United States
Securities and Exchange Commission
Washington, D.C. 20549
----------------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________ to ____________
Commission File Number
0-16439
FAIR, ISAAC AND COMPANY, INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 94-1499887
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
120 North Redwood Drive, San Rafael, California 94903
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 472-2211
-----------------------------
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.01 par
value per share New York Stock Exchange, Inc.
(Title of Class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None
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 ____.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of December 7, 1998, the aggregate market value of the Registrant's
common stock held by nonaffiliates of the Registrant was $382,136,797 based on
the last transaction price as reported on the New York Stock Exchange. This
calculation does not reflect a determination that certain persons are affiliates
of the Registrant for any other purposes.
The number of shares of common stock outstanding on December 7, 1998
was 14,047,284 (excluding 10,690 shares held by the Company as treasury stock).
Items 10, 11, 12 and 13 of Part III incorporate information by
reference from the definitive proxy statement for the Annual Meeting of
Stockholders to be held on February 2, 1999.
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TABLE OF CONTENTS
Page
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PART I
ITEM 1. Business............................................................. 3
ITEM 2. Properties........................................................... 13
ITEM 3. Legal Proceedings.................................................... 13
ITEM 4. Submission of Matters to a Vote of Security Holders.................. 13
EXECUTIVE OFFICERS OF THE REGISTRANT......................................... 14
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters................................................ 15
ITEM 6. Selected Financial Data.............................................. 16
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................... 17
ITEM 7A.Quantitative and Qualitative Disclosures About Market Risks.......... 24
ITEM 8. Financial Statements and Supplementary Data.......................... 25
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................... 44
PART III
ITEM 10. Directors and Executive Officers of the Registrant.................. 45
ITEM 11. Executive Compensation.............................................. 45
ITEM 12. Security Ownership of Certain Beneficial Owners and Management...... 45
ITEM 13. Certain Relationships and Related Transactions ..................... 45
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.... 46
SIGNATURES ................................................................ 51
Supplemental Information..................................................... 52
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PART I
ITEM 1. BUSINESS
Development Of The Business
Fair, Isaac and Company, Incorporated (NYSE: FIC)("Fair, Isaac" or the
"Company") is a leading developer of data management systems and services for
the financial services, direct marketing and personal lines insurance
industries. The Company employs various tools, such as database enhancement
software, predictive modeling, adaptive control and systems automation to help
its customers make "better decisions through data."
Established in 1956, Fair, Isaac pioneered the credit risk scoring
technologies now employed by most major U.S. consumer credit grantors. Its
rule-based decision management systems, originally developed to screen consumer
credit applicants, are now routinely employed in all phases of the credit
account cycle: direct mail solicitation (credit cards, lines of credit, etc.),
application processing, card reissuance, on-line credit authorization and
collection. Although direct comparisons are difficult, management believes Fair,
Isaac ranks first or second in sales of every type of credit management product
or service it markets, and that its total sales to the consumer credit market
exceed those for similar products by any direct competitor.
Approximately 48 percent of fiscal 1998 revenues were derived from
usage-priced products and services marketed through alliances with major credit
bureaus and third-party credit card processors. Sales of decision management
products and services directly to credit industry end-users accounted for
approximately 25 percent of revenues.
In more recent years Fair, Isaac has expanded its product and service
offerings, applying its proven risk/reward modeling capabilities to automobile
and home insurance underwriting, small business and mortgage lending,
telecommunications and most recently, healthcare. With the acquisition of
DynaMark in December 1992, the Company made its first foray into marketing data
processing and database management, an area it considers a prime target for
diversification. Its strategy in this area is to develop and market an array of
services combining DynaMark's strengths in warehousing and manipulating complex
consumer databases with Fair, Isaac's expertise in predictive modeling and
decision systems. DynaMark contributed $49.2 million or 20 percent of Fair,
Isaac's fiscal 1998 revenues. The Company's Insurance business unit generated
revenues in fiscal 1998 of $9.2 million or 4 percent of revenues. In fiscal
l997, the Company recorded its first revenues from its new Healthcare
Information business unit, and during fiscal 1998 derived revenues from
providing analytical marketing services to a large pharmaceuticals manufacturer
to help improve customer relationships and management of prescription compliance
(i.e., a patient's fulfillment of prescriptions and taking them to completion).
In July 1997 the Company acquired Risk Management Technologies (RMT), a
leading provider of enterprise-wide risk management and performance measurement
solutions to major financial institutions around the world. This acquisition
enables the Company to extend its franchise in providing data-driven decision
support to the financial services industries beyond its current focus on
individual customers. With RMT's products and services, the Company has
positioned itself to support an institution's entire financial risk management
operation, encompassing both the consumer and enterprise levels. RMT's revenues
in fiscal l998 were $6.2 million, or 3 percent of the Company's revenues. The
Company's historical financial statements for prior fiscal year periods have
been restated to account for the Company's merger with RMT on a
pooling-of-interests basis.
Fair, Isaac numbers hundreds of the world's leading credit card and
travel card issuers, retail establishments and consumer lenders among its
regular customers. It has enjoyed continuous client relationships with some of
these companies for nearly 30 years. Through alliances with all three major U.S.
credit bureaus, the Company also serves a large and growing number of
middle-market credit grantors, primarily by providing direct mail solicitation
screening, application scoring and account management services on a usage-fee
basis. In addition, some of its newer end-user products, such as CreditDesk(R)
application processing software and CrediTable(R) pooled-data scoring systems,
are designed to meet the needs of relatively small users of scoring systems.
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Approximately 17 percent of Fair, Isaac's fiscal 1998 revenues came
from sales outside the United States. With its long-standing presence in Western
Europe and Canada and the more recent establishment of operating bases in Great
Britain, France, Germany, Japan, Mexico and South Africa, the Company is well
positioned to benefit from the expected growth in global credit card issuance
and usage through the balance of the 1990s. In September l997 the Company signed
an agreement with Serasa Centralizaco de Servicos dos Banco, Brazil's largest
credit reporting agency, which will result in the first bureau-based score
delivery service in Brazil.
Since 1993, Fair, Isaac's revenues and diluted earnings per share have
increased at a compound rate of 30 percent and 35 percent, respectively. The
Company attributes this growth to rising market demand for credit scoring and
account management services; success in increasing its share of the market; and
a gradual shift in marketing and pricing strategy, from primary reliance on
direct, end-user sales of customized analytical and software products to ongoing
usage revenues from services provided through credit bureaus and bankcard
processing agencies.
During the period since 1990, while the rate of account growth in the
U.S. bankcard industry has been slowing and many of the Company's largest
institutional clients have merged and consolidated, the Company has generated
above-average growth in revenues--even after adjusting for the effect of
acquisitions--from its bankcard-related scoring and account management
businesses by deepening its penetration of large banks and other credit issuers.
The Company believes much of its future growth prospects will rest on its
ability to: (1) develop new, high-value products, (2) increase its penetration
of established or emerging credit markets outside the U.S. and Canada and (3)
expand--either directly or through further acquisitions--into relatively
undeveloped or underdeveloped markets for its products and services, such as
direct marketing, insurance, small business lending and healthcare information
management.
Products and Services
The Company's principal products are statistically derived, rule-based
analytic tools designed to help businesses make better decisions on their
customers and prospective customers, and software systems and components to
implement these analytic tools. In addition to sales of these products directly
to end-users, the Company also makes these products available in service mode
through arrangements with credit bureaus and third-party credit card processors.
The Company's DynaMark subsidiary provides data processing and database
management services to businesses engaged in direct marketing. Its RMT
subsidiary provides management tools to larger, more sophisticated financial
institutions for enterprise-wide, integrated financial risk and profitability
management.
Products and services sold to the consumer credit industry have
traditionally accounted for most of the Company's revenues. However, the Company
is actively promoting its products and services to other segments of the credit
industry, including mortgage and small business lending; and to non-credit
industries, particularly personal lines insurance, direct marketing,
telecommunications and healthcare. Consumer credit accounted for over 73 percent
of the Company's revenues in each of the three years in the period ended
September 30, 1998. Sales to customers in the direct marketing business,
including the marketing arms of financial service businesses, accounted for 13
to 20 percent of revenues in each of the three years in the period ended
September 30, 1998. Revenues from sales to the insurance industry accounted for
3 to 4 percent of revenues in each of the three years in the period ended
September 30, 1998. In fiscal 1997 the Company's recorded the first revenues
from its new Healthcare Information business unit, and during fiscal 1998
derived revenues from providing analytical marketing services to a large
pharmaceuticals manufacturer to help improve customer relationships and
management of prescription compliance (i.e., a patient's fulfillment of
prescriptions and taking them to completion).
Analytic Products
The Company's primary analytic products are scoring algorithms (also
called "scorecards") which can be used in screening lists of prospective
customers, evaluating applicants for credit or insurance and managing existing
credit accounts. Some of the most common types of scoring algorithms developed
by the Company are described below. Scoring algorithms are developed by
correlating information available at the time a particular decision is made with
known performance at a later date. Scoring algorithms can be developed to
predict the likelihood of
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different kinds of performance (e.g., credit delinquency, response to a
solicitation, and insurance claims frequency); they can be developed from
different data sources (e.g., credit applications and credit bureau files); and
they can be developed either for a particular user ("custom" scorecards) or for
many users in a particular industry ("pooled data" or "generic" scorecards).
Credit Application Scoring Algorithms. First introduced in 1958, Credit
Application Scoring Algorithms are tools that permit credit grantors to
calculate the risk of lending to individual applicants. They are delivered in
the form of a table of numbers, one for each possible answer to each of about
ten to twelve selected predictive questions that are found on the form filled in
by the applicant or on a credit report purchased by the credit grantor. The user
"scores" an applicant by looking in the table for the number associated with the
answers provided about the applicant and calculating their sum. The "score" thus
obtained is compared to a "cutoff score" previously established by the credit
grantor's management to determine whether or not to extend the requested credit.
A significant proportion of revenues from Credit Application Scoring Algorithms
is derived from sales of new or replacement algorithms to existing users.
Behavior Scoring Algorithms. The Company pioneered Behavior Scoring
Algorithms with a research program in 1969. The first commercially successful
products were introduced in 1978. In contrast to Credit Application Scoring
Algorithms which deal with credit applicants, Behavior Scoring Algorithms permit
management to define rules for the treatment of existing credit customers on an
ongoing basis.
Although similar in statistical principle and manner of construction,
Behavior Scoring Algorithms differ in several important respects from Credit
Application Scoring Algorithms. First, rather than using an applicant's answers
on a credit application or a credit report, the data used to determine a
behavior score come from the customer's purchase and payment history with that
credit grantor. Second, each customer is scored monthly, rather than only at
application time, and an action is selected each time in response to the score.
Third, the available actions are much more varied than simply granting or
denying credit to an applicant. For example, if an account is delinquent, the
actions available to a credit manager can include a simple message on a
customer's bill calling attention to the delinquency, a dunning letter, a phone
call, or a referral to a collection agency, with the action to be taken in any
given case to be determined by the customer's behavior score.
Scores produced by specially designed Behavior Scoring Algorithms can
be used to select actions for mailing promotional materials to customers, for
changing the credit limits allowed, for authorizing individual credit card
transactions, for taking various actions on delinquent accounts and for
reissuing credit cards which are about to expire. Behavior Scoring Algorithms
are also components of the Adaptive Control Systems described below.
Credit Bureau Scoring Services. The Company also provides scoring
algorithms to each of the three major automated credit bureaus in the United
States based solely on the information in their files. Customers of the credit
bureau can use the scores derived from these algorithms to prescreen
solicitation candidates, to evaluate applicants for new credit and to review
existing accounts. Credit grantors using these services pay based on usage and
the Company and the credit bureau share these usage revenues. The PreScore(R)
service offered by the Company combines a license to use such algorithms for
prescreening solicitation candidates along with tracking and consulting services
provided by the Company and is priced on a time or usage basis.
ScoreNet(SM) Service. The ScoreNet Service, introduced in August 1991,
allows credit grantors to obtain Fair, Isaac's credit bureau scores and related
data on a regular basis and in a format convenient for use in their account
management programs. In most cases the account management program is a Fair,
Isaac Adaptive Control System or Adaptive Control service at a credit card
processor. The Company obtains the data from the credit bureau(s) selected by
each subscriber and delivers it to the subscriber in a format compatible with
the subscriber's account management system.
Insurance Scoring Algorithms. The Company has also delivered scoring
systems for insurance underwriters and marketers. Such systems use the same
underlying statistical technology as credit scoring systems, but are designed to
predict claim frequency or profitability of applicants for personal insurance
such as automobile or homeowners'
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coverage. During fiscal 1993, the Company introduced a Property Loss Score
("PLS") service in conjunction with Equifax, Inc., a leading provider of data to
insurance underwriters. In 1994, the Company introduced a similar service in
conjunction with Trans Union Corporation called "ASSIST" which is designed to
predict automobile insurance risk. In 1995, with Equifax Inc., the Company
introduced a risk prediction score for automobile insurance called Casualty Loss
Score ("CLS") service. Equifax subsequently spun off its Insurance Unit, which
is now Choicepoint. In 1996, with Acxiom, the Company introduced a risk
prediction score for homeowners' and automobile insurance called InfoScore. PLS,
ASSIST, CLS and InfoScore are similar to the credit bureau scoring services in
that a purchaser of data from Choicepoint, Trans Union or Acxiom can use the
scores to evaluate the risk posed by applicants for homeowners' or automobile
insurance. The Company and Choicepoint, Trans Union or Acxiom, as the case may
be, share the usage revenue produced by these services. Aspects of automated
application processing systems and Adaptive Control Systems are also applicable
to insurance underwriting decisions. The Company is actively marketing its
products and services to the insurance industry.
Other Scoring Algorithms. The Company has developed scoring algorithms
for other users, which include public utilities that require deposits from
selected applicants before starting service, tax authorities that select returns
to be audited, and mortgage lenders. The Company has also developed scoring
algorithms for use in selecting life insurance salesmen, finance company
managers, and prisoners suitable for early release, although to date these
algorithms have not generated significant revenues.
Automated Strategic Application Processing Systems (ASAP)
The Company's Automated Strategic Application Processing systems (ASAP)
automate the processing of credit applications, including the implementation of
the Company's Credit Application Scoring Algorithms. The Company offers
Mid-Range ASAPs which are stand-alone assemblies of hardware and software;
Mainframe ASAP, SEARCH, StrategyWare,(R) and ScoreWare consisting of software
for IBM and IBM-compatible mainframe computers; and CreditDesk which consists of
software for personal computers. The Company does not expect significant sales
of new Mid-Range ASAP systems but still derives maintenance and enhancement
revenues from existing systems.
The tasks performed by ASAPs include: (i) checking for the completeness
of the data initially given and printing an inquiry letter in the case of
insufficient information; (ii) checking whether an applicant is a known
perpetrator of fraud; (iii) electronically requesting, receiving, and
interpreting a credit report when it is economic to do so; (iv) assigning a
credit limit to the account, if acceptable, and printing a denial letter if not;
and (v) forwarding the data necessary to originate billing records for accepted
applicants.
Mid-Range ASAP is a minicomputer-based system which carries out the
tasks listed above in a manner extensively "tailored" to each user's unique
requirements. Mainframe ASAP is a software-only package designed to be executed
on IBM or IBM-compatible mainframe computers. It is most useful for very large
volume credit grantors who elect to enter application information from a number
of separate locations. CreditDesk is designed for use on stand-alone or
networked personal computers. Although its software functions are not tailored
as extensively as the other versions of ASAP, CreditDesk features an easy-to-use
graphics interface. The Company also sells software components for IBM or
IBM-compatible mainframe computers under the tradenames "SEARCH" and
"ScoreWare." SEARCH acquires and interprets credit bureau reports as a separate
package. ScoreWare provides for easy installation of credit application
scorecards and computes scores from such scorecards as part of the application
processing sequence. StrategyWare combines the application processing features
described "above with the "Champion/Challenger" strategy concept described below
under "Adaptive Control Systems."
The Company's Mid-Range and Mainframe ASAP systems are currently being
used in the United States, Canada, and Europe by banks, retailers, and other
financial institutions. CreditDesk is being used by over 600 credit grantors in
more than a dozen countries. To support these installations, the Company
provides complete hardware and software maintenance, general software support in
the form of consulting, and specific software support by producing enhancements,
as well as other modifications at a user's request.
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Adaptive Control Systems
The Company's most advanced product is the Adaptive Control System, now
generally marketed under the tradename "TRIAD". An Adaptive Control System is a
complex of behavior scoring algorithms, computer software, and account
management strategy addressed to one or more aspects of the management of a
consumer credit or similar portfolio. For example, the Company has developed an
Adaptive Control System for use by an electric utility in the management of its
customer accounts.
A principal feature of an Adaptive Control System is software for
testing and evaluation of alternative management strategies, designated the
"Champion and Challenger Strategy Software." The "Champion" strategy applied to
any aspect of controlling a portfolio of accounts (such as determining
collection messages or setting credit limits) is that set of rules considered by
management to be the most effective at the time. A "Challenger" strategy is a
different set of rules which is considered a viable candidate to outperform the
Champion. The Company's Champion and Challenger Strategy software is tailored to
the customer's billing system and is designed to permit the operation of both
strategies at the same time and also to permit varying fractions of the accounts
to go to each of the competing strategies. For example, if a Challenger is very
different from the Champion, management may wish to test it on a very small
fraction of the accounts, rather than to risk a large loss. Alternatively, if a
Challenger appears to be outperforming a Champion, management can direct more
and more of the account flow to it. There need not, in fact, be a limitation on
the number of Challengers in place at any one time beyond the limits imposed by
the ability of the Company and the user management to study the results.
A Champion/Challenger structure is based on one or more of the
Company's component products, usually Behavior Scoring Algorithms, as well as
Company-developed software that permits convenient allocation of accounts to
strategies and convenient modification of the strategies themselves. Adaptive
Control Systems can also consider information external to the particular
creditor, particularly scores and other information obtained from credit
bureaus, in the design of strategies. A specific goal of the Company's Adaptive
Control System product is to make the account management functions of the user
as independent as possible of the user's overall data processing systems
development department.
For a Champion/Challenger structure to function effectively, new
Challenger strategies must be developed continually as insight is gained, as
external conditions change, and as management goals are modified. The Company
often participates in the design and development of new Challenger strategies
and in the evaluation of the results of Champion/Challenger competitions as they
develop.
Contracts for Adaptive Control Systems for end-users generally include
multi-year software maintenance, strategy design and evaluation, and consulting
components. The Company also provides Adaptive Control services through First
Data Resources, Inc. and Total System Services, Inc., the two largest
third-party credit card processors in the United States. The Adaptive Control
service is also available in the United Kingdom through First Data Resources,
Ltd. and Bank of Scotland; in Buenos Aires, through Argencard S.A.; and in
Frankfurt, through B+S Card Service Gmbh. Credit card issuers subscribing to
these services pay monthly fees based on the number of accounts processed.
During fiscal 1996, the Company introduced StrategyWare(R), which is an Adaptive
Control System designed to apply Champion/Challenger principles to the
processing of new credit accounts, rather than the management of existing
accounts. The Company also believes that Adaptive Control Systems can operate in
areas other than consumer credit; and, as noted above, has provided an Adaptive
Control System to an electric utility company.
DynaMark
DynaMark provides a variety of data processing and database management
services to companies and organizations in direct marketing. DynaMark offers
several proprietary tools in connection with such services including "DynaLink"
and "DynaMatch." DynaLink gives financial institutions and other users remote
computer access to their "warehoused" customer account files or marketing
databases. It allows them to perform on-line analyses ranging from profiling the
history of a single customer purchase or credit usage to calling up print-outs
of all files
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having certain defined characteristics in common. DynaMatch uses a unique
scoring system to identify matching or duplicate records that most standard
"merge-purge" systems would overlook. Credit managers and direct marketers can
use it to identify household relationships (accounts registered in different
names, but sharing a common address and surname) and to eliminate costly
duplicate mailings. Credit card issuers can use it to spot potentially
fraudulent or overlimit credit card charges by individuals using two or more
cards issued under slightly different names or addresses.
Risk Management Technologies
Risk Management Technologies (RMT) provides management tools to larger,
more sophisticated financial institutions around the world for enterprise-wide,
integrated financial risk and profitability management. Financial institutions
must constantly evaluate the effect of interest rate changes and other factors
on their entire operation including their loan, credit card and investment
portfolios, to determine bottom line exposure and potential revenues. RMT's
financial decision support software, the RADAR System, is a comprehensive
enterprise management system that performs asset-liability management, transfer
pricing, and performance measurement modeling. RMT's Genesis product is a
graphical data integration management tool used to integrate data rapidly from
multiple legacy systems and other sources into a consolidated, client/server
data warehouse. Within this warehouse, data remain readily available for use in
multiple decision-support applications.
Healthcare
The Company is currently providing analytical marketing services to a
large pharmaceuticals manufacturer to help improve customer relationship and
"compliance" management using a variety of techniques including internet
communications. "Compliance" in this instance refers to whether prescriptions
are actually filled and taken to completion. The Company has also introduced a
receivables management system for hospitals and other healthcare providers. The
first revenue-generating contract for this product was signed in October 1998.
Customer Service and Support
The Company provides service and support to its customers in a variety
of ways. They include: (i) education of liaison teams appointed by buyers of
scoring algorithms and software; ( ii) maintenance of an answering service that
responds to inquiries on minor technical questions; (iii) proactive
Company-initiated follow-up with purchasers of the Company's products and
services; (iv) conducting seminars held several times a year in various parts of
the United States and, less often, in other countries; (v) conducting annual
conferences for clients in which user experience is exchanged and new products
are introduced; (vi) delivery of special studies which are related to the use of
the Company's products and services; and (vii) consulting and training services
provided by the Company's subsidiary, Credit & Risk Management Associates, Inc.
("CRMA").
Scoring algorithms can diminish in effectiveness over time as the
population of applicants or customers changes. Such changes take place for a
variety of reasons, many of which are unknown or poorly understood, but some are
a result of marketing strategy changes or shifts in the national or the local
economy. It is to the user's advantage, therefore, to monitor the performance of
its algorithms so that they can be replaced when it is economic to do so. In
response to this need as well as the requirement of the Equal Credit Opportunity
Act that scoring algorithms be periodically validated, the Company provides
tracking services and software products which measure the continuing performance
of its scoring algorithms while in use by customers.
Technology
The Company's personnel have a high degree of expertise in several
separate disciplines: operations research, mathematical statistics,
computer-based systems design, programming and data processing.
The fundamental principle of operations research is to direct attention
to a class of management decisions, to make a mathematical model of the
situation surrounding that class of decisions and to find rules for making the
decisions which maximize achievement of the manager's goal. The Company's
analytic products are classic
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examples of this doctrine reduced to practice. The entire focus is on decision
making using the best mathematical and computational techniques available.
The fundamental goal of mathematical statistics is to provide the
method for deriving the maximum amount of useful information from an undigested
body of data. The objective of the design of computer-based systems is to
provide a mechanism for efficiently accepting input data from a source, storing
that data in a cost-effective medium, operating on the data with reliable
algorithms and decision rules and reporting results in readily comprehensible
forms.
The Company's analytic products have a clear distinguishing
characteristic in that they make management by rule possible in situations where
the only alternative is reliance on a group of people whose actions can never be
entirely consistent. Rules for selecting actions require computation of
probabilities of results. But computing the probability of a particular result
in the traditional mode, that is, by counting the number of occurrences of each
possible result in all possible combinations of circumstances, clearly breaks
down when the number of combinations becomes very large. When only a few
thousand cases of results are available, more subtle mathematical methods must
be used. The Company has been actively developing and using techniques of this
kind for 42 years, as indicated by the development and continual enhancement of
its proprietary suite of algorithms and computer programs used to develop
scoring algorithms.
The Company's products must also interface successfully with systems
already in place. For example, they must accept data in various forms and in
various media such as handwritten applications, video display terminal input,
and telecommunications messages from credit bureaus. They must also provide
output in diverse forms and media, such as video displays, printed reports,
transactions on magnetic tape and printed letters. The Company's response to
this interface requirement has been to develop a staff which is expert in both
logical design of information systems and the various computer languages used
for coding.
