garage. The services of any
parking attendant or valet requested by Tenant in connection with such parking
and reasonable direct enforcement costs (including costs of barriers and signs
and any changes thereto caused by Tenant's election under subsection (b) to
increase or decrease the number of parking passes it rents) shall be paid for
directly by Tenant as Additional Rent and not as part of Operating Expenses.
(b) Upon giving at least sixty (60) days prior notice to Landlord at
any time during the Term, Tenant shall have the option to adjust upward (up to
the limits set forth in Paragraph 6.1(a) above) or downward the number of
----------------
parking passes it rents hereunder. In no event shall Landlord be required to
make any modifications to the Parking Garage or other portions of the Project as
a result of the existence of any Laws governing Tenant or its use of the Project
or the parking rights of Tenant's employees.
(c) Initially, Tenant shall pay as Additional Rent for the parking
passes the following amounts:
(i) For parking spaces on level B-1: One Hundred Seventy-Five
Dollars ($175.00) per month;
(ii) For parking spaces on level B-2, as well as reserved spaces
in the Garage: One Hundred Fifty-Five Dollars ($155.00) per month;
(iii) For unreserved parking spaces in the Garage: One Hundred
Twenty-Five Dollars ($125.00) per month;
From and after the first anniversary of the Commencement Date, Landlord may
increase the monthly rental rate for the parking passes, no more frequently than
once a year, so that such rate is consistent with prevailing market rates in the
area. At Tenant's written request, Landlord shall provide Tenant with what
Landlord in good faith believes to be substantiation for such rate increases.
(d) To the extent available, Tenant shall have the right to validate
parking for Tenant's invitees upon reasonable, nondiscriminatory terms and
conditions and subject to reasonable, nondiscriminatory rules and regulations
established from time to time by Landlord or Landlord's operator or licensee
subject to and in accordance with the Rules Requirements. Tenant shall pay the
current prevailing rate charged by Landlord to other tenants in the Project for
validation parking.
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(e) The parking passes rented by Tenant pursuant to this Article 6 are
---------
provided to Tenant solely for use by Tenant's own personnel and visitors, and
such passes may not be transferred, assigned, subleased or otherwise alienated
by Tenant without Landlord's prior approval except to a Permitted Transferee or
to a permitted Sublessee or Assignee.
(f) Landlord may, at Landlord's option, rent parking passes (or
parking spaces) in the Garage to individuals or entities who or which are not
tenants of the Project. Landlord agrees to implement a system reasonably
designed to ensure that tenants of the Project have a preference over non-
tenants for the more desirable (i.e. covered) parking spaces. Landlord further
agrees that at all times during the Term, Landlord shall make available to
Tenant, on the terms and conditions set forth above, no less than the number of
parking spaces indicated in Section 6.1(a), subject to adjustment as provided in
Section 15.2. If adjusted pursuant to Section 15.2, in no event shall the total
number of parking spaces made available to Tenant be less than 3.5 spaces per
each 1,000 square feet of Rentable Area of the Premises.
5.2 Off-Site Parking. Without changing or reducing Tenant's parking
----------------
rights under Section 6.1, Landlord shall have the right to provide parking for
-----------
tenants of the Project other than Tenant at off-site locations other than the
Parking Garage, in which event, said off-site locations other than the Parking
Garage shall be deemed part of the Project for purposes of this Lease provided
that such parking at off-site locations shall not increase the Operating
Expenses, Real Property Taxes or Capital Improvement Amortization otherwise
allocable to Tenant hereunder. Nothing in this Lease shall be deemed to prohibit
or limit Landlord's right to change, delete or modify any such off-site parking
areas.
60 Utilities and Services.
----------------------
6.1 Landlord Obligations. Landlord shall furnish the services and
--------------------
utilities described in this Section 7.1 to the Premises during the periods from
8:00 a.m. to 6:00 p.m., Monday through Friday and 9:00 a.m. to 12:00 Noon
Saturday, except on New Year's Day, Martin Luther King Day, President's Day,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day and
other holidays on which the New York Stock Exchange is closed, and subject to
rules and regulations from time to time established by Landlord in compliance
with the Rules Requirements (such hours and days of operation are herein called
"Normal Working Hours"). The cost of providing such services and utilities shall
be included in Operating Expenses except as specifically provided otherwise
herein.
(a) HVAC. Landlord shall furnish heating, ventilation and air
----
conditioning ("HVAC") in amounts required for the use and occupancy of the
Premises for normal office purposes consistent with the highest category of
premiere, first-class office
20
<PAGE>
building projects in the Golden Triangle area and on Maple Drive in Beverly
Hills, California. Tenant shall not, without Landlord's prior written consent,
use heat-generating machines (other than normal fractional horsepower office
machines) or other machinery or equipment (including but not limited to "space
heaters") which may affect the temperature otherwise maintained in any portion
of the Premises by the HVAC system, and if such temperature is affected as a
result of: (i) any lights, machines or equipment (including without limitation,
computers, telephone switches, photocopiers and electronic data processing
machines) used by Tenant in the Premises in excess of normal office use; (ii)
the occupancy of the Premises by more than one person per one hundred fifty
(150) square feet of Rentable Area therein; or (iii) an electrical demand in
excess of four and one-half (4.5) watts (connected load) per square foot of
Rentable Area of the Premises, Landlord shall have the right to install, after
notice to Tenant and a thirty (30) day opportunity for Tenant to restore the
required temperature balance in the Premises, any supplemental machinery or
equipment which Landlord reasonably deems necessary to restore temperature
balance, including without limitation, modifications or additions to the
standard air conditioning equipment, and the cost thereof including the
reasonable cost of equipment and installation and any additional reasonable cost
of operation and maintenance incurred thereby, shall be paid by Tenant to
Landlord within thirty (30) days following demand therefor by Landlord. Landlord
makes no representation with respect to the adequacy or fitness of the HVAC
system or equipment in the Building to maintain temperatures which may be
required for, or because of, any equipment of Tenant except with respect to the
equipment specifically shown on the Final Plans or which is typically used in
similar locations and densities by other tenants in first-class office buildings
comparable to the Building, and Landlord shall have no liability for loss or
damage in connection therewith. Tenant hereby agrees to indemnify, defend,
protect and hold Landlord harmless from and against any and all loss, damage,
claim, liability, expense or costs, including attorneys' fees, incurred by
Landlord to any other tenant in the Project as a material result of the use by
Tenant of electric current, HVAC or other services in excess of the capacity of
the Building Systems set forth in this subsection (a).
21
<PAGE>
(b) Electricity. Landlord shall furnish sufficient electric power at
-----------
277 volts, single phase, to supply tenant lighting load permitted by the State
of California, Title 24 energy code (1.5 watts per square foot of Usable Area)
and sufficient power at 120/208 volts, three phase, four wire, for 3 watts
connected load per square foot of Usable Area for office power. If specifically
approved by Landlord, either pursuant to Article 8 or otherwise, additional
---------
power may be made available at 480 volts, three phase, for additional power
and/or air-conditioning requirements up to the limit of available building power
taking into account potential needs of other tenants and a reasonable safety
factor. The cost of equipment and installation for transformers, panel boards,
bus duct taps, feeders, and other items required for the utilization of such
additional power shall be paid by Tenant. Tenant shall not install or operate
in the Premises any electrically operated machinery, appliances or equipment
(including without limitation, computers, telephone switches, electronic data
processing machines, word processors, photocopiers, and punch card machines, and
machines using in excess of 110 volts) which would exceed the capacity of the
Building Systems as determined by Landlord, except as specifically shown on the
Final Plans. Without the prior written consent of Landlord, which Landlord may
refuse in its reasonable discretion, Tenant shall not install or operate any
apparatus, device, machinery, appliances or equipment in the Premises, which
will in any way increase the amount of electricity usually furnished or supplied
for use of the Premises as general office space; nor connect any apparatus,
device, machinery, appliances or equipment (except through existing electrical
outlets in the Premises), for the purpose of using electric current.
Notwithstanding the above, Tenant may install computers, word processing and
duplicating machines and office equipment typically found in buildings in the
highest category of premiere, first-class office building projects in the Golden
Triangle area and on Maple Drive in Beverly Hills, California as long as the
electrical capacity limits set forth above are not exceeded. Tenant agrees to
pay Landlord directly (instead of as part of Operating Expenses and in addition
to Operating Expense payments pursuant to Section 5.1) for the cost of
-----------
electrical power (at rates no higher than the applicable rates charged to the
Project by the public utility providing similar service) used by Tenant which
exceeds the amount of such power typically used by other tenants in the Project
such that the allocation of electricity costs to all tenants in the Project
through Operating Expenses would otherwise be distorted or unfair (and Landlord
shall not enforce this sentence in a discriminatory manner as to Tenant). If
Landlord determines at any time during the Term that Tenant is using such excess
amount of electric power, Landlord shall have the right to install a submeter on
any floor or floors, or portion of any floor or floors, of the Premises to
determine the actual amount of electric power which Tenant is utilizing from
time to time. If such submeter indicates that Tenant's usage of electric power
exceeds the amount of such electric power typically used by other tenants in the
Project and that the allocation of electricity costs to all tenants in the
22
<PAGE>
Project through Operating Expenses is, therefore, materially distorted or
unfair, then Tenant shall pay Landlord the actual cost of equipment and
installation for such submeter and shall pay directly (instead of as part of
Operating Expenses) for the actual cost of such excess electric power usage plus
any additional expense incurred in keeping account of the electric power so
consumed. Landlord shall have the right to install such submeter at any time and
from time to time during the Term or any Renewal Term, after notice to Tenant
and without unreasonable interference with Tenant's conduct of its business.
(c) Elevators. Subject to the requirements of Building security,
---------
Landlord shall furnish freight and passenger elevator services to the Premises
twenty-four hours per day. Landlord's actual, out of pocket costs for Tenant's
use of non-standard freight elevator service, including elevator service
requiring the use of the top of the "cab" of the elevator, shall be paid by
Tenant within ten (10) days after receipt of an invoice. In addition, if Tenant
requires extended and uninterrupted use of the freight elevator for other than
normal deliveries to the Premises (such as for a special move or alterations),
then Landlord shall provide such freight elevator service by prior arrangement
with the manager of the Building the cost of which shall be charged to Tenant in
accordance with Section 7.3.
-----------
(d) Water. Landlord shall make available water for lavatory and
-----
drinking purposes in the Premises and in the cafeteria and gym on a seven (7)
day, twenty-four (24) hour per day basis to be drawn from the public lavatory in
the core of the floors on which the Premises are located. Tenant shall not make
any use of the Premises which would increase the amount of water typically
furnished for office use, nor connect any appliance directly to the water pipes
other than in connection with kitchens, pantries and similar uses expressly
shown on the Final Plans. If unreasonable or unusual amounts of water are
consumed by Tenant, then, at Landlord's option, water meters shall be installed
at Tenant's sole cost and expense and Tenant shall pay for its additional
consumption at the Building's average cost.
(e) Janitorial. Landlord shall provide janitorial service consistent
----------
with the standards of the highest category of premiere, first-class office
building projects in the Golden Triangle area and on Maple Drive in Beverly
Hills, California and in accordance with the Cleaning Specifications set forth
on Exhibit "E" attached hereto. Landlord shall not be required to provide
-----------
janitorial services for portions of the Premises used for storage, storage room
or similar purposes, preparing or consuming food or beverages (except for floors
and counters where food and dishes are not present and such cleaning is
practical), or areas secured, obstructed or locked by Tenant. Any and all
additional or specialized janitorial services not described on Exhibit "E" which
-----------
are required by Tenant shall, at Tenant's request, be contracted for by Landlord
with Landlord's janitorial agent on behalf of Tenant, in which case Tenant shall
pay, as Additional
23
<PAGE>
Rent hereunder, all costs and expenses of such additional or specialized
janitorial services within fifteen (15) days after delivery of the statement
therefor by Landlord.
(f) Building Security. Landlord and Tenant shall provide building
-----------------
security equipment, procedures and personnel for the Project (but not within the
Premises) twenty-four (24) hours per day, seven (7) days per week in accordance
with the Security Specifications set forth on Exhibit "F" attached hereto;
-----------
provided, however, Landlord does not guaranty or make any warranty with respect
to the safety of Tenant's personnel or property. The cost of such security
service shall be allocated between Landlord and Tenant as set forth in Exhibit
F. Tenant shall have the right, at Tenant's expense, to provide additional
security equipment or personnel in the Premises, provided that Landlord is given
reasonable access to the Premises (subject to Tenant's right to maintain secured
areas) and that any such security system installed by Tenant complies with all
applicable codes and shall not create any security risk to the Project, or
adversely impact Landlord's security system or adversely affect the rights of
other tenants to the Project.
6.2 Access. Landlord shall furnish to Tenant's employees and agents
------
access to the Premises and the Parking Garage on a seven (7) day per week,
twenty-four (24) hour per day basis, subject to compliance with such security
measures as shall from time to time be in effect for the Building and/or the
Project, subject to interruptions in access required by applicable Laws or
governmental authorities or as reasonably required for Landlord in the case of
emergencies or to perform its obligations of repair and maintenance under this
Lease or to make required or permitted alterations in the Project, and subject
to the Rules and Regulations and any future rules and regulations from time to
time established by Landlord subject to and in compliance with the Rules
Requirements.
6.3 Extraordinary Services. Freight and passenger elevator services,
----------------------
HVAC, electricity, and access to and use of the loading dock facilities (if any)
will be available twenty-four (24) hours a day, subject to the provisions of
this Article 7. Landlord may impose a reasonable direct charge and establish
---------
reasonable rules and regulations for any of the following:
(a) The use of any HVAC or electricity by Tenant at any time other
than during Normal Working Hours. Such usage shall be charged to Tenant at the
standard rates for the Project, which initially shall be $35.00 per hour and
shall be subject to adjustment from time to time based on Landlord's reasonable
estimate of actual costs;
(b) The usage of any services provided to Tenant (including without
limitation, freight elevator service, or use of the loading dock facilities by
Tenant) at any time other than during Normal Working Hours. Such usage shall be
charged to Tenant at the standard rates for the Project which shall be based
24
<PAGE>
upon Landlord's reasonable estimate of actual costs. Nothing contained in this
subsection (b) shall limit subsections (a), (c) or (d). Notwithstanding the
foregoing, provided Tenant obtains the appropriate permits therefor, Tenant
shall be entitled to use the freight elevators in the Building in connection
with Tenant's initial moves into each floor of the Premises without charge to
Tenant;
(c) Additional or unusual janitorial services required because of any
non-building standard improvements in the Premises, the carelessness of Tenant,
the nature of Tenant's business (including the extensive operation of Tenant's
business other than during Normal Working Hours);
(d) The removal of any refuse and rubbish from the Premises except
for discarded material placed in wastepaper baskets and left for emptying as is
customary in the highest category of premiere, first class office building
projects located in the Golden Triangle area and on Maple Drive in Beverly
Hills, California. Landlord will cause the Premises to be cleaned after
Tenant's initial move into the Premises (excluding removal of large packing
cartons or moving materials, the breakdown and disposal of which shall be the
responsibility of Tenant) without charge to Tenant.
The foregoing direct charges shall be payable by Tenant as Additional Rent
on the next rent payment date at least twenty (20) days following submission of
an invoice therefor by Landlord.
6.4 Interruption in Utility Services. Landlord shall not be liable for
--------------------------------
damages or otherwise for failure, stoppage or interruption of any services or
utilities, nor shall the same be construed either as an eviction of Tenant, or
result in an abatement of rent, when such failure is caused by acts of God,
accidents, breakage, strikes, lockouts, other reasonably unavoidable labor
disputes, or by the making of repairs, alterations or improvements to the
Premises or the Building, or the limitation, curtailment, rationing or
restriction on supply of natural gas, water, electricity, labor or other
supplies or for any other condition beyond Landlord's reasonable control,
including without limitation, any mandatory governmental energy conservation
program or legal requirement; provided, however, that Tenant shall have the
right to an abatement of any rent paid in proportion to the portion of the
Premises which is rendered untenantable and unusable by Tenant if such portion
of the Premises is determined to be untenantable and is not used by Tenant for a
period of more than three (3) consecutive business days as a result of a failure
in the services or utilities to be provided by Landlord described in Section
-------
7.1, other than any such failure caused by the negligent or willful acts of
- ---
Tenant or its contractors, employees, licensees or invitees (acting within the
scope of their relationship with Tenant). Notwithstanding any abatement of rent
under this Lease, Tenant shall remain obligated to pay Landlord for all
Additional Rent owed under
25
<PAGE>
Article 5 for services and utilities provided to and used by Tenant during the
- ---------
period of such rent abatement. If any governmental entity imposes mandatory
controls or guidelines on Landlord or the Project relating to the services
provided by Landlord, or the reduction of automobile or other emissions,
Landlord may make such alterations to the Buildings or any other part of the
Project related thereto and take such other steps as are necessary to comply
with such controls and guidelines, the cost of such compliance and alterations
shall be included in Operating Expenses or deemed to be a Capital Improvement,
and Landlord shall not be liable therefor, for damages or otherwise, nor shall
the same be construed either as an eviction of Tenant, or result in an abatement
of rent except to the extent abatement of rent is otherwise provided for in this
Lease; provided that if the Premises as a whole are untenantable and unusable by
Tenant and are not used by Tenant, as a result of such alterations by Landlord,
for a period of over 180 consecutive days (other than a de minimus number of
days during which such services and utilities are restored to the Premises),
then Tenant shall have the right to cancel this Lease by giving notice thereof
to Landlord within ten (10) days after the expiration of said 180-day period and
this Lease shall terminate ten (10) days after delivery of such notice if the
Premises are not again made tenantable and usable for Tenant within said second
ten (10) day period. The foregoing 180-day period shall be extended on a day for
day basis by the number of days of any delay in providing such utilities and
services which is caused by force majeure events which also affect other owners
----- -------
of real estate projects in the greater Los Angeles metropolitan area. Landlord
will minimize the interference with Tenant's use and occupancy of the Premises
and restore all services and utilities to the Premises as soon as possible.
Nothing contained in this Section 7.4 shall limit any provision of Article 12.
7. Alterations.
-----------
7.1 Restriction on Alterations.
--------------------------
(a) Tenant may make alterations, additions or improvements to the
Premises after the Commencement Date (collectively, "Tenant Alterations") which
do not, individually or cumulatively, materially and adversely affect the
Building Systems or Service Facilities provided Tenant submits its plans,
including floor load calculations in the event heavy equipment is part of such
plans, for such alterations to Landlord at least thirty (30) days prior to
commencement of construction of such Tenant Alterations (except as to decorative
items, minor repairs or installations of trade fixtures and furniture for which
plans are not required). Without limiting the foregoing, any Tenant Alterations
which increase the floor load, electrical, plumbing or HVAC requirements over
the capacities of such Building Systems
26
<PAGE>
provided as of the Commencement Date shall be deemed to materially and adversely
affect the Building Systems for purposes of this Article 8 only, and such Tenant
---------
Alterations shall only be made, if at all, by Tenant if Tenant complies with
the requirements of Section 8.1(b). Within fifteen (15) days after receipt of
--------------
the plans for alterations, Landlord shall inform Tenant, in good faith, whether
such Tenant Alterations will (for purposes of this Article 8) materially and
---------
adversely affect the Building Systems or Service Facilities. If Landlord
indicates that such Tenant Alterations will so affect the Building Systems or
Service Facilities, Landlord will have five (5) additional business days to
inform Tenant of its approval or disapproval thereof, and if disapproved,
Landlord will detail specific conditions of Landlord's disapproval.
(b) Tenant shall make no Tenant Alterations which, individually or
cumulatively, may have a material and adverse effect on the Building Systems or
Service Facilities without the prior written consent of Landlord, and Landlord
may impose as a condition to such consent such requirements as Landlord, in its
reasonable discretion, may deem necessary or desirable, including without
limitation, (i) the right to approve the plans and specifications for any work
to insure, among other things, that such work will not materially and adversely
affect the Building Systems, (ii) the right to require supplemental insurance
reasonably satisfactory to Landlord and naming Landlord as an additional
insured, (iii) the right to require reasonable security (including assurance of
the availability of sufficient funds of Tenant) for the full payment for any
work which costs in excess of $100,000, and (iv) reasonable requirements as to
the manner in which or the time or times at which work may be performed. Tenant
acknowledges that Landlord shall have the sole right to perform all Tenant
Alterations required to be approved by Landlord. In the event that Landlord
acts as general contractor, Tenant shall pay Landlord a fee equal to ten percent
(10%) of the construction costs of such Tenant Alterations. In the event that
Landlord does not act as general contractor, Tenant shall pay Landlord a
supervisory fee equal to three percent (3%) of the construction costs of such
Tenant Alterations. Landlord agrees that all contracts for Tenant Alterations
shall be subject to a reasonably implemented competitive bidding process. All
Tenant Alterations shall be compatible with a first-class office building
complex and completed in accordance with Landlord's requirements as set forth
herein and all applicable rules, regulations and requirements of governmental
authorities and insurance carriers. In addition to general contractor or
supervisory fees, Tenant shall pay to Landlord all out-of-pocket costs and fees
reasonably incurred by Landlord together with reasonable allocations of in-house
staff costs for reviewing and inspecting all Tenant Alterations to assure full
compliance with all of Landlord's requirements, which charges shall not, in the
aggregate, exceed three percent (3%) of the total design and construction costs
of the Tenant Alterations being reviewed (provided that such limitation on
Landlord's charges shall apply only if the plans for such Tenant Alterations
27
<PAGE>
submitted by Tenant are reasonably precise and suitable for final review for
both engineering and design). Landlord does not expressly or implicitly
covenant or warrant that any plans or specifications submitted by Tenant are
safe or that the same comply with any applicable laws, ordinances, codes, rules
or regulations. Further, Tenant shall indemnify, protect, defend and hold
Landlord harmless from any loss, cost or expense, including attorneys' fees and
costs, incurred by Landlord as a result of any defects in design, materials or
workmanship resulting from Tenant Alterations, except to the extent such defects
are caused by Landlord, its agents, contractors, servants or employees. If
Tenant desires to install any rooftop equipment, Tenant may submit, and the
parties shall process, such request as a Tenant Alteration requiring Landlord
consent pursuant to this Article 8.
(c) Landlord shall provide Tenant with copies of all material
contracts, receipts, paid vouchers, and any other documentation (including,
without limitation, "as-built" drawings to the extent such drawings are
reasonably available to Landlord, air/water balancing reports, permits and
inspection certificates) in connection with the construction of such Tenant
Alterations. Tenant shall promptly pay all costs incurred in connection with
all Tenant Alterations and shall not permit the filing of any mechanic's lien or
other lien in connection with any Tenant Alterations. Tenant shall be
responsible for paying the general contractor's overhead and fee in connection
with the work performed pursuant to this Article 8. If a mechanic's lien or
---------
other lien is filed against the Building or the Project as a result of Tenant
Alterations made by or on behalf of Tenant, Tenant shall discharge or cause to
be discharged (by bond or otherwise) such lien within ten (10) days after Tenant
receives notice of the filing thereof and shall not allow any such lien to be
foreclosed upon, although Tenant shall otherwise be entitled to contest the
validity of any such lien. If a mechanic's lien or other lien is filed against
the Land, the Building or the Project as a result of Tenant Alterations made by
or on behalf of Tenant and Tenant fails to timely discharge such lien, Landlord
may, without waiving its rights and remedies based on such breach of Tenant and
without releasing Tenant from any of its obligations, cause such liens to be
released by any means it shall deem proper, including payment in satisfaction of
the claim giving rise to such lien. Tenant shall pay to Landlord within fifteen
(15) days following notice by Landlord, any sum paid by Landlord to remove such
liens, together with interest at Landlord's cost of money from the date of such
payment by Landlord. The parties acknowledge that the filing of a preliminary
notice is not in and of itself the filing of a mechanic's lien. Notwithstanding
the foregoing, if Tenant has made payment to Landlord for the cost of any Tenant
Alterations or portion thereof, and Landlord fails to forward such payment to a
contractor or subcontractor, Landlord shall be solely responsible for a
mechanics' lien filed as a result of such nonpayment. Any increase in any tax,
assessment or charge levied
28
<PAGE>
or assessed as a result of any Tenant Alterations shall be payable by Tenant in
accordance with Article 10.
----------
(d) Notwithstanding anything in the foregoing to the contrary (i) the
outside appearance, character or use of the Building shall not be adversely
affected by any Tenant Alteration, and no Tenant Alteration shall materially
weaken or impair the structural strength or, in the reasonable opinion of
Landlord, materially lessen the value of the Building or create the potential
for unusual expenses to be incurred upon the removal of the Tenant Alterations
and the restoration of the Premises upon the termination of this Lease (unless
Tenant agrees to pay therefor); (ii) no part of the Building outside of the
Premises shall be materially, adversely, physically affected by any Tenant
Alteration; and (iii) the proper functioning of the Building Systems and Service
Facilities shall not be materially, adversely affected by any Tenant Alteration
and there shall be no Tenant Alteration which materially, adversely interferes
with Landlord's free access to the Building Systems or materially, adversely
interferes with the moving of Landlord's equipment to or from the enclosures
containing the Building Systems; (iv) in performing the work involved in making
such Tenant Alterations, Tenant shall be bound by and observe all of the
conditions and covenants contained in this Article 8; (v) all work shall be done
---------
at such times and in such manner as Landlord from time to time may reasonably
designate; and (vi) Tenant shall not be permitted to install and make part of
the Premises any materials, fixtures or articles which are subject to liens,
conditional sales contracts or chattel mortgages other than trade fixtures,
furniture and equipment. In connection with Landlord's approval of any Tenant
Alteration, Landlord shall have the right to advise Tenant that such Tenant
Alteration must be removed by Tenant upon the expiration or termination of this
Lease, provided that Landlord agrees not to impose such requirement if Landlord
determines that such Tenant Alterations do not impair the functionality of the
Premises or the portion thereof affected. If Tenant proceeds to implement such
Tenant Alteration, Tenant shall be obligation to remove such Tenant Alteration
in accordance with Section 8.2 below.
(e) Tenant acknowledges that the exterior rooftop areas on the third
floor of the Premises are not intended to be used as balconies. Should Tenant
desire to use such areas as balconies, Tenant shall be solely responsible for
seeking and obtaining all necessary permits and approvals. Any Tenant
Alterations in connection with converting such areas to usable balconies shall
be subject to the provisions of this Article 8. The completion of any such
conversion shall not cause an increase in Basic Rent or in Tenant's share of
Operating Expenses.
7.2 Removal and Surrender of Fixtures and Tenant Alterations. All
--------------------------------------------------------
Tenant Alterations and tenant improvements installed in the Premises by Landlord
which are attached to, or built into, the Premises, including without
limitation, floor coverings, window coverings, wall coverings, paneling,
molding,
29
<PAGE>
doors, vaults (excluding vault doors), plumbing systems, electrical systems,
mechanical systems, structural systems, lighting systems, sound equipment,
communication systems and outlets for the systems mentioned above and for all
telephone, computer, radio, telegraph and television purposes, and any special
flooring or ceiling installations, shall become the property of Landlord and
shall be surrendered with the Premises, as a part thereof, at the end of the
Term; provided, however, (i) Landlord may, by notice to Tenant at least thirty
(30) days prior to the end of the Term, require Tenant to remove any Tenant
Alterations designated by Landlord to be removed at the time of Landlord's
approval thereof (with respect to such Tenant Alterations as to which Landlord
has a right of approval hereunder) or designated in such notice (for all Tenant
Alterations as to which Landlord does not have a right of approval hereunder) if
such improvements are not generally found in the highest category of premiere,
first-class office building in the Golden Triangle area and on Maple Drive in
Beverly Hills, California, and to repair any damage to the Premises, the
Building and any other part of the Project caused by such removal, all at
Tenant's sole expense and to the reasonable satisfaction of Landlord and (ii)
Tenant shall promptly remove from the Premises all signs and graphics and any
other items containing Tenant's name and/or logo and shall repair any damage to
the Premises or the Project caused by such removal, all at Tenant's sole expense
and to the reasonable satisfaction of Landlord. Any articles of Tenant's
personal property including business and trade fixtures not attached to, or
built into, the Premises, machinery and equipment, free-standing cabinet work,
and movable partitions as well as all equipment for Tenant's network operating
center, if any, shall be and remain the property of Tenant and may be removed by
Tenant at any time during the Term as long as Tenant is not in default hereunder
and provided that Tenant repairs to Landlord's satisfaction any damage to the
Premises, the Building and any other part of the Project caused by such removal.
For purposes of the insurance requirements of Section 11.2, Tenant shall be
------------
deemed to have an insurable interest in all of the tenant improvements and
Tenant Alterations in the Premises, as between Landlord and Tenant, but the same
shall be surrendered with the Premises on termination of this Lease, as set
forth above.
7.3 Standard Window Covering. Tenant shall use the Building standard
------------------------
window covering as specified by Landlord and Landlord reserves the right to
approve or disapprove of interior improvements visible from outside the Building
on wholly aesthetic grounds, which approval shall not be unreasonably withheld
in light of the quality and reputation of the Project. Such improvements must be
submitted for Landlord's written approval prior to installation, or Landlord may
remove or replace such items at Tenant's sole expense.
7.4 Arbitration of Disputes. Any dispute concerning whether the
-----------------------
provisions of Sections 8.1 through 8.3 have been
------------------------
30
<PAGE>
properly interpreted or complied with shall be submitted to arbitration pursuant
to Article 34.
8. Maintenance and Repairs.
-----------------------
8.1 Tenant's Obligations. Except for Landlord's obligations
--------------------
specifically set forth in this Lease, Tenant shall, at Tenant's sole expense,
keep the Premises and the Building and every part thereof clean and in good and
sanitary condition and repair and Landlord shall have no obligation to alter,
remodel, improve, repair, decorate or paint the Premises or the Building or any
part thereof. Subject to the provisions of Section 11.5 and Article 12, Tenant
------------ ----------
shall reimburse Landlord for all repairs to the Premises, the Building or any
other portion of the Project which are required as a result of any misuse or
neglect of the same by Tenant or any of its officers, agents, employees,
contractors, licensees or invitees while in or about the Premises, the Building
or any other portion of the Project.
8.2 Landlord's Obligations. The improvements to the Premises
----------------------
constructed by or on behalf of Landlord shall be in full compliance with all
applicable Laws in effect at the time of such construction. Subject to Article
-------
12, Landlord shall repair and maintain with reasonable diligence and in a first-
- --
class manner after written notice thereof from Tenant, defects in, and damage
to, the Building's plumbing, HVAC and electrical systems and structural systems
installed by or on behalf of Landlord and serving or located on the Premises. If
and to the extent such maintenance and repair is required in part or in whole by
the act, neglect, misuse, fault or omission of any duty of Tenant, its agents,
employees, contractors, licensees or invitees (acting within the scope of their
relationship with Tenant), Tenant shall pay to Landlord the cost of such
maintenance and repairs, except to the extent Tenant has been relieved of such
liability under Section 11.5. Except as provided in Article 12, there shall be
------------ ----------
no abatement of rent with respect to, and Landlord shall not be liable for, any
injury to or interference with Tenant's business arising from any repairs,
maintenance, alteration or improvement in or to any portion of the Project or
the Building, including the Premises, or in or to the fixtures, appurtenances
and equipment therein. Further, neither Landlord nor any partner, director,
officer, agent or employee of Landlord shall be liable (a) for any damage caused
by other lessees or persons in or about the Project; or (b) for any
consequential damages arising out of any loss of use of the Premises or any
equipment or facilities therein by Tenant or any person claiming through or
under Tenant. Subject to Section 9.3, as a material inducement to Landlord
entering into this Lease, Tenant waives and releases its right to make repairs
at Landlord's expense under Sections 1932(1) or 1942 of the California Civil
Code or under any other law, statute or ordinance now or hereafter in effect.
9.3 Failure to Repair. If Landlord refuses or neglects to repair any
-----------------
condition causing an interruption in the reasonably necessary operation of the
Building Systems or Service Facilities, then if such failure shall continue for
a period of
31
<PAGE>
thirty (30) days following written notice from Tenant demanding that Landlord
make such repair, Tenant shall have the right, but not the obligation, to make
such repair. If Tenant performs such repair, it shall invoice Landlord for the
reasonable cost thereof, which invoice shall be supported by reasonable
documentation substantiating the cost of repair. Tenant's invoice shall be
payable by Landlord within thirty (30) days after receipt. If payment is not
received within such 30-day period, Tenant shall have the right to deduct the
amount of such invoice from the rent payable hereunder.
9. Tax on Tenant's Personal Property and Tenant Improvements.
---------------------------------------------------------
9.1 Personal Property Taxes. At least ten (10) days prior to
-----------------------
delinquency, Tenant shall pay all taxes levied or assessed upon Tenant's
equipment, furniture, fixtures and other personal property located in or about
the Premises. If the assessed value of Landlord's property is increased by the
inclusion therein of a value placed upon Tenant's equipment, furniture, fixtures
or other personal property, Tenant shall pay to Landlord, within thirty (30)
days following written demand therefor, together with copies of documentation
reasonably demonstrating that such taxes are applicable to Tenant's personal
property, the taxes so levied against Landlord, or the proportion thereof
resulting from said increase in assessment. Landlord will cooperate at Tenant's
expense in causing the tax assessor to properly allocate taxes between personal
property and real property and to directly assess Tenant for any personal
property taxes; provided, however, that nothing contained in this Section 10.1
------------
shall obligate Landlord to contest, in any manner whatsoever, whether by
judicial action or otherwise, any assessment of Tenant's personal property by
the tax assessor.
9.2 Tax on Leasehold Improvements. Tenant shall pay Landlord, within
-----------------------------
fifteen (15) days after demand, such portion of all real estate taxes levied or
assessed against the Building or any other portion of, or all of, the Project
which are attributable to the value of the leasehold improvements installed in
the Premises, including but not limited to, all tenant improvements and Tenant
Alterations, regardless whether constructed by or on behalf of Landlord or
Tenant. If the assessing authority allocates a specific value to said leasehold
improvements, the amount payable by Tenant shall be the tax attributable to such
specific value. If the assessing authority does not allocate a specific value to
said leasehold improvements, the amount payable by Tenant pursuant to this
Section 10.2 shall be the amount determined by multiplying the total cost of
- ------------
leasehold improvements installed in the Premises by the Building's full assessed
rate, or, if different, the assessed rate for all leasehold improvements in the
Building, as determined by the applicable assessing authority. Following
Tenant's request, Landlord shall provide Tenant with a copy of the property tax
bill for the Project, or the portion of the Project that includes the Buildings.
32
<PAGE>
9.3 Exclusion from Real Property Taxes. The portion of real estate
----------------------------------
taxes payable by Tenant pursuant to Sections 10.1 and 10.2 and by other tenants
----------------------
of the Project, as if all such other tenants had provisions comparable to
Sections 10.1 and 10.2 in their leases, shall be excluded from Real Property
- ----------------------
Taxes for purposes of rent adjustments under Article 5.
---------
10. Insurance; Waiver of Subrogation.
--------------------------------
10.1 Liability Insurance. Tenant shall at all times during the Term
-------------------
(and prior to the Term with respect to any activity of Tenant hereunder at the
Project) and at its own cost and expense procure and continue in force workers'
compensation insurance, Employer's Liability Insurance, and Commercial General
Liability insurance adequate to protect Tenant and Landlord against liability
for injury to or death of any person or damage to property in connection with
the use, operation or condition of the Premises. The limits of liability under
the workers' compensation insurance policy shall be equal to the statutory
requirements therefor and the limits of liability under the Employer's Liability
Insurance policy carried by Tenant shall be at least $1,000,000. The Commercial
General Liability insurance for injuries to non-employees and for damage to
property at all times shall be in an amount of not less than Five Million
Dollars ($5,000,000) per occurrence and Five Million Dollars ($5,000,000)
general aggregate, Combined Single Limit.
10.2 Property Insurance. Tenant shall at all times during the Term
------------------
maintain in effect policies of insurance covering (a) all leasehold improvements
(including, but not limited to, all tenant improvements and Tenant Alterations),
trade fixtures, merchandise and other personal property from time to time in, on
or upon the Premises, in an amount not less than their actual replacement cost
providing "All Risk Coverage" (excluding plate glass on the perimeter walls of
the Building). The proceeds of such insurance, so long as this Lease remains in
effect, shall be used for the repair or replacement of the property so insured.
Upon termination of this Lease due to any casualty, the proceeds of insurance
shall be paid to Landlord and Tenant, as their interests appear in the insured
property.
10.3 Policy Requirements.
-------------------
(a) All insurance required to be carried by Tenant hereunder
shall be issued by financially responsible insurance companies.
(b) Each policy shall be written on an "occurrence" basis and
shall have a deductible or deductibles, if any, which do not exceed the
deductible amount(s) maintained for similar insurance by similarly situated
tenants in the highest category
33
<PAGE>
of premiere, first-class office building projects in the Golden Triangle area
and on Maple Drive in Beverly Hills, California. Each policy shall name
Landlord, Landlord's Project manager and Landlord's lender as additional
insureds, as their interests may appear. Certificates evidencing the existence
and amounts of such insurance, shall be delivered to Landlord by Tenant prior to
Tenant's occupancy of any portion of the Premises, and in any event, prior to
any activity of Tenant hereunder at the Project. All such policies shall provide
that they are not cancelable, except after thirty (30) days written notice to
Landlord. Tenant shall furnish Landlord with appropriate renewal certificates
when due. Should Tenant at any time neglect or refuse to provide the insurance
certification required by this Lease, or should such insurance be canceled,
Landlord shall have the right, but not the duty, to procure the same and Tenant
shall pay Landlord for the cost thereof as Additional Rent promptly upon
Landlord's demand.
(c) The policies of insurance required to be carried by Tenant
shall be primary and non-contributing with, and not in excess of, any other
insurance available to Landlord. Tenant shall use its best efforts immediately
to report to Landlord the occurrence of any injury, loss or damage incurred by
Tenant, or Tenant's receipt of notice or knowledge of any claim by a third party
or any occurrence that might give rise to such claims in connection with
Tenant's use or occupancy of the Premises. It shall be the responsibility of
Tenant not to violate nor knowingly permit to be violated any condition of the
policies required under this Lease.
10.4 Landlord's Requirements. Landlord shall, at all times during the
-----------------------
Term hereof, at its sole cost and expense (subject to reimbursement in
accordance with Article 5) procure and maintain in force insurance of the type
commonly referred to as an "all risk of physical loss" policy, including
earthquake insurance to the extent required by any Underlying Mortgage or deemed
commercially practicable by Landlord, and general public liability insurance
insuring the Land, the Building and the Project against all risks and all other
hazards as are customarily insured against, in Landlord's reasonable judgment,
by others similarly situated and operating like properties. Landlord shall
procure and maintain in force (subject to reimbursement in accordance with
Article 5) a commercially reasonable amount (or an amount as required by any
Underlying Mortgage) of rental loss insurance during the Term of this Lease.
Each policy shall name Tenant and Tenant's lenders, if required, as additional
insureds as their interests may appear. Landlord's policies shall be primary and
non-contributing with other insurance carried by Tenant. Certification of
coverage shall provide 30 days notice or cancellation or material change.
10.5 Waiver of Subrogation. To the extent permitted by their insurance
---------------------
carriers, Landlord and Tenant each hereby waives its respective right of
recovery against the other to the extent damage or liability is insured against
under a policy or policies of insurance maintained by the waiving party, whether
or not such
34
<PAGE>
damage or liability may be attributable to the negligence or other act of either
party or its respective agents, invitees, contractors, servants or employees.
11. Damage or Destruction.
---------------------
11.1 Damage to Premises.
------------------
(a) If the Premises are damaged by fire or other casualty
during the Term, as renewed, and such damage, in Landlord's reasonable opinion,
can be fully repaired within one (1) year after notice to Landlord of the
occurrence of such damage ("Damage Notice") Landlord shall so notify Tenant
within sixty (60) days after the Damage Notice and Landlord shall repair such
damage with reasonable diligence and in a manner consistent with the provisions
of any Underlying Mortgage and this Section 12.1. Tenant shall promptly pay to
------------
Landlord all property insurance proceeds (other than for loss to Tenant's
personal property) received by Tenant as a result of such damage and Landlord
shall use such proceeds in the repair of such damage.
(b) If the Premises are damaged by fire or other casualty so
that the repair of the Premises cannot, in Landlord's reasonable opinion, be
completed within one (1) year after the Damage Notice, Landlord shall so notify
Tenant ("Repair Period Notice") within sixty (60) days after the Damage Notice
and Landlord and/or Tenant shall have the option ("First Termination Option"),
to be exercised by written notice to the other within sixty (60) days after
Landlord gives Tenant the Repair Period Notice to terminate this Lease as of the
date the notice of the exercise of the right to terminate this Lease is received
by the other party (the "Effective Date"). The First Termination Option may be
exercised by either Landlord or Tenant as to only portions of the Premises which
are damaged, provided that such portions are in full floor increments (or in
increments of 25,000 square feet of Rentable Area, if less than a full floor of
the Premises is damaged).
(c) If neither party timely exercises the First Termination
Option, or if the damage can be repaired in less than one (1) year after the
Damage Notice, in Landlord's reasonable opinion, Landlord shall repair the
entire Premises, including all tenant improvements and Tenant Alterations, to
their condition immediately prior to such damage as soon as reasonably possible
utilizing the insurance proceeds Landlord is entitled to receive pursuant to
Article 11. Landlord and Tenant shall each use commercially reasonable efforts
- ----------
to obtain any insurance proceeds to which such party is entitled; however, if
Landlord does not receive proceeds from Tenant's property insurance policies
required to be carried by Tenant under Section 11.2 which are adequate to repair
------------
completely the Premises to such condition, then Landlord shall only be required
to repair the Premises to the extent that Landlord has received proceeds from
such insurance policies and/or additional funds from Tenant. Nothing
35
<PAGE>
in this Section 12.1 shall be construed to limit Tenant's right to the
------------
applicable rent abatement pursuant to Section 12.3.
------------
11.2 Damage to Project. If the Building or any portion of the Project
-----------------
is totally destroyed or is so extensively damaged that it renders the Premises
inaccessible or economically unviable for its use as presently intended and the
repair thereof cannot, in Landlord's reasonable opinion, be completed within one
(1) year after the Damage Notice, or if substantial alteration or reconstruction
of the Building or any other portion of the Project is required, in Landlord's
reasonable opinion, as a result of the damage, then Landlord shall give Tenant
the Repair Period Notice specifying such period of repair or that such
substantial alteration or reconstruction is required as a result of the damage
and Landlord and/or Tenant shall have the option ("Second Termination Option"),
to be exercised by written notice to the other within sixty (60) days after
Landlord gives Tenant the Repair Period Notice, to terminate this Lease as of
the Effective Date. If neither party so elects to terminate this Lease, then
Landlord shall repair and rebuild the Building or other damaged portion of the
Project as soon as reasonably possible, in which event this Lease shall continue
in full force and effect (subject to the applicable rent abatement pursuant to
Section 12.3) unless terminated earlier as provided herein. Notwithstanding the
- ------------
foregoing, neither party shall have the right to exercise the Second Termination
Option if such damage to the Building or the Project can, in Landlord's
reasonable opinion, be fully completed within eighteen (18) months after the
Damage Notice and can be completed to the extent necessary (a) to make the
Premises viable for their use as presently intended, and (b) to provide Tenant
with access to and use of the Premises, within one (1) year after the Damage
Notice.
11.3 Abatement; Termination.
----------------------
(a) If any part of the Premises is rendered untenantable as a
result of damage by fire or other casualty to any part of the Premises or the
Project, and is not used for the conduct of Tenant's business, rent shall be
reduced and abated from the date of such casualty in proportion to the part of
the Premises which is so rendered untenantable and unusable until the damaged
portion of the Premises has been made tenantable or are used for the conduct of
Tenant's business or until this Lease expires or terminates, whichever occurs
first; provided that, (i) there shall be no abatement of rent with respect to
any portion of the Premises which is rendered unusable for a period of three (3)
consecutive business days or less (except to the extent Landlord is entitled to
receive and does receive the proceeds from the rent loss insurance carried by
Landlord, the costs of which is included in Operating Expenses, for the period
prior to the fourth (4th) day after damage by any casualty), (ii) there shall be
no abatement of rent after the fifth (5th) business day after Landlord provides
other space in the Building or the Project to Tenant which is reasonably
comparable and substantially similar in size and quality to the Premises and
36
<PAGE>
reasonably suited for the temporary conduct of Tenant's business, (iii) there
shall be no abatement of rent whatsoever with respect to any damage caused in
whole or in part by the gross negligence or willful act of Tenant, its agents,
employees, contractors, licensees or invitees, except to the extent such
abatement is covered by rent loss insurance carried by Landlord, the premiums
for which are included in Operating Expenses. For purposes of this Section 12.3,
------------
the Premises shall be deemed to have been made tenantable when Landlord has
repaired or restored the Premises to substantially the same (or better)
condition as the Premises were in immediately prior to such casualty, and
Landlord has given Tenant sufficient time (but in no event more than two (2)
weeks) and access to reinstall and reconnect Tenant's personal property,
furniture, fixtures and equipment in the Premises. Subject to the foregoing
clauses (i), (ii) and (iii), if any part of the Premises which is necessary for
the operation of Tenant's business is rendered untenantable by fire or other
casualty and as a result thereof the entire Premises are not used for the
operation of Tenant's business, rent for the entire Premises shall be abated
until such damaged portion has been made tenantable, or is used by Tenant for
the operation of its business or becomes unnecessary for the operation of
Tenant's business. Notwithstanding the foregoing, during any rent abatement
under this Lease, Tenant shall continue to be obligated to pay Landlord
Additional Rent under Article 5 for all services and utilities provided to and
---------
used by Tenant during the period of rent abatement.
(b) If Landlord or Tenant terminates this Lease in its
entirety by exercising the First Termination Option, Second Termination Option
or Third Termination Option, pursuant to Sections 12.1, 12.2, or 12.5, then (1)
----------------------------
this Lease and the estate and interest of Tenant in the Premises shall terminate
and expire on the Effective Date and the rent payable hereunder shall be pro
rated and paid through such date, subject to rent abatement, if any, to the
extent provided in Section 12.3(a), and (2) Tenant shall retain the proceeds of
---------------
insurance received from its insurance carriers with respect to the damage to the
tenant improvements and Tenant Alterations in the Premises. If the First
Termination Option is exercised as to only a portion of the Premises in
accordance with Section 12.1, then (3) this Lease and the estate and interest of
------------
Tenant in the portion of the Premises in question shall terminate and expire on
the Effective Date and the rent payable hereunder with respect to the terminated
portion of the Premises shall be prorated as of such date, subject to rent
abatement, if any, to the extent provided in Section 12.3(a) and (4) Tenant
---------------
shall retain the proceeds of insurance received from its insurance carriers with
respect to the damage to the tenant improvements and Tenant Alterations in the
portion of the Premises as to which this Lease is terminated.
11.4 Limitations. Nothing contained in this Article 12 shall relieve,
----------- ----------
discharge or in any way affect Tenant's liability to Landlord in connection with
any damage or destruction of or to the Premises, the Building or any other
portion of the Project
37
<PAGE>
arising out of the gross negligence or willful acts or omissions of Tenant, its
agents, employees, contractors, licensees and invitees (acting within the scope
of their relationship with Tenant). Nothing contained in this Article 12 shall
----------
relieve, discharge or in any way affect Landlord's liability to Tenant in
connection with any damage or destruction of or to the Premises arising out of
the negligent or willful acts or omissions of Landlord, its agents, employees or
contractors (acting within the scope of their relationship with Landlord).
Landlord shall not be liable for any loss of business, inconvenience or
annoyance arising from any repair or restoration of any portion of the Premises,
the Building or other portions of the Project as a result of any damage from
fire or other casualty; provided, however, that Landlord shall use reasonable
efforts to avoid interfering with or adversely affecting the conduct of Tenant's
business from the Premises. Furthermore, in the event of such damage from fire
or other casualty, Landlord shall have no obligation (i) to repair any
equipment, furniture and fixtures (collectively, "FF&E"), paneling, ceilings,
carpets or other floor coverings, partitions, drapes or any personal property
installed in or about the Premises by Landlord or Tenant or (ii) to expend any
amount for the repair of the Premises and the FF&E in excess of Twenty Dollars
($20.00) per square foot of Usable Area in the Premises; provided, however, that
to the extent that Landlord is entitled to receive and does receive from Tenant
or an insurance company, sufficient money to repair the Premises and the FF&E
(and Landlord and Tenant shall use commercially reasonable efforts to obtain any
insurance proceeds to which each such party is entitled), Landlord shall repair
the Premises and the FF&E in the Premises except to the extent that this Lease
is terminated due to a casualty in accordance with this Article 12.
----------
11.5 Damage During Last Years. If the Premises are damaged by fire or
------------------------
other casualty during the last two (2) years of the Term (including any Renewal
Term) so that the repair of the Premises cannot, in Landlord's reasonable
opinion, be completed within a period after the Damage Notice, equal to one-half
(1/2) of the remaining Term ("Repair Period"), Landlord and/or Tenant shall have
the option to terminate this Lease ("Third Termination Option") under this
Section 12.5. Landlord shall give Tenant the Repair Period Notice within sixty
- ------------
(60) days after Landlord's receipt of the Damage Notice. If Landlord determines
that all or a substantial portion of the Premises cannot be repaired within the
Repair Period, Landlord and/or Tenant shall have thirty (30) days after Tenant's
receipt of the Repair Notice to exercise the Third Termination Option by notice
to the other; provided that if Landlord exercises the Third Termination Option,
Tenant shall have the right, by notice to Landlord within fifteen (15) days
after such exercise of the option, to extend the Term by exercising any
available Renewal Option in accordance with Section 3.4 and thereby prevent the
-----------
effectiveness of Landlord's exercise of such Third Termination Option as to the
specific damage in question (and without affecting either party's rights to
subsequently exercise the Third Termination Option as to subsequent damage). If
neither party timely exercises the Third
38
<PAGE>
Termination Option by notice to the other, then Landlord shall repair the
Premises, including all tenant improvements and Tenant Alterations, to the
extent and subject to the limitations set forth in Section 12.1(c). Nothing in
---------------
this Section 12.5 shall be construed to limit Tenant's right to the applicable
------------
rent abatement pursuant to Section 12.3. If either party timely exercises the
------------
Third Termination Option, this Lease shall terminate as of the Effective Date.
11.6 Agreement Governs. The provisions of this Lease, including this
-----------------
Article 12, constitute an express agreement between Landlord and Tenant with
- ----------
respect to any and all damage to, or destruction of, all or any part of the
Premises, the Building or any other portion of the Project and no statute or
regulation which is inconsistent with this Article 12, now or hereafter in
----------
effect, including without limitation, Sections 1932(2) and 1933(4) of the
California Civil Code, shall have any application to this Lease with respect to
any damage or destruction to all or any part of the Premises, the Building or
any other portion of the Project.
12. Eminent Domain.
--------------
12.1 Taking.
------
(a) In case the whole of the Premises, or such part thereof as
shall substantially interfere with Tenant's use and occupancy of the remainder
of the Premises not so taken, shall be taken by any lawful power or authority by
exercise of the right of eminent domain, or sold to prevent such taking, within
sixty (60) days of receipt of notice of such taking, either Tenant or Landlord
may terminate this Lease effective as of the date possession is required to be
surrendered to said authority. If such portion of the Building or the Project is
so taken or sold so as to require, in the opinion of Landlord, a substantial
alteration or reconstruction of the remaining portions thereof, or which renders
the Building or the Project economically unviable for its use as presently
intended, or requires cancellation of substantially all tenant leases in the
Building, this Lease may be terminated by Landlord, as of the date of the
vesting of title under such taking or sale, by written notice to Tenant within
sixty (60) days following notice to Landlord of the date on which said vesting
will occur. Except as provided herein, Tenant shall not because of such taking
assert any claim against Landlord or the taking authority for any compensation
because of such taking, and Landlord shall be entitled to receive the entire
amount of any award without deduction for any estate or interest of Tenant. In
the event that the amount of property or the type of estate taken shall not
substantially interfere with Tenant's use of the Premises, Landlord shall be
entitled to the entire amount of the award without deduction for any estate or
interest of Tenant. Subject to Section 13.2, in the event of a taking of a
------------
portion of the Premises which does not result in the termination of this Lease,
Landlord shall promptly proceed to restore the Premises substantially to their
condition prior to
39
<PAGE>
such taking, and the Rent shall be abated in proportion to
the time during which, and to the part of the Premises of which, Tenant shall be
so deprived on account of such taking and restoration (including the restoration
of tenant improvements to the extent that funds are available from the
condemning authority or Tenant) in accordance with Section 12.3. For purposes of
------------
this Section 13.1, the Premises shall be deemed to have been restored to
------------
substantially their condition prior to such partial taking when Landlord has
repaired or restored the Premises to substantially the same (or better)
condition as the Premises were in immediately prior to such casualty, and
Landlord has given Tenant sufficient time (but in no event more than two (2)
weeks) and access to reinstall and reconnect Tenant's personal property,
furniture, fixtures and equipment in the Premises. Notwithstanding the
foregoing, during any rent abatement under this Lease, Tenant shall continue to
be obligated to pay Landlord Additional Rent (including, without limitation,
Additional Rent under Article 5) for all services and utilities provided to and
used by Tenant during the period of the rent abatement. Nothing contained in
this Article 13 shall be deemed to give Landlord any interest in, or prevent
----------
Tenant from seeking any award against the taking authority for, the taking of
personal property, tenant improvements and Tenant Alterations and FF&E belonging
to Tenant or for relocation or business interruption expenses recoverable from
the taking authority.