Markets and Customers
The Company's products for use in the area of consumer credit are
marketed to banks, retailers, finance companies, oil companies, credit unions
and credit card companies. The Company has over 600 users of products sold
directly by the Company to end-users. These include about 75 of the 100 largest
banks in the United States; several of the largest banks in Canada;
approximately 40 banks in the United Kingdom; more than 70 retailers; 7 oil
companies; major travel and entertainment card companies; and more than 40
finance companies. Custom algorithms and systems have generally been sold to
larger credit grantors. The scoring, application processing and adaptive control
services offered through credit bureaus and third-party processors are intended,
in part, to extend usage of the Company's technology to smaller credit issuers
and the Company believes that users of its products and services distributed
through third-parties number in the thousands. As noted above, the Company also
sells its products to utilities, tax authorities, and telecommunications and
insurance companies.
DynaMark markets its services to a wide variety of businesses engaged
in direct marketing. These include banks and insurance companies, catalog
merchandisers, fund-raisers and others. Most of DynaMark's revenues come from
direct sales to the end user of its services, but in some cases DynaMark acts as
a subcontractor to advertising agencies or others managing a particular project
for the end user. RMT markets to large financial institutions throughout the
world. Its clients are typically large financial institutions with a wide range
of products, investments and operational units and a sophisticated balance
sheet.
No single end-user customer accounted for more than 10% of the
Company's revenues in fiscal 1998. Revenues generated through the Company's
alliances with the three major credit bureaus in the United States, Equifax,
Experian Information Solutions, Inc. (formerly known as TRW Information Systems
& Services) and Trans Union, each accounted for approximately seven to ten
percent of the Company's total revenues in fiscal 1998.
The percentage of revenues derived from customers outside the United
States was approximately 17 percent in each of fiscal 1998, 1997, and 1996. RMT
derives more than half of its revenues from clients outside the United States.
DynaMark had virtually no non-U.S. revenues prior to fiscal 1997. The United
Kingdom, Japan and Canada
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are the largest international market segments. Mexico, South Africa, a number of
countries in South America and almost all of the Western European countries are
represented in the user base. The Company has delivered products to users in
approximately 60 countries. The information set forth under the caption "Segment
Information" in Note 12 to the Consolidated Financial Statements is incorporated
herein by reference. The Company's foreign offices are primarily sales and
customer service offices acting as agents on behalf of the U.S. production
operations. Net identifiable assets, capital expenditures and depreciation
associated with foreign offices are not material.
The Company has enjoyed good relations with the majority of its
customers over extended periods of time, and a substantial portion of its
revenue is derived from repeat customers. As noted above, the Company is
actively pursuing new users, particularly in the marketing, insurance and
healthcare fields as well as those potential users in the consumer credit area
not yet using the Company's products.
Contracts and Backlog
The Company's practice is to enter into contracts with several
different kinds of payment terms. Scoring algorithms have historically been sold
through one-time, fixed-price contracts. The Company will continue to sell
scoring algorithms on this basis but has also entered into longer term
contractual arrangements with some of its largest customers for the delivery of
multiple algorithms. PC-ASAP ("CreditDesk") customers have the option to enter
into contracts that provide for a one-time license fee or volume-sensitive
monthly lease payments. The one-time and usage-based contracts contain a
provision requiring monthly maintenance payments. Mainframe ASAP contracts
include a one-time fee for the basic software license, plus monthly fees for
maintenance and enhancement services. The Company also realizes maintenance and
enhancement revenues from users of its line of Mid-Range ASAP systems. PreScore
contracts call for usage or periodic license fees and there is generally a
minimum charge. Contracts for the delivery of complete Adaptive Control Systems
typically contain both fixed and variable elements in recognition of the fact
that they extend over multiple years and must be negotiated in the face of
substantial uncertainties. As noted above, the Company is also providing scoring
algorithms and application processing on a service basis through credit bureaus,
and credit account management services through third-party bankcard processors.
Subscribers pay for these services and for the ScoreNet service based on usage.
DynaMark and RMT employ a combination of fixed fee and volume-or usage-based
pricing for their services.
As of September 30, 1998, the Company's backlog, which includes only
firm contracts, was approximately $68,517,000, as compared with approximately
$70,168,000 as of September 30, 1997. Most usage-based revenues do not appear as
part of the backlog. The Company believes that approximately 25 percent of the
September 30, 1998 backlog will be delivered after the end of the current fiscal
year ending September 30, 1999. Most DynaMark contracts include unit or usage
charges, the total amount of which cannot be determined until the work is
completed. DynaMark's and CRMA's backlog are not significant in amount, are not
considered a significant indicator of future revenues, and are not included in
the foregoing figures. RMT's backlog is included in the foregoing backlog
figures.
Competition
The Company believes that its typical product development cycle, which
in the past has extended as long as ten years, has tended to moderate the
Company's growth rate. It also believes, however, that this long product
development lead time provides a barrier to entry of competitive products. As
credit scoring, automated application processing, and behavioral scoring
algorithms, all of which were pioneered by the Company, have become standard
tools for credit providers, competition has emerged from five sectors: scoring
algorithm builders, providers of automated application processing services, data
vendors, neural network developers and artificial intelligence system builders.
It is likely that a number of new entrants will be attracted to the market,
including both large and small companies. Many of the Company's present and
potential competitors have substantially greater financial, managerial,
marketing, and technological resources than the Company. The Company believes
that none of its competitors offer the same mix of products as the Company.
However certain competitors may have larger shares of particular geographic or
product markets. In-house analytic and systems developers are also a significant
source of competition for the Company.
10
<PAGE>
The Company believes that the principal factors affecting competition
for scoring algorithms are product performance and reliability; expertise and
knowledge of the credit industry; ability to deliver algorithms in a timely
manner; customer support, training and documentation; ongoing enhancement of
products; and comprehensiveness of product applications. It competes with both
outside suppliers and in-house groups for this business. The Company's primary
competitor among outside suppliers of scoring algorithms is Experian, formerly
known as, C.C.N. Systems Limited ("CCN") of Nottingham, England, a subsidiary of
Great Universal Stores plc, a large British retailer. Scores sold by credit
bureaus in conjunction with credit reports, including scores computed by
algorithms developed by the Company, provide potential customers with the
alternative of purchasing scores on a usage-priced basis.
The Company believes that the principal factors affecting competition
in the market for automated application processing systems (such as ASAP) are
the same as those affecting scoring algorithms, together with experience in
developing computer software products. Competitors in this area include outside
computer service providers and in-house computer systems departments. The
Company believes that its primary competitor in this area is American Management
Systems, Incorporated ("AMS"). AMS also offers credit scoring algorithms.
The Company competes with data vendors in the market for its credit
bureau scoring services including PreScore and ScoreNet. In the past several
years, data vendors have expanded their services to include evaluation of the
raw data they provide. All of the major credit bureaus offer competing
prescreening and credit bureau scoring services developed, in some cases, in
conjunction with the Company's primary scoring algorithm competitor, CCN. In
November 1996 it was announced that CCN had agreed to acquire Experian
Information Solutions, Inc. (formerly known as TRW Information Systems &
Services). CCN has since been renamed "Experian".
Both AMS and Experian offer products intended to perform some of the
same functions as the Company's Adaptive Control Systems. The Company believes
that customers using its Adaptive Control Systems, in both custom end-user form
and through third-party processors, significantly outnumber users of the
competing AMS and Experian products.
Another source of emerging competition comes from companies developing
artificial intelligence systems including those known as "expert systems" and
"neural networks." An expert system is computer software that replicates the
decision-making process of the best available human "experts" in solving a
particular class of problem, such as credit approval, charge card authorization,
or insurance underwriting. Scoring technology differs from expert systems in
that scoring technology is based upon a large database of results, from which
rules and algorithms are developed, as compared to expert systems, which are
typically based primarily on the "expert's" judgment and less so upon a
significant database. The Company believes its technology is superior to expert
system technology where sufficient performance data are available. Neural
networks, on the other hand, are an alternative method of developing scoring
algorithms from a database but using mathematical techniques quite different
from those used by the Company. For example, HNC Software, Inc. has developed
systems using neural network technology which compete with some of the Company's
products and services. The Company believes that analytical skill and knowledge
of the business environment in which an algorithm will be used are generally
more important than the choice of techniques used to develop the algorithm; and,
further, that the Company has an advantage in these areas with respect to its
primary markets as compared with neural network developers.
There are a large number of companies providing data processing and
database management services in competition with DynaMark, some of which are
considerably larger than DynaMark. The Company believes the market for such
services will continue to expand rapidly for the foreseeable future. Competition
in this area is based on price, service, and, in some cases, ability of the
processor to perform specialized tasks. DynaMark has concentrated on providing
specialized types of data processing and database management services using
proprietary tools which, it believes, give it an edge over its competition in
these areas. RMT is a leading provider of enterprise-wide risk management and
performance-measurement solutions to major financial institutions. There are a
number of companies offering enterprise-wide "solutions", or serving
sub-segments of this market (such as trading operations of financial
institutions), in competition with RMT. The Company believes that no direct
competitor currently offers the depth and scope of analytical functionality in
products and services for financial risk management that RMT provides, which
gives RMT an advantage in this market.
11
<PAGE>
Product Protection
The Company relies upon the laws protecting trade secrets and upon
contractual non-disclosure safeguards, including its employee non-disclosure
agreements and restrictions on transferability that are incorporated into its
customer agreements, to protect its software and proprietary interests in its
product methodology and know-how. The Company currently has one patent
application pending but does not otherwise have patent protection for any of its
programs or algorithms, nor does it believe that the law of copyrights affords
any significant protection for its proprietary software. The Company instead
relies principally upon such factors as the knowledge, ability, and experience
of its personnel, new products, frequent product enhancements, and name
recognition for its success and growth. The Company retains title to and
protects the suite of algorithms and software used to develop scoring algorithms
as a trade secret and has never distributed its source code.
In spite of these precautions, it may be possible for competitors or
users to copy or reproduce aspects of the Company's software or to obtain
information that the Company regards as trade secrets. In addition, the laws of
some foreign countries do not protect the Company's proprietary rights to the
same extent as do the laws of the United States. Due to recent changes in the
case law and Patent and Trademark Office Guidelines with respect to the
patentability of software, algorithms and "methods of doing business," the
Company is currently reevaluating the possibility of obtaining patent protection
for certain aspects of its technology.
Research and Development
Technological innovation and excellence have been goals of the Company
since its founding. The Company has devoted, and intends to continue to devote,
significant funds to research and development. The Company has ongoing projects
for improving its fundamental knowledge in the area of algorithm design, its
capabilities to produce algorithms efficiently, and its ability to specify and
code algorithm executing software. The information set forth in the line
entitled "Research and development" in the Consolidated Statement of Income and
the information set forth under the caption "Software costs" in Note 1 to the
Consolidated Financial Statements is incorporated herein by reference.
In addition to the projects formally designated as Research and
Development, many of the Company's activities contain a component that produces
new knowledge. For example, an Adaptive Control System, by its nature and
purpose, must be designed to match its environment and learn as it operates. In
the areas in which the Company's products are useful, the "laboratory" is
necessarily the site of the user's operations.
Hardware Manufacturing
Hardware for the Company's Mid-Range ASAP systems consists primarily of
a Motorola MC 68030-based central processing unit, one or more video display
terminals, a disk storage unit, and various other input-output and peripheral
devices. The Company's manufacturing process at its San Rafael, California
facility involves assembly, testing, and quality assurance functions. Components
and parts used in the Company's Mid-Range ASAP systems are purchased from
outside vendors, and the Company generally seeks to use components and parts
that are available in quantity from a number of distributors. The Company
believes that, should any of these components become unavailable from current
sources, alternative sources could be developed. Hardware manufacturing and
enhancements account for less than one percent of total revenue.
Personnel
As of September 30, 1998, the Company employed approximately 1,487
persons. None of its employees is covered by a collective bargaining agreement
and no work stoppages have been experienced.
12
<PAGE>
ITEM 2. PROPERTIES
The Company's principal office is located in San Rafael, California,
approximately 15 miles north of San Francisco. The Company leases approximately
270,000 square feet of office space in four buildings at that location under
leases expiring in 2000 or later. It also leases approximately 5,884 square feet
of warehouse space in San Rafael for its hardware operations and for storage
under month-to-month leases. In May 1998 the Company entered into a synthetic
lease agreement for an office complex with approximately 406,000 square feet in
San Rafael, California with an expected initial occupancy date in the year 2001.
DynaMark leases approximately 109,000 square feet of office and data processing
space in three buildings in Arden Hills, Minnesota under leases which expire in
2012. DynaMark has entered into a lease for a fourth building with approximately
50,407 square feet at the same location, with an anticipated occupancy date of
July 1999 and expiring in 2012. DynaMark also leases approximately 25,000 square
feet of office and data processing space in New York City under a lease expiring
in 2004 and approximately 14,800 square feet for offices in Brookings and
Madison, South Dakota and Shoreview, Minnesota. RMT leases approximately 14,740
square feet of office space in Berkeley, California. The Company also leases a
total of approximately 47,147 square feet of office space for offices in
Baltimore, Maryland; New Castle, Delaware; Atlanta, Georgia; Chicago, Illinois;
Toronto, Ontario; Birmingham, England; Tokyo, Japan; Paris, France; Mexico City,
Mexico; Sao Paulo, Brazil; Milan, Italy; Johannesburg, South Africa; and
Wiesbaden, Germany. See Notes 5 and 11 in the Consolidated Financial Statements
for information regarding the Company's obligations under leases. The Company
believes that suitable additional space will be available to accommodate future
needs.
ITEM 3. LEGAL PROCEEDINGS
No material legal proceedings are pending.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
13
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
Name Positions Held Age
---- -------------- ---
Larry E. Rosenberger President and Chief Executive Officer 52
since March, 1991, Executive Vice
President 1985-1991, Senior Vice
President 1983-1985, Vice President
1977-1983. A Director since 1983.
Joined the Company in 1974.
John D. Woldrich Appointed Chief Operating Officer 55
effective August 1, 1995. Executive
Vice President since 1985, Senior
Vice President 1983-1985, Vice
President 1977-1983. A Director since
1983. Joined the Company in 1972.
Barrett B. Roach Executive Vice President since 58
joining the Company in August 1992.
Chief Administrative and Financial
Officer of Network Equipment
Technologies, Inc. from 1986 to July
1990. Owned and operated a vineyard
from July 1990 to August 1992.
Patrick G. Culhane Executive Vice President since August 44
1995; Senior Vice President 1992-
1995; Vice President 1990-1992;
joined the Company in 1985.
H. Robert Heller Executive Vice President since 58
September 1996 and a Director since
February 1994. President of
International Payments Institute from
December 1994 to September 1996;
President and Chief Executive Officer
of Visa U.S.A., Inc. 1991-1993,
Executive Vice President of Visa
International 1989-1991.
Jeffrey F. Robinson Senior Vice President since 1986, 49
Vice President 1980-1986. Treasurer
1981-1983. Joined the Company in
1975.
Kenneth M. Rapp Senior Vice President since August 52
1994, and President and Chief
Operating Officer of DynaMark, Inc.
since it was founded in 1985.
Peter L. McCorkell Senior Vice President since August 52
1995; Vice President, Secretary and
General Counsel since joining the
Company in 1987.
Patricia Cole Senior Vice President, Chief 49
Financial Officer and Treasurer since
November 1996; Controller since
joining the Company in September
1995. Vice President and Controller
of Qwest Communications International
Inc. 1993-1995; Controller of Los
Angeles Cellular Telephone Company
1990-1992.
David M. LaCross President, Chief Executive Officer of 46
Risk Management Technologies since it
was founded in 1989.
- ----------------------
The term of office for all officers is at the pleasure of the Board of
Directors.
14
<PAGE>
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters
As of May 6, 1996, the Company's common stock began trading on the New
York Stock Exchange under the symbol: FIC. Prior to that date, it was traded
over-the-counter on the NASDAQ Stock Market under the symbol: FICI. At December
7, 1998, Fair, Isaac had 340 holders of record of its common stock. The
following table lists the high and low last transaction prices for the periods
shown, as reported by the New York Stock Exchange and the NASDAQ Stock Market.
Stock Prices High Low
- ------------------------------------------------------------
October 1 - December 31, 1996 39 3/8 33 5/8
January 1 - March 31, 1997 43 1/8 35
April 1 - June 30, 1997 44 7/8 30 1/4
July 1 - September 30, 1997 47 1/2 40 3/4
October 1 - December 31, 1997 46 30 1/4
January 1 - March 31, 1998 38 5/8 28 3/16
April 1 - June 30, 1998 40 9/16 31 1/2
July 1 - September 30, 1998 41 1/2 29 1/4
Dividends
On May 24, 1995, Fair, Isaac announced a 100 percent stock dividend
(equivalent to a two-for-one stock split) and its intention to pay quarterly
dividends of 2 cents per share or 8 cents per year subsequent to issuance of the
stock dividend. Quarterly dividends of that amount were paid throughout the 1997
and 1998 fiscal years. There are no current plans to change the cash dividend or
to issue any further stock dividend.
Recent Sales of Unregistered Securities
On July 21, 1997, the Company acquired all the outstanding stock of
RMT, a privately held California corporation, pursuant to a merger of a wholly
owned subsidiary of the Company and RMT in which RMT became a wholly-owned
subsidiary of the Company (the "Merger"). The number of shares of the Company's
common stock and option equivalents issued by the Company in connection with the
Merger was 1,252,655.
At the time of the transaction, the issuance of the shares of the
Company's common stock and the options to purchase the Company common stock to
the former RMT security holders in the Merger was not registered under the
Securities Act of 1933, as amended (the "1933 Act"), because the transaction
involved a non-public offering exempt from registration under Section 4(2) of
the 1933 Act and Regulation D promulgated thereunder.
In July 1996, the Company purchased certain assets and liabilities of
Printronic Corporation of America, Inc. (Printronic), a privately held direct
mail computer processing company, and effective at the close of September 30,
1996, the Company acquired 100% of the stock of Credit & Risk Management
Associates, Inc. (CRMA), a privately held consulting services company. Part of
the consideration paid for Printronic and CRMA consisted of 84,735 Company
shares of common stock. At the time of each of these transactions, the issuance
of the shares of the Company's common stock was not registered under the 1933
Act, because the transaction involved a non-public offering exempt from
registration under Section 4(2) of the 1933 Act and Regulation D promulgated
thereunder.
15
<PAGE>
<TABLE>
ITEM 6. Selected Financial Data
<CAPTION>
(dollars in thousands, except per share data)
Fiscal year ended September 30, 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $245,545 $199,009 $155,913 $117,089 $92,046
Income from operations 40,432 37,756 29,518 19,828 16,420
Income before income taxes 42,105 35,546 28,704 21,390 17,178
Net income 24,327 20,686 17,423 12,753 10,559
Earnings per share:
Diluted $ 1.68 $ 1.46 $ 1.25 $ .93 $ .79
Basic $ 1.77 $ 1.55 $ 1.32 $ .99 $ .85
Dividends per share* $ .08 $ .08 $ .08 $ .055 $ .07
At September 30, 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
Working capital $ 54,852 $ 47,727 $ 34,699 $ 23,448 $ 17,436
Total assets 189,614 145,228 118,023 91,009 72,056
Long-term obligations 789 1,183 1,552 1,930 2,333
Stockholders' equity 133,451 103,189 79,654 56,176 42,929
<FN>
* Because the change to quarterly dividends was initiated in September
1995, the rate of dividends paid in fiscal 1995 does not reflect the current
annual rate of 8 cents per share.
</FN>
</TABLE>
The financial data for the fiscal years ended September 30, 1994
through 1996 have been restated to reflect the merger, effective July 1997,
between Fair, Isaac and Company, Incorporated and Risk Management Technologies
which has been accounted for under the pooling-of-interests method.
16
<PAGE>
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Fair, Isaac and Company, Incorporated, provides products and services
designed to help a variety of businesses use data to make better decisions on
their customers, prospective customers and existing portfolios. The Company's
products include statistically derived, rule-based analytical tools, software
designed to implement those analytical tools and consulting services to help
clients use and track the performance of those tools. The Company also provides
a range of credit scoring and credit account management services in conjunction
with credit bureaus and credit card processing agencies. Its DynaMark subsidiary
provides data processing and database management services to businesses engaged
in direct marketing activities, many of which are in the credit and insurance
industries. The Company's Risk Management Technologies subsidiary provides
enterprise-wide risk management and performance measurement solutions to major
financial institutions.
The Company is organized into business units that correspond to its
principal markets: consumer credit, insurance, direct marketing (DynaMark),
enterprise-wide financial risk management (RMT) and a new unit, Healthcare.
Sales to the consumer credit industry have traditionally accounted for the bulk
of the Company's revenues. Products developed specifically for a single user in
this market are generally sold on a fixed-price basis. Such products include
application and behavior scoring algorithms (also known as "analytic products"
or "scorecards"), credit application processing systems (ASAP(TM) and
CreditDesk(R)) and custom credit account management systems, including those
marketed under the name TRIAD. Software systems usually also have a component of
ongoing maintenance revenue, and CreditDesk systems have also been sold under
time- or volume-based price arrangements. Credit scoring and credit account
management services sold through credit bureaus and third-party credit card
processors are generally priced based on usage. Products sold to the insurance
industry are generally priced based on the number of policies in force, subject
to contract minimums. DynaMark and RMT employ a combination of fixed-fee and
usage-based pricing, and the Healthcare unit intends to employ a combination of
fixed-fee and usage-based pricing for its products.
This discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements and Notes. In addition to historical
information, this report includes certain forward-looking statements regarding
events and trends that may affect the Company's future results. Such statements
are subject to risks and uncertainties that could cause the Company's actual
results to differ materially. Such factors include, but are not limited to,
those described in this discussion and analysis.
RESULTS OF OPERATIONS
Revenues
<TABLE>
The following table sets forth for the fiscal periods indicated (a) the
percentage of revenues represented by fixed-price and usage-priced revenues from
the Credit business unit, and the percentage of revenues contributed by the
DynaMark, RMT, Insurance and Healthcare business units; and (b) the percentage
change in revenues within each category from the prior fiscal year. Credit
fixed-price revenues include all revenues from custom scorecard, software and
consulting projects. Most credit usage revenues are generated through
third-party alliances such as those with credit bureaus and third-party credit
card processors. In addition, some credit scorecards and software products are
licensed under volume-based fee arrangements and these are included in credit
usage-priced revenues.
17
<PAGE>
<CAPTION>
Percentage of Period-to-period
revenue percentage changes
---------------------- ------------------
Years ended 1997 1996
September 30, to to
1998 1997 1996 1998 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Credit:
Fixed-price 25 29 29 9 28
Usage-priced 48 48 50 21 23
DynaMark 20 15 13 65 41
RMT 3 4 5 (26) 18
Insurance 4 3 3 58 27
Healthcare Less than 1 1 -- (4) NM*
---- ---- ----
Total revenues 100 100 100 23 28
==== ==== ====
<FN>
*Not meaningful
</FN>
</TABLE>
Revenues from credit application scoring products increased by 22
percent in fiscal 1997 compared with fiscal 1996, and decreased by 12 percent in
fiscal 1998 compared with fiscal 1997. The increase in fiscal 1997 was due
primarily to the Company's sales of new products and increased sales of small
business loan scoring products. The decrease in revenues in fiscal 1998
reflected the impact of bank consolidations. ASAP revenues increased by 47
percent in fiscal 1997 compared with fiscal 1996, and by 14 percent in fiscal
1998 compared with fiscal 1997, primarily due to increased sales of PC-based
ASAP products (CreditDesk) and sales of the StrategyWare(R) decision support
system.
Revenues from sales of credit account management systems (TRIAD) sold
to end-users decreased by 5 percent from fiscal 1996 to fiscal 1997, and
increased by 18 percent from fiscal l997 to fiscal l998. The major factor in the
decline in revenues in fiscal l997 was a delay in the completion of the next
major release of the software. The increase in fiscal 1998 was due primarily to
the release of the next version of TRIAD (TRIAD 5.0) in November l997. The
Company's high degree of success in penetrating the U.S. bankcard industry with
these products has limited, and may continue to limit, the revenue growth in
that market. However, the Company has added functionality for the existing base
of TRIAD users and is actively marketing TRIAD for other types of credit
products and in overseas markets.