(b) If this Lease is terminated as to all or any portion of
the Premises pursuant to this Section 13.1, the award (including but not limited
------------
to compensation, damages and interest) shall be divided between Landlord and
Tenant so that Tenant shall receive from the award:
(1 the amount, if any, awarded for Tenant's
FF&E, personal property and Tenant's interest in tenant improvements and Tenant
Alterations which have been taken; plus
(2 the amount, if any, awarded for Tenant's
relocation or business interruption expenses. Landlord shall receive the
remaining balance of the award.
(c) If less than all the Premises is taken and this entire
Lease is not terminated pursuant to this Section 13.1, the award (including but
------------
not limited to compensation, damage and interest) shall be divided between
Landlord and Tenant in the same proportions as provided above for an entire
taking. In addition to the reduction in rent provided for in Section 13.1(a),
---------------
the rent for the remainder of the Premises shall be abated in proportion to the
portion of the Premises rendered untenantable and actually unused by Tenant
during the period for any restoration.
12.2 Temporary Taking. If all or any portion of the Premises are
----------------
condemned or otherwise taken for public or quasi-
40
<PAGE>
public use for a limited period of time, this Lease shall remain in full force
and effect and Tenant shall continue to perform all of the terms, conditions and
covenants of this Lease, including without limitation, the payment of rent and
all other amounts required hereunder. Tenant shall be entitled to receive the
entire award made in connection with any temporary condemnation or other taking
attributable to any period within the Term. Landlord shall be entitled to the
entire award for any such temporary condemnation or other taking which relates
to a period after the expiration of the Term or which is allocable to the cost
of restoration of the Premises. Any portion of such award relating to any period
during an unexercised Renewal Term shall be held in escrow until the earlier of
(i) the date on which Tenant exercises the Renewal Option (in which case such
portion of the award shall be paid to Tenant); or (ii) the date on which the
Renewal Option expires (in which case such portion of the award shall be paid to
Landlord). If any such temporary condemnation or other taking terminates prior
to the expiration of the Term, Tenant shall restore the Premises as nearly as
possible to the condition prior to the condemnation or other taking, at Tenant's
sole cost and expense; provided that, Tenant shall receive the portion of the
award attributable to such restoration.
13.3 As of the date of this Lease, Landlord has no knowledge of any
threatened, contemplated or pending special assessments or eminent domain
proceedings that would affect the Premises or any part thereof in any way
whatsoever.
13. Assignment/Subleasing
---------------------
13.1 Limitation.
----------
(a) Tenant shall not directly or indirectly, voluntarily or
involuntarily assign, mortgage or otherwise encumber all or any portion of its
interest in this Lease or in the Premises (collectively, "Assignment") or permit
the Premises to be occupied by anyone other than Tenant or Tenant's employees,
or sublet the Premises (collectively, "Sublease"), or any portion thereof,
without obtaining the prior written consent of Landlord, which consent may be
granted or withheld by Landlord in its sole and absolute discretion, and any
such attempted assignment, subletting, mortgage or other encumbrance without
such consent shall be null and void and of no effect.
(b) Notwithstanding the foregoing, provided that Tenant is not
in material default hereunder, from and after the first anniversary of the
Commencement Date, Tenant may assign this Lease or sublease the Premises (but in
no event less than a full floor of the Premises), with the prior written
approval of Landlord, which approval shall not be unreasonably withheld or
delayed, provided that (i) in no event shall there be more than one tenant or
occupant per floor and (ii) Tenant shall have no right to enter into any
Assignment or Sublease for any floor of
41
<PAGE>
the Premises which relates to less than the entirety of such floor.
13.2 Notice of Intent to Assign or Sublet. If Tenant desires at any
------------------------------------
time to enter into an Assignment or to Sublease the Premises or any portion
thereof, it shall first notify Landlord of its desire to do so and shall submit
in writing to Landlord (i) the proposed effective date of the Assignment or
Sublease, which shall be not less than thirty (30) days after nor more than one
hundred eighty (180) days after the date of the delivery of such notice; (ii)
the name of the proposed assignee, subtenant, transferee or occupant
("Transferee"); (iii) the nature of the proposed Transferee's business to be
carried on in the Premises; (iv) the material terms and provisions of the
proposed Sublease or Assignment; and (v) such financial information as Landlord
may reasonably request concerning the proposed Transferee (collectively, the
"Transfer Notice").
13.3 Landlord's Options. At any time within twenty (20) days after
------------------
Landlord's receipt of all of the information required in the Transfer Notice,
Landlord may by written notice to Tenant elect to (a) approve the proposed
sublease or assignment or (b) reasonably disapprove the proposed sublease or
assignment, in which event the notice shall state the reasons for such
disapproval. In the event Landlord wrongfully withholds consent to a proposed
Assignment or Sublease, Tenant's remedy shall be limited to (i) injunctive
relief or (ii) an action to recover the actual damages incurred by Tenant in
connection with such withholding of consent, provided that Tenant shall be
affirmatively obligated to mitigate its damages (including without limitation by
continuing to seek an acceptable Transferee).
13.4 Conditions for Landlord's Consent to Subleases.
----------------------------------------------
(a) If Landlord is required pursuant to Section 14.1(b) above
---------------
not to unreasonably withhold or delay its consent to any proposed Assignment or
Sublease, without limitation as to the other reasonable grounds for withholding
consent, Landlord's refusal to consent to any such proposed Assignment or
Sublease shall be deemed reasonable under this Lease and applicable law if:
(1) The Transferee, in Landlord's reasonable
opinion, is not a tenant which would be located in a first-class office building
project, or is of a character or reputation or engaged in a business which is
not consistent with the quality of the Project;
(2) The purposes for which the Transferee
intends to use the Premises are, in Landlord's reasonable judgment, incompatible
with the uses of a first-class office building project comparable to the
Project;
42
<PAGE>
(3) In the reasonable judgment of Landlord, the
purpose for which the Transferee intends to use the Premises is in violation of
the terms of any other lease in the Project of which Landlord has given Tenant
written notice, or would give an occupant of the Project a right to cancel its
lease or bring an action against Landlord;
(4) The Transferee has been involved in bona
fide negotiations with Landlord within the preceding six (6) months for space in
the Project which is comparable in size, lease term, and if relevant, contiguous
to the existing Premises of the Transferee in the Building;
(5) The effective rent for the Sublease is less
than the effective Fair Market Rental Rate in the sublease market (ignoring the
parenthetical in the first sentence of Section 30.2 which excludes subleases,
and considering exclusively subleases) with appropriate adjustments in the
procedures for determining Fair Market Rental Rate in order to make such
determination for sublease space) for comparable space in the Project at the
time of such Sublease;
(6) The portion of the Premises to be sublet is
not regular in shape with appropriate means of ingress and egress and suitable
for normal renting purposes in conformity with all applicable building and
safety codes;
(7) The Transferee is either a government (or
subdivision or agency thereof) or an occupant of the Project;
(8) The Transferee is engaged in the same or a
substantially similar business as that of Landlord or its affiliates or of
another tenant in the Project; or
(9) Tenant is in default under this Lease,
following receipt of notice and expiration of Tenant's cure rights pursuant to
Article 22.
(b) If Landlord consents to any Assignment or Sublease under
this Section 14.4, Tenant may thereafter within one hundred twenty (120) days
after Landlord's consent, but not later than the expiration of said one hundred
twenty (120) days, enter into such Assignment or Sublease, upon substantially
the same terms and conditions as are set forth in the applicable Transfer Notice
furnished by Tenant to Landlord pursuant to Section 14.2 above.
(c) As a condition to Landlord's consent to any Sublease, such
Sublease shall provide that it is subject and subordinate to this Lease and to
all Underlying Mortgages.
13.5 Transfer Premium. If Landlord consents to an Assignment or
----------------
Sublease, as a condition thereto which the parties hereby agree is reasonable,
Tenant shall pay to Landlord fifty percent (50%) of any "Transfer Premium," as
that term is defined in this Section 14.5, as and when received by Tenant from
------------
such
43
<PAGE>
Transferee. "Transfer Premium" shall mean all rent, additional rent and
other consideration payable by or on behalf of such Transferee, net of
reasonable and reasonably documented subleasing costs actually incurred by
Tenant, in excess of the rent and additional rent payable under this Lease by
Tenant on a per rentable square foot basis. "Transfer Premium" shall also
include, but not be limited to, key money and bonus money paid by the Transferee
to Tenant in connection with such Assignment or Sublease, any payment in excess
of fair market value for services rendered by Tenant to Transferee or for
assets, fixtures, inventory, equipment or furniture transferred by Tenant in
connection with such Assignment or Sublease.
13.6 No Release of Tenant's Obligations. No Assignment or Sublease
----------------------------------
shall relieve Tenant of its obligation to pay the rent and to perform all of the
other obligations to be performed by Tenant hereunder. The acceptance of rent by
Landlord from any other person shall not be deemed to be a waiver by Landlord of
any provision of this Lease or to be a consent to any Assignment or Sublease.
Consent to one Sublease or Assignment shall not be deemed to constitute consent
to any subsequent Sublease or Assignment. Tenant agrees to promptly pay as
Additional Rent Landlord's reasonable costs and attorneys' fees incurred in
connection with the processing and documentation of any requested Assignment or
Sublease whether or not Landlord consents to the Assignment or Sublease or the
same is finally consummated.
13.7 Transfer is Assignment. If Tenant is a corporation which under the
----------------------
then current guidelines published by the Commissioner of Corporations of the
State of California is not deemed a public corporation, or is an unincorporated
association or partnership, the transfer, assignment or hypothecation of any
stock or ownership interest in such corporation, association or partnership in
the aggregate in excess of twenty-five percent (25%) shall be deemed an
Assignment hereunder.
13.8 Assumption of Obligations. Each Transferee shall assume all
-------------------------
obligations of Tenant under this Lease and shall be and remain liable jointly
and severally with Tenant for the payment of the rent, and for the performance
of all of the terms, covenants, conditions and agreements herein contained on
Tenant's part to be performed for the term of this Lease with respect to the
portion of the Premises subject to the assignment or sublease. No Assignment
shall be binding on Landlord unless the Transferee or Tenant shall deliver to
Landlord a counterpart of the Assignment and, if so requested by Landlord, an
instrument in recordable form which contains a covenant of assumption by the
Transferee satisfactory in substance and form to Landlord consistent with the
requirements of this Section 14.8, but the failure or refusal of the Transferee
------------
to execute such instrument or assumption shall not release or discharge the
Transferee from its liability as set forth above.
13.9 Recapture Rights. Notwithstanding anything to the contrary
----------------
contained in this Article 14, Landlord shall have the
44
<PAGE>
option, by giving notice to Tenant within twenty (20) days after receipt of
Tenant's notice of any proposed Assignment or Sublease, to recapture the portion
of the Premises which is the subject of Tenant's notice. Such recapture notice
shall cancel and terminate this Lease with respect to such portion of the
Premises as of the date stated in Tenant's notice as of the effective date of
the proposed Assignment or Sublease, unless Tenant revokes Tenant's notice of
proposed Assignment or Sublease by notice to Landlord within ten (10) days after
Landlord's notice of recapture.
14.10 Related Entities. Notwithstanding the provisions of this
----------------
Article 14, Tenant, without the consent of Landlord, may assign or sublet all or
any portion of this Lease to any "Related Entity" (as hereinafter defined), or
to any corporation with which Tenant may merge or consolidate or which may
acquire substantially all of the assets of Tenant. As used herein, the term
"Related Entity" shall mean and refer to any parent, subsidiary or affiliate of
Tenant which controls or is controlled by Tenant or by persons controlling or
controlled by Tenant. For the purposes of this paragraph, control refers to the
record and beneficial ownership of at least fifty-one percent (51%) of the
voting interests of the entity in question.
14.11 Preapproved Sublease. Notwithstanding any other
--------------------
provision of this Article 14, Landlord acknowledges that Landlord approves of
the sublease of approximately 10,000 square feet located on the first floor of
the Premises to Pacific Capital Group, Inc.
14. Landlord's Reserved Rights.
--------------------------
14.1 Right of Entry. Landlord and its agents and representatives shall
--------------
have the right, at all reasonable times, but in such manner as to cause as
little disturbance to Tenant as reasonably practicable, to enter the Premises
for purposes of inspection, to post notices of non-responsibility, to protect
the interest of Landlord in the Premises, to supply janitorial service and any
other services to be provided by Landlord hereunder, to perform all required or
permitted work therein, including the erection of scaffolding, props and other
mechanical devices for the purpose of making alterations, repairs or additions
to the Premises or the Building which are provided for in this Lease or required
by Laws, provided that except in the case of emergencies or for janitorial
services, Landlord's entry into the Premises shall either be following notice
given at least one (1) business day in advance or be accompanied by one or more
qualified representatives of Tenant (who Tenant shall make reasonably available
for such purposes during Normal Working Hours). Locks to the Premises, including
interior areas, shall be keyed consistent with the keying system for the
Building. Tenant may designate certain areas within the Premises as "Secured
Areas" for the purpose of securing certain valuable property or confidential
information. Except in emergencies and to provide janitorial services (unless
Tenant advises Landlord
45
<PAGE>
that it does not desire janitorial services for such Secured Areas), Landlord
may not enter said Secured Areas unless Landlord provides Tenant at least five
(5) business days prior written notice of the date and time of such entry, and
any such entry shall be subject to escort by a Tenant representative. Upon
reasonable prior notice, Landlord and its agents and representatives shall also
have the right, during normal business hours, to show the Premises to
prospective tenants (during the last eighteen (18) months of the Term), lessors
of superior leases, mortgagees, prospective mortgagees or prospective purchasers
of the Building, subject to Landlord's obligation to cause as little disturbance
to Tenant as reasonably practicable. No such reasonable entry shall be construed
under any circumstances as a forcible or unlawful entry into, or a detainer of,
the Premises, or an eviction of Tenant, and Tenant hereby waives any claim
against Landlord or its agents or representatives for damages for any injury or
inconvenience to or interference with, Tenant's business or quiet enjoyment of
the Premises.
14.2 Building and Common Areas. Provided Landlord does not unreasonably
-------------------------
interfere with Tenant's use of the Premises and the Common Areas, Landlord may:
(a) install, repair, replace or relocate pipes, ducts, conduits, wires and
appurtenant meters and equipment for service to other parts of the Building
above the ceiling surfaces, below the floor surfaces, within the walls and in
the central core areas of the Premises or the rest of the Building; (b) repair,
renovate, alter, expand or improve the Building; (c) make changes to the Common
Areas, including without limitation, changes in the location, size, shape and
number of street entrances, driveways, ramps, entrances, exits, parking spaces
(subject to Section 6.1(f) above), parking areas, loading and unloading areas,
halls, passages, stairways and other means of ingress and egress, and direction
of traffic, landscaped areas and walkways; (d) close temporarily (and only so
long as necessary) any of the Common Areas for maintenance purposes so long as
reasonable access to the Premises remains available; (e) designate other land
outside the boundaries of the Building to be part of the Common Areas; (f) add
additional buildings and improvements to the Common Areas, subject to the
limitations in Section 15.5; (g) use the Common Areas while engaged in making
------------
additional improvements, repairs or alterations to the Building, or any portion
thereof; and (h) do and perform such other acts and make such other changes in,
to or with respect to the Common Areas and Building and other portions of the
Project as Landlord may deem appropriate.
14.3 Intentionally Omitted.
---------------------
14.4 Excavation. Landlord shall have the right to utilize the Land for
----------
purposes of excavation and shall have the right to authorize the use of, and
grant licenses and easements over, the Land to owners of adjacent property or
governmental authorities for excavation purposes. If an excavation is made upon
any of the Land adjacent to the Building by Landlord or said owner of
46
<PAGE>
adjacent property, Tenant shall license and authorize Landlord or said owner to
enter on to the Premises for the purpose of performing such work in connection
with the excavation as may be necessary or prudent to preserve the Building and
other portions of the Project from injury or damage. Except as specifically
provided otherwise in this Lease, Tenant shall have no claim for damages or
indemnity against Landlord or any right to abatement of rent in connection
therewith, except to the extent Landlord acts unreasonably and unreasonably
interferes with Tenant's use and occupancy of the Premises.
14.5 Development of Other Improvements. Any other adjacent property
---------------------------------
which may be acquired by Landlord, or any portion thereof, may be developed by
Landlord, or by any successor-in-interest to Landlord, or by any entity
controlling, controlled by or under common control with Landlord, for office,
retail and/or other purposes deemed appropriate in Landlord's discretion
(individually or collectively, the "Other Improvements"). If the Other
Improvements are owned by an entity other than Landlord, Landlord shall have the
right, but not the obligation (unless Landlord is obligated to comply with
zoning or other governmental requirements), to enter into an agreement with the
owner of any or all of the Other Improvements to provide (a) for reciprocal
rights of access, use and enjoyment of the Project and the Other Improvements
(without unreasonably impairing Tenant's access to and use of the Common Areas
in the Project), (b) for the common management, operation, maintenance,
improvement and repair of all or any portion of the Project and all or any
portion of the Other Improvements, or (c) for the allocation of all or any
portion of the Operating Expenses, Real Property Taxes and Capital Improvement
Amortization for the Project to the Other Improvements and the allocation of the
Operating Expenses, Real Property Taxes and Capital Improvement Amortization for
the Other Improvements to the Project in order to provide for the efficient
management, operation, maintenance, improvement and repair of the Project and
the Other Improvements provided that the total Operating Expenses, Real Property
Taxes and Capital Improvement Amortization otherwise allocable to Tenant shall
not be increased as a result of such allocation. Landlord agrees that it will
use reasonable efforts to cause the Other Improvements to be taxed and assessed
separately from the Project for Real Property Taxes. If the Other Improvements
and the Project are taxed together, Landlord shall allocate the Real Property
Taxes between the Project and the Other Improvements in order to equitably
allocate such Taxes between the Project and the Other Improvements.
14.6 Incorporation of Other Improvements. In the event Landlord (a) is
-----------------------------------
the owner of any or all of the Other Improvements and the property on which they
are located, or (b) conveys the Project to the owner of the Other Improvements
or to any other person or entity which will become the owner of both the Project
and the Other Improvements, Landlord, or its successors or assigns, shall have
the right, but not the obligation (unless Landlord is obligated to comply with
zoning or other governmental requirements), to incorporate the Other
Improvements into the
47
<PAGE>
Project and to provide for the common management, operation, maintenance and
repair of the Project and the Other Improvements provided that such
incorporation of the Other Improvements shall not increase the total Operating
Expenses, Real Property Taxes and Capital Improvement Amortization otherwise
allocable to Tenant under this Lease or unreasonably impair Tenant's access to
and use of the Common Areas of the Project as they existed prior to such
incorporation into the Project. In the event the Other Improvements are so
incorporated into the Project, all references to the Project contained in this
Lease shall be deemed and construed to include the Other Improvements. Landlord
agrees that it will use reasonable efforts to cause the Other Improvements to be
taxed and assessed separately from the Project for Real Property Taxes. If the
Other Improvements and the Project are taxed together, Landlord shall allocate
the Real Property Taxes between the Project and the Other Improvements in order
to equitably allocate such Taxes between the Project and Other Improvements.
Nothing contained in this Article 15 shall be deemed or construed to limit or
----------
otherwise affect Landlord's right to sell the Project or any other rights
described in this Lease.
15. Indemnification and Limitation on Liability.
-------------------------------------------
15.1 Indemnity of Landlord. Tenant shall be liable for, and shall
---------------------
indemnify, protect, defend and hold harmless Landlord and Landlord's partners,
officers, directors, agents, successors and assigns (collectively, "Landlord
Indemnified Parties"), from and against, any and all claims, damages, judgments,
suits, causes of action, losses, liabilities and expenses, including reasonable
attorneys' fees and court costs (collectively, "Indemnified Claims"), arising or
resulting from (i) any act or omission of Tenant or any of Tenant's agents,
employees, contractors, subtenants, assignees, licensees or invitees (acting
within the scope of their relationship with Tenant) (collectively, "Tenant
Parties"); (ii) the use of the Premises and Common Areas and conduct of Tenant's
business by Tenant or any Tenant Parties, or any other activity, work or thing
done, permitted or suffered by Tenant or any Tenant Parties (acting within the
scope of their relationship with Tenant), in or about the Premises, the Building
or elsewhere within the Project; and/or (iii) any default by Tenant of any
obligations on Tenant's part to be performed under the terms of this Lease;
exclusive of any Indemnified Claims (A) arising out of or in connection with the
negligence or willful misconduct by Landlord or its employees, contractors, or
agents (acting within the scope of their relationship with Landlord), or breach
by Landlord under any agreement between Landlord and a third party; or (B)
extending to any such damage or injury which is covered by any insurance
maintained by Landlord or any Landlord Indemnified Parties (or which would have
been covered had Landlord obtained the insurance required under the provisions
of this Lease) (collectively, "Landlord-Related Claims"). In case any action or
proceeding is brought against Landlord or any Landlord Indemnified Parties by
reason of any such Indemnified Claims, Tenant, upon notice from Landlord, shall
defend the same
48
<PAGE>
at Tenant's expense by counsel approved in writing by Landlord, which approval
Landlord shall not unreasonably withhold. Landlord shall indemnify, defend and
hold Tenant harmless from and against any and all Landlord-Related Claims. In
case any action or proceeding is brought against Tenant by reason of any such
Landlord-Related Claims, Landlord, upon notice from Tenant, shall defend the
same at Landlord's expense by counsel approved in writing by Tenant, which
approval Tenant shall not unreasonably withhold.
15.2 Tenant's Assumption of Risk and Waiver. Except to the extent
--------------------------------------
specifically included in Landlord's indemnification obligations set forth in
Section 16.1 above, Tenant, as a material part of the consideration to Landlord,
- ------------
hereby agrees that neither Landlord nor any Landlord Indemnified Parties shall
be liable to Tenant for, and Tenant expressly assumes the risk of and waives any
and all claims it may have against Landlord or any Landlord Indemnified Parties
with respect to, any and all damage to property or injury to persons in, upon or
about the Premises, the Building of the Project resulting from any act or
omission of Landlord or of any Landlord Indemnified Party (whether or not
negligent) or from any other cause whatsoever, including without limitation, (i)
any such damage caused by other tenants or persons in or about the Building or
the Project, or caused by quasi-public work, (ii) any damage to property
entrusted to employees of the Building, (iii) any loss of or damage to property
by theft or otherwise, or (iv) any injury or damage to persons or property
resulting from any casualty, explosion, falling plaster or other masonry or
glass, steam, gas, electricity, water or rain which may leak from any part of
the Building or any other portion of the Project or from the pipes, appliances
or plumbing works therein or from the roof, street or subsurface or from any
other place, or resulting from dampness, or any other cause whatsoever.
Notwithstanding anything to the contrary contained in this Lease, neither
Landlord nor any Landlord Indemnified Parties shall be liable for consequential
damages arising out of any loss of the use of the Premises or any equipment or
facilities therein by Tenant or any Tenant Parties or for interference with
light or other incorporeal hereditaments. Tenant shall use its best efforts to
give prompt notice to Landlord in case of fire or accidents in the Premises, or
of defects therein or in the fixtures or equipment therein.
15.3 Survival; No Release of Insurers. Tenant's and Landlord's
--------------------------------
indemnification obligations under Section 16.1, respectively, shall survive the
------------
expiration or earlier termination of this Lease. Tenant's covenants, agreements
and indemnification in Section 16.1, and Landlord's indemnification in Section
------------ -------
16.1, are not intended to and shall not relieve any insurance carrier of its
- ----
obligations under policies required to be carried by Landlord or Tenant,
respectively, pursuant to the provisions of this Lease.
16. Definitions of Landlord.
-----------------------
49
<PAGE>
The term "Landlord" as used in this Lease, so far as covenants or
obligations on the part of Landlord are concerned, shall be limited to mean and
include only the owner or owners, at the time in question, of the fee title of
the Premises or the lessees under any ground lease, if any. In the event of any
transfer, assignment or other conveyance or transfers of any such title,
Landlord herein named (and in case of any subsequent transfers or conveyances,
the then grantor) shall be automatically freed and relieved from and after the
date of such transfer, assignment or conveyance of all liability as respects the
performance of any covenants or obligations on the part of Landlord contained in
this Lease thereafter to be performed; provided, however, that within thirty
(30) days of any such transfer, assignment or conveyance, Landlord shall notify
Tenant of same in writing, including the names, addresses and telephone numbers
of such successors and Landlord shall be relieved of any obligation in
connection with the return of the Security Deposit upon the unconditional
written assumption of such obligation by the Landlord's successor for the
benefit of Tenant and the delivery to Tenant of a notice by Landlord in
accordance with California Civil Code Section 1950.7. Without further agreement,
the transferee of such title shall be deemed to have assumed and agreed to
observe and perform any and all obligations of Landlord hereunder, during its
ownership of the Premises. Landlord may transfer its interest in the Premises
without the consent of Tenant and such transfer or subsequent transfer shall not
be deemed a violation on Landlord's part of any of the terms and conditions of
this Lease.
17. Subordination.
-------------
17.1 Subordination. This Lease shall not be subordinate to any
-------------
mortgage, trust deed, ground lease or other encumbrance which may hereafter be
executed affecting the Land, the Building and/or the Project but shall be
subordinate to the existing deed of trust in favor of The Union Labor Life
Insurance Company ("Ullico") (the existing deed of trust together with all
future deeds of trust, mortgages, ground leases or other encumbrances are
referred to collectively as the "Underlying Mortgage"). Notwithstanding the
preceding sentence, this Lease shall be subordinate to the liens of any future
Underlying Mortgages in the event such subordination is required by the holder
of any such Underlying Mortgage, provided that any such subordination shall be
subject to the execution by such holder of a commercially reasonable
non-disturbance and attornment agreement ("Non-Disturbance Agreement") in a
commercially reasonable form. Landlord shall also cause Ullico to execute and
deliver to Tenant a Non-Disturbance Agreement substantially in the form of "G"
concurrently with the execution and delivery of this Lease by Landlord.
17.2 Attornment. If Landlord's interest in the Land, the Building or
----------
the Project is sold or conveyed upon the exercise of any remedy provided for in
any Underlying Mortgage, or otherwise by operation of law, this Lease will not
be affected, subject to
50
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and in accordance with the applicable Non-Disturbance Agreement, and Tenant will
attorn to and recognize the new owner as Tenant's Landlord under this Lease,
subject to and in accordance with the applicable Non-Disturbance Agreement.
Tenant will confirm such attornment in writing within twenty (20) days after
request (Tenant's failure to do so will constitute a default under this Lease).
17.3 Notice from Tenant. Tenant shall give written notice to the holder
------------------
of any Underlying Mortgage whose name and address have been previously furnished
to Tenant, together with a request that such holder receive copies of such
notices, of any act or omission by Landlord which Tenant asserts as giving
Tenant the right to terminate this Lease or to claim a partial or total eviction
or any other right or remedy under this Lease or provided by law (including
without limitation any notice of default pursuant to Section 22.6 hereof).
Tenant further agrees that the holder of any Underlying Mortgage shall have the
right to cure any default by Landlord on the same terms and conditions set forth
in Section 22.6, with such holder's cure period running the date of receipt of
written notice by such holder.
18. Estoppel Certificates.
---------------------
Each party ("Certifying Party") shall, at any time and from time to
time upon not less than twenty (20) days prior notice by the other party
("Requesting Party") execute, acknowledge and deliver to the Requesting Party a
statement in writing, certifying (a) the Commencement Date of this Lease, (b)
that this Lease is unmodified and in full force and effect (or if there have
been modifications, that the same is in full force and effect as so modified and
stating such modifications), (c) the dates to which the Basic Rent, Additional
Rent and other charges have been paid in advance, if any, (d) whether or not to
the best knowledge of the Certifying Party, the Requesting Party is in default
in the performance of any covenant, agreement or condition contained in this
Lease and, if so, specifying each such default of which the Certifying Party may
have knowledge, (e) the balance of the Security Deposit (including any accrued
interest thereon) and (f) any other information which reasonably may be
requested by the Requesting Party or the beneficiary under any Underlying
Mortgage. Any such statement delivered pursuant to this Article 19 may be relied
----------
upon by any prospective purchaser of the fee of the Building, the Project or the
Land or any mortgage or any mortgagee, ground lessor or other like encumbrancer
thereof or any assignee of any such encumbrancer of the Land, the Building or
the Project or any proposed assignee, sublessee or lender of Tenant. If such
statement is not delivered with twenty (20) days, the requesting party shall
give the other party an additional written request for such statement. If such
statement is not delivered within an additional ten (10) day cure period, then
the information contained in the requested statement shall be conclusively
deemed to be true and may be relied upon as such by the requesting party. In the
event that
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in any calendar year either party requests more than two (2) estoppel
certificates from the other party, in connection with the third and each
subsequent estoppel certificate, the requesting party shall pay the other party
a fee equal to Five Hundred Dollars ($500.00) to compensate such party for its
costs.
52
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19. Surrender of Premises and Removal of Property.
---------------------------------------------
19.1 No Merger. The voluntary or other surrender of this Lease by
---------
Tenant, a mutual cancellation or a termination hereof, shall not constitute a
merger, and shall, at the option of Landlord, terminate all or any exiting
subleases or shall operate as an assignment to Landlord of any or all subleases
affecting the Premises.
19.2 Surrender of Premises. Upon the expiration of the Term, or upon
---------------------
any earlier termination hereof, Tenant shall quit and surrender possession of
the Premises to Landlord in as good order and condition as the Premises are now
or hereafter may be improved by Landlord or Tenant, reasonable wear and tear and
repairs which are Landlord's obligation excepted, and shall, without expense to
Landlord, remove or cause to be removed from the Premises, all debris and
rubbish, all FF&E, free-standing cabinet work, movable partitions and other
articles of personal property owned by Tenant or installed or placed by Tenant
at its expense in the Premises (including without limitation any equipment for
Tenant's network operating center, if any), and all similar articles of any
other persons claiming under Tenant unless Landlord exercises its option to have
any subleases or subtenancies assigned to Landlord, and Tenant shall repair all
damage (other than reasonable wear and tear) to the Premises or the Project
resulting from such removal.
19.3 Disposal of Property. In the event of the expiration of this Lease
--------------------
or other re-entry of the Premises by Landlord as provided in this Lease, any
personal property of Tenant not removed by Tenant upon the expiration of the
Term of this Lease, or within seven (7) days after a termination by reason of
Tenant's default, shall be considered abandoned and Landlord may remove any or
all of such property and dispose of the same in any manner or store the same in
a public warehouse or elsewhere for the account of, and at the expense and risk
of, Tenant. If Tenant shall fail to pay the costs of storing any such property
after it has been stored for a period of thirty (30) days or more, Landlord may
sell any or all of such property at public or private sale, in such manner and
at such places as Landlord, in its sole discretion, may deem proper, without
notice to or demand upon Tenant. In the event of such sale, Landlord shall apply
the proceeds thereof, first, to the cost and expense of sale, including
reasonable attorneys' fees; second, to the repayment of the cost of removal and
storage; third, to the repayment of any other sums which may then or thereafter
be due to Landlord from Tenant under any of the terms of this Lease; and fourth,
the balance, if any, to Tenant.
19.4 Fixtures and Improvements. All FF&E, alterations, additions,
-------------------------
improvements and/or appurtenances attached to or built into the Premises
(excluding trade fixtures, such as audio-visual equipment and theatrical
equipment, and any equipment for Tenant's network operating center, if any)
prior to or during the Term hereof, whether by Landlord at its expense or at the
expense
53
<PAGE>
of Tenant, or both, as further described in Section 8.2, shall be and remain
-----------
part of the Premises and shall not be removed by Tenant at the end of the term
of this Lease unless such removal is required by Landlord or permitted pursuant
to the provisions of Article 8.
---------
20. Holding Over.
------------
In the event Tenant holds over after the expiration of the Term, with
the express or implied consent of Landlord, such tenancy shall be from
month-to-month only, and not a renewal hereof or an extension for any further
term, and such month-to-month tenancy shall be subject to each and every term,
covenant and agreement contained herein; provided, however, that Tenant shall
pay as Basic Rent during any holding over period, an amount equal to one hundred
fifty percent (150%) of the rent for the Premises in effect on the last day of
the Term. Nothing in this Article 21 shall be construed as a consent by Landlord
----------
to any holding over by Tenant and Landlord expressly reserves the right to
require Tenant to surrender possession of the Premises upon the expiration of
the Term or upon the earlier termination hereof and to assert any remedy at law
or in equity to evict Tenant and/or collect damages in connection with such
holding over.
21. Defaults and Remedies.
---------------------
21.1 Defaults by Tenant. The occurrence of any of the following
------------------
shall constitute a default under this Lease by Tenant:
(a) The failure by Tenant to pay the rent or make any other
payment required to be made by Tenant under this Lease and the exhibits hereto
as and when due where such failure continues for ten (10) days after written
notice thereof by Landlord to Tenant; provided, however, that such notice shall
be in lieu of and not in addition to any notice required under Section 1161 of
the California Code of Civil Procedure.
(b) The abandonment of the Premises by Tenant in accordance
with California Civil Code '1951.3. Further, if Tenant (i) vacates the Premises,
(ii) is not actively marketing the Premises for a Sublease, (iii) is not holding
such space for its own use, and Landlord requests Tenant to execute an agreement
terminating this Lease ("Lease Termination Agreement"), Tenant shall execute the
Lease Termination Agreement and this Lease shall thereupon terminate. If Tenant
fails to execute the Lease Termination Agreement within ten (10) days after
Landlord's request to do so, which request references this Section 22.1(b),
---------------
Tenant shall be in default under this Lease.
(c) The failure by Tenant to observe or perform the provisions
of Article 2 where such failure continues and is not remedied within three (3)
---------
business days after notice thereof from Landlord to Tenant; provided, however
that such notice shall be in lieu of and not in addition to any notice required
under Section 1161 of the California Code of Civil Procedure; provided,
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<PAGE>
however, if Tenant cannot remedy such failure by cessation of its own action
within such time period or if Tenant's violation of Article 2 does not cause
---------
loss or injury to Landlord or the Building or Project, Tenant shall not be in
default if Tenant commences to cure such failure within such period and
thereafter diligently prosecutes the same to completion. Notwithstanding the
foregoing, Landlord shall have the absolute right, but not the obligation, to
cure such failure on Tenant's behalf. If Landlord exercises its right to cure
any such failure on Tenant's behalf, Landlord shall notify Tenant of Landlord's
reasonable estimate of the cost to effect such cure and Tenant shall promptly
deposit such sum with Landlord within five (5) business days after receipt of
Landlord's estimate. If Tenant (i) timely deposits the estimated cost of cure
with Landlord, and (ii) within five (5) business days after receipt of an
invoice for the actual cost of cure, reimburses Landlord for such actual costs
to the extent that they exceed the estimated costs previously paid to Landlord
by Tenant, Landlord shall not be entitled to exercise its right to terminate
this Lease pursuant to Section 22.2(a) as a result of Tenant's failure under
this Section 22.1(c), without limiting any other rights which Landlord may have
---------------
under this Lease or at law or in equity as a result of such failure.
(d) The failure by Tenant to observe or perform the provisions
of Article 8 where such failure continues and is not remedied within three (3)
---------
business days after notice thereof from Landlord to Tenant; provided, however,
that such notice shall be in lieu of and not in addition to any notice required
under Section 1161 of the California Code of Civil Procedure. If such failure
cannot reasonably be cured within such three (3) business day period, Landlord
shall not be entitled to exercise its right to terminate this Lease under
Section 22.2(a) if within three (3) business days after notice from Landlord,
- ---------------
Tenant ceases all work on the Tenant Alterations and immediately commences
repairing any damages and diligently prosecutes such repairs to completion
provided Tenant does not commence any further work on the Tenant Alterations
until Landlord has fully approved the same in writing. If the nature of such
failure under this Section 22.1(d) is such that it adversely affects the
---------------
Building Systems, Service Facilities, access to or safety of any premises in the
Building or the quiet enjoyment of any other tenant in the Building, then
Landlord shall have the absolute right, but not the obligation, to cure such
failure on Tenant's behalf. If Landlord exercises its right to cure any such
failure on Tenant's behalf, Landlord shall notify Tenant of Landlord's
reasonable estimate of the cost to effect such cure and Tenant shall promptly
deposit such sum with Landlord within forty-eight (48) hours after receipt of
Landlord's estimate. If Tenant (x) timely deposits the estimated cost of cure
with Landlord, and (y) within three (3) business days after receipt of an
invoice for the actual cost of cure reimburses Landlord for such actual costs to
the extent that they exceed the estimated costs previously paid to Landlord by
Tenant, Landlord shall not be entitled to exercise its right to terminate this
Lease pursuant to this Section 22.1(d), without limiting any other rights which
---------------
Landlord may
55
<PAGE>
have under this Lease or at law or in equity as a result of such failure.
(e) The failure by Tenant to observe or perform any other
provision of this Lease and the exhibits hereto, including the Rules and
Regulations and Parking Garage Rules and Regulations referred to in Article 28,
to be observed or performed by Tenant, where such failure continues for thirty
(30) days after notice thereof by Landlord to Tenant; provided, however, that if
the nature of such default is such that the same cannot reasonably be cured
within such thirty (30) day period, Tenant shall not be deemed to be in default
if Tenant shall within such period commence such cure and thereafter diligently
prosecute the same to completion. Such thirty (30) day notice shall be in lieu
of and not in addition to any notice required under Section 1161 of the
California Code of Civil Procedure.
(f) Any action taken by or against Tenant pursuant to any
statute pertaining to bankruptcy or insolvency or the reorganization of Tenant
(but, in the case of a petition filed against Tenant only if Tenant is
adjudicated to be bankrupt); the making by Tenant of any general assignment for
the benefit of creditors; the appointment of a trustee or receiver to take
possession of all or any portion of Tenant's assets located at the Premises or
of Tenant's interest in this Lease, where possession is not restored to Tenant
within ninety (90) days; or the attachment, execution, or other judicial seizure
of all or any portion of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where such seizure is not discharged within ninety (90)
days.
(g) Tenant's failure to vacate and surrender the Premises as
required by this Lease upon the expiration of the Term or termination of this
Lease.
21.2 Landlord's Remedies.
-------------------
(a) In the event of any such default by Tenant, then, in
addition to any other remedies available to Landlord at law or in equity,
Landlord shall have the immediate option to terminate this Lease and all rights
of Tenant hereunder by giving Tenant five (5) days' written notice of such
election to terminate. In the event Landlord shall elect to so terminate this
Lease, Landlord may recover from Tenant:
(i) the worth at the time of award of any unpaid
rent which has been earned at the time of such termination; plus
(ii) the worth at the time of award of any 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 Tenant proves could
have been reasonably avoided; plus
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<PAGE>
(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 the award
exceeds the amount of such rental loss that Tenant proves could be reasonably
avoided; plus
(iv) any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant's failure to perform
its obligations under this Lease or which in the ordinary course of things would
be likely to result therefrom; and
(v) at Landlord's election, such other amounts in
addition to or in lieu of the foregoing as may be permitted from time to time by
applicable law.
(b) All "rent" (as defined in Section 4.1) shall be computed
-----------
on the basis of the monthly amounts thereof payable on the date of Tenant's
default, as the same are to be adjusted thereafter as contemplated by this
Lease. As used in Paragraphs 22.2(a)(i) and (ii), the "worth at the time of
------------------------------
award" is computed by allowing interest in the per annum amount equal to the
prime rate of interest or other equivalent reference rate from time to time
announced by the Bank of America National Trust and Savings Association (the
"Reference Rate") plus two percent (2%), but in no event in excess of the
maximum interest rate permitted by law. As used in Paragraph 22.2(a)(iii) above,
----------------------
the "worth at the time of award" is 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%).
(c) In the event of any such default by Tenant, Landlord shall
also have the right, with or without terminating this Lease, to re-enter the
Premises and remove all persons and property therefrom by summary proceedings or
otherwise; such property may be removed and stored in a public warehouse or
elsewhere at the cost of and for the account of Tenant.
(d) In the event of the abandonment of the Premises by Tenant,
a vacation of the Premises and subsequent refusal or failure to execute a Lease
Termination Agreement if required in Section 22.1(b), or in the event that
---------------
Landlord elects to re-enter as provided in Paragraph (c) above or takes
-------------
possession of the Premises pursuant to legal proceeding or pursuant to any
notice provided by law, and, in any event, if Landlord does not elect to
terminate this Lease, then Landlord may from time to time, without terminating
this Lease, either recover all rent as it becomes due or relet the Premises or
any part thereof for such term or terms and at such rent and upon such other
terms and conditions as Landlord, in its reasonable discretion, may deem
advisable, with the right to make alterations and repairs to the Premises.
(e) If Landlord elects to so relet as provided in Paragraph
---------
(d) above, then rentals received by Landlord from such reletting shall be
- ---
applied: First, to the payment of any
57
<PAGE>
indebtedness other than rent due hereunder from Tenant to Landlord; second, to
the payment of any cost of such reletting (including, but not limited to,
leasing commissions, tenant improvement costs, and rent concessions such as free
rent); third, to the payment of the cost of any alterations and repairs to the
Premises; fourth, to the payment of rent due and unpaid hereunder; and the
remainder, if any, shall be held by Landlord and applied in payment of future
rent as the same may become due and payable hereunder. Should that portion of
such rentals received from such reletting during any month, which is applied to
the payment of rent hereunder, be less than the rent payable during that month
by Tenant hereunder, then Tenant shall pay such deficiency to Landlord. Such
deficiency shall be calculated and paid monthly. Tenant shall also pay to
Landlord, as soon as ascertained, any costs and expenses incurred by Landlord in
such reletting or in making such alterations and repairs not covered by the
rentals received from such reletting.
(f) If Landlord elects to terminate this Lease as a result of
Tenant's default, on the expiration of the time stated in Landlord's notice to
Tenant given under Paragraph 22.2(a) above, this Lease and the Term hereof, as
-----------------
well as all of the right, title and interest of Tenant hereunder, shall wholly
cease and expire and become void in the same manner and with the same force and
effect (except as to Tenant's liability) as if the date fixed in such notice
were the date herein specified for expiration of the term of this Lease.
Thereupon, Tenant shall immediately quit and surrender to Landlord the Premises,
and Landlord may enter into and repossess the Premises by summary proceedings,
detainer, ejectment or otherwise, and remove all occupants thereof and, at
Landlord's option, any property thereon without being liable for any damages
therefor.
21.3 Re-Entry Not Termination. No re-entry or taking possession of the
------------------------
Premises by Landlord pursuant to this Article 22 shall be construed as an
----------
election to terminate this Lease unless a written notice of such intention be
given to Tenant or unless the termination thereof be decreed by a court of
competent jurisdiction. Notwithstanding any reletting without termination by
Landlord because of any default of Tenant, Landlord may at any time after such
reletting elect to terminate this Lease for any such default.
21.4 Right of Landlord to Injunction; Cumulative Remedies. In the event
----------------------------------------------------
of a breach by Tenant of any of the agreements, conditions, covenants or terms
hereof, Landlord shall have the right of injunction to restrain the same and the
right to invoke any remedy allowed by law or in equity whether or not other
remedies, indemnity or reimbursements are herein provided. The rights and
remedies given to Landlord in this Lease are distinct, separate and cumulative
remedies, and no one of them, whether or not exercised by Landlord, shall be
deemed to be in exclusion of any of the others.
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21.5 Definition of Tenant. As used in this Article 22 and in Article
-------------------- ---------- -------
24, the term "Tenant" shall be deemed to include all persons or entities named
- --
as Tenant under this Lease, or each and every one of them, jointly and
severally. If any of the obligations of Tenant hereunder is guaranteed by
another person or entity, the term "Tenant" shall be deemed to include all of
such guarantors and any one or more of such guarantors. If this Lease has been
assigned, the term "Tenant," as used in this Article 22 and in Article 23 shall
---------- ----------
be deemed to include both the assignee and the assignor.
21.6 Defaults by Landlord. Landlord shall be in default in the
--------------------
performance of any material obligation required to be performed by Landlord
under this Lease if Landlord has failed to perform such material obligation,
subject to force majeure events, within thirty (30) days after the receipt of
----- -------
notice thereof from Tenant (or, in the case of a failure by Landlord to provide
the services described in Article 7, within fifteen (15) days after the receipt
---------
of the notice thereof from Tenant); provided, however that if the nature of such
material default is such that the same cannot reasonably be cured within such
thirty (30) day period (or 15 day period, as the case may be), Landlord shall
not be deemed to be in default if Landlord shall within such period commence
such cure and thereafter diligently prosecute the same to completion. Upon any
such material default by Landlord ("Landlord Default"), Tenant may exercise any
of its rights provided at law or in equity (including without limitation any
right to terminate this Lease) but nothing herein shall be deemed to give Tenant
the right to offset against rent or other sums due pursuant to this Lease,
except as otherwise expressly set forth herein.
22. Bankruptcy.
----------
If, at any time prior to the Commencement Date, any action is taken by
or against Tenant (and not dismissed within ninety (90) days) in any court
pursuant to any statute pertaining to bankruptcy or insolvency or the
reorganization of Tenant, Tenant makes any general assignment for the benefit of
creditors, a trustee or receiver is appointed to take possession of
substantially all of Tenant's assets or of Tenant's interest in this Lease, or
there is an attachment (not dismissed within sixty (60) days), execution or
other judicial seizure of substantially all of Tenant's assets or of Tenant's
interest in this Lease, then this Lease shall ipso facto be canceled and
---- -----
terminated and of no further force or effect. In such event, neither Tenant nor
any person claiming through or under Tenant or by virtue of any statute or of
any order of any court shall be entitled to possession of the Premises or any
interest in this Lease and Landlord shall, in addition to any other rights and
remedies under this Lease, be entitled to retain any rent, Security Deposit or
other monies received by Landlord from Tenant as liquidated damages.
23. Interest on Tenant's Obligations; Late Charges.
----------------------------------------------
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<PAGE>
23.1 Interest. Any amount due from Tenant to Landlord which is not paid
--------
when due shall bear interest at the lesser of two percent (2%) in excess of the
Reference Rate or the maximum rate per annum which Landlord is permitted by law
to charge, from the day after the date such payment is due until paid, but the
payment of such interest shall not excuse or cure any default by Tenant under
this Lease.
23.2 Late Charge. In the event Tenant is more than five (5) days late
-----------
in paying any amount of rent due under this Lease, Tenant shall pay Landlord a
late charge equal to three percent (3%)of each delinquent amount of rent and any
subsequent delinquent amount of rent; provided, however, that such late charge
shall not be payable with respect to the first two (2) late payments of rent in
each of the first two (2) Lease Years of the Term unless Tenant fails to pay the
delinquent amount of rent within five (5) days after notice of such delinquency
by Landlord. Notwithstanding the previous sentence, no late charge shall be
payable by Tenant with respect to any delinquent payment of rent which is late
as a result of Landlord's failure to notify Tenant of a new address for the
payment of rent at least five (5) days prior to the date on which such payment
of rent was due. The parties agree that the amount of the late charge set forth
in the first sentence of this Section 24.2 represents a reasonable estimate of
------------
the cost and expense that would be incurred by Landlord in processing each
delinquent payment of rent by Tenant and that such late charge shall be paid to
Landlord as liquidated damages for each delinquent payment pursuant to Section
1671 of the California Civil Code, but the payment of such late charge shall not
excuse or cure any default by Tenant under this Lease. The parties further agree
that the payment of late charges and the payment of interest provided for in
Section 24.1 are distinct and separate from one another in that the payment of
- ------------
interest is to compensate Landlord for the use of Landlord's money by Tenant,
while the payment of a late charge is to compensate Landlord for the additional
administrative expense incurred by Landlord in handling and processing
delinquent payments, but excluding attorneys' fees and costs incurred with
respect to such delinquent payments.
24. Quiet Enjoyment.
---------------
Tenant, upon the paying of all rent hereunder and performing each of
the covenants, agreements and conditions of this Lease required to be performed
by Tenant, shall lawfully and quietly hold, occupy and enjoy the Premises during
the Term without hindrance or molestation of anyone lawfully claiming by,
through or under Landlord, subject, however, to the provisions of this Lease and
subject to any Underlying Mortgage (to the extent this Lease is subordinate
thereto, and subject to the terms of any non-disturbance agreement by the holder
of such Underlying Mortgage in favor of Tenant).
25. Rentable Area.
-------------
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25.1 Computation of Rentable Area. For all purposes under this Lease,
----------------------------
the Rentable Area of the Project or any portion thereof (including without
limitation the Premises) shall be determined by Landlord in accordance with the
standard method for measuring floor area in office buildings established by the
Building Owners and Managers Association in American National Standard ANSI
Z65.1-1980 (reaffirmed 1996).
25.2 Building Common Areas. All enclosed floor areas in the Building
---------------------
have been constructed for the benefit of Tenant and the other tenants in the
Building. All tenants in the Building must equitably share the cost of those
areas in the Building which contribute to the access, comfort, use and enjoyment
of the premises of each tenant, and for that purpose, each tenant in the
Building, including Tenant, shall bear its "proportionate share of the Building
Common Areas," as defined herein. "Building Common Areas" is defined as the
mechanical areas in the sub-basement and basement, fire response room,
mechanical penthouse, telephone closets, electrical closets, common toilet areas
throughout the Building (which are not part of the premises of any tenant),
janitor's toilet area in the basement, elevator lobbies (which are not part of
the premises of any tenant) and ground floor lobbies in the Building.
Notwithstanding the foregoing, it is specifically agreed that the restrooms and
corridor area on any multi-tenant floor shall not be part of the Building Common
Areas and shall be allocated solely to the tenants on said multi-tenant floor.
Tenant's "proportionate share of the Building Common Areas" shall be determined
by multiplying the total square footage of the Building Common Areas by a
fraction, the numerator of which is the number of square feet of Rentable Area
in Tenant's Premises and the denominator of which is the total number of square
feet of Rentable Area in the Building.
25.3 Premises and Project Rentable Area. The total Rentable Area of the
----------------------------------
Premises is estimated to be 86,408 square feet. The total Rentable Area of
office space in the Project is estimated to be 109,861 square feet. The final
numbers shall be determined by Landlord's interior surveyors promptly following
the Commencement Date, at which time Landlord shall provide written notice
thereof to Tenant, accompanied by reasonable written back-up material. If Tenant
objects to any aspect of such determination, Tenant must deliver written notice
thereof with fifteen days following receipt of such notice, and any error shall
be corrected as mutually agreed by the parties. The final amount of Rentable
Area for the Premises shall be the "numerator" and the final amount of Rentable
Area of office space in the Project shall be the "denominator" for purposes of
Section 5.1 above with respect to the determination of Tenant's pro rata share
of Operating Expenses and Real Estate Taxes.
26. Examination of Lease.
--------------------
The submission of this instrument for examination or signature by Tenant,
Tenant's agents or attorneys, does not
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constitute a reservation of, or an option to lease, and this instrument shall
not be effective or binding as a lease or otherwise until its execution and
delivery by both Landlord and Tenant.
27. Rules and Regulations.
---------------------
The Rules and Regulations for the Building and Project and the Parking
Garage Rules and Regulations attached hereto as Exhibits "H" and "I",
------------ ---
respectively, are hereby incorporated herein and made a part of this Lease.
Tenant agrees to abide by and comply with each and every one of said rules and
regulations and any amendments, modifications and/or additions thereto as may
hereafter be adopted by Landlord for the safety, care, security, good order and
cleanliness of the Premises, the Building, the Parking Garage and the Project.
Landlord shall use its reasonable best efforts to enforce the Rules and
Regulations in a non-discriminatory manner; provided Landlord shall not be
liable to Tenant for any violation of any of the said rules and regulations by
any other tenant, contractor or invitee or for the failure of Landlord to
enforce any of the Rules and Regulations. Notwithstanding anything above to the
contrary, Landlord agrees that (i) the Rules and Regulations shall not be
amended or modified in a way that unreasonably and adversely affects Tenant's
commercially reasonable use of the Premises as a business office and (ii) that
in the event of any inconsistency between the Rules and Regulations and a
provision of this Lease, the provisions of this Lease shall control. Other rules
and regulations promulgated by Landlord under this Lease and changes to the
Rules and Regulations and the Parking Rules and Regulations shall be subject to
the following (the "Rules Requirements"): (a) they shall be effective after
twenty (20) days prior notice to Tenant, (b) they shall not discriminate against
Tenant, and (c) they shall not unreasonably and adversely affect Tenant's use of
the Premises.