The Company provides credit risk management consulting services
primarily through CRMA, which it acquired in September 1996. CRMA completed its
second year as part of the Credit business unit on September 30, l998. CRMA's
revenues increased by 62 percent in fiscal l998 compared with fiscal 1997 and
comprised approximately 4 percent of the Company's Credit revenues in fiscal
1998 as compared to 3 percent in fiscal l997.
Usage revenues are generated primarily by credit scoring services
distributed through major credit bureaus and credit account management services
distributed through third-party bankcard processors. Revenues from credit
bureau-related services increased 22 percent in both fiscal l997 and fiscal 1998
and accounted for approximately 35 percent of revenues in fiscal 1997 and 1998.
Revenues from services provided through bankcard processors also increased in
each of these years, primarily due to increases in the number of accounts at
each of the major processors.
Revenues derived from alliances with credit bureaus and credit card
processors have accounted for much of the Company's revenue growth in the last
three years. While the Company has been very successful in extending or renewing
such agreements in the past, and believes it will generally be able to do so in
the future, the loss of one or more such alliances or an adverse change in terms
could have a significant impact on revenues and operating margin. Revenues
generated through the Company's alliances with Equifax, Inc., Experian
Information Solutions, Inc., (formerly TRW Information Systems & Services) and
Trans Union Corporation each accounted for approximately 8 to 10 percent of the
Company's total revenues in fiscal 1996 and 1997, and approximately 7 to 10
percent of the Company's total revenues in fiscal 1998.
18
<PAGE>
In 1996 Experian was acquired by CCN Group Ltd., a subsidiary of Great
Universal Stores, PLC. CCN is the Company's largest competitor, worldwide, in
the area of credit scoring. TRW/Experian has offered scoring products developed
by CCN in competition with those of the Company for several years. The
acquisition had no apparent impact on the Company's revenues from Experian in
fiscal 1997 and l998.
On September 30, 1997, amendments to the federal Fair Credit Reporting
Act became effective. The Company believes these changes to the federal law
regulating credit reporting will be favorable to the Company and its clients.
Among other things, the new law expressly permits the use of credit bureau data
to prescreen consumers for offers of credit and insurance and allows affiliated
companies to share consumer information with each other subject to certain
conditions. There is also a seven-year moratorium on new state legislation on
certain issues. However, the states remain free to regulate the use of credit
bureau data in connection with insurance underwriting.
The Company believes enacted or proposed state regulation of the
insurance industry has had a negative impact on its efforts to sell insurance
risk scores through credit reporting agencies.
DynaMark's revenues increased from $21.2 million in fiscal 1996 to
$29.8 million in fiscal 1997 and to $49.2 million in fiscal 1998. The increases
in DynaMark's revenues (excluding intercompany revenues) were due primarily to
increased revenues from customers in the financial services industry. Gross
margins for fiscal 1996, 1997 and 1998 were approximately 39, 42 and 51 percent,
respectively. Since its acquisition, DynaMark has taken on an increasing share
of the mainframe batch processing requirements of the Company's other business
units. During each of fiscal 1996 and 1997, such intercompany revenue
represented approximately 14 percent of DynaMark's total revenues, and in fiscal
1998 such revenue represented approximately 8 percent of DynaMark's total
revenues. Accordingly, DynaMark's externally reported revenues may tend to
understate DynaMark's growth and contribution to the Company as a whole.
RMT's revenues for fiscal l997 increased by 18 percent compared with
fiscal l996, and in fiscal 1998 decreased by 26 percent compared with fiscal
1997, due primarily to the impact of bank consolidations.
Increases in insurance revenues for fiscal l998, compared with fiscal
1997, were due to strong growth in both insurance products sold to end-users and
in the insurance scoring services offered through consumer reporting agencies.
In fiscal 1997, the Company recorded its first revenues from its Healthcare
business unit, and during fiscal 1998 derived revenues from providing analytical
marketing services to a large pharmaceuticals manufacturer to help improve
customer relationships and management of prescription compliance (i.e., a
patient's fulfillment of prescriptions and taking them to completion).
The Company's revenues derived from clients outside the United States
increased from $26.1 million in 1996 to $33.9 million in fiscal l997 and to
$42.9 million in fiscal 1998. RMT contributed $4.3 million, $4.6 million and
$3.7 million to the Company's non-U.S. revenues for fiscal years 1996, l997 and
l998, respectively. DynaMark has not had significant non-U.S. revenues. Sales of
software products, including TRIAD and CreditDesk, increased usage of credit
bureau scores in Canada, and an increase in the number of accounts using the
Company's account management services at credit card processors in Europe and
Latin America accounted for most of the increase in international revenues in
fiscal 1997 and 1998. Gains or losses due to fluctuations in currency exchange
rates have not been significant to date but may become more important if, as
expected, the proportion of the Company's revenues denominated in foreign
currencies increases in the future.
Revenues from software maintenance and consulting services each
accounted for less than 10 percent of revenues in each of the three years in the
period ended September 30, 1998, and the Company does not expect revenues from
either of these sources to exceed 10 percent of revenues in the foreseeable
future.
During the period since 1990, while the rate of account growth in the
U.S. bankcard industry has been slowing and many of the Company's largest
institutional clients have merged and consolidated, the Company has generated
above-average growth in revenues--even after adjusting for the effect of
acquisitions--from its bankcard-related scoring and account management business
by deepening its penetration of large banks and other credit issuers. The
Company believes much of its future growth prospects will rest on its ability
to: (a) develop new, high-value products, (b) increase its penetration of
established or emerging credit markets outside the U.S. and Canada and (c)
expand--either directly or through further acquisitions--into relatively
undeveloped or underdeveloped markets for its products and services, such as
direct marketing, insurance, small business lending and healthcare information
19
<PAGE>
management. During fiscal 1998, the Company's backlog of orders for fixed-priced
products declined slightly. This indicates that revenue growth in fiscal 1999
and later years may depend to a large extent on sales of newly developed
products.
Over the long term, in addition to the factors discussed above, the
Company's rate of revenue growth--excluding growth due to acquisitions--is
limited by the rate at which it can recruit and absorb additional professional
staff. Management believes this constraint will continue to exist indefinitely.
On the other hand, despite the high penetration the Company has already achieved
in certain markets, the opportunities for application of its core competencies
are much greater than it can pursue. Thus, the Company believes it can continue
to grow revenues, within the personnel constraint, for the foreseeable future.
At times management may forego short-term revenue growth in order to devote
limited resources to opportunities that it believes have exceptional long-term
potential. This occurred in the period from 1988 through 1990, when the Company
devoted significant resources to developing the usage-priced services
distributed through credit bureaus and third-party processors.
Expenses
<TABLE>
The following table sets forth for the fiscal periods indicated: (a)
the percentage of net revenues represented by certain line items in the
Company's Consolidated Statements of Income and (b) the percentage change in the
amount of each such line item from the prior fiscal year.
<CAPTION>
Percentage of Period-to-period
revenue percentage changes
-------------------------- ------------------
Years ended 1997 1996
September 30, to to
1998 1997 1996 1998 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenues 100 100 100 23 28
----- ----- -----
Costs and expenses:
Cost of revenues 35 36 37 17 26
Sales and marketing 15 15 17 28 13
Research and development 12 9 6 66 90
General and administrative 21 20 21 28 23
Amortization of intangibles 1 1 -- 9 74
----- ----- -----
Total costs and expenses 84 81 81 27 28
----- ----- -----
Income from operations 16 19 19 7 28
Other income (expense) 1 (1) (1) NM* NM*
----- ----- -----
Income before income taxes 17 18 18 18 24
Provision for income taxes 7 8 7 20 32
----- ----- -----
Net income 10 10 11 18 19
===== ===== =====
<FN>
*Not meaningful
</FN>
</TABLE>
Cost of revenues
Cost of revenues consists primarily of personnel, travel and related
overhead costs; costs of computer service bureaus; and the amounts paid by the
Company to credit bureaus for scores and related information in connection with
the ScoreNet(R) Service.
Cost of revenues, as a percentage of revenues, declined slightly in the
periods from fiscal l996 to fiscal 1997 and from fiscal l997 to fiscal 1998. The
decrease in both fiscal l997 and fiscal 1998 was due primarily to the
reassignment to research and development activities of certain personnel whose
primary assignment had been production and delivery.
20
<PAGE>
Sales and marketing
Sales and marketing expenses consist principally of personnel, travel,
overhead, advertising and other promotional expenses. As a percentage of
revenues, sales and marketing expenses decreased in fiscal 1997 compared with
fiscal 1996 due primarily to a reduction in media advertising and remained
essentially unchanged from fiscal 1997 to fiscal 1998.
Research and development
Research and development expenses include the personnel and related
overhead costs incurred in product development, researching mathematical and
statistical algorithms and developing software tools that are aimed at improving
productivity and management control. Research and development increased sharply
from fiscal l996 to fiscal 1997 and from fiscal 1997 to fiscal 1998. After
several years of concentrating on developing new markets--either geographically
or by industry--for its existing technologies, in fiscal 1996 and fiscal l997
the Company renewed its historical emphasis on developing new technologies,
especially in the area of software development.
In fiscal 1998, the Company continued to emphasize development of new
technologies. Research and development expenditures in fiscal 1998 were
primarily related to new bankruptcy scoring products for Visa (Integrated
Solutions Concepts) and Trans Union, new fraud-detection software products,
joint product development projects with Deluxe Financial Services, Inc.,
healthcare receivables management and Year 2000 compliance work.
General and administrative
General and administrative expenses consist mainly of compensation
expenses for certain senior management, corporate facilities expenses, the costs
of administering certain benefit plans, legal expenses, expenses associated with
the exploration of new business opportunities and the costs of operating
administrative functions, such as finance and computer information systems. As a
percentage of revenues, general and administrative expenses were essentially
unchanged for fiscal l996, l997 and l998.
Amortization of intangibles
The Company is amortizing the intangible assets arising from various
acquisitions over periods ranging from 2 to 15 years. The level of amortization
expense in future years will depend, in part, on the amount of additional
payments to the former shareholders of CRMA, a privately held company acquired
at the end of fiscal l996. See below, under "Capital Resources and Liquidity."
Other income (expense)
The table in Note 13 to the Consolidated Financial Statements presents
the detail of other income and expenses. Interest income is derived from the
investment of funds surplus to the Company's immediate operating requirements.
At September 30, 1998, the Company had approximately $46.5 million invested in
U.S. treasury securities and other interest-bearing instruments. Interest income
increased in both fiscal 1997 and 1998 due to higher average cash balances in
interest-bearing accounts and instruments.
The Company's share of operating losses in certain early-stage
development companies that are accounted for using the equity method is charged
to other expense. During the fiscal year ended September 30, l997, the Company
wrote off non-marketable investments with an equity basis of $773,000, primarily
related to an Italian start-up venture that was adversely affected by a new
privacy law. In fiscal year ended September 30, 1998, the Company liquidated its
share of this non-marketable security resulting in a gain of $165,000 and has no
further financial commitments in connection with this investment. Note 4 to the
Consolidated Financial Statements describes the Company's investment in such
companies.
In fiscal 1998, the difference between the increase in operating income
(7 percent) and the increase in net income (18 percent) was primarily due to the
interest income derived from investments in U.S. treasury securities and other
interest-bearing instruments, and the absence of losses from investments in
start-ups.
21
<PAGE>
Provision for income taxes
The Company's effective tax rate was 39.3, 41.8 and 42.2 percent in
fiscal l996, 1997 and l998, respectively. The increase to 42.2 percent in fiscal
1998 was due primarily to the nondeductible nature of goodwill, deferred
compensation and an increase in the effective state tax rate. The Company
expects its effective tax rate in fiscal 1999 to be approximately 42 percent,
barring any change in the tax laws.
Capital Resources and Liquidity
Working capital increased from $34,699,000 at September 30, 1996, to
$47,727,000 at September 30, l997, and to $54,852,000 at September 30, 1998. The
increase in fiscal 1997 was due primarily to increases in accounts receivable
and unbilled work in progress, which more than offset the increase in accrued
compensation and employee benefits and the decrease in prepaid expenses and
other assets.
The increase in fiscal 1998 was due primarily to increases in
short-term investments, unbilled work in progress and accounts receivable, which
more than offset the increase in accounts payable and other accrued liabilities
and accrued compensation and employee benefits.
The Company's exposure to collection risks is comprised of the sum of
accounts receivable plus unbilled work in progress, less billings in excess of
earned revenues. Changes in contract terms and product mix, along with
variations in timing, may cause fluctuations in any or all of these items.
During fiscal 1997, the increases in accounts receivable and billings in excess
of earned revenues were proportional to the increase in revenues. The greater
increase in unbilled work in progress was due primarily to changes in product
mix and contract terms. During fiscal 1998, the increase in accounts receivable
was proportionally much less than the increase in revenues due to improved
collection efforts by the Company, and the increases in unbilled work in
progress and billings in excess of earned revenues were proportional to the
increase in revenues.
The Company capitalized $45,000 as goodwill relating to amounts due to
the former stockholders of CRMA under the CRMA purchase agreement based upon its
financial results in fiscal 1997, and has capitalized $263,000 based upon CRMA's
financial results in fiscal 1998. An additional payment to the former
stockholders of CRMA based upon CRMA's financial results in fiscal 1999 may also
be required. That amount, which will be paid 55 percent in Company stock and 45
percent in cash, will not exceed $1,833,000.
In fiscal 1997, cash provided by operations resulted primarily from net
income before depreciation and amortization, decreases in prepaid expenses and
other assets and increases in accrued compensation and employee benefits,
partially offset by the increase in accounts receivable and unbilled work in
progress. Cash was used in investing activities primarily for additions to
property and equipment and the purchase of interest-bearing investments,
partially offset by the maturities of interest-bearing investments. Cash was
used in financing activities for the payment of dividends, reduction of capital
lease obligations and repurchase of Company stock, partially offset by cash
generated by the exercise of stock options.
In fiscal 1998, cash provided by operations resulted primarily from net
income before depreciation and amortization, and increases in accounts payable
and other accrued liabilities and accrued compensation and employee benefits,
partially offset by the increases in accounts receivable, other assets and
unbilled work in progress. Cash was used in investing activities primarily for
additions to property and equipment, and purchases of interest-bearing
investments, partially offset by the maturities of interest-bearing investments.
Cash was provided by financing activities primarily from the exercise of stock
options, partially offset by cash used for the payment of dividends and the
reduction of capital lease obligations.
Future cash flows will continue to be affected by operating results,
contractual billing terms and collections, investment decisions and dividend
payments, if any. At September 30, 1998, the Company had no significant capital
commitments other than those obligations described in Notes 2, 5 and 11 of the
Consolidated Financial Statements.
On December 1, 1997, the Company purchased undeveloped land in San
Rafael, California, with the intention of constructing an office complex to
accommodate future growth. Development has commenced, and on May 15, 1998, the
Company entered into a synthetic lease arrangement, which will materially
increase the Company's future operating lease expenses. Rental payments will
commence upon completion of construction, which is expected to
22
<PAGE>
occur in the second quarter of fiscal 2001. With this external financing, the
Company believes that the cash and marketable securities on hand, along with
cash expected to be generated by operations, will be adequate to meet its
capital and liquidity needs for both the current year and the foreseeable
future.
Year 2000
The Company is performing Year 2000 remediation work and compliance
testing on its software products marketed to customers. The updated versions of
most of its software products currently being shipped to customers are Year 2000
compliant. Certain international versions of the Company's software products are
not yet Year 2000 compliant, but the Company expects to be prepared to ship
upgrade "patches" for these products by the end of calendar 1998. Year 2000
remediation work, including compliance testing, for most earlier versions of the
Company's software installed at customer sites will be performed as part of the
Company's normal upgrade and maintenance process. Prior to the end of calendar
1999, the Company will discontinue support for some software products that have
been replaced by other products, and Year 2000 upgrades for these products will
not be available. Revenues from such products are not significant. There are no
assurances that the Company's current products do not contain undetected errors
or defects associated with Year 2000 date functions that may result in material
costs to the Company. However, the Company currently does not expect significant
disruption of its revenues or operations from the Year 2000 issues associated
with its products. The Company has not made an assessment of the potential
impact of failing to complete its own Year 2000 remediation work nor has it
developed any contingency plans for such an event.
Additionally, the Company has substantially completed its Year 2000
inventory and assessment of internal information technology (IT) and non-IT
systems and applications and expects all major internal systems to be fully
compliant by the end of December 1998. The Company has determined that the
majority of its internally developed systems are Year 2000 compliant. All
applications supplied to Company by third parties are either Year 2000 compliant
today or have "patches" currently available to bring them into compliance.
Extensive compliance testing has commenced and will continue through most of the
calendar year 1999. The most reasonably likely worst-case scenarios would
include: (a) corruption of data contained in the Company's internal information
systems, and (b) hardware/operating system failure. The Company is in the
process of completing its contingency plans for business-critical IT and non-IT
internal systems as an extension of its existing disaster recovery plan and
expects to complete such planning by June 30, 1999.
The Company estimates that the costs of Year 2000 remediation
(including compliance testing) for its products and internal systems will be in
the range of $4 million to $5 million. Approximately two-thirds of these
estimated costs have been expended as of September 30, 1998. These costs
principally consist of both internal staff costs and expenses for external
consultants, software and hardware, which have been or will be expensed by the
Company during the period they are incurred. Expected costs for the Year 2000
remediation work (including compliance testing) and projected completion dates
are based on the Company's management's estimates and assumptions and actual
results may vary materially from those anticipated.
The Company has also initiated communications with third parties on
which it is dependent for essential services and for the distribution of its
significant services to determine how they are addressing Year 2000 issues and
to evaluate any impact on the Company's operations. The Company is working with
these third parties to resolve Year 2000 issues and information received to date
indicates that these parties are in the process of implementing and/or testing
remediation strategies to ensure Year 2000 compliance of systems, services
and/or products. However, the lack of resolution of Year 2000 issues by these
parties--especially the credit bureaus and credit card processors through which
the Company distributes credit scoring and account management services--could
have a material adverse impact on the Company's future business operations,
financial condition and results of operations.
The Company anticipates that the most reasonably likely worst-case
scenarios involving third-party Year 2000 issues would include: (a) failure of
infrastructure services provided by government agencies and third parties (e.g.,
transportation, electricity, telephone, Internet services, etc.) and (b) failure
of one or more of the credit bureaus or credit card processors through which the
Company distributes its credit scoring and account management services to
achieve timely and successful Year 2000 compliance. Contingency plans to address
these most reasonably likely
23
<PAGE>
worst-case scenarios are under development and are expected to be completed by
June 30, 1999. At this time the Company cannot quantify the potential impact of
third-party Year 2000 issues.
The foregoing information and statements regarding the Company's Year
2000 capabilities and readiness are "Year 2000 Information and Readiness
Disclosures" in conformance with the Year 2000 Information and Readiness
Disclosure Act of 1998 enacted on October 19, 1998.
European Economic and Monetary Union (EMU)
Under the European Union's plan for Economic and Monetary Union (EMU),
the euro becomes the sole accounting currency of EMU countries on January 1,
2002. Its initial phase goes into effect on January 1, 1999, in 11 participating
countries: Austria, Belgium, Finland, France, Germany, Ireland, Italy,
Luxembourg, the Netherlands, Portugal and Spain. In this initial phase the EMU
mandates that key financial systems be able to triangulate conversion rates so
that any amount booked will be logged and processed simultaneously in both the
local currency and euros. The Company believes that its computer systems and
programs are euro-compliant. Costs associated with compliance were not material
and were expensed by the Company as they were incurred.
Quarterly Results
The table in Note 15 to the Consolidated Financial Statements presents
unaudited quarterly operating results for the last eight fiscal quarters.
Management believes that all the necessary adjustments have been included in the
amounts stated to present fairly the selected quarterly information, when read
in conjunction with the financial statements included elsewhere in this report.
This information includes all normal recurring adjustments that the Company
considers necessary for a fair presentation thereof, in accordance with
generally accepted accounting principles.
Quarterly results may be affected by fluctuations in revenue associated
with credit card solicitations, by the timing of orders for and deliveries of
certain ASAP and TRIAD systems and by the seasonality of ScoreNet purchases.
With the exception of the cost of ScoreNet data purchased by the Company, most
of its operating expenses are not affected by short-term fluctuations in
revenues; thus, short-term fluctuations in revenues may have a significant
impact on operating results. However, in recent years these fluctuations were
generally offset by the strong growth in revenues from services delivered
through credit bureaus and third-party bankcard processors.
Management believes that neither the quarterly variations in net
revenues and net income nor the results of operations for any particular quarter
are necessarily indicative of results of operations for full fiscal years.
Accordingly, management believes that the Company's results should be evaluated
on an annual basis.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk Disclosures. The following discussion about the Company's
market risk disclosures involves forward-looking statements. Actual results
could differ materially from those projected in the forward-looking statements.
The Company is exposed to market risk related to changes in interest rates,
foreign currency exchange rates and equity security price risk. The Company does
not use derivative financial instruments for speculative or trading purposes.
Interest Rate Sensitivity. The Company maintains a short-term
investment portfolio consisting mainly of income securities with an average
maturity of less than one year. These available-for-sale securities are subject
to interest rate risk and will fall in value if market interest rates increase.
If market interest rates were to increase immediately and uniformly by 10
percent from levels at September 30, 1998, the fair value of the portfolio would
decline by an immaterial amount. The Company has the ability to hold its fixed
income investments until maturity, and therefore the Company would not expect
its operating results or cash flows to be affected to any significant degree by
the effect of a sudden change in market interest rates on its securities
portfolio. The Company believes foreign currency and equity risk is not
material.
24
<PAGE>
ITEM 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Fair, Isaac and Company, Incorporated:
We have audited the accompanying consolidated balance sheets of Fair,
Isaac and Company, Incorporated, and subsidiaries as of September 30, 1998 and
1997, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the years in the three-year period ended September
30, 1998. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Fair, Isaac
and Company, Incorporated, and subsidiaries as of September 30, 1998 and 1997,
and the results of their operations and their cash flows for each of the years
in the three-year period ended September 30, 1998, in conformity with generally
accepted accounting principles.
San Francisco, California
October 29, 1998
25
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
(in thousands, except per share data)
Years ended September 30, 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 245,545 $ 199,009 $ 155,913
Costs and expenses:
Cost of revenues 84,980 72,566 57,732
Sales and marketing 37,470 29,162 25,722
Research and development 29,136 17,572 9,265
General and administrative 52,132 40,679 32,942
Amortization of intangibles 1,395 1,274 734
------------ ------------ ------------
Total costs and expenses 205,113 161,253 126,395
------------ ------------ ------------
Income from operations 40,432 37,756 29,518
Other income (expense), net 1,673 (2,210) (814)
------------ ------------ ------------
Income before income taxes 42,105 35,546 28,704
Provision for income taxes 17,778 14,860 11,281
------------ ------------ ------------
Net income $ 24,327 $ 20,686 $ 17,423
============ ============ ============
Earnings per share:
Diluted $ 1.68 $ 1.46 $ 1.25
============ ============ ============
Basic $ 1.77 $ 1.55 $ 1.32
============ ============ ============
Shares used in computing earnings per share:
Diluted 14,463,000 14,202,000 13,922,000
============ ============ ============
Basic 13,763,000 13,386,000 13,161,000
============ ============ ============
<FN>
See accompanying notes to the consolidated financial statements.
</FN>
</TABLE>
26
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(dollars in thousands)
September 30, 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 14,242 $ 13,209
Short-term investments 18,283 6,108
Accounts receivable, net of allowance (1998: $1,163; 1997: $758) 39,028 36,147
Unbilled work in progress 22,004 18,176
Prepaid expenses and other current assets 4,040 3,673
Deferred income taxes 5,016 4,517
--------- ---------
Total current assets 102,613 81,830
Long-term investments 24,368 13,261
Property and equipment, net 36,893 34,486
Intangibles, net 10,458 8,361
Deferred income taxes 6,398 3,369
Other assets 8,884 3,921
--------- ---------
$ 189,614 $ 145,228
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and other accrued liabilities $ 17,418 $ 8,228
Accrued compensation and employee benefits 22,065 19,160
Billings in excess of earned revenues 7,862 6,346
Capital lease obligations 416 369
--------- ---------
Total current liabilities 47,761 34,103
Other liabilities 7,613 6,753
Capital lease obligations 789 1,183
--------- ---------
Total liabilities 56,163 42,039
--------- ---------
Stockholders' equity:
Preferred stock -- --
Common stock 140 135
Paid in capital in excess of par value 32,454 26,025
Retained earnings 100,678 77,453
Less treasury stock (351) (433)
Cumulative translation adjustments (170) (308)
Unrealized gains on investments 700 317
--------- ---------
Total stockholders' equity 133,451 103,189
--------- ---------
$ 189,614 $ 145,228
<FN>
See accompanying notes to the consolidated financial statements.