28. No Directory Board; Signage; Project Identity
---------------------------------------------
28.1 Directory Board. The Building shall not have a directory board.
---------------
28.2 Signage; Project Identity. Tenant shall be permitted to install
-------------------------
appropriate signage containing Tenant's name and/or logo on the wall immediately
adjacent to entrance doors to the Premises within the floors of the Premises,
and, provided that at all times Tenant leases all of the Rentable Area on
individual floors of the Premises, on the walls of the elevator lobbies on each
floor of the Premises leased solely by Tenant. Tenant shall also have the right
to reasonable exterior identification signage at the entrance to the Building
(with the exclusive right to have such identification signage on the exterior of
the Building) and directional signage at the entrance to the Garage, to the
parking levels in the Building and other entrances to the Project, but not the
Project as a whole. Any such signage will be designed and constructed in a
manner compatible with Building standard
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signage and graphics criteria and shall be subject to Landlord's prior approval,
which approval shall not be unreasonably withheld or delayed. Tenant shall be
solely responsible for obtaining any governmental permits and approvals required
for any of Tenant's signage (including without limitation, approvals from the
City of Beverly Hills). If, at any time, Tenant does not lease all of the
Rentable Area on any floor of the Premises hereunder, Tenant's rights under this
Section 29.2 to install and maintain signage on the walls of the elevator
- ------------
lobbies within such floor shall thereupon terminate, and Tenant shall promptly
remove all such signage and repair and restore the walls to their prior
condition, at Tenant's expense. Similarly, if Tenant exercises its First Floor
Cancellation Option pursuant to Section 3.5 above, Tenant shall share the
signage described in the second sentence of this Section 29.2 (except for
Tenant's identification signage at the entrance to the Building) with any
subsequent first floor tenant of the Building on a reasonable basis taking into
account the relative square footage leased by the parties. Landlord, at
Landlord's sole and absolute discretion, may designate a name for the Project
(the "Project Name"), which Project Name may be changed from time to time by
Landlord. Tenant shall not have any intellectual property rights in or to the
Project Name.
29. Fair Market Rental Rate Arbitration; Definition.
-----------------------------------------------
29.1 Arbitration of Rate. If Tenant objects to the Fair Market Rental
-------------------
Rate as defined in Section 30.2 determined by Landlord for the Renewal Term as
------------
provided in Section 3.4(a)(3)(B), then the Fair Market Rental Rate shall be
--------------------
determined pursuant to the following procedure. Within thirty (30) days after
delivery of Tenant's Disputed Renewal Notice, Landlord and Tenant shall each, by
written notice to the other, appoint an appraiser. If either party fails to
appoint an appraiser within the required time period, then the appraiser
appointed by the other party shall be the sole appraiser for the purpose of
determining the Fair Market Rental Rate and shall deliver a written
determination thereof within sixty (60) days. If both parties timely appoint
appraisers, then within thirty days after the appointment of the second
appraiser, the two appraisers shall mutually agree upon a third appraiser to
participate in the determination of Fair Market Rental Rate. All appraisers
appointed hereunder shall be members of the American Institute of Real Estate
Appraisers (or any successor organization thereof) and shall have had at least
five years of recent experience in appraising office space in the Beverly Hills
market. If the two appraisers appointed by Landlord and Tenant fail to timely
agree upon a third appraiser, then a petition may be made by either Landlord or
Tenant to the presiding judge of the Superior Court for the County of Los
Angeles for such selection. Within sixty (60) days after the appointment of the
third appraiser, each appraiser shall deliver to both Landlord and Tenant a
written appraisal setting forth his or her determination of the Fair Market
Rental Rate. The average of the three appraisals shall be the final Fair Market
Rental Rate.
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Landlord and Tenant shall each separately bear the fees of the
appraiser whom they appoint and shall divide equally the fees of the third
appraiser.
29.2 Fair Market Rental Rate. The phrase "Fair Market Rental Rate" as
-----------------------
used in Sections 3.4 and 30.1 shall mean the fair market value annual rental
---------------------
rate for which Landlord, at or about the time that such Fair Market Rental Rate
is deemed to take effect, has entered into a lease or leases (excluding any
subleases by any tenant, including Tenant, in the Project) with a tenant or
tenants for any general office use of comparable space in the Project (without
extenuating circumstances, such as the fact that a tenant is exercising a
renewal option), or if any such lease transaction is not available for purposes
of comparison, which Landlord, or other landlords leasing space of comparable
type, size, quality and floor height in the highest category of premiere,
first-class office building projects comparably located would obtain from any
prospective tenant for any general office use of such space. The Fair Market
Rental Rate shall take into account the value of any rent or equivalent economic
concessions ("Concessions") then usually and customarily given in connection
with the leasing of such comparable space in the Building or the Project, as the
case may be for a comparable lease term including, for illustrative purposes
only and not necessarily for purposes of designating necessary Concessions to
take into account unless such Concessions are then actually being given, such
items as tenant improvements, tenant improvement allowances, free rent
(including initial build-out periods granted to tenants without charge), a
maximum or minimum amount limitation on the annual rent, and the level of any
escalation base or "stop" for such comparable space, and saved brokerage
commission obligations. The Fair Market Rental Rate shall also take into account
the manner in which Rentable Area and Usable Area are computed and, to the
extent applicable, that (i) a tenant may lease the Premises on an "as-is" basis
without Landlord granting Concessions such as tenant improvement allowances;
(ii) the Premises, in their then existing condition, may be partially suitable
to a tenant, without the necessity of additional improvements or the granting of
any Concessions such as tenant improvement allowances; (iii) the Premises, in
their then existing condition, may exceed the quality of available space in the
marketplace for the operation of a tenant's business, and (iv) the improvements
in the Premises, in their then existing condition, may need to be demolished and
rebuilt to be suitable for use by a tenant. For purposes of this Section 30.2,
------------
on a renewal of the Term hereof, all of the Premises shall be deemed to be
satisfactory to Tenant and suitable for the conduct of Tenant's business, except
to the extent such space may need to be refurbished. Solely as an example to
illustrate the operation of this Section 30.2, if comparable leases in the
Building or in comparable buildings for similar space, lease space to a tenant
for $50.00 annual gross rent per square foot of Rentable Area, with a $10.00 tax
and operating expense base amount per square foot of Rentable Area, give four
(4) months free rent, a three (3) month build-out period prior to the
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occupancy of such space, and an allowance of $10.00 per square foot of Usable
Area for tenant improvements, and require the landlord to take over the tenant's
obligations under its former lease, the Fair Market Rental Rate shall not be
$50.00 annual gross rent per square foot of Rentable Area only, but shall be a
net effective rent which, after taking into account any of such Concessions to
which Tenant is entitled under this Lease, shall account for the value of the
$10.00 tax and operating expense base amount per square foot of Rentable Area,
the four (4) months free rent, the three (3) month build-out period prior to the
occupancy of such space, the allowance of $10.00 per square foot of Usable Area
for tenant improvements and the lease takeover obligation (i.e., the actual cost
to a landlord of assuming such lease takeover obligation, after taking into
account any reduction in the obligation, such as rent received from subleasing
such space).
30. Covenant Against Liens.
----------------------
Tenant has no authority or power to cause or permit any lien or
encumbrance of any kind whatsoever, whether created by act of Tenant, operation
of law or otherwise, to attach to or be placed upon the Project or Premises, and
any and all liens and encumbrances created by Tenant shall attach to Tenant's
interest only. Landlord shall have the right at all times to post and keep
posted on the Premises any notice which it deems necessary for protection from
such liens. Tenant covenants and agrees not to suffer or permit any lien of
mechanics or materialmen or others to be placed against the Project, the
Building or the Premises, or any portion thereof, with respect to work or
services claimed to have been performed for or materials claimed to have been
furnished to Tenant or the Premises (including, without limitation, in
connection with any Alterations) and, in case of any such lien attaching or
notice of any lien, Tenant covenants and agrees to cause it to be released and
removed of record, or bonded over, within ten (10) days. Notwithstanding
anything to the contrary set forth in this Lease, in the event that such lien is
not released and removed, or bonded over, within ten (10) days after notice of
such lien is delivered by Landlord to Tenant, Landlord may, without waiving its
rights and remedies based upon such breach by Tenant and without releasing
Tenant from any of its obligations, immediately take all action necessary to
release and remove such lien, without any duty to investigate the validity
thereof, and all sums, costs and expenses, including reasonable attorneys' fees
and costs, incurred by Landlord in connection with such lien shall be deemed
Additional Rent under this Lease and shall immediately be due and payable by
Tenant. Notwithstanding the foregoing, if Tenant has made payment to Landlord
for the cost of any Tenant Alterations or portion thereof, and Landlord fails to
forward such payment to a contractor or subcontractor, Landlord shall be solely
responsible for a mechanics' lien filed as a result of such nonpayment.
31. Consents; Good Faith.
--------------------
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31.1 Consents. Any time this Lease requires a consent or approval of
--------
Landlord or Tenant, such consent or approval shall not be unreasonably withheld
or delayed; provided, however, that nothing in this Section 32.1 shall require
------------
Landlord to consent to (i) any use of the Premises for purposes other than those
described in Article 2, (ii) any Tenant Alterations which would adversely affect
---------
the Building Systems or Service Facilities, or unreasonably affect the exterior
appearance of the Building, or (iii) any proposed assignment of or subletting
under this Lease to which Landlord is not otherwise required to consent under
Article 14.
- ----------
31.2 Good Faith. Whenever this Lease grants Landlord or Tenant a right
----------
to take action, exercise discretion, or make an allocation, judgment or other
determination (collectively, an "Act"), Landlord or Tenant shall act reasonably
and in good faith (meaning that no action will be taken which would materially
contravene the reasonable expectations of a sophisticated landlord operating the
highest category of premiere, first-class office building and a sophisticated
tenant in the highest category of premiere, first-class office buildings
concerning the benefits, rights and obligations under this Lease but not
contravening the plain and clear intent of the specific language of this Lease
governing the specific issue in question), provided, however, that:
(a) Wherever this Lease elsewhere provides another standard
which specifically defines or limits Landlord's or Tenant's discretion with
respect to any Act, such other standard and not this Section 32.2 shall then
------------
control as to such Act;
(b) Except for an obligation to act in good faith, this
Section 32.2 shall not apply to (i) an election by Landlord to terminate the
- ------------
Lease under Sections 12.2, 12.3 or 13.1; or (ii) an election by Landlord under
---------------------------
Section 33.2 to cure any default of Tenant hereunder;
- ------------
(c) This Section 32.2 shall not apply to an Act taken by
------------
Landlord pursuant to Article 22 of the Lease; and
----------
(d) Nothing contained in this Section 32.2 shall be deemed to
------------
limit the discretion of Landlord or Tenant with respect to any matter
(including, without limitation, a proposal to amend or otherwise modify the
Lease) which is not otherwise within the contemplation of the Lease.
32. General Provisions.
------------------
32.1 No Waiver. The waiver by Landlord of any breach of any term,
---------
covenant or condition herein contained shall not be deemed to be a waiver of any
subsequent breach of the same or any other term, covenant or condition herein
contained, nor shall any custom or practice which may grow up between the
parties in the administration of the terms hereof be deemed a waiver of or in
any way affect the right of Landlord to insist upon the
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<PAGE>
performance by Tenant in strict accordance with said terms. The subsequent
acceptance of rent hereunder by Landlord shall not be deemed to be a waiver of
any preceding breach by Tenant of any term, covenant or condition of this Lease,
other than the failure of Tenant to pay the particular rent so accepted,
regardless of Landlord's knowledge of such preceding breach at the time of
acceptance of such rent. No acceptance by Landlord of a lesser sum than the
Basic Rent and Additional Rent or other sum then due shall be deemed to be other
than on account of the earliest installment of such rent or other amount due,
nor shall any endorsement or statement on any check or any letter accompanying
any check 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 installment or other amount or pursue any other remedy in this Lease
provided.
32.2 Landlord's Right to Perform. All covenants and agreements to be
---------------------------
performed by Tenant under any of the terms of this Lease shall be performed by
Tenant at Tenant's sole expense and without abatement of rent, except as
otherwise expressly provided in this Lease. If Tenant shall fail to observe and
perform any covenant, condition, provision or agreement contained in this Lease
or shall fail to perform any other act required to be performed by Tenant,
Landlord may, upon notice to Tenant, without obligation, and without waiving or
releasing Tenant from any default or obligations of Tenant, make any such
payment or perform any such obligation on Tenant's part to be performed. All
sums so paid by Landlord and all costs incurred by Landlord, including
attorneys' fees, together with interest thereon in a per annum amount equal to
two percent (2%) in excess of the Reference Rate but not in excess of the
maximum rate permitted by law, shall be payable to Landlord on demand and Tenant
covenants to pay any such sums, and Landlord shall have (in addition to any
other right or remedy hereunder) the same rights and remedies in the event of
the non-payment thereof by Tenant as in the case of default by Tenant in the
payment of rent.
32.3 Terms; Headings. The words "Landlord" and "Tenant" as used herein
---------------
shall include the plural, as well as the singular. The words used in neuter
gender include the masculine and feminine and words in the masculine or feminine
gender include the neuter. If there is more than one tenant, the obligations
hereunder imposed upon Tenant shall be joint and several. The headings or titles
of this Lease shall have no effect upon the construction or interpretation of
any part hereof.
32.4 Entire Agreement. This Lease, along with any exhibits referred to
----------------
herein and attached hereto and referenced herein, or other documents expressly
incorporated by reference herein, constitute the entire and exclusive agreement
between Landlord and Tenant with respect to the Premises and the estate and
interest leased to Tenant hereunder. This Lease and said exhibits and other
documents may be altered, amended, modified or revoked only by an instrument in
writing signed by both Landlord and Tenant. Landlord and Tenant hereby agree
that all prior or
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contemporaneous oral understandings, agreements or negotiations relative to the
leasing of the Premises are merged into and revoked by this instrument.
32.5 Successors and Assigns. Subject to the provisions of Article 14
---------------------- ----------
relating to Assignment and Sublease, this Lease is intended to and does bind the
heirs, executors, administrators and assigns of any and all of the parties
hereto.
32.6 Notices. Any notice, consent, approval, request, demand and other
-------
communication ("Notice") which Landlord or Tenant is required or desires to
serve upon, or deliver to, the other shall be in writing and mailed postage
prepaid by certified or registered mail, return receipt requested, or by
personal delivery, to the appropriate address indicated below, or at such other
place or places as either Landlord or Tenant may, from time to time, designate
in a written notice given to the other. If the term "Tenant" in this Lease
refers to more than one person or entity, Landlord shall be required to make
service or delivery, as aforesaid, to any one of the said persons or entities
only. Notices shall be deemed sufficiently served or given at the time of
personal delivery or three (3) days after the date of mailing thereof; provided,
however, that any notice of default to Tenant under Article 22 shall be
----------
hand-delivered to the Premises (without affecting the required manner of
delivery of any copy of any such notice of default). Any notice, request,
communication or demand by Tenant to Landlord shall be addressed to Landlord at
the Office of the Building with a copy to Mitchell Evall, Esq., Weissmann,
Wolff, Bergman, Coleman & Silverman, LLP, 9665 Wilshire Boulevard, Suite 900,
Beverly Hills, California 90212, and, if requested in writing by the Landlord,
given or served simultaneously to the Landlord's mortgagee at the address
specified in such request. Any notice, request, communication or demand by
Landlord to Tenant shall be addressed to Tenant at the Premises, Attention:
General Counsel, with a copy to:
Munger, Tolles & Olson, LLP
355 South Grand Avenue, Thirty-Fifth Floor
Los Angeles, California 90071-1560
Attention: O'Malley Miller, Esq.
and a copy to Global Crossing Holdings, Ltd., at the Premises, Attention:
General Counsel. Rejection or other refusal to accept a Notice or the inability
to deliver the same because of a changed address of which no Notice was given
shall be deemed to be receipt of the Notice sent.
32.7 Severability. If any term or provision of this Lease, the deletion
------------
of which would not adversely affect the receipt of any material benefit by
either party hereunder, shall be held invalid or unenforceable to any extent,
the remaining terms, conditions and covenants of this Lease shall not be
affected thereby and each of said terms, covenants and conditions shall be valid
and enforceable to the fullest extent permitted by law.
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32.8 Time of Essence. Time is of the essence of this Lease and each
---------------
provision hereof in which time of performance is established.
32.9 Governing Law. This Lease shall be governed by, interpreted and
-------------
construed in accordance with the laws of the State of California.
32.10 Attorneys' Fees. If Landlord retains the services of attorneys
---------------
and successfully recovers possession of the Premises whether or not suit is
filed, then all such reasonable costs and expenses, including reasonable
attorneys' fees and costs, incurred by Landlord shall be paid by Tenant. If any
action or proceeding (including any appeal thereof) is brought by Landlord or
Tenant (whether or not such action is prosecuted to judgment) to enforce its
respective rights under this Lease or to enforce a judgment ("Action"), (1) the
unsuccessful party therein shall pay all costs incurred by the prevailing party
therein, including reasonable attorneys' fees and costs to be fixed by the
court, and (2) as a separate right, severable from any other rights set forth in
this Lease, the prevailing party therein shall be entitled to recover its
reasonable attorneys' fees and costs incurred in enforcing any judgment against
the unsuccessful party therein, which right to recover post-judgment attorneys'
fees and costs shall be included in any such judgment. The right to recover
post-judgment attorneys' fees and costs shall (i) not be deemed waived if not
included in any judgment, (ii) survive the final judgment in any Action, and
(iii) not be deemed merged into such judgment. The rights and obligations of the
parties under this Section 33.10 shall survive the termination of this Lease.
-------------
32.11 Light and Air. Any diminution or shutting off of light, air or
-------------
view by any structure which may be erected on lands adjacent to the Building or
any other portion of the Project shall in no manner affect this Lease or impose
any liability whatsoever on Landlord.
32.12 Execution by Corporation. The persons executing this Lease on
------------------------
behalf of Tenant represent and warrant to Landlord that they are duly authorized
to execute and deliver this Lease on Tenant's behalf in accordance with a duly
adopted resolution of the board of directors of Tenant, a copy of which is to be
delivered to Landlord on execution hereof, and in accordance with the bylaws of
Tenant, and that this Lease is binding upon Tenant in accordance with its terms.
The persons executing this Lease on behalf of Landlord represent and warrant to
Tenant that they are duly authorized to execute and deliver this Lease on behalf
of Landlord and that this Lease is binding upon Landlord in accordance with its
terms.
32.13 Force Majeure. Neither Landlord nor Tenant shall be liable for
-------------
any failure to comply or delay in complying with its obligations hereunder if
such failure or delay is due to acts of God, inability to obtain labor, strikes,
lockouts, lack of materials, governmental restrictions, enemy actions, civil
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commotion, riots, insurrection, war, fire, earthquake, unavoidable casualty or
other similar causes beyond such party's reasonable control (all of which events
are herein referred to as force majeure events). It is expressly agreed that
----- -------
Landlord shall not be obliged to settle any strike to avoid a force majeure
----- -------
event from continuing. Payment of money hereunder by one party to the other
shall never be subject to force majeure conditions.
----- -------
32.14 Limitation on Liability. Tenant agrees that, in any action by
-----------------------
Tenant arising out of or relating to the performance of this Lease, Tenant will
proceed only against the interest of Landlord, or its successors and assigns, in
the Project and not against any other assets of Landlord or against any partner
in Landlord (or in any limited or general partnership to which Landlord may
assign this Lease), or against any of such partner's directors, officers,
employees, agents, shareholders, partners or affiliates.
32.15 Development of Project. Landlord shall have sole and absolute
----------------------
discretion in the present and future development of the Project and the leasing
of any space to any tenants, subject to all of the other terms of this Lease.
Tenant has not relied, and shall not rely, on any proposed or potential
development of the Project or any portion thereof, or any other area, and Tenant
acknowledges that Landlord has no obligation to lease, market or develop the
Project in any manner or to any degree. Landlord has no obligation, nor has
Landlord represented that (a) any facilities or amenities in or about the
Project will be any different than as specifically identified in this Lease; (b)
Landlord will develop, expand or complete the Project in any particular way or
to any particular degree; (c) any occupancy levels in the Project, or in
portions thereof, will be reached; or (d) only certain kinds of tenants will
occupy any portion of the Project. Tenant therefore accepts the Project in its
current condition, subject only to the specific express obligations of Landlord
to repair and maintain the Project as may be provided in this Lease.
33. Arbitration.
-----------
(a) Whenever in this Lease it is provided that a dispute shall
be resolved by arbitration, the arbitration shall be conducted in Los Angeles
County, California, as provided in this Article 34. The party desiring such
----------
arbitration shall give written notice thereof to the other specifying the
dispute to be arbitrated. Within ten (10) days after the date on which the
arbitration procedure is invoked as provided in this Lease, each party shall
appoint an experienced arbitrator and notify the other party of the arbitrator's
name and address. For purposes of this Article 34 an "experienced arbitrator"
----------
shall be a licensed lawyer actively engaged in the full-time practice of law in
the County of Los Angeles for a continuous period, immediately preceding the
date on which the arbitration procedure is invoked, of not less than ten (10)
years, but who has at no time ever
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represented or acted on behalf of any of the parties. The party who selects the
experienced arbitrator may not consult with such experienced arbitrator,
directly or indirectly, to determine such experienced arbitrator's position on
the issue which is the subject of the dispute. If any party fails to so appoint
an experienced arbitrator and notify the other party of such arbitrator's name
and address, an arbitrator shall be appointed pursuant to the same procedure
that is followed when agreement cannot be reached as to the third arbitrator.
Within ten (10) days after the appointment of the second experienced arbitrator
and notice to the other party of such arbitrator's name and address, the two
arbitrators so appointed shall appoint a third experienced arbitrator who shall
notify both parties of the third arbitrator's name and address. If the three
arbitrators to be so appointed are not appointed within thirty (30) days after
the date the arbitration procedure is invoked as provided in this Lease, then
the arbitrator or arbitrators, if any, who have been selected shall proceed to
carry out the arbitration. The arbitrator or arbitrators so selected shall
furnish Landlord and Tenant with a written decision within thirty (30) days
after the date of selection of the last of the arbitrators to be so selected.
Any decision so submitted shall be signed by a majority of the arbitrators, if
more than two have been selected. If only two arbitrators have been selected and
they are unable to agree, then either Landlord or Tenant shall be entitled to
apply to the presiding judge of the Superior Court of the County of Los Angeles,
California for the selection of a third arbitrator who shall select from a list
of names of experienced arbitrators submitted by Landlord or from a list of
names submitted by Tenant, as the case may be, unless both Landlord and Tenant
submit lists of names, in which case the Court, in it sole discretion, shall
select the third arbitrator from the lists. In the event of any subsequent
vacancies or inabilities to perform among the arbitrators appointed, the
arbitrator or arbitrators involved shall be replaced in accordance with the
provisions of this Article 34 as if such replacement was an initial appointment
----------
to be made under this Article 34 within the time constraints set forth in this
----------
Article 34, measured from the date of notice of such vacancy or inability to the
- ----------
person or persons required to make such appointment, with all the attendant
consequences of failure to act timely if such appointment person is a party
hereto. In designating arbitrators and in deciding the dispute, the arbitrators
shall utilize their utmost skill and act diligently in accordance with the
Commercial Rules of Arbitration then in force of the American Arbitration
Association, subject, however, to such limitations as may be placed upon them by
the provisions of this Lease.
(b) The arbitrators appointed pursuant to this Article 34
----------
shall (i) enforce and interpret the rights and obligations set forth in the
Lease to the extent not prohibited by law, (ii) fix and establish any and all
rules as it shall consider appropriate in its sole and absolute discretion to
govern the proceedings before it, including any and all rules of discovery,
procedure and/or evidence, and (iii) make and issue
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any and all orders, final or otherwise, and any and all awards, as a court of
competent jurisdiction sitting at law or in equity could make and issue and as
it shall consider appropriate in its sole and absolute discretion, including the
awarding of monetary damages (but shall not award consequential damages or
punitive damages to either party), and the awarding of reasonable attorneys'
fees and costs to the prevailing party as determined by the arbitrators in their
sole discretion, and the issuance of injunctive relief. If the party against
whom the award is issued complies with the award within the time period
established by the arbitrators, then no default will be deemed to have occurred,
unless the default pertained to the non-payment of money by either party, and
such party failed to make such payment under protest within the time period
required by this Lease.
(c) The decision of the arbitrators shall be final and
binding, may be confirmed and entered by any court of competent jurisdiction at
the request of any party and may not be appealed to any court of competent
jurisdiction or otherwise except upon a claim of fraud on the part of the
arbitrators, or on the basis of a mistake as to the applicable law. The
arbitrators shall retain jurisdiction over any dispute until its award has been
implemented, and judgment on any such award may be entered in any court having
appropriate jurisdiction.
(d) The obligation of Landlord and Tenant to submit a dispute
to arbitration is limited to disputes arising under those articles of this Lease
which specifically provide for arbitration. Neither party shall be in default
hereunder with respect to any provision hereof during the time period commencing
as of the initial notice of desire to arbitrate and ending on the date of
resolution by the arbitrators; provided, however, that during said period each
party shall continue to make all payments of money required by this Lease and
shall otherwise perform all duties and obligations required to be performed by
such party under this Lease and, with respect to the issue under arbitration,
shall maintain the status quo.
34. Guaranty.
--------
Concurrently with the execution of this Lease by Tenant, and as a
condition precedent to its effectiveness, Tenant shall deliver to Landlord a
Guaranty of Lease in the form of Exhibit J attached hereto, executed by Global
Crossing Holdings, Ltd., a Bermuda corporation.
35. No Brokers.
----------
Landlord and Tenant each hereby represent and warrant to the other, and
shall indemnify and defend the other for any breach hereof by such warranting
party, that no brokers' or finders' fees or commissions will be owed arising out
of the entering into of this Lease as a result of the warranting party's actions
or inactions.
72
<PAGE>
36. Gym and Cafeteria.
-----------------
Tenant acknowledges that Landlord intends to operate in the Building a
gym and cafeteria for the benefit of the Project, including the Premises. Such
gym and cafeteria shall be operated in a first-class manner with a quality of
operations commensurate with gyms and cafeterias, respectively, in the highest
category of premiere, first-class office building projects in the Golden
Triangle area and on Maple Drive in Beverly Hills, California. Without
derogating from the foregoing, with Landlord shall maintain the highest
standards of cleanliness with respect to comparable facilities in comparable
buildings. Both Landlord and Tenant acknowledge that the cafeteria is an amenity
for the Project which is not intended to be a profit center. The cost of food at
the cafeteria shall be at reasonable market prices in comparison to comparable
facilities in comparable buildings. Landlord shall pay the costs of initial
buildout of the gym and cafeteria, subject to reimbursement as set forth herein.
Tenant agrees that Tenant shall be responsible to reimburse Landlord for the
entire cost of operation of such gym and cafeteria (including (A) Basic Rent in
the amounts of $2.00 per square foot, which $2.00 shall be increased during the
Term in accordance with the CPI adjustments to Basic Rent made pursuant to
Section 4.5 hereof, and (B) Landlord's total costs of the initial buildout of
the cafeteria and gym (less an allowance of $20 per square foot), which buildout
costs shall be amortized on a straight line basis over ten years). Such costs
shall be paid within fifteen (15) days after receipt of Landlord's invoice.