</FN>
</TABLE>
27
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Period from September 30, 1995, to September 30, 1998 (in thousands)
- -----------------------------------------------------------------------------------------------------------------------------------
Common stock Paid in Unrealized Total
------------- capital in Cumulative gains on stock-
Par excess of Retained Treasury Pension translation Invest- holders'
Share value par value earnings stock adjustments adjustments ments equity
------ ----- ---------- --------- -------- ----------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at September 30, 1995 12,909 $ 130 $ 14,947 $ 41,577 $ (228) $ (406) $ -- $ 156 $ 56,176
Issuance of common stock 101 1 3,586 -- -- -- -- -- 3,587
Issuance/vesting of restricted stock 1 -- 115 -- -- -- -- -- 115
Exercise of stock options 221 2 911 -- -- -- -- -- 913
Tax benefit of exercised stock
options -- -- 1,124 -- -- -- -- -- 1,124
Contribution/sale to ESOP 38 -- 945 -- 160 -- -- -- 1,105
Net income -- -- -- 17,423 -- -- -- -- 17,423
Dividends declared -- -- -- (991) -- -- -- -- (991)
Pension adjustment -- -- -- -- -- 406 -- -- 406
Unrealized losses on investments -- -- -- -- -- -- -- (59) (59)
Cumulative translation adjustments -- -- -- -- -- -- (145) -- (145)
------ ----- -------- --------- ------- --------- ------- ------- --------
Balances at September 30, 1996 13,270 133 21,628 58,009 (68) -- (145) 97 79,654
Issuance of common stock 47 -- 1,044 -- -- -- -- -- 1,044
Vesting of restricted stock -- -- 289 -- -- -- -- -- 289
Exercise of stock options 141 2 1,018 -- -- -- -- -- 1,020
Tax benefit of exercised stock
options -- -- 1,474 -- -- -- -- -- 1,474
Contribution/sale to ESOP 41 -- 504 -- 105 -- -- -- 609
Deferred compensation -- -- 68 -- -- -- -- -- 68
Repurchase of company stock (37) -- -- -- (470) -- -- -- (470)
Net income -- -- -- 20,686 -- -- -- -- 20,686
Dividends declared -- -- -- (1,028) -- -- -- -- (1,028)
Charge to reflect change in RMT's
fiscal year -- -- -- (214) -- -- -- -- (214)
Unrealized gains on investments -- -- -- -- -- -- -- 220 220
Cumulative translation adjustments -- -- -- -- -- -- (163) -- (163)
------ ----- -------- --------- ------- --------- ------- ------- --------
Balances at September 30, 1997 13,462 135 26,025 77,453 (433) -- (308) 317 103,189
Issuance of common stock 33 -- 1,468 -- -- -- -- -- 1,468
Vesting of restricted stock -- -- 185 -- -- -- -- -- 185
Exercise of stock options 487 5 2,726 -- -- -- -- -- 2,731
Tax benefit of exercised stock
options -- -- 1,660 -- -- -- -- -- 1,660
Deferred compensation -- -- 472 -- -- -- -- -- 472
Repurchase of company stock (3) -- (82) -- (28) -- -- -- (110)
Issuance of treasury stock 3 -- -- -- 110 -- -- -- 110
Net income -- -- -- 24,327 -- -- -- -- 24,327
Dividends declared -- -- -- (1,102) -- -- -- -- (1,102)
Unrealized gains on investments -- -- -- -- -- -- -- 383 383
Cumulative translation adjustments -- -- -- -- -- -- 138 -- 138
------ ----- -------- --------- ------- --------- ------- ------- --------
Balances at September 30, 1998 13,982 $ 140 $ 32,454 $ 100,678 $ (351) $ -- $ (170) $ 700 $133,451
====== ===== ======== ========= ======= ========= ======= ======= ========
28
<FN>
See accompanying notes to the consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
(dollars in thousands)
Years ended September 30, 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 24,327 $ 20,686 $ 17,423
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization 14,948 11,753 7,928
Deferred compensation 472 -- --
Deferred income taxes (3,809) (2,824) 84
Equity loss in investments -- 2,082 821
Investment write-off -- 773 1,535
Charge to reflect change in RMT's fiscal year -- (214) --
Changes in operating assets and liabilities:
(Increase) in accounts receivable (2,743) (8,104) (7,824)
Decrease (increase) in unbilled work in progress (3,828) (7,611) 1,425
Decrease (increase) in prepaid expenses and other assets 473 2,945 (3,180)
Decrease (increase) in other assets (4,963) 515 (40)
Increase in accounts payable and other accrued liabilities 10,226 329 2,894
Increase in accrued compensation and employee benefits 4,413 3,659 5,105
Increase (decrease) in billings in excess of earned revenues 1,516 1,406 (1,244)
Increase (decrease) in other liabilities 236 664 (1,002)
-------- -------- --------
Net cash provided by operating activities 41,268 26,059 23,925
-------- -------- --------
Cash flows from investing activities
Purchases of property and equipment (15,669) (21,653) (13,472)
Proceeds from sale of property and equipment -- 340 --
Payments for acquisition of subsidiaries (3,347) (78) (2,811)
Purchases of investments (33,491) (9,658) (10,781)
Proceeds from maturities of investments 11,030 7,568 5,913
-------- -------- --------
Net cash used in investing activities (41,477) (23,481) (21,151)
-------- -------- --------
Cash flows from financing activities
Principal payments of capital lease obligations (387) (378) (391)
Proceeds from the exercise of stock options and issuance of treasury stock 2,841 1,020 928
Dividends paid (1,102) (1,028) (991)
Repurchase of company stock (110) (470) --
-------- -------- --------
Net cash provided by (used in) financing activities 1,242 (856) (454)
-------- -------- --------
Increase in cash and cash equivalents 1,033 1,722 2,320
Cash and cash equivalents, beginning of year 13,209 11,487 9,167
-------- -------- --------
Cash and cash equivalents, end of year $ 14,242 $ 13,209 $ 11,487
======== ======== ========
<FN>
See accompanying notes to the consolidated financial statements.
</FN>
</TABLE>
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business and Summary of Significant Accounting Policies
Nature of business
Fair, Isaac and Company, Incorporated, (the "Company") is incorporated
under the laws of the State of Delaware. The Company offers a variety of
technological tools to enable users to make better decisions through data. The
Company is a world leader in developing predictive and risk assessment models
for the financial services industry, including credit and insurance scoring
algorithms. The Company also offers direct marketing and database management
services, and enterprise-wide risk management and performance measurement
solutions to major financial institutions through its wholly owned subsidiaries,
DynaMark, Inc. (DynaMark) and Risk Management Technologies (RMT), respectively.
Basis of consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated from the consolidated financial
statements.
Use of estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
Cash and cash equivalents
Cash and cash equivalents consist of cash in banks and investments with
an original maturity of 90 days or less at time of purchase.
Investments
Investments in U.S. government obligations and marketable equity
securities are classified as "available-for-sale" and carried at market.
Investments in 50% or less owned companies in which the Company has the ability
to exercise significant influence are accounted for using the equity method and
are classified as non-marketable securities. Other investments are carried at
the lower of cost or net realizable method and are classified as non-marketable
securities.
Investments classified as available-for-sale securities with remaining
maturities over one year and non-marketable securities are classified as
long-term investments.
Credit and market risk
The Company invests a portion of its excess cash in U.S. government
obligations and has established guidelines relative to diversification and
maturities that maintain safety and liquidity. In addition, an allowance for
doubtful accounts is maintained at a level which management believes is
sufficient to cover potential credit losses for accounts receivable. Actual
losses have been within management's expectations.
Depreciation and amortization
Depreciation and amortization on property and equipment including
leasehold improvements and capitalized leases are provided using the
straight-line method over estimated useful lives ranging from three to ten years
or the term of the respective leases.
30
<PAGE>
Revenue recognition
Revenues from contracts for the development of credit scoring systems
and custom software are recognized using the percentage-of-completion method of
accounting based upon milestones that are defined using management's estimates
of costs incurred at various stages of the project as compared to total
estimated project costs. Revenues determined by the percentage-of-completion
method in excess of contract billings are recorded as unbilled work in progress.
Such amounts are generally billable upon reaching certain performance milestones
that are defined by the individual contracts. Deposits billed and received in
advance of performance under contracts are recorded as billings in excess of
earned revenues.
Revenues from usage-priced products and services are recognized on
receipt of usage reports from the third parties through which such products and
services are delivered. Amounts due under such arrangements are recorded as
unbilled work in progress until collected. Revenues from non-customized software
licenses and shrink-wrapped products are recognized upon delivery of product and
services, or license renewal. Revenues from products and services sold on
time-based pricing, including maintenance of computer and software systems, are
recognized ratably over the contract period.
Software costs
The Company follows one of two paths to develop software. One involves
a detailed program design, which is used when introducing new technology; the
other involves the creation of a working model for modification to existing
technologies that has been supported by adequate testing. All costs incurred
prior to the resolution of unproven functionality and features, including new
technologies, are expensed as research and development. After the uncertainties
have been tested and the development issues have been resolved, technological
feasibility is achieved and subsequent costs such as coding, debugging and
testing are capitalized.
When developing software using existing technology, the costs incurred
prior to the completion of a working model are expensed. Once the product design
is met, this typically concludes the software development process and is usually
the point at which technological feasibility is established. Subsequent
expenses, including coding and testing, if any, are capitalized. For the
three-year period ending September 30, 1998, technological feasibility coincided
with the completion process; thus, all design and development costs were
expensed as research and development costs.
Purchased software costs are amortized over three to five years. For
the years ended September 30, 1998, 1997 and 1996, amortization of capitalized
software was $528,000, $808,000 and $248,000, respectively. At September 30,
1998 and 1997, unamortized purchased computer software costs were $6,508,000 and
$1,221,000, respectively.
Intangibles
The intangible assets consisting of goodwill and non-compete agreements
arose principally from business acquisitions and are amortized on a
straight-line basis over the period of expected benefit, which ranges from 2 to
15 years. The Company assesses the recoverability of goodwill by evaluating the
undiscounted projected results of operations over the remaining amortization
period.
Income taxes
Income taxes are recognized during the year in which transactions enter
into the determination of financial statement income, with deferred taxes being
provided for temporary differences between amounts of assets and liabilities for
financial reporting purposes and such amounts as measured by tax laws.
31
<PAGE>
Foreign currency
The Company has determined that the functional currency of each foreign
operation is the local currency. Assets and liabilities denominated in foreign
currencies are translated into U.S. dollars at the exchange rate on the balance
sheet date, while revenues and expenses are translated at average rates of
exchange prevailing during the period. Translation adjustments are accumulated
as a separate component of stockholders' equity.
Earnings per share
Diluted earnings per share are based on the weighted-average number of
common shares outstanding and common stock equivalent shares. Common stock
equivalent shares result from the assumed exercise of outstanding stock options
that have a dilutive effect when applying the treasury stock method. Basic
earnings per share is computed on the basis of the weighted average number of
common stock shares outstanding.
Accounting pronouncements
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 130, "Reporting
Comprehensive Income." SFAS No. 130 established standards for reporting
comprehensive income and its components in financial statements. This statement
requires that all items which are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. Comprehensive income is equal to net income plus the change in
"other comprehensive income." SFAS No. 130 requires that an entity: (a) classify
items of other comprehensive income by their nature in a financial statement,
and (b) report the accumulated balance of other comprehensive income separately
from common stock and retained earnings in the equity section of the balance
sheet. This statement is effective for financial statements issued for fiscal
years beginning after December 15, 1997. Beginning with the first quarter of
1999, management intends to conform its consolidated financial statements to
this pronouncement.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." This statement establishes standards
for publicly held entities to follow in reporting information about operating
segments in annual financial statements and requires that those entities report
selected information about operating segments in interim financial statements.
This statement also establishes standards for related disclosures about products
and services, geographic areas and major customers. This statement is effective
for financial statements issued for fiscal years beginning after December 15,
1997. Beginning with fiscal year 1999, management intends to conform its annual
consolidated financial statements to this pronouncement.
In October 1997, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) No. 97-2, "Software Revenue
Recognition," which supersedes SOP 91-1. The Company will be required to adopt
SOP 97-2 for software transactions entered into beginning October 1, 1998, and
retroactive application to years prior to adoption is prohibited. SOP 97-2
generally requires revenue earned on software arrangements involving multiple
elements (e.g., software products, upgrades/enhancements, postcontract customer
support, installation, training, etc.) to be allocated to each element based on
the relative fair values of the elements. The fair value of an element must be
based on evidence, which is specific to the vendor. The revenue allocated to
software products (including specified upgrades/enhancements) generally is
recognized upon delivery of the products. The revenue allocated to postcontract
customer support generally is recognized ratably over the term of the support
and revenue allocated to service elements (such as training and installation)
generally is recognized as the services are performed. If a vendor does not have
evidence of the fair value for all elements in a multiple-element arrangement,
all revenue from the arrangement is deferred until such evidence exists or until
all elements are delivered. The Company's management believes that the adoption
of SOP 97-2 will not have a material impact on the Company's results of
operations. Beginning with fiscal year 1999, management intends to conform its
consolidated financial statements to this pronouncement.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure
about Pensions and Other Postretirement Benefits." The statement standardizes
the disclosure requirements for pension and other
32
<PAGE>
postretirement benefits. This statement is effective for financial statements
issued for fiscal years beginning after December 15, 1997. The Company is
currently evaluating the impact of the disclosure. Beginning with fiscal year
1999, management intends to conform its consolidated financial statements to
this pronouncement.
In March 1998, the AICPA issued SOP No. 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use." The SOP requires
that certain costs related to the development or purchase of internal-use
software be capitalized and amortized over the estimated useful life of the
software. The SOP also requires that costs related to the preliminary project
stage and the post-implementation/operations stage of an internal-use computer
software development project be expensed as incurred. This statement is
effective for financial statements issued for fiscal years beginning after
December 15, 1998. Beginning with fiscal year 2000, management intends to
conform its consolidated financial statements to this pronouncement.
Fair value of financial instruments
The fair values of cash and cash equivalents, accounts receivable and
accounts payable are approximately equal to their carrying amounts because of
the short-term maturity of these instruments. The fair values of the Company's
investment securities are disclosed in Note 4.
2. Mergers and Acquisitions
In July 1997, the Company issued 1,252,665 shares of its common stock
(including 544,218 shares underlying options assumed by the Company) in
connection with the merger with RMT. The acquisition has been accounted for
under the pooling-of-interests method. Accordingly, the consolidated financial
statements have been restated for all prior periods to include RMT. Further, all
common share and per share data have been restated for prior periods.
For the pre-merger periods indicated, revenues and net income of the
Company and RMT are as follows:
Nine-months ended
June 30, 1997 Year ended
(dollars in thousands) Unaudited September 30, 1996
- --------------------------------------------------------------------------------
Revenues
Fair, Isaac and Company, Incorporated $137,031 $148,749
Risk Management Technologies 5,746 7,164
-------- --------
$142,777 $155,913
======== ========
Net Income
Fair, Isaac and Company, Incorporated $ 13,732 $ 16,179
Risk Management Technologies 630 1,244
-------- --------
$ 14,362 $ 17,423
======== ========
RMT previously used the fiscal year ended December 31 for its financial
reporting. RMT's operating results for the year ended December 31, 1996, are
included in the accompanying statement of income in the column headed September
30, 1996. The statement of income's comparative 1997 results reflect the
operations of the Company and RMT for the year ended September 30, 1997.
Accordingly, the duplication of RMT's net income, for the three months ended
December 31, 1996, has been adjusted by a $214,000 charge to retained earnings
in fiscal 1997.
In July 1996, the Company purchased certain assets and liabilities of
Printronic Corporation of America, Inc. (Printronic), a privately held direct
mail computer processing company, and effective at the close of September 30,
1996, the Company acquired 100% of the stock of Credit & Risk Management
Associates, Inc. (CRMA), a privately held consulting services company.
33
<PAGE>
The consideration paid for Printronic and CRMA consisted of 84,735
Company shares valued at $3,572,000 plus $1,697,000 in cash. Both acquisitions
have been accounted for as purchases. The results of operations of Printronic
have been included in the consolidated financial statements since the
acquisition date; no results of operations for CRMA are included in the
consolidated financial statements for the year ended September 30, 1996. The
purchase price for each acquisition was allocated based on estimated fair values
at the dates of acquisition. The excess of the purchase prices over the fair
value of net assets or liabilities was $5,547,000 and has been recorded as
goodwill, which will be amortized on a straight-line basis over 7 or 15 years.
The CRMA purchase agreement provides for additional contingent cash and
Company stock payments to the former CRMA shareholders not to exceed $5,499,000
based on specified financial performance of CRMA through September 1999. For the
years ended September 30, 1998 and 1997, an additional $265,000 and $45,000,
respectively, were capitalized as goodwill relating to the additional contingent
cash and Company stock payments.
Pro forma unaudited consolidated operating results of the Company,
Printronic and CRMA for the years ended September 30, 1996, assuming the
acquisitions had been made as of October 1, 1995, are summarized below.
Pro forma summary (unaudited) Year ended September 30,
(dollars in thousands except per share data) 1996
- --------------------------------------------------------------------------------
Revenue $ 162,491
Net income $ 17,495
Earnings per share:
Diluted $ 1.25
Basic $ 1.32
These pro forma results have been prepared for comparative purposes
only and include certain adjustments such as additional amortization expense as
a result of goodwill and other intangible assets. They do not purport to be
indicative of the results of operations that actually would have resulted had
the combinations been in effect on October 1, 1995, or of future results of
operations of the consolidated entities.
3. Cash Flow Statement
<TABLE>
Supplemental disclosure of cash flow information:
<CAPTION>
Years ended September 30,
(dollars in thousands) 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax payments $17,174 $14,278 $13,785
Interest paid $ 803 $ 336 $ 223
Non-cash investing and financing activities:
Tax benefit of exercised stock options $ 1,660 $ 1,474 $ 1,124
Issuance of common stock to ESOP $ 1,323 $ 969 $ --
Vesting of restricted stock $ 185 $ 289 $ 115
Purchase of Printronic and CRMA with common stock $ 145 $ -- $ 3,572
Contributions of treasury stock to ESOP $ -- $ 609 $ 1,105
</TABLE>
34
<PAGE>
4. Investments
<TABLE>
The following is a summary of available-for-sale securities and other
investments at September 30, 1998 and 1997:
<CAPTION>
1998 1997
---------------------------------------- ----------------------------------------------
Gross Gross Gross Gross
Amortized unrealized unrealized Fair Amortized unrealized unrealized Fair
(dollars in thousands) cost gains losses value Cost gains losses value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Short-term investments:
U.S. government obligations $ 18,049 $ 234 $ -- $ 18,283 $ 6,069 $ 39 $ -- $ 6,108
======== ======== ==== ======== ======== ======== ======== ========
Long-term investments:
U.S. government obligations $ 20,051 $ 676 $ -- $ 20,727 $ 10,480 $ 93 $ -- $ 10,573
Non-marketable securities 382 -- -- 382 306 -- -- 306
Marketable equity securities 2,978 281 -- 3,259 1,987 716 (321) 2,382
-------- -------- ---- -------- -------- -------- -------- --------
$ 23,411 $ 957 $ -- $ 24,368 $ 12,773 $ 809 $ (321) $ 13,261
======== ======== ==== ======== ======== ======== ======== ========
</TABLE>
The long-term U.S. government obligations mature in one to five years.
For the year ended September 30, 1997, a non-marketable investment with
an equity basis of $773,000 in an overseas start-up venture, principally an
Italian credit reporting agency, was written off due to the potential negative
impact on the agency's operations from a new Italian privacy law. During the
year ended September 30, 1998, the Company liquidated its share of this
non-marketable security for a gain of $165,000. The Company does not have any
further financial commitments with respect to this investment. The Company also
recognized its equity share of losses from this Italian venture of $2,082,000
and $821,000 for the years ended September 30, 1997 and 1996, respectively.
For the year ended September 30, 1996, an investment of $1,535,000 in
the non-marketable preferred stock of an early-stage enterprise was written off
due to the deteriorating financial condition of the entity. The Company does not
have any further financial commitments with respect to the investment.
5. Property and Equipment
Property and equipment at September 30, 1998 and 1997 valued at cost,
consist of the following:
(dollars in thousands) 1998 1997
- -------------------------------------------------------------------------------
Data processing equipment $ 42,995 $ 34,248
Office furniture, vehicles and equipment 16,156 14,383
Leasehold improvements 13,777 12,003
Capitalized leases 2,841 2,841
Less accumulated depreciation and amortization (38,876) (28,989)
-------- --------
Net property and equipment $ 36,893 $ 34,486
======== ========
Depreciation and amortization charged to operations were $13,553,000,
$10,479,000 and $7,194,000 for the years ended September 30, 1998, 1997 and
1996, respectively.
35
<PAGE>
Capitalized leases consist primarily of one lease bearing an interest
rate of 7% that matures in the year 2001. The following is a schedule, by years,
of future minimum lease payments under capitalized leases, together with the
present value of the net minimum lease payments, at September 30, 1998:
Years ended September 30, (dollars in thousands)
- -------------------------------------------------------------------------------
1999 $ 487
2000 467
2001 375
-------
1,329
Less: Amount representing interest (124)
-------
Present value of net minimum lease payments $ 1,205
=======
6. Intangibles
Intangibles at September 30, 1998 and 1997, consist of the following:
(dollars in thousands) 1998 1997
- -------------------------------------------------------------------------------
Goodwill $ 13,430 $ 10,138
Other 2,470 2,270
Less accumulated amortization (5,442) (4,047)
-------- --------
$ 10,458 $ 8,361
======== ========
Amortization charged to operations was $1,395,000, $1,274,000 and
$734,000 for the years ended September 30, 1998, 1997 and 1996, respectively.
7. Income Taxes
The provision for income taxes consists of the following:
Years ended September 30,
(dollars in thousands) 1998 1997 1996
- -------------------------------------------------------------------------------
Current:
Federal $ 17,380 $ 14,685 $ 9,026
State 3,967 2,863 1,901
Foreign 240 136 270
-------- -------- --------
21,587 17,684 11,197
-------- -------- --------
Deferred:
Federal (3,152) (2,400) 183
State (657) (424) (99)
-------- -------- --------
(3,809) (2,824) 84
-------- -------- --------
$ 17,778 $ 14,860 $ 11,281
======== ======== ========
Amounts for the current year are based upon estimates and assumptions
as of the date of this report and could vary significantly from amounts shown on
the tax returns as filed.
36
<PAGE>
The tax effect of significant temporary differences resulting in
deferred tax assets at September 30, 1998 and 1997, are as follows:
(dollars in thousands) 1998 1997
- -------------------------------------------------------------------------------
Deferred tax assets:
Depreciation and amortization $ 2,350 $ 2,637
Customer advances 2,198 --
Employee benefit plans 1,594 280
Deferred compensation 1,489 2,042
Compensated absences 1,455 1,070
State taxes 1,388 1,007
Capital loss carryforward 1,245 1,530
Bad debt provision 464 283
Capital lease obligations 197 201
Warranty reserves 140 26
Other 630 103
-------- --------
13,150 9,179
Less valuation allowance (1,245) (1,083)
-------- --------
11,905 8,096
Deferred tax liabilities:
Tax on net unrealized gains on available-for-sale
securities (491) (210)
-------- --------
Deferred tax assets, net $ 11,414 $ 7,886
======== ========
The valuation allowance for deferred tax assets at September 30, 1998
and 1997, was $1,245,000 and $1,083,000, respectively. The valuation allowance
was needed to reduce the deferred tax assets since the Company does not meet the
more-likely-than-not requirement for utilization of the capital loss carry
forward.
<TABLE>
A reconciliation between the federal statutory income tax rate and the
Company's effective tax rate is shown below:
<CAPTION>
Years ended September 30,
(dollars in thousands) 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax provision at federal statutory rates in 1998, 1997 and 1996 $ 14,737 $ 12,441 $ 10,031
State income taxes, net of federal benefit 2,152 1,586 1,190
Increase in valuation allowance 162 480 603
Other 727 353 (543)
-------- -------- --------
$ 17,778 $ 14,860 $ 11,281
======== ======== ========
</TABLE>
37
<PAGE>
8. Employee Benefit Plans
Pension plan
<TABLE>
The Company has a defined benefit pension plan that covers eligible
full-time employees. The benefits are based on years of service and the
employee's compensation during employment. Contributions are intended to provide
not only for benefits attributed to service to date but also for those expected
to be earned in the future. The following table sets forth the plan's funding
status at September 30, 1998 and 1997:
<CAPTION>
(dollars in thousands) 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Vested benefit obligation $ 9,524 $ 7,578
Nonvested benefit obligation 1,457 479
Effect of projected future earnings 5,877 3,710
-------- --------
Projected benefit obligation 16,858 11,767
Fair value of plan assets (10,413) (10,266)
-------- --------
Projected benefit obligation in excess of plan assets 6,445 1,501
Unrecognized prior service cost 59 68
Unrecognized net loss (5,895) (2,692)
Unrecognized net obligation remaining to be amortized (138) (158)
Additional minimum liability 97 --
-------- --------
(Prepaid) accrued pension cost $ 568 $ (1,281)
======== ========
</TABLE>
The plan assets consist primarily of U.S. government and marketable
equity securities.
The projected benefit obligation includes an accumulated benefit
obligation of $10,981,000 and $8,057,000 at September 30, 1998 and 1997,
respectively. The projected benefit obligation exceeded the fair value of the
pension plan assets for the years ended September 30, 1998 and 1997,
respectively.
The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 6.5% and 4.0%, respectively, at September 30,
1998, and 7.5% and 5.0%, respectively, at September 30, 1997. The expected
long-term rate of return on assets was 8.5% at September 30, 1998 and 1997.
The net pension cost for the fiscal years ended September 30, 1998 and
1997, included the following components:
(dollars in thousands) 1998 1997
- -------------------------------------------------------------------------------
Service costs $ 1,516 $ 1,011
Interest cost on projected benefit obligation 943 745
Actual return on plan assets (840) (2,050)
Net amortization and deferral 132 1,502
------- -------
Net periodic pension plan cost $ 1,751 $ 1,208
======= =======
38
<PAGE>
Employee stock ownership plan
The Company has an Employee Stock Ownership Plan (ESOP) that covers
eligible full-time employees. Contributions to the ESOP are determined annually
by the Company's Board of Directors. In addition, the ESOP may purchase stock
from the Company or its stockholders. Provisions for contributions to the ESOP
were $1,803,000, $1,534,000 and $1,445,000 for the years ended September 30,
1998, 1997 and 1996, respectively.
At September 30, 1998 and 1997, the ESOP held 835,693 and 970,566
shares of Company stock, respectively. The amount of dividends on ESOP shares
were $75,212, $81,000 and $94,000 for the years ended September 30, 1998, 1997
and 1996, respectively.
Company stock held and paid for by the ESOP is allocated annually to
participants based on employee compensation levels. While employed by the
Company, participants vest in the allocated shares at rates ranging from 0% to
30% over a period of 1 to 7 years until fully vested, depending on the plan.
Defined contribution plans
The Company offers 401(k) plans for eligible employees. Eligible
employees may contribute up to 15% of compensation. The Company provides a
matching contribution, which either vests immediately or over five years,
depending on the plan. The Company contributions to 401(k) plans were $790,000,
$673,000 and $470,000 for the years ended September 30, 1998, 1997 and 1996,
respectively. In addition, the Company maintains a supplemental retirement and
savings plan for certain officers and senior management employees. Company
contributions to that plan were $247,000, $132,000 and $104,000 for the years
ended September 30, 1998, 1997 and 1996, respectively.
Officers' incentive plan
The Company has an executive compensation plan for the benefit of
officers. Benefits are payable based on the achievement of financial and
performance objectives, which are set annually by the Board of Directors, and
the market value of the Company's stock. Total expenses under the plan were
$3,273,000, $3,842,000 and $3,560,000 for the years ended September 30, 1998,
1997 and 1996, respectively. The incentive earned each year is paid 50%
currently, and the balance is payable over a four-year period, subject to
certain adjustments, as defined in the plan, based on employment status and the
market value of the Company's common stock. At September 30, 1998 and 1997, the
long-term officers' incentive plan payable was $3,066,000 and $3,475,000,
respectively.
Employee incentive plans
The Company has incentive plans for eligible employees not covered
under the executive compensation plan. Awards under these plans are paid
annually and are based on the achievement of certain financial and performance
objectives. Total expenses under these plans were $5,537,000, $5,211,000 and
$4,426,000 for the years ended September 30, 1998, 1997 and 1996, respectively.
9. Stock
Common
A total of 35,000,000 shares of common stock, $.01 par value, are
authorized, of which 13,992,126 shares (including 9,787 shares of treasury
stock) were outstanding at September 30, 1998, and 13,474,382 shares (including
12,114 shares of treasury stock) were outstanding at September 30, 1997.
Preferred
A total of 1,000,000 shares of preferred stock, $.01 par value, are
authorized; no preferred stock has been issued.
39
<PAGE>
10. Stock Option Plans
The Company has two stock option plans, one of which is for the
granting of stock options, stock appreciation rights, restricted stock and
common stock that reserve shares of common stock for issuance to officers, key
employees and non-employee directors. The Company has elected to continue to
apply the provisions of APB No. 25, and provide the pro forma disclosures of
SFAS No. 123, "Accounting for Stock-Based Compensation." Granted awards
generally have a maximum term of ten years and vest over one to five years.
Under this plan approved by the stockholders, a number of shares equal to 4% of
the number of shares of the Company's common stock outstanding on the last day
of the preceding fiscal year is added to the shares available under the plan
each fiscal year, provided that the number of shares suitable for grants of
incentive stock options for the remaining term of the plan shall not exceed
1,500,000 shares. The other plan is limited to the former employees of RMT, who,
as of the merger date, held unexpired and unexercised stock option grants under
the RMT stock option plans. Granted awards have a maximum term of ten years and
vest over three years. The total number of issuable options under the plan is
650,800.
The fair value of options at the date of grant was estimated using the
Black-Scholes model with the following weighted-average assumptions for the
years ended September 30:
1998 1997 1996
- -------------------------------------------------------------------------------
Expected life (years) 5 5 5
Interest rate 5.5% 6.5% 6.2%
Volatility 43% 45% 45%
Dividend yield 0% 0% 0%
<TABLE>
The following information regarding these option plans for the years ended
September 30 is as follows:
<CAPTION>
1998 1997 1996
---------------------- ------------------------ ----------------------
Weighted- Weighted- Weighted-
average average average
exercise exercise exercise
Options price Options price Options price
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 1,843,000 $20.63 1,388,000 $12.21 1,324,000 $ 6.72
Granted 526,000 $38.02 613,000 $36.82 286,000 $ 32.57
Exercised (487,000) $ 5.61 (141,000) $ 7.19 (222,000) $ 5.62
Forfeited (86,000) $34.43 (17,000) $28.96 -- $ --
--------- --------- ---------
Outstanding at end of year 1,796,000 $29.11 1,843,000 $20.63 1,388,000 $ 12.21
========= ========= =========
Options exercisable at year end 541,000 $11.80 782,000 $ 5.33 694,000 $ 3.73
========= ========= =========
</TABLE>
The weighted-average fair value of options granted for the years ended
September 30, 1998, 1997 and 1996, was $17.30, $17.47 and $15.35, respectively.
40
<PAGE>
<TABLE>
The following table summarizes information about significant fixed-price stock
option groups outstanding September 30, 1998:
<CAPTION>
Options outstanding Options exercisable
------------------------------------------------ ----------------------------
Weighted
average Weighted Weighted
Number remaining average Number average
Range of exercise prices outstanding contractural life exercise price outstanding exercise price
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ .92 to $ 3.50 238,000 1.27 $ 2.09 238,000 $ 2.09
$ 3.84 to $ 19.31 226,000 5.00 $ 11.95 209,000 $ 12.41
$20.75 to $ 36.94 430,000 6.22 $ 31.91 45,000 $ 27.11
$38.25 to $ 45.63 902,000 7.84 $ 39.22 49,000 $ 42.33
--------- -------
$ .92 to $ 45.63 1,796,000 6.22 $ 29.11 541,000 $ 11.80
========= =======
</TABLE>
Stock-based compensation under SFAS No. 123 would have had the
following pro forma effects for the years ended September 30:
(in thousands, except per share data) 1998 1997 1996
- --------------------------------------------------------------------------------
Net income, as reported $ 24,327 $ 20,686 $ 17,423
======== ======== ==========
Pro forma net income $ 20,655 $ 18,091 $ 17,002
======== ======== ==========
Earnings per share, as reported:
Diluted $ 1.68 $ 1.46 $ 1.25
======== ======== ==========
Basic $ 1.77 $ 1.55 $ 1.32
======== ======== ==========
Pro forma earnings per share:
Diluted $ 1.43 $ 1.27 $ 1.22
======== ======== ==========
Basic $ 1.50 $ 1.35 $ 1.29
======== ======== ==========
The pro forma effect on net income for each of the years ended
September 30, 1998, 1997 and 1996, may not be representative of the effects on
reported net income in future years.
11. Commitments and Contingencies
The Company conducts certain of its operations in facilities occupied
under non-cancelable operating leases with lease terms in excess of one year.
The leases generally provide for annual increases based upon the Consumer Price
Index or fixed increments.
In May 1998, the Company entered into a synthetic lease agreement to
lease land in San Rafael, California, and improvements comprising the first
phase of an office complex facility to be constructed on the land. A synthetic
lease is asset-based financing structured to be treated as a lease for
accounting purposes but as a loan for tax purposes. The office complex facility
is intended to accommodate the future growth of the Company.
The Company had an option (the "Option") to purchase the undeveloped
land in December 1997, and the Option was assigned to the lessor in connection
with the synthetic lease transaction. The lessor under the synthetic lease has
committed to spend up to $55 million for the purchase of the land and
construction of this first phase of the facility, and the Company will act as
construction agent for the lessor. At September 30, 1998, the lessor's total
accumulated cost for land and construction of the facility was $15.1 million.
The lease term began in May 1998 and continues thereafter for five years for the
land and, when they are constructed, will incorporate the buildings and other
improvements that will comprise the first phase of the facility. Rental payments
will commence on completion of construction, and at that time the rental
payments will be based on the total construction costs for the facility and the
one month LIBOR rate plus 0.75% or 1.00%. The completion of construction is
expected to occur in January 2001.
41
<PAGE>
With the approval of lessor, the Company may extend the lease term for
up to three one-year periods or one three-year period. The Company has the
option either to purchase the entire facility at a purchase price approximating
lessor's then-accumulated total costs or only certain portions of the facility,
at a pre-set price, at any time during the term or, at the expiration of the
lease term to cause the facility to be sold to a third party.
The synthetic lease requires the Company to maintain specified
financial covenants, all of which the Company was in compliance with at
September 30, 1998. Future minimum lease payments under the synthetic lease are
not included in the schedule below.
Minimum future rental commitments under operating leases are as
follows:
Year ending September 30, (dollars in thousands)
- -------------------------------------------------------------------------------
1999 $ 7,954
2000 8,198
2001 7,779
2002 7,544
2003 5,075
Thereafter 33,270
--------
$ 69,820
========
Rent expense under operating leases, including month-to-month leases,
was $8,298,000, $6,413,000 and $4,821,000 for the years ended September 30,
1998, 1997 and 1996, respectively.
The Company is involved in various claims and legal actions arising in
the ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial condition.
12. Segment Information
The Company operates principally in the financial services industry.
Operations in other industries are less than 10% of consolidated revenues. The
Company's international operations consist primarily of sales, production and
service offices. Foreign sales are primarily exports. The Company's revenues
from customers outside the United States were $42,894,000, $33,879,000 and
$26,142,000 for the years ended September 30, 1998, 1997 and 1996, respectively.
13. Other Income (Expense)
Other income (expense) consists of the following:
Years ended September 30,
(dollars in thousands) 1998 1997 1996
- --------------------------------------------------------------------------------
Interest income $ 2,403 $ 2,040 $ 1,748
Interest expense (803) (336) (223)
Foreign currency loss (278) (677) (97)
Equity loss in investments -- (2,082) (821)
Investment write-off -- (773) (1,535)
Acquisition expenses -- (558) --
Other 351 176 114
------- ------- -------
$ 1,673 $(2,210) $ (814)
======= ======= =======
42
<PAGE>
Earnings Per Share
<TABLE>
The following reconciles the numerators and denominators of diluted and
basic earnings per share (EPS):
<CAPTION>
Years ended September 30,
(dollars in thousands, except per share data) 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Numerator - Net income $ 24,327 $ 20,686 $ 17,423
======== ======== ========
Denominator - Shares:
Diluted weighted-average shares and assumed
conversions of stock options 14,463 14,202 13,922
Effect of dilutive securities - employee stock options (700) (816) (761)
-------- -------- --------
Basic weighted-average shares 13,763 13,386 13,161
======== ======== ========
Earnings per share:
Diluted $ 1.68 $ 1.46 $ 1.25
======== ======== ========
Basic $ 1.77 $ 1.55 $ 1.32
======== ======== ========
</TABLE>
Total options outstanding included 930,000, 474,000 and 59,000 options
to purchase shares of common stock at prices ranging from $36.50 to $45.63,
$38.25 to $45.63 and $40.00 to $41.88 at September 30, 1998, 1997 and 1996,
respectively. These options were not included in the computation of diluted EPS
because the exercise price for such options was greater than the average market
price of the common shares for the years ended September 30, 1998, 1997 and
1996, respectively.
15. Supplementary Financial Data (Unaudited)
<TABLE>
The following table presents selected unaudited consolidated financial
results for each of the eight quarters in the two-year period ended September
30, 1998. In the Company's opinion, this unaudited information has been prepared
on the same basis as the audited information and includes all adjustments
(consisting of only normal recurring adjustments) necessary for a fair statement
of the consolidated financial information for the period presented.
<CAPTION>
(in thousands, except per share data) Dec. 31, 1996 Mar. 31, 1997 June 30, 1997 Sept. 30, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 43,337 $ 48,366 $ 51,074 $ 56,232
Cost of revenues 16,372 17,825 18,715 19,654
----------- ----------- ----------- -----------
Gross profit $ 26,965 $ 30,541 $ 32,359 $ 36,578
=========== =========== =========== ===========
Net income $ 4,698 $ 5,370 $ 4,294 $ 6,324
=========== =========== =========== ===========
Earnings per share:
Diluted $ .33 $ .38 $ .30 $ .44
=========== =========== =========== ===========
Basic $ .35 $ .40 $ .32 $ .47
=========== =========== =========== ===========
Shares used in computing earnings per share:
Diluted 14,155,000 14,228,000 14,325,000 14,452,000
=========== =========== =========== ===========
Basic 13,291,000 13,361,000 13,395,000 13,449,000
=========== =========== =========== ===========
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
(in thousands, except per share data) Dec. 31, 1997 Mar. 31, 1998 June 30, 1998 Sept. 30, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 53,511 $ 59,655 $ 64,642 $ 67,737
Cost of revenues 19,865 21,206 21,946 21,963
----------- ----------- ----------- -----------
Gross profit $ 33,646 $ 38,449 $ 42,696 $ 45,774
=========== =========== =========== ===========
Net income $ 3,967 $ 5,488 $ 6,399 $ 8,473
=========== =========== =========== ===========
Earnings per share:
Diluted $ .28 $ .38 $ .45 $ .59
=========== =========== =========== ===========
Basic $ .29 $ .40 $ .46 $ .61
=========== =========== =========== ===========
Shares used in computing earnings per share:
Diluted 14,346,000 14,304,000 14,359,000 14,449,000
=========== =========== =========== ===========
Basic 13,489,000 13,707,000 13,894,000 13,964,000
=========== =========== =========== ===========
</TABLE>
The financial data for the above quarterly information has been
restated to reflect the merger, effective July 1997, between Fair, Isaac and
Company, Incorporated, and Risk Management Technologies, which has been
accounted for under the pooling-of-interests method.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
44
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The required information regarding Directors of the registrant is
incorporated by reference from the information under the caption "Election of
Directors - Nominees" in the Company's definitive proxy statement for the Annual
Meeting of Stockholders to be held on February 2, 1999.
The required information regarding Executive Officers of the registrant
is contained in Part I of this Form 10-K.
The required information regarding compliance with Section 16(a) of the
Securities Exchange Act is incorporated by reference from the information under
the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Company's definitive proxy statement for the Annual Meeting of Stockholders to
be held on February 2, 1999.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the information under the captions
"Compensation of Directors and Executive Officers," "Compensation Committee
Interlocks and Insider Participation," and "Director Consulting Arrangements" in
the Company's definitive proxy statement for the Annual Meeting of Stockholders
to be held on February 2, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from the information under the caption "Stock
Ownership" in the Company's definitive proxy statement for the Annual Meeting of
Stockholders to be held on February 2, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the information under the captions
"Director Consulting Arrangements" and "Compensation Committee Interlocks and
Insider Participation" in the Company's definitive proxy statement for the
Annual Meeting of Stockholders to be held on February 2, 1999.
45
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Reference Page
Form 10-K
(a) 1. Consolidated financial statements:
Report of Independent Auditors................................ 25
Consolidated statements of income for each of the years
in the three-year period ended September 30, 1998........ 26
Consolidated balance sheets at September 30, 1998 and
September 30, 1997....................................... 27
Consolidated statements of stockholders' equity for each
of the years in the three-year period ended
September 30, 1998....................................... 28
Consolidated statements of cash flows for each of the
years in the three-year period ended September 30, 1998.. 29
Notes to consolidated financial statements.................... 30
2. Financial statement schedule:
Independent Auditor's Report on Financial Statement Schedule.... 52
II Valuation and qualifying accounts at September 30, 1998,
1997 and 1996............................................ 53
3. Exhibits:
2.1 Lease dated December 2, 1998, by and between DynaMark, Inc.,
and CSM Corporation.
2.2 Agreement and Plan of Reorganization, dated June 12, l997,
among the Company, FIC Acquisition Corporation, Risk
Management Technologies ("RMT"), and the shareholders and
optionholders of RMT, filed as Exhibit 2.2 to the Company's
report on Form 10-K for the fiscal year ended September 30,
1997, and incorporated herein by reference. Pursuant to Item
601(b)(2) of Regulation S-K, certain schedules were omitted
but will be furnished supplementally to the Commission on
request.
2.3 Employment Agreement, dated July 21, l997, by and between the
Company and David LaCross, filed as Exhibit 2.3 to the
Company's report on Form 10-K for the fiscal year ended
September 30, 1997, and incorporated herein by reference.*
2.4 Amendment To Lease, dated December 2, 1998, by and between CSM
Corporation (assignee) and DynaMark, Inc. amending lease dated
May 1,1995 between DynaMark, Inc. and Control Data Systems
Inc.
3.1 Restated Certificate of Incorporation of the Company, filed as
Exhibit 3.1 to the Company's report on Form 10-K for the
fiscal year ended September 30, 1997, and incorporated herein
by reference.
46
<PAGE>
3.2 Restated By-laws of the Company, filed as Exhibit 3.2 to the
Company's report on Form 10-K for the fiscal year ended
September 30, 1997, and incorporated herein by reference.
4.1 Registration Rights Agreement, dated June 23, l997, among the
Company, David LaCross and Kathleen O. LaCross, Trustees U/D/T
dated April 2, 1997, Jefferson Braswell, Software Alliance
LLC, Robert Ferguson, James T. Fan and Leland Prussia, filed
as Exhibit 4.1 to the Company's report on Form 10-K for the
fiscal year ended September 30, 1997, and incorporated herein
by reference.*
4.2 Registration Rights Agreement, dated September 30, 1996, among
the Company, Donald J. Sanders, Paul A. Makowski and Lawrence
E. Dukes, filed as Exhibit 4.2 to the Company's report on Form
10-K for the fiscal year ended September 30, 1995, and
incorporated herein by reference.
10.1 Certificate of Resolution Changing Officers' Incentive Plan,
Exempt Employees Bonus Plan and other Company Plan
Parameters.*
10.2 Company's 1987 Stock Option Plan, originally filed as Exhibit
10.2 to the Company's Registration Statement on Form S-1
(Commission File No. 33-14491) (the "Registration
Statement").*
10.3 Lease dated April 28, 1995, between CSM Investors, Inc., and
DynaMark, Inc. filed as Exhibit 10.3 to the Company's report
on Form 10-K for the fiscal year ended September 30, 1995, and
incorporated herein by reference.
10.4 Fair, Isaac and Company, Inc. Officers' Incentive Plan
(effective October 1, 1992), originally filed as Exhibit 10.4
to the Company's report on Form 10-K for the fiscal year ended
September 30, 1994.*
10.5 Lease, dated October 30, 1983, between S.R.P. Limited
Partnership and the Company, as amended, originally filed as
Exhibit 10.7 to the Registration Statement.
10.6 Stock Option Plan for Non-Employee Directors, originally filed
as Exhibit 10.8 to the Company's report on Form 10-K for the
fiscal year ended September 30, 1988.*
10.7 Lease dated July 1, 1993, between The Joseph and Eda Pell
Revocable Trust and the Company and the First through Fifth
Addenda thereto filed as Exhibit 10.7 to the Company's report
on Form 10-K for the fiscal year ended September 30, 1995, and
incorporated herein by reference.
10.8 First Amendment to the Company's 1987 Stock Option Plan,
originally filed as Exhibit 10.11 to the Company's report on
Form 10-K for the fiscal year ended September 30, 1989.*
10.9 First Amendment to the Company's Stock Option Plan for
Non-Employee Directors, originally filed as Exhibit 10.12 to
the Company's report on Form 10-K for the fiscal year ended
September 30, 1989.*
10.10 Amendment No.1 to the Company's 1992 Long-Term Incentive Plan
(as amended and restated effective November 21, 1995), filed
as Exhibit 10.10 to the Company's report on Form 10-K for the
fiscal year ended September 30, 1997 and incorporated herein
by reference.*
10.11 Addendum Number Seven to lease between S.R.P. Limited
Partnership and the Company, originally filed as Exhibit 10.15
to the Company's report on Form 10-K for the fiscal year ended
September 30, 1990.
10.12 Addenda Numbers Eight and Nine to lease between SRP Limited
Partnership and the Company filed as Exhibit 10.12 to the
Company's report on Form 10-K for the fiscal year ended
September 30, 1995, and incorporated herein by reference.
47
<PAGE>
10.13 Lease, dated September 5, 1991, between 111 Partners, a
California general partnership, and the Company originally
filed as Exhibit 10.20 to the Company's report on Form 10-K
for the fiscal year ended September 30, 1991.
10.14 Construction Loan Agreement, dated September 5, 1991, between
111 Partners and the Company originally filed as Exhibit 10.21
to the Company's report on Form 10-K for the fiscal year ended
September 30, 1991.
10.15 Amendment No.2 to the Company's 1992 Long-Term Incentive Plan
(as amended and restated effective November 21, 1995) filed as
exhibit 10.15 to the Company's report on Form 10-K for the
fiscal year ended September 30, 1997, and incorporated herein
by reference.*
10.16 The Company's 1992 Long-Term Incentive Plan as amended and
restated effective November 21, 1995, filed as Exhibit 10.16
to the Company's report on Form 10-K for the fiscal year ended
September 30, 1996, and incorporated herein by reference.*
10.17 Amendment No.3 to the Company's Stock Option Plan for
Non-Employee Directors, filed as Exhibit 10.17 to the
Company's report on Form 10-K for the fiscal year ended
September 30, 1997, and incorporated herein by reference.*
10.18 Lease dated May 1, 1995, between Control Data Corporation and
DynaMark, Inc. filed as Exhibit 10.18 to the Company's report
on Form 10-K for the fiscal year ended September 30, 1995, and
incorporated herein by reference.