Notwithstanding the foregoing, in the event that Tenant exercises its First
Floor Cancellation Option pursuant to Section 3.5 above, following the earlier
to occur of (i) Landlord's execution of a lease with a new tenant for the first
floor of the Building or (ii) twelve (12) months after possession of the First
Floor is returned to Landlord pursuant to Section 3.5, Tenant shall only be
responsible for its pro rata share of the costs of such gym and cafeteria
(including the aforementioned amortization of the buildout costs) (based on the
ratio of the square footage of Rentable Area in the remaining Premises to the
square footage of Rentable Area of office space in the Building), and Landlord
or the first floor occupant shall be responsible for the remaining costs.
37. Storage Space; Equipment Room.
-----------------------------
In the event that Landlord wishes to enter into a lease for all or any
portion of the Storage Space and/or Equipment Rooms on levels B-1 and B-2 of the
Building (the "Storage Space"), Landlord shall deliver to Tenant written notice
of Landlord's desire to enter into such a lease (the "Landlord's Storage Space
Notice"). Within twenty (20) days of Tenant's receipt of the Landlord's Storage
Space Notice, Tenant shall deliver to Landlord a written notice (the "Tenant's
Storage Space Notice") setting forth Tenant's election to lease (or not to
lease) all or any portion of the Storage Space. In the event that Tenant fails
to timely elect (through the timely delivery of the Tenant's Storage
73
<PAGE>
Space Notice so stating) to lease all or a portion of the Storage Space, then,
for a period of ninety (90) days thereafter, Landlord may enter into a lease for
all or any portion of the Storage Space with any third party on any terms and
conditions. With respect to any portion of the Storage Space which Landlord does
not lease to a third party within such 90-day period, the provisions of this
Article 38 shall thereafter apply again to any future leasing of such space.
Should Tenant timely notify Landlord within the Tenant's Storage Space Notice
that Tenant wishes to lease all or a portion of the Storage Space, then this
Lease shall be amended to include within the definition of Premises the
appropriate portion of the Storage Space. The initial base rental rate for the
Storage Space shall be $1.00 per square foot per month, as such sum may be
increased from and after the first anniversary of the Commencement Date in
accordance with the CPI mechanism set forth in Paragraph 4.5 above (as
increased, the "Storage Space Rent"). Tenant's obligation to promptly pay the
Storage Space Rent shall be deemed rent for all purposes under this Lease.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the date set forth in the first paragraph above.
LANDLORD:
NORTH CRESCENT REALTY V, LLC,
a Delaware limited liability company
By:
By: _____________________________
Name: ___________________________
Title: __________________________
TENANT:
GLOBAL CROSSING DEVELOPMENT COMPANY,
a Delaware corporation
By: ___________________________
Name: _________________________
Title: ________________________
74
<PAGE>
Exhibit A
Description of Premises
-----------------------
North Crescent Realty V, LLC
The Plaza
Rentable Square Feet
Building B
Rentable
Square Feet
-----------
B-1 Level 16,081.1
Floor 1 24,006.1
Floor 2 24,012.6
Floor 3 22,308.3
-----------
Rented to Global Crossing 86,408.1
===========
<PAGE>
Exhibit B
DESCRIPTION
PARCEL 1:
LOTS 21, 22, 23 AND 24 OF BLOCK 5 OF BEVERLY, IN THE CITY OF BEVERLY HILLS,
COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 11 PAGE
94 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL 2:
LOT 3 IN BLOCK 16 OF BEVERLY, IN THE CITY OF BEVERLY HILLS, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 11 PAGE 94 OF MAPS, IN
THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT THE SOUTHEASTERLY 20 FEET OF SAID LOT.
PARCEL 3:
LOTS 1 AND 2 OF BLOCK 16 OF BEVERLY, IN THE CITY OF BEVERLY HILLS, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 11 PAGE 94 OF MAPS, IN
THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT FROM THE SOUTHEASTERLY 20 FEET OF SAID LOT 2, ANY INTEREST IN AND TO ALL
OIL, GAS AND OTHER MINERALS LYING BELOW A DEPTH OF 500 FEET FROM THE SURFACE
THEREOF, WITHOUT, HOWEVER, THE RIGHT OF SURFACE ENTRY, EXCEPTED BY THE CITY OF
BEVERLY HILLS, A MUNICIPAL CORPORATION, IN QUITCLAIM DEED RECORDED NOVEMBER 7,
1967, AS INSTRUMENT NO. 114, OFFICIAL RECORDS.
PARCEL 4:
LOTS 23 AND 24 OF BLOCK 16 OF BEVERLY, IN THE CITY OF BEVERLY HILLS, COUNTY OF
LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 13 PAGE 62 OF
MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT FROM THE SOUTHEASTERLY 20 FEET OF SAID LOT 23, ANY INTEREST IN AND TO ALL
OIL, GAS AND OTHER MINERALS LYING BELOW A DEPTH OF 500 FEET AND FROM THE SURFACE
THEREOF, WITHOUT, HOWEVER, THE RIGHT OF SURFACE ENTRY, EXCEPTED BY THE CITY OF
BEVERLY HILLS, A MUNICIPAL CORPORATION, IN QUITCLAIM DEED RECORDED NOVEMBER 7,
1967, AS INSTRUMENT NO. 114, OFFICIAL RECORDS.
PARCEL 5:
THE NORTHWESTERLY 80 FEET OF THAT CERTAIN 20 FOOT ALLEY ADJOINING LOT 1 AND 2 OF
BLOCK 16 OF BEVERLY, IN THE CITY OF BEVERLY HILLS, COUNTY OF LOS ANGELES, STATE
OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 11 PAGE 94 OF MAPS, IN THE OFFICE OF
THE COUNTY RECORDER OF SAID COUNTY, ON THE NORTHEAST, VACATED IN ORDINANCE NO.
1037, ADOPTED BY THE CITY OF BEVERLY HILLS ON JULY 22, 1958, VACATING AND
ABANDONING FOR PUBLIC ALLEY PURPOSES, A CERTIFIED COPY THEREOF BEING RECORDED IN
THE OFFICE OF THE COUNTY RECORDER ON AUGUST 1, 1958 AS DOCUMENT NO. 3452 IN BOOK
D-174 PAGE 687, OFFICIAL RECORDS.
Page 1 of 3
<PAGE>
DESCRIPTION
PARCEL 6:
BLOCK 17 OF BEVERLY, IN THE CITY OF BEVERLY HILLS, COUNTY OF LOS ANGELES, STATE
OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 11 PAGE 94 OF MAPS, IN THE OFFICE OF
THE COUNTY RECORDER OF SAID COUNTY.
PARCEL 7:
THOSE PORTIONS OF BRIGHTON WAY, 60 FEET WIDE, SHOWN ON THE MAP OF "BEVERLY", IN
THE CITY OF BEVERLY HILLS, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER
MAP RECORDED IN BOOK 11 PAGE 94 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF
SAID COUNTY AND SHOWN ON THE MAP OF "BEVERLY", IN SAID COUNTY AND STATE,
RECORDED IN BOOK 13 PAGES 62 AND 63 OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY, AND A PORTION OF SANTA MONICA BOULEVARD, FORMERLY
BURTON WAY, SHOWN ON SAID MAP OF BEVERLY, VACATED IN ORDINANCE NO. 1018 ADOPTED
BY THE CITY OF BEVERLY HILLS ON DECEMBER 17, 1957, VACATING AND ABANDONING FOR
PUBLIC STREET PURPOSES, PORTIONS OF SAID STREETS A CERTIFIED COPY THEREOF BEING
RECORDED IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY ON JANUARY 2, 1958
AS INSTRUMENT NO. 2716 IN BOOK 56344 PAGE 47, OFFICIAL RECORDS, SAID PORTIONS
BEING DESCRIBED AS FOLLOWS:
BEGINNING AT THE MOST NORTHERLY CORNER OF LOT 24, BLOCK 16, BEVERLY, AS RECORDED
IN MAP BOOK 13 PAGE 52, RECORDS OF LOS ANGELES COUNTY, CALIFORNIA; THENCE SOUTH
50 DEGREES 28 MINUTES 30 SECONDS WEST 151 FEET ALONG THE NORTHWESTERLY PROPERTY
LINE OF SAID LOT 24, ALSO BEING THE SOUTHEASTERLY LINE OF BRIGHTON WAY, AS SHOWN
ON THE MAP OF SAID BEVERLY, TO THE MOST WESTERLY CORNER OF SAID LOT 24; THENCE
CONTINUING IN A STRAIGHT LINE FOR A DISTANCE OF 20 FEET TO THE MOST NORTHERLY
CORNER OF LOT 1 OF SAID BLOCK 16, BEVERLY, AS SAID LOT 1 IS SHOWN ON THE MAP OF
SAID BEVERLY, RECORDED IN MAP BOOK 11 PAGE 94, RECORDS OF SAID LOS ANGELES
COUNTY, CALIFORNIA; THENCE SOUTH 50 DEGREES 28 MINUTES 30 SECONDS WEST 151 FEET
ALONG THE NORTHWESTERLY PROPERTY LINE OF SAID LOT 1, ALSO BEING THE
SOUTHEASTERLY LINE OF BRIGHTON WAY, TO THE MOST WESTERLY CORNER OF SAID LOT 1;
THENCE NORTH 39 DEGREES 31 MINUTES 30 SECONDS WEST 60 FEET TO THE MOST
SOUTHEASTERLY CORNER OF BLOCK 17 OF SAID BEVERLY; THENCE NORTH 50 DEGREES 28
MINUTES 30 SECONDS EAST 227.35 FEET ALONG THE SOUTHEASTERLY LINE OF SAID BLOCK
17, ALSO BEING THE NORTHWESTERLY LINE OF SAID BRIGHTON WAY TO THE MOST EASTERLY
CORNER OF SAID BLOCK 17; THENCE NORTHEASTERLY ALONG A STRAIGHT LINE TO A POINT,
SAID POINT BEING LOCATED AT THE INTERSECTION OF SAID LINE WITH THE NORTHWESTERLY
PROLONGATION OF THE WESTERLY LINE OF REXFORD DRIVE, AS SAID REXFORD DRIVE IS
ALSO SHOWN ON THE MAP OF BEVERLY, RECORDED IN MAP BOOK 13 PAGE 62, RECORDS OF
SAID LOS ANGELES COUNTY AND BEING DISTANT 30.5 FEET, MEASURED ALONG SAID
NORTHWESTERLY PROLONGATION FROM THE BEFORE MENTIONED MOST NORTHERLY CORNER OF
LOT 24; THENCE SOUTHEASTERLY ALONG SAID NORTHWESTERLY PROLONGATION TO THE POINT
OF BEGINNING.
Page 2 of 3
<PAGE>
PARCEL 8:
THAT CERTAIN PARCEL OF LAND, IN THE CITY OF BEVERLY HILLS, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, THE SOUTHEASTERLY 50 FEET OF THE NORTHWESTERLY 130
FEET OF THE FIRST ALLEY WESTERLY OF REXFORD DRIVE BETWEEN DAYTON WAY AND THE
NORTHEASTERLY PROLONGATION OF THE NORTHWESTERLY LINE OF LOT 1, BLOCK 16, BEVERLY
TRACT, THE SOUTHEASTERLY LIMIT OF SAID SOUTHEASTERLY 50 FEET BEING A LINE 20
FEET NORTHWESTERLY OF AND PARALLEL TO THE NORTHEASTERLY PROLONGATION OF THE
SOUTHEASTERLY LINE OF LOT 3, BLOCK 16, BEVERLY TRACT, AS SAID LOTS ARE SHOWN ON
THE MAPS OF SAID BEVERLY TRACT, AS RECORDED IN MAP BOOK 11 PAGE 94 AND MAP BOOK
13 PAGE 62, RECORDS OF THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA.
EXCEPT THEREFROM ANY INTEREST IN AND TO ALL OIL, GAS AND OTHER MINERALS LYING
BELOW A DEPTH OF 500 FEET FROM THE SURFACE THEREOF, WITHOUT, HOWEVER, THE RIGHT
OF SURFACE ENTRY, EXCEPTED BY THE CITY OF BEVERLY HILLS, A MUNICIPAL
CORPORATION, IN QUITCLAIM DEED RECORDED NOVEMBER 7, 1967, AS INSTRUMENT NO. 114,
OFFICIAL RECORDS.
PARCEL 9:
LOT 22 IN BLOCK 16 OF BEVERLY TRACT, IN THE CITY OF BEVERLY HILLS, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 13 PAGES 62 AND 63 OF
MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT THE SOUTHEASTERLY 20 FEET OF SAID LOT.
Page 3 of 3
<PAGE>
EXHIBIT "C"
MEMORANDUM OF COMMENCEMENT DATE
Dated as of ____________
Landlord:
Tenant:
Tenant's Address:
Date of Lease and
Amendments, if any:
Premises:
Property:
Pursuant to Section 3.1 of the Lease, Landlord and Tenant hereby
confirm and verify the following information:
Commencement Date:
-------------------------------------
Expiration Date of the Term:
-------------------------------------
TENANT:
[Company]
By:__________________________________
Name:______________________________
Title:_____________________________
LANDLORD:
[Company]
By:__________________________________
Name:______________________________
Title:_____________________________
C-1
<PAGE>
Exhibit D
Intentionally Omitted
<PAGE>
EXHIBIT "E"
CLEANING SPECIFICATIONS
A. OFFICE AREAS:
-------------
Daily: (Five days each week, including Monday through Friday, and
excluding the holidays set forth in Section 7.1 of the Lease):
1. Empty and clean all waste receptacles and ash trays; remove
waste materials from the Premises; wash receptacles as
necessary.
2. Dry-mop all uncarpeted areas.
3. Vacuum all rugs and carpet areas in offices, lobbies and
corridors.
4. Hand-dust all office furniture, fixtures and all other
horizontal surfaces (but only to the extent surfaces are
cleared of all materials such as papers, documents and files).
5. Sweep all private stairways, vacuum if carpeted.
6. Police all stairwells throughout the entire Building and keep
in clean condition.
7. Spot-clean carpeting as reasonably required.
8. Spot-clean spill marks on resilient floor tile.
9. It is understood that Landlord shall have no obligation (a) to
wash or otherwise clean dishes, glasses and other utensils
used for preparing food or beverages or (b) to remove or store
such dishes, glasses and other utensils in order to clean any
area, fixture or surface of the Premises.
Weekly:
-------
1. Hand dust all door louvers and other ventilating louvers.
2. Dust and/or wash all directory boards and display glass;
remove fingerprints and smudges.
3. Wipe clean and polish all metal and bright work.
<PAGE>
4. Damp-mop and polish all resilient flooring in the Premises and
public corridors and elevator lobbies; more often if
necessary.
5. Wash, clean and polish all water coolers and fountains.
6. Dust in place all picture frames, charts, graphs, and similar
wall hangings.
7. Spot-clean all wall marks.
Monthly:
--------
1. Wash and polish all resilient floors.
2. Dust all paneled walls and doors and other similar surfaces
not reached in nightly or weekly cleaning.
3. Vacuum all ventilating and air-conditioned louvers, high
moldings, and other areas not reached in nightly or weekly
cleaning.
4. Remove all finger marks and smudges from doors, door frames,
around light switches, private entrance glass and partitions.
Quarterly:
----------
1. Dust exterior of lighting fixtures.
B. LAVATORIES:
-----------
Daily: (Five days each week, including Monday through Friday, and
------ excluding the holidays set forth in Section 7.1 of the Lease):
1. Clean and damp-mop floors.
2. Wash and polish all mirrors, bright work and enameled
surfaces.
3. Wash and sanitize all sinks, bowls and urinals.
4. Wash and sanitize toilet seats.
5. Dust, and clean, wash where necessary, all partitions, tile
walls and all dispensers and receptacles.
6. Empty and sanitize all receptacles and sanitary disposals.
7. Provide materials and fill tissue-holders, toilet seat
dispensers, towel, sanitary napkin and soap dispensers.
E-2
<PAGE>
Monthly:
--------
1. Machine-scrub lavatory floors, apply floor finishing where
applicable.
2. Wash and polish all partitions, tile walls and enamel
surfaces.
Every Ninety Days:
------------------
1. Vacuum all louvers, ventilating grilles and dust light
fixtures.
C. MISCELLANEOUS SERVICES.
-----------------------
1. Maintain building lobby, corridors and other public areas in a
clean and orderly condition.
2. Police all lavatories; refill dispensers; clean and polish all
mirrors and fixtures.
3. Damp-mop spillage in office and public areas as required.
D. GLASS CLEANING.
---------------
1. Windows will be washed every 90 days, except when rendered
impracticable by inclement weather.
This cleaning specification may be changed or altered from time to time
to facilitate the inclusion of the latest methods of maintenance and
cleaning technology generally recognized as acceptable for a
first-class office building.
E-3
<PAGE>
EXHIBIT "F"
SECURITY SPECIFICATIONS
A. Project and Building.
---------------------
1. Project management staff shall be reasonably educated and trained to
handle security and emergency procedures for fire, explosion, earthquake, power
failure, bomb threat, evacuation and similar matters. All tenants of the Project
upon notice from Landlord or public authorities shall be obligated to evacuate
all buildings in the Project in the event of life-threatening emergencies which
necessitate a general evacuation of any building or the entire Project or to
comply with any fire or similar drills required by applicable statutes or codes.
2. Landlord's security system shall be so designed that, when
activated, it shall not allow persons to gain elevator access or other access to
the Premises after Business Hours unless such persons are admitted or authorized
by Tenant. Landlord shall cause security access cards for the Building elevators
to be issued to each employee of Tenant, as designated by Tenant to Landlord.
3. Subject to applicable ordinances, rules and/or regulations of any
federal, state or local governmental authority, the freight elevators shall be
manned and available after Business Hours, when required for Tenant, provided
that Tenant shall pay Landlord for such use in accordance with the Lease, and
Tenant gives reasonable advance notice to the Building personnel of such a
requirement for scheduling of the elevator. All elevator personnel shall be
instructed to comply with security procedures.
4. Landlord's standard security procedures shall require all of
Tenant's stairwell doors to be locked from the stairwell side so long as such
procedures do not violate any ordinance or law of any governmental authority
having jurisdiction.
5. Landlord shall develop a system and procedures for monitoring all
Building entrance and exit doors and the loading dock for security purposes.
Tenant shall pay for after hours access to loading dock in accordance with the
Lease.
6. Landlord's security system shall include an adequate emergency
communications system, "GROUP ALERT" or other system capable of notifying Tenant
of an emergency.
7. Landlord shall have the right to modify or add to these security
specifications if, in the reasonable opinion of Landlord, it is necessary in
order to assist in the protection of the Building or other parts of the Project,
or persons or property therein, consistent with a first-class office building
complex, provided Tenant's rights under the Lease are not materially diminished
thereby. Tenant is solely responsible for security within its Premises.
F-1
<PAGE>
B. Parking Garage.
---------------
1. Various mechanical and electrical security devices and procedures
will be maintained within the Parking Garage to assist Landlord and the garage
operator, if any, with the security of these facilities. The number, location
and operation of these devices and procedures will be at the reasonable
discretion of Landlord. Such devices may include but are not limited to:
(a) roving guards;
(b) cameras and video tape devices;
(c) telephones in the elevator lobby;
(d) officer(s) at the loading dock;
(e) on stairwell doors;
(f) doors at the various entrances and exits from the
various facilities; and
(g) command center at the garage level.
2. Landlord shall have the right to modify or add to these security
specifications if, in the reasonable opinion of Landlord, it is necessary in
order to assist in the protection of the Parking Garage, the Building, or other
parts of the Project, or persons or property therein; provided Tenant's rights
under the Lease are not materially diminished thereby.
C. Costs.
------
The costs of security for the Project shall be allocated as follows:
(i) Landlord shall pay the security costs applicable to the entire Project,
subject to reimbursement pursuant to Section 5.1. (ii) Tenant shall pay the
entire amount of any security measures provided solely for Tenant's benefit.
F-2
<PAGE>
EXHIBIT "G"
NON-DISTURBANCE, ATTORNMENT AND
-------------------------------
SUBORDINATION AGREEMENT
-----------------------
Dated as of ____________
Landlord:
Tenant:
Tenant's Address:
Date of Lease and
Amendments, if any:
Premises:
Property:
_______________________________________________ ("Mortgagee") having an
office at ___________________________________________________________, holder of
a mortgage or deed of trust (together with any increased, future or consolidated
mortgages or deeds of trust held by Mortgagee, the "Mortgage") of the Property
and Tenant, holder of a lease ("Lease") of a portion thereof ("Premises"), and
Landlord hereby agree as follows:
1. Provided Tenant is not in default under the terms of and as defined
in the Lease, the right of possession of Tenant to the Premises and all rights
of Tenant under the Lease and exhibits thereto (including the Landlord's
Improvement Letter), including, without limitation, the right to exercise and
enjoy any expansion, right of first offer and renewal options under the Lease,
shall not be affected or disturbed by Mortgagee in the exercise of any of its
rights under the Mortgage or any note secured thereby and any sale of the
Property pursuant to the exercise of any rights and remedies under the Mortgage
or otherwise shall be made subject to Tenant's right of possession and other
rights under the Lease.
2. Tenant shall attorn to Mortgagee or any purchaser of the Property,
and the Lease shall continue in effect, in accordance with its terms, between
Tenant and Mortgagee or such purchaser (Mortgagee or such purchaser being
hereinafter sometimes called "Successor Landlord"), except that Paragraphs 3,
-------------
9 and 10 hereof shall modify the Lease.
- ---------------
G-1
<PAGE>
3. The Lease and all amendments thereto shall be subject and
subordinate to the lien of the Mortgage and to all the terms, conditions and
provisions thereof, to all advances made or to be made thereunder, and to any
renewals, extensions, modifications or replacements thereof, including any
increases therein or supplements thereto, subject to and without limiting the
other provision of this Agreement.
4. The foregoing provisions shall be self-operative. However, Tenant
agrees to execute and deliver to Mortgagee or to any person to whom Tenant
herein agrees to attorn such other instrument as either shall reasonably request
in order to effectuate said provisions.
5. Tenant certifies that, upon the full execution and delivery hereof,
there are no known defaults on the part of Landlord, that the Lease is a
complete statement of the agreement of the parties thereto with respect to the
letting of the Premises, that the Lease is in full force and effect and that all
conditions to the effectiveness or continuing effectiveness thereof required to
be satisfied at the date hereof have been satisfied except as otherwise set
forth herein.
6. Tenant will notify Mortgagee at the aforesaid address, by registered
or certified mail, return receipt requested, of any default of Landlord which
would entitle Tenant to cancel the Lease or abate the rent payable thereunder.
Tenant's failure to so notify Mortgagee, however, shall not constitute a waiver
by Tenant of any such default.
7. Tenant and Landlord agree that notice from Mortgagee shall have the
same effect under the Lease as notice to Tenant from Landlord thereunder, and
Tenant agrees to be bound by such notice notwithstanding the existence or
nonexistence of a default under the Mortgage or any dispute with respect thereto
between the mortgagor under the Mortgage and Mortgagee or any contrary notice
from Landlord to Tenant.
8. If the Property or any portion thereof which includes the Premises
shall be transferred to and owned by Mortgagee or any assignee of Mortgagee, or
any purchaser at judicial sale or any transferee under an action in lieu
thereof, by reason of foreclosure or other remedial proceedings brought by
Mortgagee or any assignee of Mortgagee, or by any transferee or purchaser, or by
any other similar manner, or if the interest of Landlord is terminated or
assigned by any action of the Mortgagee, and Tenant is not in default in the
payment of rent or in the performance of any of the other terms, covenants or
conditions of the Lease requiring performance on the part of Tenant, Tenant's
rights shall not be terminated thereby; rather, Tenant shall be bound to
Mortgagee or any such assignee, purchaser or transferee under all of the terms,
covenants and conditions of the Lease for the balance of the term thereof
remaining, with the same force and effect as if the Successor Landlord were the
lessor under the Lease with the Lease remaining in full force and effect,
provided, however, that the Successor Landlord shall not be:
G-2
<PAGE>
(a) liable for any act or omission of any prior landlord,
or for the return of any security deposit unless actually received by Successor
Landlord; or
(b) subject to any offsets or defenses which Tenant may
have against any prior landlord; or
(c) bound by any payment of rent which Tenant may have
paid for more than the then current month to any prior landlord, or bound by any
amendment, modification, extension or supplement of the Lease made without the
written consent of Mortgagee; or
(d) obligated to repair, replace, rebuild or restore the
Premises, or any part thereof, in the event of total or substantially total
damage or destruction beyond such repair, replacement, rebuilding or restoration
of the Premises as can reasonably be accomplished from the net proceeds of
insurance actually received by, or made available to, Successor Landlord for
such purposes; or
(e) obligated to repair, replace, rebuild or restore the
Premises, or any part thereof, in the event of partial condemnation beyond such
repair, replacement, rebuilding or restoration of the Premises as can be
reasonably accomplished from the net proceeds of any award actually received by,
or made available to, Successor Landlord, as consequential damages allocable to
the part of the Premises not taken; or
(f) obligated to make any capital improvements to the
Premises, or to construct, erect or complete any construction or renovation of
all or any portion of the improvements at the Premises, which Lessor may have
agreed to make but has not commenced or completed.
9. Anything herein or in the Lease to the contrary notwithstanding, in
the event that Mortgagee or a purchaser shall acquire title to the Property,
Mortgagee and such purchaser shall have no obligation, nor incur any liability,
beyond Mortgagee's or purchaser's then interest, if any, in the Property and
Tenant shall look exclusively to such interest, if any, of Mortgagee or such
purchaser in the Property for the payment and discharge of any obligation
imposed upon Mortgagee hereunder or under the Lease, and Mortgagee and such
purchaser are hereby released or relieved of any other liability hereunder and
under the Lease. Tenant agrees that, with respect to any money judgment which
may be obtained or secured by Tenant against Mortgagee or such purchaser, Tenant
shall look solely to the estate or interest owned by Mortgagee or such purchaser
in the Property, and Tenant will not collect or attempt to collect any such
judgment out or any other assets of Mortgagee or such purchaser.
G-3
<PAGE>
10. This Agreement shall inure to the benefit of and be binding upon
Tenant and any successor or assignee of Tenant which pursuant to the provisions
of the Lease are entitled to succeed to Tenant's interest therein without
consent of Landlord.
11. If any action or proceeding (including any appeal thereof) is
brought by either party (whether or not such action is prosecuted to judgment)
to enforce its respective rights under this Agreement or to enforce a judgment
("Action"), (1) the unsuccessful party therein shall pay all costs incurred by
the prevailing party therein, including reasonable attorneys' fees and costs to
be fixed by the court, and (2) as a separate right, severable from any other
rights set forth in the Agreement, the prevailing party therein shall be
entitled to recover its reasonable attorneys' fees and costs incurred in
enforcing any judgment against the unsuccessful party therein, which right to
recover post-judgment attorneys's fees and costs shall be included in any such
judgment. The right to recover post-judgment attorneys' fees and costs shall (i)
not be deemed waived if not included in any judgment, (ii) survive the final
judgment in any Action, and (iii) not be deemed merged into such judgment. The
rights and obligations of the parties under this Section 11 shall survive the
termination of this Agreement.