10.19 Lease dated April 10, 1994, between Leed Properties and
DynaMark, Inc., filed as Exhibit 10.19 to the Company's report
on Form 10-K for the fiscal year ended September 30, 1994, and
incorporated herein by reference.
10.20 Fair, Isaac Supplemental Retirement and Savings Plan and Trust
Agreement effective November 1, 1994, filed as Exhibit 10.20
to the Company's report on Form 10-K for the fiscal year ended
September 30, 1994, and incorporated herein by reference.*
10.21 Lease dated July 10, 1993, between the Joseph and Eda Pell
Revocable Trust and the Company filed as Exhibit 10.21 to the
Company's report on Form 10-K for the fiscal year ended
September 30, 1995, and incorporated herein by reference.
10.22 Lease dated October 11, 1993, between the Joseph and Eda Pell
Revocable Trust and the Company and the First through Fourth
Addenda thereto filed as Exhibit 10.22 to the Company's report
on Form 10-K for the fiscal year ended September 30, 1995, and
incorporated herein by reference.
10.23 Second Amendment to Lease dated December 2, 1998, between CSM
Corporation and DynaMark, Inc. amending lease between the
parties dated March 11, 1997.
10.24 Exchange Agreement and Plan of Reorganization, dated July 19,
1996, among DynaMark, Inc., Printronic Corporation of America,
Inc., Leo R. Yochim, and Susan Keenan, filed as Exhibit 10.24
to the Company's report on Form 10-K for the fiscal year ended
September 30, 1996, and incorporated herein by reference.
10.25 Agreement and Plan of Merger and Reorganization, dated
September 30, 1996, among the Company, FIC Acquisition
Corporation, Credit & Risk Management Associates, Inc., Donald
J. Sanders, Paul A. Makowski and Lawrence E. Dukes, filed as
Exhibit 10.25 to the Company's report on Form 10-K for the
fiscal year ended September 30, 1996, and incorporated herein
by reference.
48
<PAGE>
10.26 Contract between the Company and Dr. Robert M. Oliver, dated
April 2, 1996, filed as Exhibit 10.26 to the Company's report
on Form 10-K for the fiscal year ended September 30, 1996, and
incorporated herein by reference.*
10.27 Letter of Intent dated July 15, 1996, between the Company and
Village Properties, and the First Amendment thereto dated July
18, 1996, filed as Exhibit 10.27 to the Company's report on
Form 10-K for the fiscal year ended September 30, 1996, and
incorporated herein by reference.
10.28 Office Building Lease, dated November 14, 1996, between the
Company and Regency Center, filed as Exhibit 10.28 to the
Company's report on Form 10-K for the fiscal year ended
September 30, 1996, and incorporated herein by reference.
10.29 Sixth and Seventh Addenda to the Lease, dated July 1, 1993,
between the Company and the Joseph and Eda Pell Revocable
Trust, filed as Exhibit 10.29 to the Company's report on Form
10-K for the fiscal year ended September 30, 1996, and
incorporated herein by reference.
10.30 First and Second Addenda to the Lease dated July 10, 1993,
between the Company and the Joseph and Eda Pell Revocable
Trust, filed as Exhibit 10.30 to the Company's report on Form
10-K for the fiscal year ended September 30, 1996, and
incorporated herein by reference.
10.31 Fifth Addendum to the Lease, dated October 11, 1993, between
the Company and the Joseph and Eda Pell Revocable Trust, filed
as Exhibit 10.31 to the Company's report on Form 10-K for the
fiscal year ended September 30, 1996, and incorporated herein
by reference.
10.32 First Addendum to Lease, dated August 13, l997, by and between
the Company and Regency Center, filed as Exhibit 10.32 to the
Company's report on Form 10-K for the fiscal year ended
September 30, 1997, and incorporated herein by reference.
10.33 Option Agreement, dated November 26, l997, by and between the
Company and Village Builders, L.P., filed as Exhibit 10.33 to
the Company's report on Form 10-K for the fiscal year ended
September 30, 1997, and incorporated herein by reference.
10.34 Leasehold Improvements Agreement, dated November 26, l997, by
and between the Company and Village Builders, L.P., filed as
Exhibit 10.34 to the Company's report on Form 10-K for the
fiscal year ended September 30, 1997, and incorporated herein
by reference.
10.35 Lease, dated March 11, l997, by and between DynaMark, Inc. and
CSM, filed as Exhibit 10.35 to the Company's report on Form
10-K for the fiscal year ended September 30, 1997, and
incorporated herein by reference.
10.36 First Amendment to Lease, dated September 24, l997, by and
between DynaMark, Inc. and CSM, filed as Exhibit 10.36 to the
Company's report on Form 10-K for the fiscal year ended
September 30, 1997, and incorporated herein by reference.
10.37 Chase Database Agreement, dated October 29, l997, by and among
DynaMark, Inc. and Chase Manhattan Bank USA, National
Association, filed as Exhibit 10.37 to the Company's report on
Form 10-K for the fiscal year ended September 30, 1997, and
incorporated herein by reference. Confidential treatment has
been requested for certain portions of this document. Such
portions have been omitted from the filing and have been filed
separately with the Commission.
10.38 Participation Agreement, dated May 15, 1998, between Company,
Lease Plan North America, Inc., ABN Amro Bank N.V. and other
participants named therein.
49
<PAGE>
10.39 Lease Agreement, Construction Deed of Trust with Assignment of
Rents, Security Agreement and Fixture Filing, dated May 15,
1998, between Company and Lease Plan North America, Inc.
10.40 Purchase Agreement dated May 15, 1998, between Company and
Lease Plan North America, Inc.
10.41 Third Amendment to Lease Dated December 2, 1998, by and
between CSM Corporation and DynaMark, Inc. amending lease
between the parties dated April 28, 1995.
21.1 Subsidiaries of the Company.
23.1 Consent of KPMG Peat Marwick LLP (see page 54 of this Form
10-K).
24.1 Power of Attorney (see page 51 of this Form 10-K).
27 Financial Data Schedule.
* Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed with the Securities and Exchange
Commission during the fiscal quarter ended September 30, 1998.
50
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
FAIR, ISAAC AND COMPANY, INCORPORATED
DATE: December 28, 1998
By /s/ Peter L. McCorkell
-----------------------------------
Peter L. McCorkell
Senior Vice President,
Secretary and General Counsel
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints PETER L. McCORKELL his attorney-in-fact,
with full power of substitution, for him in any and all capacities, to sign any
amendments to this Report on Form 10-K and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
<TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
<CAPTION>
<S> <C> <C>
/s/ Larry E. Rosenberger
- ------------------------------------ President, Chief Executive Officer December 28, 1998
Larry E. Rosenberger (Principal Executive Officer) and Director
/s/ Patricia Cole
- ------------------------------------ Senior Vice President and December 28, 1998
Patricia Cole Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ A. George Battle
- ------------------------------------ Director December 28, 1998
A. George Battle
/s/ Bryant J. Brooks
- ------------------------------------ Director December 28, 1998
Bryant J. Brooks
/s/ H. Robert Heller
- ------------------------------------ Director December 28, 1998
H. Robert Heller
/s/ Guy R. Henshaw
- ------------------------------------ Director December 28, 1998
Guy R. Henshaw
/s/ David S. P. Hopkins
- ------------------------------------ Director December 28, 1998
David S. P. Hopkins
/s/ Robert M. Oliver
- ------------------------------------ Director December 28, 1998
Robert M. Oliver
/s/ Robert D. Sanderson
- ------------------------------------ Director December 28, 1998
Robert D. Sanderson
/s/ John D. Woldrich
- ------------------------------------ Director December 28, 1998
John D. Woldrich
</TABLE>
51
<PAGE>
The Board of Directors
Fair, Isaac and Company, Incorporated:
Under date of October 29, 1998, we reported on the consolidated balance
sheets of Fair, Isaac and Company, Incorporated and subsidiaries as of September
30, 1998 and 1997, and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the years in the three-year
period ended September 30, 1998, which are included in the 1998 annual report on
Form 10-K. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related financial statement schedule
in the 1998 annual report on Form 10-K. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
San Francisco, California
October 29, 1998
52
<PAGE>
<TABLE>
Schedule II
Fair, Isaac and Company, Incorporated
VALUATION AND QUALIFYING ACCOUNTS
Rule 12-09
September 30, 1998, 1997 and 1996
<CAPTION>
Additions
Balance at -------------------- Balance at
Beginning Charged End of
Description of Period to Expense Other(1) Write-offs Period
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
September 30, 1998:
Allowance for Doubtful Accounts $ 758,000 $ 677,000 $ -- $ (272,000) $1,163,000
September 30, 1997:
Allowance for Doubtful Accounts $ 485,000 $ 438,000 $ -- $ (165,000) $ 758,000
September 30, 1996:
Allowance for Doubtful Accounts $ 332,000 $ 600,000 $ 11,000 $ (458,000) $ 485,000
<FN>
(1) Amount represents the allowance recorded due to the acquisition of
Credit & Risk Management Associates, Inc.
</FN>
</TABLE>
53
<PAGE>
Consent of Independent Auditors
The Board of Directors
Fair, Isaac and Company, Incorporated:
We consent to incorporation by reference in the registration statement
(No. 33-20349) on Form S-8, the registration statement (No. 33-26659) on Form
S-8, the registration statement (No. 33-63428) on Form S-8, the registration
statement (No. 333-02121) on Form S-8, the registration statement (No.
333-32309) on Form S-8, the registration statement (No. 333-20537) on Form S-3,
the registration statement (No. 333-42473) on Form S-3 of Fair, Isaac and
Company, Incorporated and subsidiaries of our reports dated October 29, 1998,
relating to the consolidated balance sheets of Fair, Isaac and Company,
Incorporated and subsidiaries as of September 30, 1998 and 1997, and the related
consolidated statements of income, stockholders' equity, and cash flows and
related financial statement schedule for each of the years in the three-year
period ended September 30, 1998, which reports appear in the September 30, 1998
annual report on Form 10-K of Fair, Isaac and Company, Incorporated, and
subsidiaries.
San Francisco, California
December 28, 1998
54
<PAGE>
EXHIBIT INDEX
TO FAIR, ISAAC AND COMPANY, INCORPORATED
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
Exhibit No. Exhibit
- ----------- -------
2.1 Lease dated December 2, 1998, by and between DynaMark, Inc.
and CSM Corporation.
2.4 Amendment To Lease, dated December 2, 1998, by and between CSM
Corporation (assignee) and DynaMark, Inc. amending lease dated
May 1,1995 between DynaMark, Inc. and Control Data Systems
Inc.
10.1 Certificate of Resolution Changing Officers' Incentive Plan,
Exempt Employees Bonus Plan and other Company Plan Parameters.
10.2 Company's 1987 Stock Option Plan, originally filed as Exhibit
10.2 to the Registration Statement.
10.5 Lease, dated October 30, 1983, between S.R.P. Limited
Partnership and the Company, as amended, originally filed as
Exhibit 10.7 to the Registration Statement.
10.6 Stock Option Plan for Non-Employee Directors, originally filed
as Exhibit 10.8 to the Company's report on Form 10-K for the
fiscal year ended September 30, 1988.
10.8 First Amendment to the Company's 1987 Stock Option Plan,
originally filed as Exhibit 10.11 to the Company's report on
Form 10-K for the fiscal year ended September 30, 1989.
10.9 First Amendment to the Company's Stock Option Plan for
Non-Employee Directors, originally filed as Exhibit 10.12 to
the Company's report on Form 10-K for the fiscal year ended
September 30, 1989.
10.11 Addendum Number Seven to lease between S.R.P. Limited
Partnership and the Company, originally filed as Exhibit 10.15
to the Company's report on Form 10-K for the fiscal year ended
September 30, 1990.
10.13 Lease, dated September 5, 1991, between 111 Partners, a
California general partnership, and the Company originally
filed as Exhibit 10.20 to the Company's report on Form 10-K
for the fiscal year ended September 30, 1991.
10.14 Construction Loan Agreement, dated September 5, 1991, between
111 Partners and the Company originally filed as Exhibit 10.21
to the Company's report on Form 10-K for the fiscal year ended
September 30, 1991.
10.23 Second Amendment to Lease dated December 2, 1998 between CSM
Corporation and DynaMark, Inc. amending lease between the
parties dated March 11, 1997.
10.38 Participation Agreement, dated May 15, 1998, between Company,
Lease Plan North America, Inc., ABN Amro Bank N.V. and other
participants named therein.
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10.39 Lease Agreement, Construction Deed of Trust with Assignment of
Rents, Security Agreement and Fixture Filing, dated May 15,
1998, between Company and Lease Plan North America, Inc.
10.40 Purchase Agreement dated May 15, 1998, between Company and
Lease Plan North America, Inc.
10.41 Third Amendment To Lease, dated December 2, 1998, by and
between CSM Corporation and DynaMark, Inc. amending lease
between the parties dated April 28, 1995.
21.1 Subsidiaries of the Company.
23.1 Consent of KPMG Peat Marwick LLP (see page 54 of this Form
10-K).
24.1 Power of Attorney (see page 51 of this Form 10-K).
27 Financial Data Schedule.
56
L E A S E
ARTICLE 1. LEASE TERMS
1.1 LANDLORD AND TENANT. This lease ("Lease") is entered into this 2nd day of
December, 1998 by and between CSM CORPORATION, a Minnesota corporation,
("Landlord") and DYNAMARK, INC., a Minnesota corporation, ("Tenant").
1.2 PREMISES. Landlord hereby rents, leases, lets and demises to Tenant the
premises and building (sometimes hereinafter referred to as the "Premises" and
"Building", or collectively as the "Premises") illustrated on the site plan
attached hereto as EXHIBIT A, together with a nonexclusive right of ingress,
egress and access over and across the private drives shown on EXHIBIT A. The
Premises and Building are located on the real property legally described on
attached EXHIBIT B. The parties acknowledge that the Tenant is leasing the
entire Building, and that the Building and Premises consist of approximately
50,407 square feet.
The Tenant acknowledges that the Premises are a part of a development which,
with the addition of the Premises, will include four buildings and associated
appurtenant improvements, all as shown on the site plan attached as EXHIBIT A.
The Tenant acknowledges and agrees that the Premises will be subject to and
benefited by various non-exclusive easements for ingress, egress and access over
the private drives serving the Project, and certain exclusive easements for
utilities, and other purposes provided that the same shall not interfere with
the use and enjoyment of the Premises, as contemplated herein.
1.3 IMPROVEMENTS. Landlord shall diligently pursue the construction of the
Building, improvements to the Premises, and site improvements pursuant
to plans and specifications agreed to by Landlord and Tenant pursuant
to Section 6.1 of this Lease. Architectural plans and specifications
describing the improvements to be constructed are attached hereto as
EXHIBITS C and D.
1.4 LEASE TERM.
A. Term. The term of this Lease shall be for a period of one
hundred fifty-six (156) months ("Lease Term"), commencing on
the commencement date hereinafter specified
B. Commencement Date. The Lease Term shall commence (the
"Commencement Date") on the date that Landlord delivers the
Premises to Tenant substantially complete and ready for
occupancy by Tenant. The parties anticipate that the Premises
will be delivered to Tenant on or about July 1, 1999. If
Landlord, despite its diligent efforts, is unable to deliver
the Premises to Tenant on or before such date this Lease shall
nevertheless remain in full force and effect, and Landlord
shall exercise diligent and reasonable efforts to deliver the
Premises to Tenant as soon thereafter as is reasonably
possible. If the Landlord's failure to deliver possession of
the Premises on July 1, 1999 results in the Tenant paying
holdover rent at its "Churchill" facility, the Landlord shall
reimburse the Tenant for its actual holdover costs, provided
that the Landlord's
1 Exhibit 2.1
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reimbursement shall in no case exceed $5,000.00. In addition,
the Landlord shall also reimburse the Tenant for "overlap" of
any rent that the Tenant pays at the Churchill facility due to
Landlord's failure to deliver the Premises by the first of the
month. For example, if the Tenant must pay the Churchill
landlord $15,000.00 for July rental, which includes $5,000.00
of holdover rent, due to the Landlord's failure to complete
the Premises, and the Tenant ultimately vacates the Churchill
facility on July 15th, but is not entitled to a refund for the
balance of the July rent, the Landlord's penalty would be
$10,161.00, which represents a $5,000.00 holdover penalty and
$5,161.00 for 16/31 of the month for which the Tenant is
obligated to pay rent at two facilities. Any penalty owed by
the Landlord may be paid by crediting the Tenant's next rent
obligation. When the Commencement Date has been established as
above provided, the parties shall execute an Addendum to Lease
in the form attached hereto as EXHIBIT E, which Addendum
shall, among other things, confirm the Commencement Date. If
the Commencement Date is other than the first day of a
calendar month, this Lease shall continue in force and effect
for the full Lease Term from and after the first day of the
calendar month next succeeding the Commencement Date.
C. Subject to the terms and conditions hereinafter set forth,
Tenant shall have the option to extend the term of this Lease
for one (1) additional sixty (60) month term ("Option Term")
upon and pursuant to the same conditions contained herein.
This option may be exercised by written notice of exercise
from Tenant to Landlord given not less than one (1) year prior
to the expiration of the Lease Term. Tenant may exercise this
option only if: (i) no condition of default exists with
respect to Tenant's performance of its obligations under the
Lease; and (ii) Tenant simultaneously exercises its options to
extend under the New Lease and under the Existing Lease
covering the premises located at 4295 Lexington Avenue North
in Arden Hills, Minnesota (as defined in Section 14.12 of the
New Lease). Base Rent for the Option Term shall be at the fair
market rate for comparable space in the north suburban
geographic area. The fair market rent shall be agreed upon by
Tenant and Landlord within sixty (60) days of Tenant's notice
to Landlord of its irrevocable intent to exercise its option
to extend set forth herein. The fair market rental rate shall
be determined in accordance with the definition set forth in
Section 7 of the Existing Lease dated May 1, 1995 and amended
December 30, 1996 for the premises located at 4295 Lexington
Avenue North in Arden Hills, Minnesota. In the event that
Landlord and Tenant fail to agree to the fair market rental
rate in the time period set forth herein, then the fair market
rent shall be established in accordance with the arbitration
procedures set forth in Section 8 of the Existing Lease for
the premises located at 4295 Lexington Avenue North in Arden
Hills, Minnesota. If Tenant fails to exercise this option as
aforesaid, this option shall be null and void and of no
further force and effect.
D. Miscellaneous. In the event that Tenant does not vacate the
Premises upon the expiration or termination of this Lease,
Tenant shall be a tenant at will for the holdover period and
all of the terms and provisions of this Lease shall be
applicable during that period, except that Tenant shall pay
Landlord as base rental for the period of such holdover an
amount equal to one and one-quarter
2
<PAGE>
(1.25) times the base rent which would have been payable by
Tenant had the holdover period been a part of the original
term of this Lease, together with all additional rent as
provided in this Lease. During any such holdover period,
Tenant agrees to vacate and deliver the Premises to Landlord
upon Tenant's receipt of notice from Landlord to vacate. The
rental payable during the holdover period shall be payable to
Landlord on demand. No holding over by Tenant, whether with or
without the consent of Landlord, shall operate to extend the
term of this Lease.
1.5 BASE RENT.
A. Initial Base Rent.
Months Monthly Base Rent* Per Sq. Ft.*
------ ------------------ ------------
Initial Term:
1-60 $64,899.01 $15.45
61-120 $66,789.28 $15.90
121-156 $68,679.54 $16.35
Option Term:
157-216 market market
*Base Rent is subject to adjustment as provided in Sections
1.5.B., 6.1, and 14.14 of this Lease
B. Adjustment of Base Rent. The Initial Base Rent set forth above
has been computed at the per square foot rates set forth
above, assuming that the Premises consist of 50,407 square
feet. The actual number of square feet in the Premises shall
be determined by Landlord from "As Built" measurements of the
Building and Premises, and shall be accomplished by measuring
from the exterior face of the exterior walls of the Building.
Once such measurements are accomplished, Landlord and Tenant
shall execute an addendum to lease to confirm the actual
square footage of the Premises and to establish the monthly
base rent for the Premises by multiplying the actual square
footage of the Premises times the per square foot rent set
forth above. The Initial Base Rent shall also be adjusted
based upon the actual construction costs as set forth in
Section 6.1.
1.6 PERMITTED USE: General office.
1.7 PRO-RATA SHARE: One hundred and no/100 percent (100%), subject to
adjustment as provided in Section 2.2 hereof.
1.8 ADDRESSES.
LANDLORD'S ADDRESS: TENANT'S ADDRESS:
CSM CORPORATION DYNAMARK, INC.
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2575 UNIVERSITY AVE. W., #150 4255 LEXINGTON AVE. N.
ST. PAUL, MN 55114-1024 ARDEN HILLS, MN 55112
(651) 646-1717 ATTN: JIM SCHOELLER, SR. V.P.
ARTICLE 2. RENT, OPERATING EXPENSES AND SECURITY DEPOSIT
2.1 BASE RENT. Tenant agrees to pay monthly as Base Rent during the term of this
Lease the sum of money set forth in Section 1.5 of this Lease, which amount will
be payable to Landlord at the address shown above. Monthly installments of Base
Rent shall be due and payable, in advance, on or before the first day of each
calendar month during the term of this Lease; provided that if the Commencement
Date should be a date other than the first day of a calendar month, the monthly
Base Rent shall be prorated on a daily basis to the end of that calendar month,
and shall be payable on or before the Commencement Date of this Lease. Tenant
shall pay, as additional rent, all other sums due under this Lease. Landlord
will promptly commence construction of the Building and Premises and shall
diligently pursue construction thereof in order to have the Building and the
Premises substantially complete on the Commencement Date. For the purposes of
this provision, "substantially complete" shall mean that the Building and
Premises are substantially completed in accordance with the approved
construction documents and the requirements of the City of Arden Hills, subject
only to punchlist and minor completion items that will not prevent Tenant from
occupying and commencing operations within the Premises, which punchlist and
minor completion items Landlord agrees to promptly complete.
If, prior to June 15, 1999, Landlord determines that it will not be able to
deliver the Building and Premises to Tenant in the condition required by the
anticipated Commencement Date, Landlord shall notify Tenant, in writing, on or
before July 1, 1999, and the Commencement Date shall be extended to the actual
substantial completion date. In such event, Landlord shall provide Tenant with
not less than forty-five (45) days prior written notice of the anticipated
substantial completion date.
If, subject to force majeure or Tenant caused delays, the Building and Premises
are not substantially complete and ready for Tenant's occupancy by August 1,
1999, Landlord shall pay to Tenant, as a credit against the first installment of
Base Rent and additional rent payable hereunder, an amount equal to $500.00 for
each day thereafter until the Building and the Premises are substantially
complete and ready for Tenant's occupancy. If, subject to force majeure or
Tenant caused delays, the Building and Premises are not substantially complete
and ready for Tenant's occupancy by September 1, 1999, Tenant shall have the
option to terminate this Lease by written notice to Landlord after September 1,
1999 and prior to substantial completion of the Building and Premises.
2.2 OPERATING EXPENSES. Tenant shall also pay as additional rent Tenant's pro
rata share of the operating expenses of Landlord for the Building. Landlord may
invoice Tenant monthly for Tenant's pro rata share of the estimated operating
expenses for each calendar year, which amount shall be adjusted from
time-to-time by Landlord based upon reasonably anticipated operating expenses.
Within six (6) months following the close of each calendar year, Landlord shall
provide Tenant an accounting showing in reasonable detail the computations of
additional rent due under this Section. In the event the accounting shows
4
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that the total of the monthly payments made by Tenant exceeds the amount of
additional rent due by Tenant under this Section, the accounting shall be
accompanied by evidence of a credit to Tenant's account. In any event the
accounting shows that the total of the monthly payments made by Tenant is less
than the amount of additional rent due by Tenant under this Section, the
accounting shall be accompanied by an invoice for the additional rent. If this
Lease shall terminate on a day other than the last day of a calendar year, the
amount of any additional rent payable by Tenant applicable to the year in which
the termination shall occur shall be prorated on the ratio that the number of
days from the commencement of the calendar year to and including such
termination date bears to 365. Tenant agrees to pay any additional rent due
under this Section within ten (10) days following receipt of the invoice or
accounting showing additional rent due. Tenant's pro rata share set forth in
Section 1.8 shall, subject to reasonable adjustment by Landlord, be equal to a
percentage based upon a fraction, the numerator of which is the total area of
the Premises as set forth in Article 1 and the denominator of which shall be the
net rentable area of the Building, as the same may change from time to time.