[Signatures on next page]
G-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
MORTGAGEE:
[company]
By:_______________________________________
Name:__________________________________
Title:_________________________________
TENANT:
[company]
By:_______________________________________
Name:___________________________________
Title:__________________________________
LANDLORD:
[company]
By:_______________________________________
Name:__________________________________
Title:_________________________________
G-5
<PAGE>
EXHIBIT "H"
RULES AND REGULATIONS FOR THE BUILDING AND PROJECT
1. Except as otherwise provided in the Lease or any other exhibits
thereto or as otherwise approved by Landlord:
1.1 No sign, placard, picture, advertisement, name or
notice shall be inscribed, displayed or printed or affixed on or to any part of
the outside or inside of the Building (other than inside the Premises) without
the written consent of Landlord first had and obtained. Landlord shall have the
right to remove any such sign, placard, picture, advertisement, name or notice,
unless Landlord has given written consent, without notice to and at the expense
of Tenant. Landlord shall not be liable in damages for such removal unless the
written consent of Landlord has been obtained.
1.2 All approved signs or lettering on doors and walls to
the Premises which are visible from outside the Premises or the elevator lobbies
on any floor of the Building shall be printed, painted, affixed or inscribed at
the expense of Tenant by Landlord or by a person approved by Landlord in a
manner and style acceptable to Landlord.
1.3 Tenant shall not use any blinds, shades, awnings, or
screens in connection with any window or door of the Premises unless approved in
writing by Landlord. Tenant shall not use any drape or window covering facing
any exterior glass surface other than the standard window covering established
by Landlord. The windows and doors that reflect or admit light and air into the
halls, passageways or other public places in the Project shall not be covered or
obstructed by any tenant, nor shall any bottles, parcels or other articles be
placed on the windowsills.
2. Except as otherwise provided in the Lease or any exhibits thereto,
Tenant shall not obtain for use upon the Premises, food, milk, soft drinks,
bottled water, plant maintenance and all other services, except from persons
reasonably authorized by Landlord and at the hours and under regulations fixed
by Landlord. No vending machines or machines of any description shall be
installed, maintained or operated upon the Premises, except at locations shown
on the Final Plans, without the prior written consent of Landlord.
3. The sidewalks, halls, passages, exits, entrances, elevators and
stairways and Common Areas of the Project shall not be obstructed by any tenants
or used by them for any purpose other than for ingress to and egress from their
respective premises. The halls, passages, exits, entrances, elevators, stairways
and roof are not for the use of the general public, and Landlord shall in all
cases retain the right to control and prevent access thereto by all persons
whose presence in the reasonable judgment of Landlord shall be prejudicial to
the safety, character, reputation and interests of the Project and its tenants,
provided that nothing herein contained shall be construed to prevent such access
to persons with whom Tenant normally deals in the ordinary course of Tenant's
business unless such persons are engaged in illegal activities. No tenant and no
employees or invitees of any tenant shall go upon the roof of the Building. No
tenant shall throw anything out of the doors or windows or balconies or down the
passageways or in any of the passageways. Landlord shall have the right to
control and operate all Common
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Areas of the Project (including, without limitation, the Parking Garage, ramps,
stairs, plazas, balconies and park) in the best interests of tenants generally.
Tenant shall have the right, upon prior notice to Landlord and approval by
Landlord, which shall not be unreasonably withheld, to use portions of the
Common Areas for parties and other similar events open to Tenant's invitees and
guests, so long as (i) Tenant pays for all reasonable costs associated with such
use of the Common Areas and any additional cleanup or janitorial expenses caused
by use, and (ii) such use by Tenant does not unreasonably interfere with the use
and enjoyment of the Project by other tenants and their invitees and licensees
or unreasonably annoy such other tenants. Landlord shall have the right to
approve or disapprove in its sole discretion any fixtures, furnishings, plants
or other items proposed to be placed on the balconies by Tenant.
Tenant shall not display any signs or insignia on the balconies.
4. Tenant, upon the termination of its tenancy, shall deliver to
Landlord the parking and security access cards issued to Tenant and all keys of
offices, rooms and toilet rooms which shall have been furnished to Tenant or
which Tenant shall have made, and in the event of loss of any access cards or
keys so furnished, shall pay Landlord therefor. Tenant shall not alter any lock
or install any new or additional locks or any bolts other than the standard lock
set of the Building on any door of the Premises without the written consent of
Landlord.
5. The toilet rooms, toilets, urinals, wash bowls and other apparatus
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be thrown
therein and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by Tenant who, or whose employees or
invitees, shall have caused it.
6. Tenant shall not overload any floor of the Premises. Tenant shall
not permanently deface or damage the partitions, woodwork or drywall or in any
way deface the Premises or any part thereof, ordinary wear and tear excepted,
without Landlord's prior written consent. Tenant shall not purchase spring
water, ice, towel, linen, maintenance or other like services from any person or
persons not approved by Landlord.
7. No furniture, bulky packages, supplies, merchandise, freight or
equipment of any kind shall be brought into the Building without the consent of
Landlord. All moving of the same into or out of the Building shall be via the
Building's freight handling facilities, unless otherwise directed by Landlord,
at such time and in such manner as Landlord shall prescribe. No hand trucks or
vehicles (other than a wheelchair for an individual) shall be used in passenger
elevators. All hand trucks permitted in the Building must be equipped with soft
rubber tires and side guards.
8. Landlord shall have the right to prescribe the weight, size and
position of heavy equipment brought into the Building and also the times and
manner of moving the same in and out of the Building. Safes or other heavy
objects shall, if considered necessary by Landlord, stand on a platform of such
thickness as is necessary to properly distribute the weight. Landlord will not
be responsible for loss of or damage to any such safe or property from any
cause, and all damage done to the Building by moving or maintaining any such
safe or other property shall be repaired by the expense of Tenant.
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<PAGE>
9. Tenant shall not employ any person or persons other than the
janitorial contractor of Landlord for the purpose of cleaning the Premises,
other than day-maids or butlers for Tenant's exclusive use, unless otherwise
agreed to by Landlord. Except with the written consent of Landlord, no person or
persons other than those approved by Landlord shall be permitted to enter the
Building for the purpose of cleaning the same. Janitor service will not be
furnished to any room while such room is occupied after Normal Working Hours.
Interior and exterior window cleaning shall be done only by Landlord. Any
persons employed by Tenant to do janitorial work shall be subject to the prior
written approval of Landlord, and while in the Building and outside of the
Premises, shall be subject to and under the control and direction of the
Building manager (but not as an agent or servant of such manager or of
Landlord), and Tenant shall be responsible for all acts of such persons.
10. Tenant shall not use, keep or permit to be used or kept any foul or
noxious gas or substance in the Premises, or permit or suffer the Premises to be
occupied or used in any manner offensive or objectionable to Landlord or other
occupants of the Building by reason of noise, odors and/or vibrations, or
interfere in any way with other tenant or those having business therein, nor
shall any animals (other than as required for disabled persons) or birds be
brought in or kept in or about the Premises or the Building. No bicycles shall
be brought into or kept in or about the Premises.
11. No cooking shall be done or permitted by any tenant on Premises,
nor shall any premises be used for the manufacture or storage of merchandise
(unless incidental to the use of such premises for normal office purposes), for
washing clothes, for lodging, or for any improper, objectionable or immoral
purpose. Notwithstanding the foregoing, Tenant shall have the right to use
microwave ovens for heating food in the kitchen and pantry areas.
12. Neither Tenant nor any of Tenant's servants, employees, agents,
visitors or licensees shall at any time use or keep in the Premises or the
Building any kerosene, gasoline or other inflammable, explosive or combustible
fluid, chemical, gas or substance, or any hazardous or toxic substance which
would be in violation of the Environmental Acts (as defined below), except
normal office products typically found in a first-class office building, or use
any method of heating or air-conditioning other than that supplied by Landlord.
"Environmental Acts" shall mean all federal, state and local environmental
statues and regulations, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (42
U.S.C. Sec. 9061 et seq.), the Hazardous Materials Transportation Act (49 U.S.C.
Sec. 1802 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. 6901
et seq.), the Federal Water Pollution Control Act, the Federal Safe Water
Drinking Act, the Federal Clean Air Act, the Federal Solid Waste Disposal Act,
the Federal Toxic Substance Control Act, the Federal Emergency Planning and
Community Right-to-Know Act, the Federal Radon and Indoor Air Quality Research
Act, and the counterparts of such statutes as enacted by state and local
governments with jurisdiction over the Project and any regulations promulgated
under any of the aforementioned laws, together with any and all federal, state
and local environmental laws, rules or regulations presently in existence, or
hereafter enacted affecting the Project.
13. Landlord will direct electricians as to where and how telephone and
telegraph wires are to be introduced into the Premises. No boring or cutting for
wires or stringing of wires will be allowed without written consent of Landlord,
except as part of permitted Tenant
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<PAGE>
Alterations under the Lease. The location of telephones, call boxes and other
office equipment affixed to the Premises shall be subject to the approval of
Landlord.
14. No tenant shall lay linoleum, tile, carpet or other similar floor
covering so that the same shall be affixed to the floor of the Premises in any
manner except as approved by Landlord. The expenses of repairing any damage
resulting from a violation of this rule or removal of any floor covering shall
be borne by Tenant.
15. On Saturdays, Sundays and legal holidays, and on other days between
the hours of 6:00 p.m. and 8:00 a.m. the following day, access to the Project or
to the halls, corridors, elevators or stairways in the Project or to the
Premises, may be refused unless the person seeking access in known to the person
or employee of the Project in charge or has a pass or is properly identified.
Any person whose presence in the Building at any time shall, in the reasonable
judgment of Landlord, be prejudicial to the safety, character, reputation and
interests of the Building or its tenants may be denied access to the Building or
may be ejected therefrom. Landlord may require any person leaving the Building
with any package or other object to exhibit a pass from the tenant from whose
premises the package or object is being removed, but the establishment and
enforcement of such requirement shall not impose any responsibility on Landlord
for the protection of any tenant against the removal of property from the
premises of the tenant. The Landlord shall in no case be liable to Tenant for
damages for any error with regard to the admission to or exclusion from the
Project of any person. In case of invasion, mob, riot, public excitement, or
other commotion, Landlord reserves the right to prevent access to the Project
during the continuance of the same by closing of the doors or otherwise, for the
safety of the tenants and protection of property in the Project. Tenant may
employ security guards for its Premises provided that such security service and
personnel are approved in advance and are limited to the floors of the Premises
and are subject to the direction of the Building's security personnel in the
event of an emergency. Landlord shall not be liable for any actions of the
security service employed by Tenant.
16. Tenant shall see that the doors of the Premises are closed and
securely locked before leaving the Building and must observe strict care and
caution that all water apparatus are entirely shut off before Tenant or Tenant's
employees leave the Building, and that all electricity, gas or air shall
likewise be carefully shut off, so as to prevent waste or damage.
17. The requirements of Tenant shall be attended to only upon
application to the Building Manager at the office of the Building. Employees of
Landlord shall not perform any work or do anything outside of their regular
duties unless under special instructions from Landlord.
18. No person shall be allowed to transport or carry beverages, food,
food containers, etc. (other than in proper containers for personal
consumption), on any passenger elevators. The transportation of such items shall
be via the service elevators in such manner as prescribed by landlord.
19. Tenants shall cooperate with Landlord in obtaining maximum
effectiveness of the cooling system by closing the window coverings when the
sun's rays fall directly on windows of the Premises. Tenant shall not obstruct,
alter or in any way impair the efficient operation of
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<PAGE>
Landlord's heating, ventilating and air-conditioning system and shall not place
bottles, machines, parcels or other articles on any induction unit enclosure,
intake or other vents so as to interfere with proper air flow. Tenant shall not
tamper with or change the setting of any thermostats or temperature control
valves.
20. Without the written consent of Landlord, which consent shall not be
unreasonably withheld, Tenant shall not use the name of Landlord or the Project
in connection with or in promoting or advertising the business of Tenant except
as Tenant's address in a manner which will denigrate or injure Landlord's
reputation or the reputation of the Project as a first-class office building
project, or imply any partnership or joint venture exists between Landlord and
Tenant.
21. Landlord shall have the right to prohibit any advertising by Tenant
which, in Landlord's reasonable opinion, tends to impair the reputation of the
Project as a first-class office building complex or its desirability as a
location for offices, and upon written notice from Landlord, Tenant shall
refrain from or discontinue such advertising.
22. Canvassing, soliciting and peddling within the entire Project are
prohibited and each tenant shall cooperate to prevent such activity.
23. The Premises shall not be used for manufacturing or the storage of
merchandise except as such storage may be incidental to the use of the Premises
for general office purpose. No tenant shall occupy nor permit any portion of its
premises to be occupied for the manufacture or sale of narcotics, liquor, or
tobacco in any form, or as a barber or manicure shop. No tenant shall engage or
pay any employees on the Premises except those actually working for such tenant
on the Premises nor advertise for laborers giving an address at the Premises or
Project. The Premises shall not be used for lodging or sleeping or for any
immoral or illegal purposes.
24. Tenant shall not conduct any auction, fire, bankruptcy, going out
of business, liquidation or similar sales.
25. Tenant shall not place any radio or television antennae on the roof
of the Project or on any exterior part of the Premises or the Project.
26. Tenant shall not alter any lock or install any new or additional
locks or bolts on any doors or windows of the Premises without obtaining
Landlord's prior written consent. Tenant shall bear the cost of any lock changes
or repairs required by Tenant. Two keys will be furnished by Landlord for the
Premises, and any additional keys required by Tenant must be obtained from
Landlord at a reasonable cost to be established by Landlord. Upon the
termination of this Lease, Tenant shall restore to Landlord all keys of stores,
offices, and toilet rooms, either furnished to, or otherwise procured by, Tenant
and in the event of the loss of keys so furnished, Tenant shall pay to Landlord
the cost of replacing same or of changing the lock or locks opened by such lost
key if Landlord shall deem it necessary to make such changes.
27. All doors opening to public corridors shall be kept closed at all
times except for normal ingress and egress to the Premises.
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<PAGE>
28. Landlord reserves the right to close and keep locked all entrance
and exit doors of the Building during such hours as re customary for comparable
buildings in the Beverly Hills, California area. Tenant, its employees and
agents must be sure that the doors to the Building are securely closed and
locked when leaving the Premises if it is after the normal hours of business for
the Building. Any tenant, its employees, agents or other persons entering or
leaving the Building at any time when it is so locked, or any time when it is
considered to be after normal business hours for the Building, may be required
to sign the Building register. Access to the Building may be refused unless the
person seeking access has proper identification or has a previously arranged
pass for access to the Building. Landlord will furnish passes to persons for
whom Tenant requests same in writing. Tenant shall be responsible for all
persons for whom Tenant requests passes and shall be liable to Landlord for all
acts of such persons. Notwithstanding anything contained in the Lease to the
contrary, the Landlord and his agents shall in no case be liable for damages for
any error with regard to the admission to or exclusion from the Building of any
person. In case of invasion, mob, riot, public excitement, or other commotion,
Landlord reserves the right to prevent access to the Building or the Real
Property during the continuance thereof by any means it deems appropriate for
the safety and protection of life and property.
29. Except for vending machines intended for the sole use of Tenant=s
employees and invitees, no vending machine or machines other than fractional
horsepower office machines shall be installed, maintained or operated upon the
Premises without the written consent of Landlord.
30. Tenant shall not without the prior written consent of Landlord use
any method of heating or air conditioning other than that supplied by Landlord.
31. Landlord reserves the right to exclude or expel from the Real
Property any person who, in the judgment of Landlord, is intoxicated or under
the influence of liquor or drugs, or who shall in any manner do any act in
violation of any of these Rules and Regulations.
32. Tenant, its employees and agents shall not loiter in or on the
entrances, corridors, sidewalks, lobbies, courts, halls, stairways, elevators,
vestibules or any Common Areas for the purpose of smoking tobacco products or
for any other purpose, nor in any way obstruct such areas, and shall use them
only as a means of ingress and egress for the Premises.
33. Tenant shall store all its trash and garbage within the interior of
the Premises. No material shall be placed in the trash boxes or receptacles if
such material is of such nature that it may not be disposed of in the ordinary
and customary manner of removing and disposing of trash and garbage in Beverly
Hills, California without violation of any law or ordinance governing such
disposal. All trash, garbage and refuse disposal shall be made only through
entry-ways and elevators provided for such purposes at such times as Landlord
shall designate.
34. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental agency.
35. Tenant must comply with requests by the Landlord concerning the
information of their employees of items of importance to the Landlord.
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<PAGE>
36. Tenant shall comply with any ordinance of the City of Beverly Hills
relating to smoking in or about the Premises, Building or Real Property. If
Tenant is required under the ordinance to adopt a written smoking policy, a copy
of said policy shall be on file in the office of the Building.
37. Tenant hereby acknowledges that Landlord shall have no obligation
to provide guard service or other security measures for the benefit of the
Premises, the Building or the Real Property. Tenant hereby assumes all
responsibility for the protection of Tenant and its agents, employees,
contractors, invitees and guests, and the property thereof, from acts of third
parties, including keeping doors locked and other means of entry to the Premises
closed, whether or not Landlord, at its option, elects to provide security
protection for the Real Property or any portion thereof. Tenant further assumes
the risk that any safety and security devices, services and programs which
Landlord elects, in its sole discretion, to provide may not be effective, or may
malfunction or be circumvented by an unauthorized third party, and Tenant shall,
in addition to its other insurance obligations under this Lease, obtain its own
insurance coverage to the extent Tenant desires protection against losses
related to such occurrences. Tenant shall cooperate in any reasonable safety or
security program developed by Landlord or required by law.
38. All office equipment of any electrical or mechanical nature shall
be placed by Tenant in the Premises in settings approved by Landlord, to absorb
or prevent any vibration, noise and annoyance.
39. Tenant shall not use in any space or in the public halls of the
Building, any hand trucks except those equipped with rubber tires and rubber
side guards.
40. Landlord reserves the right at any time to change or rescind any
one or more of these Rules and Regulations, or to make such other and further
reasonable Rules and Regulations as in Landlord=s judgment may from time to time
be reasonably necessary for the management, safety, care and cleanliness of the
Premises, Building, and the Common Areas, and for the preservation of good order
therein, as well as for the convenience of other occupants and tenants therein.
Landlord may waive any one or more of these Rules and Regulations for the
benefit of any particular tenants, but no such waiver by Landlord shall be
construed as a waiver of such Rules and Regulations in favor of any other
tenant, nor prevent Landlord from thereafter enforcing any such Rules or
Regulations against any or all tenants of the Building. Tenant shall be deemed
to have read these Rules and Regulations and to have agreed to abide by them as
a condition of its occupancy of the Premises.
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EXHIBIT "I"
PARKING GARAGE RULES AND REGULATIONS
1. Hours of Operation.
-------------------
The Parking Garage shall be operated seven (7) days per week, 24 hours
per day; provided, however, that Landlord reserves the right to establish a
schedule of operations commensurate with the type of patronage and volume of
business, which shall be determined by Landlord in its reasonable discretion.
2. No Obstruction; Controlled Access.
----------------------------------
The driveways, passages, exits, entrances, elevators and stairways
shall not be obstructed by anyone using the Parking Garage for any purpose other
than ingress to and egress from his or her parking location. Landlord shall in
all cases retain the right but shall not be obligated to control and prevent
access to the Parking Garage by all persons whose presence in the reasonable
judgment of Landlord shall be prejudicial to the safety, character, reputation
and interest of the Building, the Project, and their tenants. No person using
the Parking Garage shall go into any unauthorized location so designated within
the structure.
3. Payment by Customers/Transients.
--------------------------------
Each Parking Garage customer, upon termination of his or her stay in
the facility, shall deliver to the garage operators located at the exits of the
facility, the parking ticket and appropriate compensation for the use of the
facilities as designated by the rate structure.
4. Monthly Parking.
----------------
Parking pass rentals shall be paid by Tenant as part of rent under the
Lease, at the same time and in the same manner as the Basic Rent, subject to all
delinquency charges set forth in the Lease. Upon termination as a monthly
customer, the customer shall deliver to Landlord or garage operator all cards,
stickers, or other means of identification that allow access to the Parking
Garage.
5. No Freight in Parking Garage.
-----------------------------
No furniture, packages, supplies, merchandise, freight or equipment of
any kind shall be brought in the parking facilities without the consent of
Landlord or garage operator, which shall not be unreasonably withheld or
delayed. All moving of such items into or out of the Building shall be via the
Building's freight handling facilities unless otherwise directed by Landlord at
such reasonable time and in such reasonable manner as Landlord shall prescribe.
No hand trucks or vehicles (other than a wheelchair for an individual) shall be
used in the Parking Garage elevators. Any hand trucks permitted in the Parking
Garage must be equipped with soft rubber tires and side guards.
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6. Right to Specify Equipment:
---------------------------
Landlord shall have the right to prescribe the weight, size and
position of all heavy equipment brought into the Parking Garage and also the
times and manner of moving the same in and out of the Parking Garage.
7. Limitations on Use.
-------------------
Parking Garage customers shall not use, keep or permit to be used or
kept any foul, noxious or dangerous substance in the Parking Garage or permit or
suffer the facilities to be occupied and/or used in any manner offensive or
objectionable to Landlord or other occupants of the Parking Garage by reason of
noise, odors, and/or vibrations, or unreasonably interfere in any way with other
garage customers or those having business therein, nor shall any animals or
birds be brought in or kept in or about the parking facilities (other than as
required for handicapped persons).
8. Right to Close Garage.
----------------------
Landlord and the garage operator reserve the right but shall not be
obligated to close and keep locked all entrance and exit doors and otherwise
regulate access of all persons to the Parking Garage on Sundays and legal
holidays and all other days between the hours of 7:00 p.m. and 7:00 a.m. and at
other times as Landlord may deem advisable for the adequate protection and
safety of the parking facilities, their occupants and property; provided that
bona fide holders of parking passes shall have access at all times to the
Parking Garage. Access to the Parking Garage may be refused unless the person
seeking access agrees to abide by the rules established and pay for his stay in
accordance with the rate structure. Landlord shall in no case be liable for
damage or any error with regard to the admission or exclusion from the Parking
Garage of any person.
9. Right to Refuse Admission.
--------------------------
Landlord or garage operator may refuse admission to the Parking Garage
outside of Normal Working Hours of any person not known to the attendant in
charge (or who does not possess adequate Building identification) or any person
whose presence in the Parking Garage shall in the reasonable judgment of
Landlord or Parking Garage operator be prejudicial to the safety, character,
reputation and interest of the Parking Garage or the Building. Landlord or
Parking Garage operator may require any person leaving the Parking Garage with
any package or any other object to exhibit a pass from the Building tenant from
whose premises the package or object is being removed, but the establishment and
enforcement of such requirement does not impose any responsibility on Landlord
for the protection of any Building tenant against removal of property from the
premises of the tenant.
10. No Food or Beverages.
---------------------
No person shall be allowed to transport or carry beverages, food, food
containers (other than in proper containers for personal consumption), smoking
objects, etc. on any of the parking
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facility shuttle elevators. The transportation of such items shall be via the
service elevators in such manner as prescribed by Landlord or garage operator.
11. Own Risk.
---------
Except for the Parking Garage operator's or Landlord's negligence or
willful misconduct, it is understood that all vehicles and their occupants enter
the Parking Garage at their own risk. Under no circumstances whatsoever shall
Landlord be responsible for any damages in excess of Two Hundred Fifty Dollars
($250.00) with respect to any damage or injury to any vehicle, or the occupants
thereof, or any other person or property in the Parking Garage.
12. Speed Limit.
------------
In no case shall anyone operating a vehicle within the Parking Garage
do so at a speed greater than five (5) miles per hour. In addition, all vehicle
operators will drive in a safe and careful manner so as to preclude damaging the
Parking Garage or other vehicles and property in the Parking Garage, or injuring
persons in the Parking Garage or their general vicinity. All vehicle operators
must come to a complete stop at all posted stop signs.
13. Clearance.
----------
All vehicles shall have a maximum vertical clearance no greater than
the posted clearance heights in the facility as designated from location to
location. Landlord shall not be liable for any damage or injury due to any
failure to observe the posted clearance signs. Vehicles of a size larger than
posted clearances shall not enter the Parking Garage.
14. Lease Requirements.
-------------------
Tenant is obligated to pay for parking passes allocated to Tenant under
the Lease whether or not Tenant or its employees use the allocated passes.
15. Right to Change Markings.
-------------------------
Landlord reserves the right to change the location, size, shape and
number of driveways, entrances, exits, traffic lanes, parking spaces, parking
areas, loading and unloading areas, walkways and the boundaries and locations of
the Parking Garage subject to Tenant's parking rights under the Lease.
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EXHIBIT "J"
GUARANTY OF LEASE
-----------------
This Guaranty of Lease ("Guaranty") is made and entered into as of
October __, 1999, by GLOBAL CROSSING HOLDINGS, LTD., a Bermuda corporation
("Guarantor") with reference to the following facts.
A. Global Crossing Development Company, a Delaware corporation
(ATenant"), and North Crescent Realty V, LLC, a Delaware limited liability
company ("Landlord"), are parties to that certain lease dated concurrently
herewith (the "Lease"), concerning certain premises (the "Premises") shown on
Exhibit "A" attached hereto in Building B at 360 North Crescent Drive, Beverly
Hills, California.
B. Guarantor is an affiliate of Tenant.
C. Landlord has conditioned the effectiveness of the Lease upon the
execution of this Guaranty by Guarantor.
NOW, THEREFORE, for and in consideration of the execution of the Lease
by Landlord, Guarantor hereby agrees as follows:
1. Guaranty. Guarantor hereby unconditionally and irrevocably
---------
guarantees the prompt payment by Tenant of all rentals and all other sums
payable by Tenant under said Lease and the faithful and prompt performance by
Tenant of each and every one of the terms, conditions and covenants of the Lease
to be kept and performed by Tenant.
2. Amendments. It is specifically agreed and understood that the terms
-----------
of the foregoing Lease may be altered, affected, modified, changed, extended or
renewed by agreement between Landlord and Tenant, or by a course of conduct,
including but not limited to Tenant holding over, and the Lease may be assigned
by Landlord or any assignee of Landlord, and the premises or any interest
therein may be assigned, subleased or otherwise transferred by Tenant, all
without consent of Guarantor and that this Guaranty shall thereupon and
thereafter guarantee the performance of the Lease as so changed, modified,
altered, assigned or otherwise impacted, except to the extent that such change,
modification, alteration, assignment or other action increases the potential
liability of Guarantor. Notwithstanding the foregoing, nothing contained herein
shall be interpreted as a consent by the Landlord to any such event or change;
the provisions under the Lease requiring the Landlord's consent to any such
event or change shall remain in full force and effect.