2.3 DEFINITION OF OPERATING EXPENSES. The term "operating expenses" includes all
expenses incurred by Landlord with respect to the maintenance and operation of
the Building, including, but not limited to, the following: maintenance, repair
and replacement costs; electricity, fuel, water, sewer, gas and other common
Building utility charges; equipment used for maintenance and operation of the
Building; operational expenses; exterior window washing and janitorial services;
trash and snow removal; landscaping and pest control; management fees, wages and
benefits payable to employees of Landlord whose duties are directly connected
with the operation and maintenance of the Building; all services, supplies,
repairs, replacements or other expenses for maintaining and operating the
Building or project including parking and common areas; improvements made to the
Building which are required under any governmental law or regulation that was
not applicable to the Building at the time it was constructed; installation of
any device or other equipment which improves the operating efficiency of any
system within the Premises and thereby reduces operating expenses; all other
expenses which would generally be regarded as operating, repair, replacement and
maintenance expenses; all real property taxes and installments of special
assessments, including dues and assessments by means of deed restrictions and/or
owners' associations which accrue against the Building during the term of this
Lease and legal fees incurred in connection with actions to reduce the same; and
all insurance premiums Landlord is required to pay or deems necessary to pay,
including fire and extended coverage, and rent loss and public liability
insurance, with respect to the Building.
Notwithstanding the foregoing, operating expenses shall not include any
expenditure which must be capitalized for federal income tax purposes, except
that operating expenses shall include the amortization of any such capital
expenditures (except capital expenditures for improvements made to the Building
without the consent of Tenant, or for restoration or repair of damage to the
Building caused by casualty) on a straight-line basis over the reasonably
estimated useful life, at an amortization rate equal to the rate of Treasury
Securities of comparable term, plus two percent (2%).
Further, operating expenses shall not include:
5
<PAGE>
A. Taxes payable by reason of any "minimum assessment": or
similar agreement to the extent exceeding the taxes which
otherwise would be payable with respect to the property of
which the Premises are a part; or
B. Special assessments levied or pending on the date of this
Lease or levied for public improvements constructed in
connection with the initial construction of the Building or
any additional building; or
C. Expenses of contesting taxes or the assessed value of the
property of which the Premises are a part in excess of the
savings achieved in such contest; or
D. Management fees exceeding fifteen percent (15%) of other
operating expenses except taxes and special assessments; or
E. Expenses incurred by Landlord in satisfying its obligations
under Section 14.13 hereof.
2.4 INCREASE IN INSURANCE PREMIUMS. If an increase in any insurance premiums
paid by Landlord for the Building is caused by Tenant's use of the Premises or
if Tenant vacates the Premises and causes an increase in such premiums, then
Tenant shall pay as additional rent the amount of such increase to Landlord.
ARTICLE 3. OCCUPANCY AND USE
3.1 USE. Tenant warrants and represents to Landlord that the Premises shall be
used and occupied only for the purpose as set forth in Section 1.6. Tenant shall
occupy the Premises, conduct its business and control its agents, employees,
invitees and visitors in such a manner as is lawful, reputable and will not
create a nuisance. Tenant shall not permit any operation which emits any odor or
matter which intrudes into other portions of the Building or otherwise interfere
with, annoy or disturb any other lessee in its normal business operations or
Landlord in its management of the Building. Tenant shall not permit any waste on
the Premises to be used in any way which would, in the opinion of Landlord, be
extra hazardous on account of fire or which would, in any way, increase or
render void the fire insurance on the Building.
3.2 SIGNS. No sign of any type or description shall be erected, placed or
painted in or about the Premises or Building which are visible from the exterior
of the Premises, except those signs submitted to Landlord in writing, and which
signs are in conformance with Landlord's sign criteria, if any, established for
the Building.
3.3 COMPLIANCE WITH LAWS, RULES AND REGULATIONS. Tenant, at Tenant's sole cost
and expense, shall comply with all laws, ordinances, orders, rules and
regulations of state, federal, municipal or other agencies or bodies having
jurisdiction over the use, condition or occupancy of the Premises, provided that
Tenant shall not be obligated to make any material capital improvements required
by such laws, ordinances, orders, rules and regulations, (nor shall Landlord
have such obligation). For purposes of this clause, a "material capital
improvement" shall mean any capital improvement or series of capital
improvements within any calendar year, costing in excess of $1,500.00. Tenant
will comply with the
6
<PAGE>
reasonable rules and regulations of the Building adopted by Landlord. Landlord
shall have the right at all times to change and amend the rules and regulations
in any reasonable manner as may be deemed advisable for the safety, care,
cleanliness, preservation of good order and operation or use of the Building or
the Premises. All rules and regulations of the Building will be sent by Landlord
to Tenant in writing and shall thereafter be carried out and observed by Tenant.
3.4 WARRANTY OF POSSESSION. Landlord warrants that it has the right and
authority to execute this Lease, and Tenant, upon payment of the required rents
and subject to the terms, conditions, covenants and agreements contained in this
Lease, shall have possession of the Premises during the full term of this Lease
as well as any extension or renewal thereof. Landlord shall not be responsible
for the acts or omissions of any other lessee or third party that may interfere
with Tenant's use and enjoyment of the Premises.
3.5 RIGHT OF ACCESS. Landlord or its authorized agents shall, at any and all
reasonable times and upon reasonable notice, have the right to enter the
Premises to inspect the same, to show the Premises to prospective purchasers,
lessees, mortgagees, insurers or other interested parties, and to alter, improve
or repair the Premises or any other portion of the Building. Tenant hereby
waives any claim for damages for injury or inconvenience to or interference with
Tenant's business, any loss of occupancy or use of the Premises, and any other
loss occasioned thereby, except as may result from the negligent or willful
misconduct of Landlord. Tenant shall not change Landlord's lock system or in any
other manner prohibit Landlord from entering the Premises. Landlord shall have
the right to use any and all means which Landlord may deem proper to open any
door in an emergency without liability therefor. Tenant shall permit Landlord to
erect, use, maintain and repair pipes, cables, conduits, plumbing, vents and
wires in, to and through the Premises as often and to the extent that Landlord
may now or hereafter deem to be necessary or appropriate for the proper use,
operation and maintenance of the Building; provided that Landlord does not
thereby materially interfere with the use and enjoyment of the Premises by
Tenant for general office purposes.
ARTICLE 4. UTILITIES AND ACTS OF OTHERS
4.1 BUILDING SERVICES. Tenant shall pay when due, all charges for utilities
furnished to or for the use or benefit of Tenant or the Premises. Tenant shall
have no claim for rebate of rent on account of any interruption in service.
4.2 THEFT OR BURGLARY. Landlord shall not be liable to Tenant for losses to
Tenant's property or personal injury caused by criminal acts or entry by
unauthorized persons into the Premises or the Building.
4.3 UNDERGROUND CHILLED WATER LINE. In the event that the general contractor or
one of its subcontractors damages the underground chilled water line serving the
4295 building, and the damage necessitates the Tenant shutting down its chilled
water computers, the Landlord shall pay a penalty of $5,000.00 per day for every
day that the computers are inoperable due to the unavailability of chilled
water. Any penalty owed by the Landlord may be paid by crediting the Tenant's
next rent obligation.
ARTICLE 5. REPAIRS AND MAINTENANCE
7
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5.1. LANDLORD REPAIRS. Landlord shall not be required to make any improvements,
replacements or repairs of any kind or character to the Premises or the Building
during the term of this Lease except as are set forth in this Section. Landlord
shall maintain only the roof, foundation, parking and common areas, the
structural soundness of the exterior walls, doors, corridors, and other
structures serving the Premises in good order and repair, provided, that
Landlord's cost of maintaining, replacing and repairing the items set forth in
this Section are operating expenses subject to the additional rent provisions in
Section 2.2 and 2.3. Landlord shall correct any deficiencies in maintenance
within thirty (30) days after written notice from Tenant; provided that for work
that cannot be completed within thirty (30) days, Landlord shall not be in
default hereunder if Landlord commences the work within such thirty (30) day
period and diligently proceeds to complete such work; and provided that in the
case of an emergency, Landlord shall take action to correct deficiencies as
promptly as practicable. Landlord shall not be liable to Tenant, except as
expressly provided in this Lease, for any damage or inconvenience, and Tenant
shall not be entitled to any abatement or reduction of rent by reason of any
repairs, alterations or additions made by Landlord under this Lease; provided
that Landlord does not thereby materially interfere with the use and enjoyment
of the Premises by Tenant for general office purposes.
5.2 TENANT REPAIRS. Tenant shall, at all times throughout the term of this
Lease, including renewals and extensions, and at its sole expense, keep and
maintain the Premises in a clean, safe, sanitary and first class condition and
in compliance with all applicable laws, codes, ordinances, rules and
regulations, provided that Tenant shall not be obligated to make any material
capital improvements required by such laws, ordinances, orders, rules and
regulations, (nor shall Landlord have such obligation). For purposes of this
clause, a "material capital improvement" shall mean any capital improvement or
series of capital improvements within any calendar year, costing in excess of
$1,500.00. Tenant's obligations hereunder shall include, but not be limited to,
the maintenance, repair and replacement, if necessary, of all heating,
ventilation, air conditioning, lighting and plumbing fixtures and equipment,
fixtures, motors and machinery, all interior walls, partitions, doors and
windows, including the regular painting thereof, all exterior entrances,
windows, doors and docks and the replacement of all broken glass. When used in
this provision, the term "repairs" shall include replacements or renewals when
necessary, and all such repairs made by the Tenant shall be equal in quality and
class to the original work. Notwithstanding the foregoing, Tenant shall not be
responsible for major non-recurring repairs of or replacements to the HVAC
system, except where caused by Tenant's failure to properly utilize, maintain
and secure said system; Tenant, however, shall pay the amortization (utilizing
the amortization method for capital expenditures described in Section 2.3) of
the costs of such major repairs or replacements performed after the five (5)
year anniversary of the Commencement Date. For purposes of this paragraph,
"major repairs or replacement of the HVAC system" shall mean expenditures for
major repairs to or replacement of compressors or exchangers. The Tenant shall
keep and maintain all portions of the Premises and the sidewalk and areas
adjoining the same in a clean and orderly condition, free of accumulation of
dirt, rubbish, snow and ice. If Tenant fails, refuses or neglects to maintain or
repair the Premises as required in this Lease after notice shall have been given
Tenant, in accordance with this Lease, Landlord may make such repairs without
liability to Tenant for any loss or damage that may accrue to Tenant's
merchandise, fixtures or other property or to Tenant's business by reason
thereof, and upon completion thereof, Tenant shall pay to Landlord all costs
plus fifteen percent (15%) for overhead incurred by Landlord in making such
repairs upon presentation to Tenant of bill therefor.
8
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5.3. TENANT DAMAGES. Tenant shall not allow any damage to be committed on any
portion of the Premises or Building or common areas, and at the termination of
this lease, by lapse of time or otherwise, Tenant shall deliver the Premises to
Landlord in as good condition as existed at the Commencement Date of this Lease,
ordinary wear and tear and damage by casualty excepted. The cost and expense of
repairs necessary to restore the condition of the Premises shall be borne by
Tenant.
ARTICLE 6. ALTERATIONS AND IMPROVEMENTS
6.1 LANDLORD IMPROVEMENTS. Landlord will complete construction of the
improvements to the Premises in accordance with the architectural plans and
specifications attached hereto as EXHIBITS C and D. Any changes or modifications
to the said plans and specifications shall be accomplished by written change
order executed by both Landlord and Tenant. The parties agree that the Initial
Base Rent is based on the development cost estimates set forth in the
preliminary project budget attached hereto as EXHIBIT F, and that upon Project
completion the Base Rent will be increased or decreased to reflect actual
project costs. Specifically, upon completion of the construction of the
Premises, the Initial Base Rent shall be adjusted so that Landlord's gross
annual yield is thirteen and thirty-five/100 percent (13.35%) of the total cost
of the Project (i.e. annual Base Rent equals Total Project Costs multiplied by
13.35%), provided, however that the "Soft Costs" as set forth in EXHIBIT F shall
be fixed at $616,809.00. Tenant shall be entitled to participate in the
construction management process and will have the right to initiate and approve
plan modifications and all construction subcontracts. Landlord shall provide
Tenant with construction cost information on an "open book" basis and will allow
Tenant to audit Landlord's accounting records with respect to the construction
of the Premises. Upon completion of construction and reconciliation of Total
Project Costs, the Landlord and Tenant shall execute an Addendum in the form of
attached EXHIBIT E, which Addendum shall, among other things, confirm the Base
Rent for the Premises. In the event the Total Project Costs incurred by Landlord
(exclusive of Soft Costs) exceed Five Million Five Hundred Thousand and 00/100
Dollars ($5,500,000), then any such excess costs shall be paid to Landlord by
Tenant, in cash, within fifteen (15) days following completion of construction,
reconciliation of Project Costs, and Landlord's submission of an invoice to
Tenant for such excess costs.
6.2 TENANT IMPROVEMENTS. Tenant shall not make or allow to be made any
alterations or physical additions in or to the Premises without first obtaining
the written consent of Landlord, which consent may not be unreasonably withheld.
Any alterations, physical additions or improvements to the Premises made by
Tenant shall at once become the property of Landlord and shall be surrendered to
Landlord upon the termination of this Lease; provided, however, Landlord, as a
condition to its consent to any proposed alteration or addition, may require
Tenant to remove any physical additions and/or repair any alterations in order
to restore the Premises to the conditions existing at the time Tenant took
possession, all costs of removal and/or alterations to be borne by Tenant. This
clause shall not apply to moveable equipment or furniture owned by Tenant, which
Tenant shall have the right to mortgage, and which may be removed by Tenant at
any time and from time to time. Landlord agrees to cooperate with Tenant in
connection with any financing Tenant elects to place on its equipment and
personal property, including execution of such certificates and documents as
Tenant's lender may reasonably request.
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ARTICLE 7. CASUALTY AND INSURANCE
7.1 SUBSTANTIAL DESTRUCTION. If all or a substantial portion of the Premises or
the Building should be totally destroyed by fire or other casualty, or if the
Premises or the Building should be damaged so that rebuilding cannot reasonably
be completed within two hundred (200) working days after the date of written
notification by Tenant to Landlord of the destruction, or if insurance proceeds
are not made available to Landlord, or are inadequate, for restoration, this
Lease shall terminate at the option of Landlord or Tenant by written notice
within sixty (60) days following the occurrence, and the rent shall be abated
for the unexpired portion of the Lease effective as of the date of the
occurrence.
7.2 PARTIAL DESTRUCTION. If the Premises should be partially damaged by fire or
other casualty, and rebuilding or repairs can reasonably be completed within two
hundred (200) working days from the date of written notification by Tenant to
Landlord of the destruction, and insurance proceeds are adequate and available
to Landlord for restoration, this Lease shall not terminate, and Landlord shall
at its sole risk and expense proceed with reasonable diligence to rebuild or
repair the Building or other improvements to substantially the same condition in
which they existed prior to the damage. If the Premises are to be rebuilt or
repaired and are untenantable in whole or in part following the damage, the rent
payable under this Lease during the period for which the Premises are
untenantable shall be adjusted to such an extent as may be fair and reasonable
under the circumstances. Tenant shall not be obligated to pay rent for any
portion of the Premises which it does not actually occupy during restoration, if
such portion is not suitable for Tenant's business operations as reasonably
determined by Tenant. In the event that Landlord fails to complete the necessary
repairs or rebuilding within two hundred (200) working days from the date of
written notification by Tenant to Landlord of the destruction, Tenant may at its
option terminate this Lease by delivering written notice of termination to
Landlord, whereupon all rights and obligations under this Lease shall cease to
exist.
7.3 PROPERTY INSURANCE. Landlord shall not be obligated in any way or manner to
insure any personal property (including, but not limited to, any furniture,
machinery, goods or supplies) of Tenant upon or within the Premises, any
fixtures installed or paid for by Tenant upon or within the Premises, or any
improvements which Tenant may construct on the Premises. Tenant shall maintain
property insurance on its personal property and shall also maintain plate glass
insurance. Tenant shall have no right in or claim to the proceeds of any policy
of insurance maintained by Landlord even if the cost of such insurance is borne
by Tenant as set forth in Article 2.
7.4 WAIVER OF SUBROGATION. Anything in this Lease to the contrary withstanding,
Landlord and Tenant hereby waive and release each other of and from any and all
right of recovery, claim, action or cause of action, against each other, their
agents, officers and employees, for any loss or damage that may occur to the
Premises, the improvements of the Building or personal property within the
Building, by reason of fire, other casualty insurable under an "all risk
insurance policy", or the elements, regardless of cause or origin, including
negligence of Landlord or Tenant and their agents, officers and employees.
Landlord and Tenant agree immediately to give their respective insurance
companies which have issued
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policies of insurance covering all risk of direct physical loss, written notice
of the terms of the mutual waivers contained in this Section.
7.5 HOLD HARMLESS. Landlord shall not be liable to Tenant's employees, agents,
invitees, licensees or visitors, or to any other person, for an injury to person
or damage to property on or about the Premises caused by any act or omission of
Tenant, its agents, servants or employees, or of any other person entering upon
the Premises under express or implied invitation by Tenant, or caused by the
improvements located on the Premises becoming out of repair, the failure or
cessation of any service provided by Landlord (including security service and
devices), or caused by leakage of gas, oil, water or steam or by electricity
emanating from the Premises, provided that Landlord shall be responsible for
loss resulting from its negligence or willful misconduct or from Landlord's
failure to perform repairs within the time required by Section 5.1 hereof.
Tenant agrees to indemnify and hold harmless Landlord of and from any loss,
attorney's fees, expenses or claims arising out of any such damage or injury,
for which Landlord is not liable pursuant to the foregoing provisions.
7.6 PUBLIC LIABILITY INSURANCE. Tenant shall during the term hereof keep in full
force and effect at its expense a policy or policies of public liability
insurance with respect to the Premises and the business of Tenant, on terms and
with companies approved in writing by Landlord, in which both Tenant and
Landlord shall be covered by being named as insured parties under reasonable
limits of liability not less than $1,000,000, or such greater coverage as
Landlord may reasonably require, combined single limit coverage for injury or
death. Such policy or policies shall provide that thirty (30) days' written
notice must be given to Landlord prior to cancellation thereof. Tenant shall
furnish evidence satisfactory to Landlord at the time this Lease is executed
that such coverage is in full force and effect.
ARTICLE 8. CONDEMNATION
8.1 SUBSTANTIAL TAKING. If all or a substantial part of the Premises are taken
for any public or quasi-public use under any governmental law, ordinance or
regulation, or by right of eminent domain or by purchase in lieu thereof, and
the taking would prevent or materially interfere with the use of the Premises
for the purpose for which it is then being used, this Lease shall terminate and
the rent shall be abated during the unexpired portion of this Lease effective on
the date physical possession is taken by the condemning authority. Tenant shall
have no claim to the condemnation award or proceeds in lieu thereof, except that
Tenant shall be entitled to a separate award for the cost of removing and moving
its personal property.
8.2 PARTIAL TAKING. If all or a substantial part of the Premises are taken for
any public or quasi-public use under any governmental law, ordinance or
regulation, or by right of eminent domain or by purchase in lieu thereof, and
this Lease is not terminated as provided in Section 8.1 above, the rent payable
under this Lease during the unexpired portion of the term shall be adjusted to
such an extent as may be fair and reasonable under the circumstances. Tenant
shall not be obligated to pay rent for any portion of the Premises which it does
not actually occupy after such taking, if such portion is not suitable for
Tenant's business operations as reasonably determined by Tenant, and Tenant
shall have the option to terminate this Lease by written notice to Landlord
given within sixty (60) days after
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possession is taken if the remaining portion of the Premises is not suitable for
Tenant's business operation as reasonably determined by Tenant. Tenant shall
have no claim to the condemnation award or proceeds in lieu thereof, except that
Tenant shall be entitled to a separate award for the cost of removing and moving
its personal property.
ARTICLE 9. ASSIGNMENT OR SUBLEASE
9.1 LANDLORD ASSIGNMENT. Landlord shall have the right to sell, transfer or
assign, in whole or in part, its rights and obligations under this Lease and in
the Building. Any such sale, transfer or assignment shall operate to release
Landlord from any and all liabilities under this Lease arising after the date of
such sale, assignment or transfer, provided that the transferee or assignee
assumes such liabilities.
9.2 TENANT ASSIGNMENT. Tenant shall not assign, in whole or in part, this Lease,
or allow it to be assigned, in whole or in part, by operation of law or
otherwise, or mortgage or pledge the same, or sublet the Premises, in whole or
in part, without the prior written consent of Landlord, which consent shall not
be unreasonably withheld or delayed. In no event shall any such assignment or
sublease ever release Tenant or any guarantor from any obligation or liability
hereunder. Notwithstanding anything in this Lease to the contrary, in the event
of any assignment or sublease, any option or right of first refusal granted to
Tenant shall not be assignable by Tenant to any assignee or sublessee. No
assignee or sublessee of the Premises or any portion thereof may assign or
sublet the Premises or any portion thereof.
9.3 CONDITIONS OF ASSIGNMENT. If Tenant desires to assign or sublet all or any
part of the Premises, it shall so notify Landlord at least thirty (30) days in
advance of the date on which Tenant desires to make such assignment or sublease.
Tenant shall provide Landlord with a copy of the proposed assignment or sublease
and such information as Landlord might request concerning the proposed sublessee
or assignee to allow Landlord to make informed judgments as to the financial
condition, reputation, operations and general desirability of the proposed
sublessee or assignee. Within seven (7) business days after Landlord's receipt
of Tenant's proposed assignment or sublease and all required information
concerning the proposed sublease or assignee, Landlord shall have the following
options: (1) consent to the proposed assignment or sublease, and, if the rent
due and payable by any assignee or sublessee under any such permitted assignment
or sublease (or a combination of the rent payable under such assignment or
sublease plus any bonus or any other consideration or any payment incident
thereto) exceeds the rent payable under this Lease for such space, Tenant shall
pay to Landlord one-half (1/2) of such excess rent and other excess
consideration within ten (10) days following receipt thereof by Tenant; or (2)
refuse, subject to the limitations set forth in Section 9.2 above, to consent to
the proposed assignment or sublease, which refusal shall be deemed to have been
exercised unless Landlord gives Tenant written notice providing otherwise.
Landlord shall, upon Tenant's request, provide the reasons for any refusal. Upon
the occurrence of an event of default, if all or any part of the Premises are
then assigned or sublet, Landlord, in addition to any other remedies provided by
this Lease or provided by law, may, at its option, collect directly from the
assignee or sublessee all rents becoming due to Tenant by reason of the
assignment or sublease. Any collection directly by Landlord from the assignee or
sublessee shall not be construed to constitute a novation or a release of Tenant
or any guarantor from the further performance of its obligations under this
Lease.
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9.4 RIGHTS OF MORTGAGE. Tenant accepts this Lease subject and subordinate to any
recorded mortgage presently existing or hereafter created upon the Building and
to all existing recorded restrictions, covenants, easements and agreements with
respect to the Building. Landlord is hereby irrevocably vested with full power
and authority to subordinate Tenant's interest under this Lease to any first
mortgage lien hereafter placed on the Premises, and Tenant agrees upon demand to
execute additional instruments subordinating this Lease as Landlord may require.
If the interests of Landlord under this Lease shall be transferred by reason of
foreclosure or other proceedings for enforcement of any first mortgage or deed
of trust on the Premises, Tenant shall be bound to the transferee (sometimes
called the "Purchaser") at the option of the Purchaser, under the terms,
covenants and conditions of this Lease for the balance of the term remaining,
including any extensions or renewals, with the same force and effect as if the
Purchaser were Landlord under this Lease, and, if requested by the Purchaser,
Tenant agrees to attorn to the Purchaser, including the first mortgagee under
any such mortgage if it be the Purchaser, as its Landlord. Notwithstanding the
foregoing, Tenant shall not be disturbed in its possession of the Premises so
long as Tenant is not in default hereunder.