3. No Release. Subject to applicable statutes of limitation, this
-----------
Guaranty shall not be released, modified or affected by the failure or delay on
the part of Landlord to enforce any of the rights or remedies of the Landlord
under the Lease, whether pursuant to the terms thereof or at law or in equity,
or by the liquidation, dissolution or corporate reorganization of Tenant or any
guarantor or by rejection of the Lease
<PAGE>
or the discharge, release or limitation of liability of Tenant in any bankruptcy
proceeding.
4. No Notice. No notice of default need be given to Guarantor, it being
----------
specifically agreed and understood that the guaranty of Guarantor is a
continuing guaranty under which Landlord may proceed forthwith and immediately
against Tenant or against Guarantor, subject to applicable cure periods under
the Lease, following any breach or default by Tenant or for the enforcement of
any rights which Landlord may have as against Tenant pursuant to or under the
terms of the Lease or at law or in equity. Landlord shall have the right to
proceed against Guarantor hereunder following any such default under the Lease
by Tenant without first proceeding against Tenant.
5. Waivers. Guarantor hereby waives (a) notice of acceptance of this
--------
Guaranty, (b) demand of payment, presentation and protest, (c) any right to
require the Landlord to proceed against Tenant or any other person or entity
liable to Landlord, (d) any right to require Landlord to apply to any default
any security deposit or other security it may hold under the Lease, (e) any
right to require Landlord to proceed under any other remedy Landlord may have
before proceeding against Guarantor, (g) any right of subrogation, and (f) all
suretyship defenses.
6. Estoppels. Any obligations of Tenant under the Lease to execute and
----------
deliver estoppel statements as therein provided, shall be deemed to also require
Guarantor hereunder to provide a certification that Guarantor has no defenses
hereunder or under the Lease.
7. Miscellaneous.
--------------
a. The term "Landlord" whenever hereinabove used refers to and
means the Landlord in the foregoing Lease specifically named and also any
assignee of the Landlord, whether by outright assignment or by assignment for
security, and also any successor to the interest of the Landlord or of any
assignee in such Lease or any part thereof, whether by assignment or otherwise.
b. The term "Tenant" whenever hereinabove used refers to and
means any assignee, sublessee or transferee of the Lease and also any successor
to the interests of any of the foregoing, whether by assignment, sublease,
transfer or otherwise.
c. In the event any action be brought by the Landlord against
Guarantor hereunder to enforce the obligation of Guarantor 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. Any such action may
be brought in Los Angeles County, California. This Guaranty shall be governed by
and construed in accordance with California law. This Guaranty shall inure to
the benefit of Landlord and the successors and assigns thereof and shall bind
Guarantor and the successors and assigns thereof. This document may be executed
in counterparts, which shall be construed together as a single document.
<PAGE>
d. The persons executing this Guaranty on behalf of Guarantor
represent and warrant to Landlord that they are duly authorized to execute and
deliver this Guaranty on Guarantor's behalf, and that this Guaranty is binding
upon Guarantor in accordance with its terms.
This Guaranty has been made and entered into as of the day and year set
forth above.
GLOBAL CROSSING HOLDINGS, LTD.,
a Bermuda corporation
By:___________________________
Its:__________________________
<PAGE>
EXHIBIT 10.2
NON-OUALIFIED STOCK OPTION AGREEMENT
------------------------------------
THIS AGREEMENT, dated as of ________________, 1999, is made by and between
Global Crossing Ltd., hereinafter referred to as the "Company", and
_________________, an employee of the Company or a Subsidiary (as defined below)
of the Company, hereinafter referred to as "Optionee".
ARTICLE I
INCORPORATION OF THE PLAN BY REFERENCE; DEFINITIONS
---------------------------------------------------
The terms of the 1998 Global Crossing Ltd. Stock Incentive Plan, as amended from
time to time (the "Plan"), are hereby incorporated by reference. Except as
otherwise defined in this Agreement, capitalized terms used herein shall have
the meanings assigned in the Plan. In the event of any conflict between this
Agreement and the Plan, the terms of the Plan shall control. The masculine
pronoun shall include the feminine and neuter, and the singular the plural,
where the context so indicates.
Section 1.1 - Common Stock
- --------------------------
"Common Stock" shall mean the Company's Common Shares, par value of
$.01 per share.
Section 1.2 - Grant Date
- ------------------------
"Grant Date" shall mean the date on which the Options provided for in
this Agreement were granted, ________________, 1999.
Section 1.3 - Vesting Date
- --------------------------
"Vesting Date" shall mean _______________________, 1999.
Section 1.4 - Options
- ---------------------
"Options" shall mean the non-qualified options to purchase Common Stock
granted under this Agreement totaling ______________ shares.
Section 1.5 - Exercise Price
- ----------------------------
The exercise price of the shares of stock covered by the Options
granted hereunder shall be $__________ per share.
1
<PAGE>
ARTICLE II
GRANT OF OPTIONS
----------------
Section 2.1 - Grant of Options
- ------------------------------
The Company grants to the Optionee Options representing the right to
acquire shares of Common Stock.
Section 2.2 - Adjustments in Options Pursuant to Merger, Consolidation, etc.
- ---------------------------------------------------------------------------
Subject to Section 9 of the Plan, in the event that the outstanding shares
of the stock subject to an Option are, from time to time, changed into or
exchanged for a different number or kind of shares of the Company or other
securities of the Company by reason of a merger, consolidation,
recapitalization, Change of Control, reclassification, stock split, stock
dividend, combination of shares, or otherwise, the Committee may make such
appropriate and equitable adjustment as it deems necessary in the number and
kind of shares and/or the amount of consideration as to which or for which, as
the case may be, such Option, or portions thereof then unexercised, shall be
exercisable. Any such adjustment made by the Committee shall be final and
binding upon the Optionee, the Company and all other interested persons.
ARTICLE III
PERIOD OF EXERCISABILITY
------------------------
Section 3.1 - Options
- ---------------------
(a) The Options will become exercisable with respect to one-third of the
shares subject thereto on the first anniversary of the Vesting Date.
(b) The Options will become exercisable with respect to an additional one-
third of the shares subject thereto on the second anniversary of the Vesting
Date.
(c) The Options will become exercisable with respect to the remaining
one-third of the shares subject thereto on the third anniversary of the Vesting
Date.
(d) All outstanding Options shall immediately become exercisable in the
event of a Change of Control.
Section 3.2 - Expiration of Options
- -----------------------------------
The Options may not be exercised to any extent by the Optionee after the
first to occur of the following events:
(a) The tenth anniversary of the Grant Date; or
(b) Six months after the date of the Optionee's termination of
employment,
2
<PAGE>
consultation or Board membership for any reason; or
(c) If the Committee so determines pursuant to Section 9 of the Plan, on
the effective date of either the merger or consolidation of the Company into
another Person, a Change in Control, or the recapitalization, reclassification,
liquidation or dissolution of the Company. At least thirty (30) days prior to
the effective date of such merger, consolidation, exchange, acquisition,
recapitalization, reclassification, liquidation or dissolution, the Committee
shall give the Optionee notice of such event and an opportunity to exercise the
Option, if the Option has then neither been fully exercised nor become
unexercisable under this Section 3.2.
Section 3.3 - Effect of Termination of Employment, Consultation or Board
- ------------------------------------------------------------------------
Membership
- ----------
All unexercisable Options granted hereunder shall terminate upon the
Optionee's termination of employment, consultation or Board membership for any
reason.
Section 3.4 - No Right to Employment, Consultation or Board Membership
- ----------------------------------------------------------------------
Nothing in this Agreement or in the Plan shall confer upon the Optionee
any right to continued employment, consultation or Board membership for the
Company or any Subsidiary or shall interfere with or restrict in any way the
rights of the Company and its Subsidiaries, which are hereby expressly reserved,
to terminate any such affiliation of the Optionee at any time for any reason
whatsoever.
ARTICLE IV
EXERCISE OF OPTIONS
-------------------
Section 4.1 - Person Eligible to Exercise
- -----------------------------------------
During the lifetime of the Optionee, only he or she may exercise an Option
or any portion thereof. After the death of the Optionee, any exercisable
portion of an Option may, prior to the time when an Option becomes unexercisable
under Section 3.2, be exercised by the executor or administrator of the
Optionee's estate or by any person or persons empowered to do so under the
Optionee's will or under the then applicable laws of descent and distribution.
Section 4.2 - Partial Exercise and Periods of Unexercisability
- --------------------------------------------------------------
Any exercisable portion of an Option or the entire Option, if then wholly
exercisable, may be exercised in whole or in part at any time prior to the time
when the Option or portion thereof becomes unexercisable under Section 3.2;
provided, however, that any partial exercise shall be for whole shares of Common
- -------- -------
Stock only.
3
<PAGE>
Section 4.3 - Manner of Exercise
- --------------------------------
An Option, or any exercisable portion thereof, may be exercised solely by
delivering to the Secretary or his office all of the following prior to the time
when the Option or such portion becomes unexercisable under Section 3.2:
(a) Notice in writing signed by the Optionee or the other person then
entitled to exercise the Option or portion thereof, stating that the Option or
portion thereof is thereby exercised, such notice complying with all applicable
rules established by the Committee;
(b) Full payment for the shares with respect to which such Option or
portion thereof is exercised at the election of the Optionee (i) in cash, (ii)
in shares of Common Stock having a fair market value equal to the aggregate
option price for the shares being purchased and satisfying such other
requirements as may be imposed by the Committee; provided that such shares have
been held by the Optionee for no less than six months, (iii) partly in cash and
partly in such shares, or (iv) through the delivery of irrevocable instructions
to a broker to deliver promptly to the Company an amount equal to the aggregate
option price for the shares being purchased;
(c) If there is no effective registration statement under the Securities
Act of 1933 with respect to the Option and shares issuable upon exercise of the
Option, a bona fide written representation and agreement, in a form satisfactory
to the Committee, signed by the Optionee or other person then entitled to
exercise such Option or portion thereof, stating that the shares of stock are
being acquired for his or her own account, for investment and without any
present intention of distributing or reselling said shares or any of them except
as may be permitted under the Securities Act of 1933, as amended (the "Act"),
and then applicable rules and regulations thereunder, and that the Optionee or
other person then entitled to exercise such Option or portion thereof will
indemnify the Company against and hold it free and harmless from any loss,
damage, expense or liability resulting to the Company if any sale or
distribution of the shares by such person is contrary to the representation and
agreement referred to above; provided, however, that the Committee may, in its
--------
absolute discretion, take whatever additional actions it deems reasonably
necessary to ensure the observance and performance of such representation and
agreement and to effect compliance with the Act and any other federal or state
securities laws or regulations;
(d) Full payment to the Company of all amounts which, under federal,
state or local law, it is required to withhold upon exercise of the Option; and
(e) In the event the Option or portion thereof shall be exercised
pursuant to Section 4.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise the option.
If there is no effective registration statement under the Act respect to the
Option and shares issuable upon exercise of the Option, without limiting the
generality of the foregoing, the Committee may require an opinion of counsel
acceptable to it to the effect that any subsequent transfer of shares acquired
on exercise of an Option does not violate the Act, and may issue stop-transfer
orders covering such shares. Share certificates evidencing stock issued on such
an
4
<PAGE>
exercise of this Option shall bear an appropriate legend referring to the
provisions of subsection (c) above and the agreements herein. The written
representation and agreement referred to in subsection (c) above shall, however,
not be required if the shares to be issued pursuant to such exercise have been
registered under the Act, and such registration is then effective in respect of
such shares.
Section 4.4 - Rights as Shareholder
- -----------------------------------
The holder of an Option shall not be, nor have any of the rights or
privileges of, a shareholder of the Company in respect of any shares purchasable
upon the exercise of the Option or any portion thereof unless and until
certificates representing such shares shall have been issued by the Company to
such holder.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto as of the date first written above.
GLOBAL CROSSING LTD.,
a Bermuda corporation
Name: James C. Gorton
Title: Senior Vice President and General Counsel
__________________________________________
Optionee's Signature
__________________________________________
Print Name
__________________________________________
Street Address
__________________________________________
City, State, Zip Code, Country
__________________________________________
Taxpayer Identification Number
5
<PAGE>
EXHIBIT 10.5
FRONTIER CORPORATION
SUPPLEMENTAL RETIREMENT SAVINGS PLAN
Amendment No. 2
Pursuant to Article Eight, the Plan is amended, effective as soon as
administratively practicable following the closing date of the acquisition of
Frontier Corporation by Global Crossing Ltd., by deleting the first sentence of
the second paragraph of Section 5.1 and substituting the following in its place:
All participating Company contributions and the earnings on
them that would have been invested in Global Crossing Ltd.
Common stock under ERSP shall be invested in Global Crossing
Common stock until the fifth anniversary of the date of
investment (the "Restricted Stock").
IN WITNESS WHEREOF, the Company has caused its duly authorized officer
to execute this amendment on its behalf this 21st day of September, 1999.
FRONTIER CORPORATION
By: /s/ Barbara J. LaVerdi
Title: Assistant Secretary
<PAGE>
EXHIBIT 10.7
May 1, 1999
Mr. Robert L. Barrett
14 Stonebridge Lane
Pittsford, New York 14534
Dear Mr. Barrett:
As you know, Frontier Corporation (the "Company") has entered into an
agreement which would constitute a Change of Control pursuant to the agreement
between yourself and the Company dated March 25, 1996 (the "COC Agreement"). In
contemplation of a Change of Control, the Company and you agree to amend your
COC Agreement as follows:
1. Section 4.2.3(b) is amended to read as follows:
(b) The period of your employment by the Company (whether
under this Agreement or otherwise) and 24 months thereafter,
if your employment is terminated, prior to a Change of Control
(i) because of your Retirement, or (ii) by the Company for
Cause or without Cause;
2. Section 4.2.3(d) is amended to read as follows:
(d) On and after a Change of Control has occurred, or if your
employment is terminated for Good Reason, the period of your
employment by the Company under this Agreement.
3. The third sentence of Section 6.1.5 is amended to read as
follows:
The term "Bonus Amount" means the greatest of: (i) your annual
cash performance bonus under the Company's bonus program at
the premier target level for the year in which the Termination
Date occurs, but no lower than the premier target level
established and in effect prior to March 16, 1999; (ii) the
bonus paid or payable to you with respect to the fiscal year
preceding the year in which the Termination Date occurs; or
(iii) following a Change of Control, the bonus paid to you
<PAGE>
with respect to the fiscal year preceding the year in which
the Change of Control occurred.
4. Section 6.2 is amended to read as follows:
6.2 Termination Without Cause. If the Company terminates your
employment without Cause (as defined later in this Agreement)
prior to a Change of Control, the Company shall pay you:
6.2.1 All Accrued Compensation;
6.2.2 A Pro Rata Bonus (as defined in Section 6.1.5 above);
and
6.2.3 Severance ("Severance") equal to twice the sum of (i)
the annual base compensation you would have received for the
entire fiscal year in which the Termination Date occurs plus
(ii) the Bonus Amount plus (iii) $25,000, or if greater, the
1999 cash equivalent of the annual value of the perquisites
provided to you under the Company's Executive Compensation
Program plus (iv) the Company contributions which would have
been made on your behalf to the 401(k) retirement savings plan
maintained by the Company for the year of your termination
plus (v) the Company allocation which would have been made to
your account in the Company's Supplemental Retirement Savings
Plan (or any successor thereto) for the year of your
termination. The foregoing shall be in lieu of any other
amount of severance relating to salary or bonus continuation
to be received by you upon termination of your employment
under any severance plan, policy or arrangement of the
Company.
In addition, the Company shall continue to provide to you and
your family at the Company's expense, for 24 months following
the Termination Date, the life insurance, disability, medical,
dental, vision and hospitalization benefits provided to you
and (other than for disability) your family immediately prior
to the Termination Date.
Except as otherwise provided in this Section 6.2, your
entitlement to any other compensation or benefits shall be
determined in accordance with the Company's employee benefit
plans and other applicable programs and practices then in
effect.
<PAGE>
5. The first phrase of the introductory sentence of Section 6.4
is amended to read as follows:
6.4 Termination by Company Following Change of Control or
Termination for Good Reason. If the Company terminates your
employment on and after a Change of Control, or you terminate
your employment for Good Reason (whether or not you elect to
retire, if eligible), the Company shall pay you:
6. The first paragraph of Section 6.4.3 is amended to read as
follows:
6.4.3 Severance equal to three times the sum of (i) the annual
base compensation you would have received for the entire
fiscal year in which the Termination Date occurs plus (ii) the
Bonus Amount plus (iii) $25,000, or if greater, the 1999 cash
equivalent of the annual value of the perquisites provided to
you under the Company's Executive Compensation Program plus
(iv) the Company contributions which would have been made on
your behalf to the 401(k) retirement savings plan maintained
by the Company for the year of your termination plus (v) the
Company allocation which would have been made to your account
in the Company's Supplemental Retirement Savings Plan (or any
successor thereto) for the year of your termination. The
foregoing severance shall be in lieu of any other amount of
severance relating to salary or bonus continuation to be
received by you upon termination of your employment under any
severance plan, policy or arrangement of the Company.
7. The paragraph immediately following Section 6.4.3 shall be
amended to read as follows:
In addition, the Company shall continue to provide to you and
your family at the Company's expense, for 36 months following
the Termination Date, the life insurance, disability, medical,
dental, vision and hospitalization benefits provided to you
and (other than for disability) your family immediately prior
to the Termination Date.
8. The following proviso is added to the end of Section 8:
; provided, however, that on and after a Change of Control
neither the Company nor any other person shall
<PAGE>
be permitted to terminate any payments or benefits under the
terms of this section.
9. Section 11.1.3 is amended to read as follows:
11.1.3 You have willfully engaged in conduct which is illegal
or in violation of the Company's Code of Ethics; provided,
however, that on and after a Change of Control this Section
11.1.3 shall be of no force and effect; or
10. Section 11.4.7 is renumbered to be Section 11.4.8 and the
following Section 11.4.7 is added:
11.4.7 Without your express written consent, after a Change of
Control, any requirement that you relocate your principal
place of business more than 50 miles from your principal place
of business immediately prior to such Change of Control or any
substantial increase in business related travel over the level
of travel required immediately prior to the Change of Control;
or
11. The term "Retirement" above is used in the event you are or
are currently entitled to become retirement eligible, and does
not create new retirement eligibility. In the absence of a
definition in your existing agreement, for purposes of this
COC Amendment, the following definition applies:
"Retirement" shall, for each affected plan or agreement
involving you and the Company, have the meaning established in
the applicable plan or agreement, or in the absence of a
definition or consistently applied interpretation, shall mean
a voluntary or involuntary termination of your employment
after age 65, or at age 65 or earlier, with age and service
credits that would, in such case, entitle you to receive a
normal or early retirement service pension under the Frontier
Management Pension Plan (or any successor or substitute plan
or plans of Frontier instituted prior to March 16, 1999.)
Three signed copies of this amendment have been enclosed. The
amendments being made herein are being made pursuant to authorization of the
board of directors of the Company. Your agreement and this COC Amendment will
not adversely impact the validity or treatment of any separate agreement that
you have with the Company with respect to options, loan forgiveness or the like
that was in place as of March 16, 1999.
<PAGE>
If you agree to the above mentioned changes to your COC Agreement,
please sign all copies below and return two of the signed original agreements to
Mr. McCue.
Sincerely,
/s/ Joseph P. Clayton
---------------------------
Joseph P. Clayton
Agreed and Accepted:
/s/ Robert L. Barrett
- --------------------------
Robert L. Barrett
<PAGE>
EXHIBIT 10.9
May 1, 1999
Mr. Joseph P. Clayton
20 Windham Hill
Mendon, New York 14506
Dear Mr. Clayton:
As you know, Frontier Corporation (the "Company") has entered
into an agreement which would constitute a Change of Control pursuant to the
agreement between yourself and the Company dated January 1, 1998 (the "COC
Agreement"). In contemplation of a Change of Control, the Company and you agree
to amend your COC Agreement as follows:
1. Section 4.2.3(b) is amended to read as follows:
(b) The period of your employment by the Company (whether
under this Agreement or otherwise) and 24 months thereafter,
if your employment is terminated, prior to a Change of Control
(i) because of your Retirement, or (ii) by the Company for
Cause or without Cause;
2. Section 4.2.3(d) is amended to read as follows:
(d) On and after a Change of Control has occurred, or if your
employment is terminated for Good Reason, the period of your
employment by the Company under this Agreement.
3. The third sentence of Section 7.1.5 is amended to read as
follows:
The term "Bonus Amount" means the greatest of: (i) your annual
cash performance bonus under the Company's bonus program at
the premier target level for the year in which the Termination
Date occurs, but no lower than the premier target level
established and in effect prior to March 16, 1999; (ii) the
bonus paid or payable to you with respect to the fiscal year
preceding the year in which the Termination Date occurs; or
(iii) following a Change of Control, the bonus paid to you
with respect to the fiscal year preceding the year in which
the Change of Control occurred.
<PAGE>
4. Section 7.2 is amended to read as follows:
7.2 Termination Without Cause. If the Company terminates your
employment without Cause (as defined later in this Agreement)
prior to a Change of Control, the Company shall pay you:
7.2.1 All Accrued Compensation;
7.2.2 A Pro Rata Bonus (as defined in Section 7.1.5 above);
and
7.2.3 Severance ("Severance") equal to twice the sum of (i)
the annual base compensation you would have received for the
entire fiscal year in which the Termination Date occurs plus
(ii) the Bonus Amount plus (iii) $40,000, or if greater, the
1999 cash equivalent of the annual value of the perquisites
provided to you under the Company's Executive Compensation
Program plus (iv) the Company contributions which would have
been made on your behalf to the 401(k) retirement savings plan
maintained by the Company for the year of your termination
plus (v) the Company allocation which would have been made to
your account in the Company's Supplemental Retirement Savings
Plan (or any successor thereto) for the year of your
termination. The foregoing shall be in lieu of any other
amount of severance relating to salary or bonus continuation
to be received by you upon termination of your employment
under any severance plan, policy or arrangement of the
Company.
In addition, the Company shall continue to provide to you and
your family at the Company's expense, for 24 months following
the Termination Date, the life insurance, disability, medical,
dental, vision and hospitalization benefits provided to you
and (other than for disability) your family immediately prior
to the Termination Date.
Except as otherwise provided in this Section 7.2, your
entitlement to any other compensation or benefits shall be
determined in accordance with the Company's employee benefit
plans and other applicable programs and practices then in
effect.
5. The first phrase of the introductory sentence of Section 7.4
is amended to read as follows:
<PAGE>
7.4 Termination by Company Following Change of Control or
Termination for Good Reason. If the Company terminates your
employment on and after a Change of Control, or you terminate
your employment for Good Reason (whether or not you elect to
retire, if eligible), the Company shall pay you:
6. The first paragraph of Section 7.4.3 is amended to read as
follows:
7.4.3 Severance equal to three times the sum of (i) the annual
base compensation you would have received for the entire
fiscal year in which the Termination Date occurs plus (ii) the
Bonus Amount plus (iii) $40,000, or if greater, the 1999 cash
equivalent of the annual value of the perquisites provided to
you under the Company's Executive Compensation Program plus
(iv) the Company contributions which would have been made on
your behalf to the 401(k) retirement savings plan maintained
by the Company for the year of your termination plus (v) the
Company allocation which would have been made to your account
in the Company's Supplemental Retirement Savings Plan (or any
successor thereto) for the year of your termination. The
foregoing severance shall be in lieu of any other amount of
severance relating to salary or bonus continuation to be
received by you upon termination of your employment under any
severance plan, policy or arrangement of the Company.
7. The paragraph immediately following Section 7.4.3 shall be
amended to read as follows:
In addition, the Company shall continue to provide to you and
your family at the Company's expense, for 36 months following
the Termination Date, the life insurance, disability, medical,
dental, vision and hospitalization benefits provided to you
and (other than for disability) your family immediately prior
to the Termination Date.
8. The following proviso is added to the end of Section 9:
; provided, however, that on and after a Change of Control
neither the Company nor any other person shall be permitted to
terminate any payments or benefits under the terms of this
section.
9. Section 12.1.3 is amended to read as follows:
<PAGE>
12.1.3 You have willfully engaged in conduct which is illegal
or in violation of the Company's Code of Ethics; provided,
however, that on and after a Change of Control this Section
12.1.3 shall be of no force and effect; or
10. Section 12.1.4 is amended to read as follows:
12.1.4 You have been convicted of a felony or a crime
involving moral turpitude; provided, however, that on and
after a Change of Control this Section 12.1.4 shall be limited
to apply only to the conviction of a felony; or
11. Section 12.4.7 is renumbered to be Section 12.4.8 and the
following Section 12.4.7 is added:
12.4.7 Without your express written consent, after a Change of
Control, any requirement that you relocate your principal
place of business more than 50 miles from your principal place
of business immediately prior to such Change of Control or any
substantial increase in business related travel over the level
of travel required immediately prior to the Change of Control;
or
12. The term "Retirement" above is used in the event you are or
are currently entitled to become retirement eligible, and does
not create new retirement eligibility. In the absence of a
definition in your existing agreement, for purposes of this
COC Amendment, the following definition applies:
"Retirement" shall, for each affected plan or agreement
involving you and the Company, have the meaning established in
the applicable plan or agreement, or in the absence of a
definition or consistently applied interpretation, shall mean
a voluntary or involuntary termination of your employment
after age 65, or at age 65 or earlier, with age and service
credits that would, in such case, entitle you to receive a
normal or early retirement service pension under the Frontier
Management Pension Plan (or any successor or substitute plan
or plans of Frontier instituted prior to March 16, 1999.)
Three signed copies of this amendment have been enclosed. The
amendments being made herein are being made pursuant to authorization of the
board of directors of the Company. Your agreement and this COC Amendment will
not adversely impact the validity or treatment of any separate agreement that
you have
<PAGE>
with the Company with respect to options, loan forgiveness or the like that was
in place as of March 16, 1999.
If you agree to the above mentioned changes to your COC Agreement,
please sign all copies below and return two of the signed original agreements to
Mr. McCue.
Sincerely,
/s/Douglas H. McCorkindale
--------------------------------
Douglas H. McCorkindale
Agreed and Accepted:
/s/Joseph P. Clayton
- ---------------------------
Joseph P. Clayton
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1999 AND CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 616,257
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<ALLOWANCES> (84,211)
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485,647
0
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<CGS> 279,307
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<EPS-BASIC> 0.21
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</TABLE>