9.5 TENANT'S STATEMENT. Tenant agrees to furnish, from time to time, within ten
(10) days after receipt of a request from Landlord or Landlord's mortgagee, a
statement certifying, if applicable, the following: Tenant is in possession of
the Premises; the Premises are acceptable; the Lease is in full force and
effect; the Lease is unmodified; Tenant claims no present charge, lien, or claim
or offset against rent; the rent is paid for the current month, but is not
prepaid for more than one month and will not be prepaid for more than one month
in advance; there is no existing default by reason of some act or omission by
Landlord; and such other matters as may be reasonably required by Landlord or
Landlord's mortgagee; or specifying any exceptions to such matters. Tenant's
failure to deliver such statement, in addition to being a default under this
Lease, shall be deemed to establish conclusively that this Lease is in full
force and effect except as declared by Landlord, that Landlord is not in default
of any of its obligations under this Lease, and that Landlord has not received
more than one month's rent in advance. Tenant agrees to furnish, from time to
time, within ten (10) days after receipt of a request from Landlord, the most
recent financial statement of Tenant, certified as true and correct by Tenant.
ARTICLE 10. LANDLORD'S LIEN AND SECURITY AGREEMENT (Intentionally omitted)
ARTICLE 11. DEFAULT AND REMEDIES
11.1 DEFAULT BY TENANT. The following shall be deemed to be events of default
("Default") by Tenant under this Lease: (1) Tenant shall fail to pay when due
any installment of rent or any other payment required pursuant to this Lease and
such failure shall continue for a period of five (5) days after written notice
to Tenant; (2) Tenant shall abandon any substantial portion of the Premises; (3)
Tenant shall fail to comply with any term, provision or covenant of this Lease,
other than the payment of rent, and the failure is not cured within thirty (30)
days after written notice to Tenant; (4) Tenant shall file a petition or if an
involuntary petition is filed against Tenant, or becomes insolvent, under any
applicable federal or state bankruptcy or insolvency law or admit that it cannot
meet its financial obligations as
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they become due; or a receiver or trustee shall be appointed for all or
substantially all of the assets of Tenant; or Tenant shall make a transfer in
fraud of creditors or shall make an assignment for the benefit of creditors; or
(5) Tenant shall do or permit to be done any act which results in a lien being
filed against the Premises or the Building and/or project of which the Premises
are a part; and Tenant shall not cause such lien to be released or bonded off
within thirty (30) days after written notice to Tenant.
In the event that an order for relief is entered in any case under Title 11,
U.S.C. (the "Bankruptcy Code") in which Tenant is the debtor and: (A) Tenant as
debtor-in-possession, or any trustee who may be appointed in the case (the
"Trustee") seeks to assume the lease, then Tenant, or Trustee if applicable, in
addition to providing adequate assurance described in applicable provisions of
the Bankruptcy Code, shall provide adequate assurance to Landlord of Tenant's
future performance under the Lease by depositing with Landlord a sum equal to
the lesser of twenty-five percent (25%) of the rental and other charges due for
the balance of the Lease term or six (6) months' rent ("Security"), to be held
(without any allowance for interest thereon) to secure Tenant's obligation under
the Lease, and (B) Tenant, or Trustee if applicable, seeks to assign the Lease
after assumption of the same, then Tenant, in addition to providing adequate
assurance described in applicable provisions of the Bankruptcy Code, shall
provide adequate assurance to Landlord of the proposed assignee's future
performance under the Lease by depositing with Landlord a sum equal to the
Security to be held (without any allowance or interest thereon) to secure
performance under the Lease. Nothing contained herein expresses or implies, or
shall be construed to express or imply, that Landlord is consenting to
assumption and/or assignment of the Lease by Tenant, and Landlord expressly
reserves all of its rights to object to any assumption and/or assignment of the
Lease. Neither Tenant nor any Trustee shall conduct or permit the conduct of any
"fire", "bankruptcy", "going out of business" or auction sale in or from the
Premises.
11.2 REMEDIES FOR TENANT'S DEFAULT. Upon the occurrence of a Default as defined
above, Landlord may elect either (i) to cancel and terminate this Lease and this
Lease shall not be treated as an asset of Tenant's bankruptcy estate, or (ii) to
terminate Tenant's right to possession only without canceling and terminating
Tenant's continued liability under this Lease. Notwithstanding the fact that
initially Landlord elects under (ii) to terminate Tenant's right to possession
only, Landlord shall have the continuing right to cancel and terminate this
Lease by giving three (3) days' written notice to Tenant of such further
election, and shall have the right to pursue any remedy at law or in equity that
may be available to Landlord.
In the event of election under (ii) to terminate Tenant's right to possession
only, Landlord may, at Landlord's option, enter the Premises and take and hold
possession thereof, without such entry into possession terminating this Lease or
releasing Tenant in whole or in part from Tenant's obligation to pay all amounts
hereunder for the full stated term. Upon such reentry, Landlord may remove all
persons and property from the Premises and such property may be removed and
stored in a public warehouse or elsewhere at the cost and for the account of
Tenant, without becoming liable for any loss or damage which may be occasioned
thereby. Such reentry shall be conducted in the following manner: without resort
to judicial process or notice of any kind if Tenant has abandoned or voluntarily
surrendered possession of the Premises; and, otherwise, by resort to judicial
process. Upon and after entry into possession without termination of the Lease,
Landlord may, but is not obligated to, relet the Premises, or any part thereof,
to any one other than the Tenant, for such time and upon such terms as Landlord,
in Landlord's sole discretion, shall determine. Landlord may make alterations
and
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repairs to the Premises to the extent deemed by Landlord necessary or desirable
to relet the Premises.
Upon such reentry, Tenant shall be liable to Landlord as follows:
A. For all reasonable attorneys' fees incurred by Landlord in
connection with exercising any remedy hereunder;
B. For the unpaid installments of base rent, additional rent or
other unpaid sums which were due prior to such reentry,
including interest and late payment fees, which sums shall be
payable immediately.
C. For the installments of base rent, additional rent, and other
sums falling due pursuant to the provisions of this Lease for
the period after reentry during which the Premises remain
vacant, including late payment charges and interest, which
sums shall be payable as they become due hereunder.
D. For all expenses incurred in releasing the Premises, including
leasing commissions, reasonable attorneys' fees, and costs of
alteration or repairs, which shall be payable by Tenant as
they are incurred by Landlord; and
E. While the Premises are subject to any new lease or leases made
pursuant to this Section, for the amount by which the monthly
installments payable under such new lease or leases is less
than the monthly installment for all charges payable pursuant
to this Lease, which deficiencies shall be payable monthly.
Notwithstanding Landlord's election to terminate Tenant's right to possession
only, and notwithstanding any reletting without termination, Landlord, at any
time thereafter, may elect to terminate this Lease, and to recover (in lieu of
the amounts which would thereafter be payable pursuant to the foregoing, but not
in diminution of the amounts payable as provided above before termination), as
damages for loss of bargain and not as a penalty, an aggregate sum equal to the
present value of the amount by which the rental value of the portion of the term
unexpired at the time of such election is less than an amount equal to the
unpaid base rent and additional rent, and all other charges which would have
been payable by Tenant for the unexpired portion of the term of this Lease,
which deficiency and all expenses incident thereto, including commissions,
attorneys' fees, expenses of alterations and repairs, shall be due to Landlord
as of the time Landlord exercises said election, notwithstanding that the term
had not expired. If Landlord, after such reentry, leases the Premises, then the
rent payable under such new lease shall be conclusive evidence of the rental
value of the unexpired portion of the term of this Lease.
If this Lease shall be terminated by reason of bankruptcy or insolvency of
Tenant, Landlord shall be entitled to recover from Tenant or Tenant's estate, as
liquidated damages for loss of bargain and not as a penalty, the amount
determined by the immediately preceding paragraph.
11.3 LANDLORD'S RIGHT TO PERFORM FOR ACCOUNT OF TENANT. If Tenant shall be in
Default under this Lease, Landlord may cure the Default at any time for the
account and at the expense of Tenant. If Landlord cures a Default on the part of
Tenant, Tenant shall
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reimburse Landlord upon demand for any amount expended by Landlord in connection
with the cure, including, without limitation, attorneys' fees and interest.
11.6 INTEREST, ATTORNEY'S FEES AND LATE CHARGE. In the event of a Default by
Tenant: (1) if a monetary default, interest shall accrue on any sum due and
unpaid at the rate of the lesser of fifteen percent (15%) per annum or the
highest rate permitted by law and, if Landlord places in the hands of an
attorney the enforcement of all or any part of this Lease, the collection of any
rent due or to become due or recovery of the possession of the Premises, Tenant
agrees to pay Landlord's costs of collection, including reasonable attorney's
fees for the services of the attorney, whether suit is actually filed or not.
Other remedies for nonpayment of rent notwithstanding, if the monthly rental
payment or any other payment due from Tenant to Landlord is not received by
Landlord on or before the tenth (10th) day of the month for which the rent is
due, a late payment charge of five percent (5%) of such past due amount shall
become due and payable in addition to such amounts owed under this Lease.
11.5 ADDITIONAL REMEDIES, WAIVERS, ETC.
A. The rights and remedies of Landlord set forth herein shall be
in addition to any other right and remedy now and hereafter
provided by law. All rights and remedies shall be cumulative
and not exclusive of each other. Landlord may exercise its
rights and remedies at any times, in any order, to any extent,
and as often as Landlord deems advisable without regard to
whether the exercise of one right or remedy precedes, concurs
with or succeeds the exercise of another.
B. A single or partial exercise of a right or remedy shall not
preclude a further exercise thereof, or the exercise of
another right or remedy from time to time.
C. No delay or omission by Landlord in exercising a right or
remedy shall exhaust or impair the same or constitute a waiver
of, or acquiesce to, a Default.
D. No waiver of Default shall extend to or affect any other
Default or impair any right or remedy with respect thereto.
E. No action or inaction by Landlord shall constitute a waiver of
Default.
F. No waiver of a Default shall be effective unless it is in
writing and signed by Landlord.
ARTICLE 12. RELOCATION (Intentionally Omitted)
ARTICLE 13. AMENDMENT AND LIMITATION OF WARRANTIES
13.1 ENTIRE AGREEMENT. IT IS EXPRESSLY AGREED BY TENANT, AS A MATERIAL
CONSIDERATION FOR THE EXECUTION OF THIS LEASE, THAT THIS LEASE, WITH THE
SPECIFIC REFERENCES TO WRITTEN EXTRINSIC DOCUMENTS, IS THE ENTIRE AGREEMENT OF
THE PARTIES; AND THAT THERE ARE, AND WERE, NO VERBAL REPRESENTATIONS,
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WARRANTIES, UNDERSTANDINGS, STIPULATIONS, AGREEMENTS OR PROMISES PERTAINING TO
THIS LEASE, EXCEPT AS EXPRESSLY SET FORTH IN THIS LEASE.
13.2 AMENDMENT. THIS LEASE MAY NOT BE ALTERED, WAIVED, AMENDED OR EXTENDED
EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY LANDLORD AND TENANT.
13.3 LIMITATION OF WARRANTIES. LANDLORD AND TENANT EXPRESSLY AGREE THAT THERE
ARE AND SHALL BE NO IMPLIED WARRANTIES OR MERCHANTABILITY, HABITABILITY, FITNESS
FOR A PARTICULAR PURPOSE OR OF ANY OTHER KIND ARISING OUT OF THIS LEASE, AND
THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THOSE EXPRESSLY SET FORTH IN THIS
LEASE.
ARTICLE 14. MISCELLANEOUS
14.1 SUCCESSORS AND ASSIGNS. This Lease shall be binding upon and inure to the
benefit of Landlord and Tenant and their respective heirs, personal
representatives, successors and assigns. It is hereby covenanted and agreed that
should Landlord's interest in the Premises cease to exist for any reason during
this Lease, then notwithstanding the happening of such event this Lease
nevertheless shall remain unimpaired and in full force and effect, and Tenant
hereunder agrees to attorn to the then owner of the Premises.
14.2 USE OR RENT TAX. If applicable in the jurisdiction where the Premises are
issued, Tenant shall pay and be liable for all rental, sales and use taxes or
other similar taxes, if any, levied or imposed by any city, state, county or
other governmental body having authority, such payments to be in addition to all
other payments required to be paid to Landlord under the terms of this Lease.
Any such payment shall be paid concurrently with the payment of the rent,
additional rent, operating expenses or other charge upon which the tax is based
as set forth above.
14.3 ACT OF GOD. Landlord shall not be required to perform any covenant or
obligation in this Lease, or be liable in damages to Tenant, so long as the
performance or non-performance of the covenant or obligation is delayed, caused
or prevented by an act of God, force majeure or by Tenant.
14.4 HEADINGS. The section headings appearing in this Lease are inserted only as
a matter of convenience and in no way define, limit, construe or describe the
scope or intent of any Section.
14.5 NOTICE. All rent and other payments required to be made by Tenant shall be
payable to Landlord at the address set forth in Section 1.8. All payments
required to be made by Landlord to Tenant shall be payable at the address set
forth in Section 1.8, or at any other address within the United States as Tenant
may specify from time to time by written notice. Any notice or document required
or permitted to be delivered by the terms of this Lease shall be deemed to be
delivered (whether or not actually received) upon actual delivery or 48 hours
after deposit in the United States Mail, postage prepaid, certified mail, return
receipt requested, addressed to the parties at the respective addresses set
forth in Section 1.8.
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14.6 TENANT'S AUTHORITY. If Tenant executes this Lease as a corporation, each of
the persons executing this Lease on behalf of Tenant does hereby personally
represent and warrant that each such person signing on behalf of the corporation
is authorized to do so.
14.7 HAZARDOUS SUBSTANCES. Tenant, its agents or employees, shall not bring or
permit to remain on the Premises or Building any asbestos, petroleum or
petroleum products, explosives, toxic materials, or substances defined as
hazardous wastes, hazardous materials, or hazardous substances under any
federal, state, or local law or regulation ("Hazardous Materials"), except in
compliance with applicable environmental and other laws. Tenant's violation of
the foregoing prohibition shall constitute a material breach and default
hereunder and Tenant shall indemnify, hold harmless and defend Landlord from and
against any claims, damages, penalties, liabilities, and costs (including
reasonable attorney fees and court costs) caused by or arising out of (i) a
violation of the foregoing prohibition by Tenant or (ii) the presence of any
Hazardous Materials on, under, or about the Premises or the Building during the
term of the Lease caused by or arising, in whole or in part, out of the actions
of Tenant, its agents or employees. Tenant shall clean up, remove, remediate and
repair any soil or ground water contamination and damage caused by the presence
and any release of any Hazardous Materials in, on, under or about the Premises
or the Building during the term of the Lease caused by or arising, in whole or
in part, out of the actions of Tenant, its agents or employees, in conformance
with the requirements of applicable law. Tenant shall immediately give Landlord
written notice of any suspected breach of this paragraph; upon learning of the
presence of any release of any Hazardous Materials, and upon receiving any
notices from governmental agencies pertaining to Hazardous Materials which may
affect the Premises or the Building. The obligations of Tenant hereunder shall
survive the expiration of earlier termination, for any reason, of this Lease.
14.8 SEVERABILITY. If any provision of this Lease or the application thereof to
any person or circumstances shall be invalid or unenforceable to any extent, the
remainder of this Lease and the application of such provisions to other persons
or circumstances shall not be affected thereby and shall be enforced to the
greatest extent permitted by law.
14.9 LANDLORD'S LIABILITY. If Landlord shall be in default under this Lease and,
if as a consequence of such default, Tenant shall recover a money judgment
against Landlord, such judgment shall be satisfied only out of the right, title
and interest of Landlord in the Building, as the same may then be encumbered, or
by offset against rents, and neither Landlord nor any person or entity
comprising Landlord shall be liable for any deficiency. In no event shall Tenant
have the right to levy execution against any property of Landlord nor any person
or entity comprising Landlord other than the rents and its interest in the
Building as herein expressly provided.
14.10 BROKERAGE. Landlord and Tenant each represents and warrants to the other
that there is no obligation to pay any brokerage fee, commission, finder's fee
or other similar charge in connection with this Lease, other than fees due to
PHIL SIMONET OF PARAMOUNT REAL ESTATE CORPORATION which are the responsibility
of Landlord. Each party covenants that it will defend, indemnify and hold
harmless the other party from and against any loss or liability by reason of
brokerage or similar services alleged to have been rendered to, at the instance
of, or agreed upon by said indemnifying party. Notwithstanding anything herein
to the contrary, Landlord and Tenant agree that there shall be no brokerage fee
or commission due on expansions, options or renewals by Tenant.
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14.11 MANAGEMENT AGENT. Landlord hereby notifies Tenant that the person
authorized to execute this Lease and manage the Premises is CSM Corporation, a
Minnesota corporation, which has been appointed to act as the agent in leasing
management and operation of the Building for owner and is authorized to accept
service of process and receive or give receipts for notices and demands on
behalf of Landlord. Landlord reserves the right to change the identity and
status of its duly authorized agent upon written notice to Tenant.
14.12 EXISTING LEASES. The Landlord and Tenant are parties to leases covering
premises located at 4255, 4265 and 4295 Lexington Avenue North, Arden Hills,
Minnesota (the "Existing Leases"). The parties acknowledge and agree that a
material condition for Landlord's agreement to enter into this Lease, and to
enable Landlord to perform its obligations hereunder, is the Amendment of the
Existing Leases. Attached hereto and incorporated herein by this reference as
EXHIBITS G-1, G-2 and G-3, are the proposed amendments of the Existing Leases
(the "Amendments"). This Lease shall only be effective upon full execution and
delivery of this Lease and each of the Amendments, by both Landlord and Tenant.
14.13 CONSTRUCTION PROVISIONS. All of the work to be performed by Landlord
pursuant to Section 1.3 hereof shall be performed in accordance with the plans
and specifications described in Section 6.1 hereof, shall be completed in a good
and workmanlike manner, utilizing new and first-grade materials; shall be in
conformity with all applicable federal, state and local laws, ordinances,
regulations, building codes and fire regulations; shall comply with all
insurance requirements of Landlord and Tenant; and shall be free of any liens
for labor and materials. Landlord shall use all reasonable efforts to complete
such construction on or before the Commencement Date.
For the period commencing as of the Commencement Date and ending on the day one
(1) year thereafter, Landlord will correct and/or repair, or cause to be
corrected and/or repaired, any latent or non-obvious defect, malfunction or
failure in or of construction, workmanship, material or operation of the
Premises, provided any such defect, malfunction or failure is not the result of
any work performed by Tenant, and is not caused by any act or negligence of
Tenant, its employees or contractors. At the expiration of the one (1) year
period, Landlord shall assign to Tenant all guaranties and warranties made by
any contractor, subcontractor or materialmen with respect to the Premises and
thereafter Tenant shall have the right, at its option, to enforce all such
guaranties and warranties in its name directly against the warrantor. Landlord
agrees to exercise good faith efforts to obtain contractor/subcontractor
warranties longer than one (1) year, to the extent the same are available
without additional cost.
As to items which Tenant has notified Landlord are defective and which are
covered by referenced Landlord warranty, Landlord shall proceed expeditiously
and in good faith to complete and repair any such items. As a condition thereof,
Tenant shall allow Landlord, its employees or contractors, to enter upon the
Premises to perform any remedial work required to be performed, and will
cooperate with Landlord, its employees or contractors, so that such remedial
work can be accomplished as quickly as is reasonable under the circumstances,
and with the least amount of interruption to the business of the Tenant.
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<PAGE>
Occupancy of the Premises by Tenant for conducting its business shall constitute
an acknowledgement by Tenant, and shall be presumptive evidence, that the
Premises are in the condition called for by this Lease and that Landlord has
performed all of the construction work it is obligated to perform pursuant to
Section 1.3 hereof, except for such items which are not completed and as to
which Tenant shall have given notice to Landlord within thirty (30) days after
Tenant takes possession of the Premises (the "Punchlist"), and subject to any
latent or non-obvious defects, malfunctions or failures covered by the foregoing
warranty by Landlord. Landlord shall proceed expeditiously and in good faith to
complete and repair all items set forth on the Punchlist.
In the event of any dispute between Landlord and Tenant as to whether the
Premises are substantially complete and ready for occupancy by Tenant for the
conduct of Tenant's business, or as to any other claim by Tenant based upon
Landlord's warranties and construction obligations contained herein, such
dispute shall be resolved by arbitration in accordance with the rules of the
American Arbitration Association, or in accordance with such other procedures as
shall be mutually approved by the parties. In no event shall the Premises be
deemed substantially complete and ready for occupancy by Tenant until a
certificate of occupancy (temporary or permanent) (or, if certificates of
occupancy are not issued by the municipality, an equivalent final inspection
report authorizing Tenant's occupancy and use of the property) has been issued
by the city in which the Premises are located. Landlord agrees to exercise every
reasonable effort to obtain a final certificate of occupancy as soon as possible
following completion of the Premises.
14.14 ADDITIONAL PARKING. As of the Commencement Date, the Parking Plan for the
Premises will be as depicted in EXHIBIT A. Upon written request from Tenant,
Landlord will install additional parking on the Premises, and on the premises
covered by the Existing Leases, generally in accordance with the parking layout
shown on attached EXHIBIT A-1, subject to the following conditions:
(i) Landlord's application for and acquisition of all governmental
permits and appraisals necessary to permit Landlord to proceed
with construction and installation of such additional parking;
(ii) Landlord shall, following acquisition of necessary permits and
approvals, immediately proceed with construction of such
additional parking and shall complete the same within ninety
(90) days, subject to force majeure delays, including adverse
weather conditions (Note: the normal paving season is May 15th
through October 15th of each year);
(iii) From and after the date of completion of the construction and
installation of such parking, the Base Rent payable by Tenant
under this Lease shall be increased, annually, by an amount
equal to 13.35% of the costs incurred by Landlord in
connection with the construction of such additional parking,
which increased rent shall be payable monthly, as a part of
Tenant's Monthly Base Rent.
At any time following the expiration of the fifth lease year, Landlord may, at
its option, proceed with the additional parking, or a portion thereof, and from
and after the date of
20
<PAGE>
completion thereof, the Base Rent payable by Tenant hereunder shall be increased
in accordance with Subsection (iii) above.
14.15 GUARANTY. The Landlord has required, as a condition to its execution of
this Lease, that Fair, Isaac and Company, Incorporated unconditionally guarantee
the full performance of the Tenants obligations hereunder. The Tenant agrees to
deliver such guaranty, in the form of EXHIBIT H attached hereto and incorporated
herein by reference, within ten (10) days following the full execution of this
Lease by Landlord and Tenant. In the event Tenant fails to deliver such
guaranty, Landlord may, at its option terminate this Lease upon five (5) days
written notice to Tenant.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease effective the
day and year first above written.
LANDLORD: TENANT:
CSM CORPORATION DYNAMARK, INC.
BY: _______________________________ BY: _______________________________
ITS: _______________________________ ITS: _______________________________
21
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE is made and entered into effective as of the 2nd
day of December, 1998, between CSM CORPORATION, a Minnesota corporation,
("Landlord") and DYNAMARK, INC., a Minnesota corporation, ("Tenant").
RECITALS
First: Tenant entered into a lease agreement with Control Data Systems,
Inc. ("CDSI") dated May 1, 1995, (the "Lease") covering certain
premises located at 4295 Lexington Avenue North, Arden Hills,
Minnesota (the "Premises").
Second: Landlord purchased the real property upon which the Premises is
located under the terms of the Purchase Agreement dated November
8, 1996.
Third: As a part of Landlord's purchase of the real property, CDSI
assigned its interest in the Lease to Landlord.
Fourth: The parties have executed a First Amendment to Lease Agreement
("First Amendment") dated December 30, 1996.
Fifth: The parties wish to execute this Second Amendment to Lease to
further extend the term of the Lease, establish the rents payable
thereunder, adjust the site plan to reflect the reduction in the
area of other improvements to the Premises, and nullify the future
development agreement contained in the First Amendment:
AGREEMENT
In consideration of the above stated premises and the mutual covenants
hereinafter contained, the parties hereby agree that the Lease is modified,
amended and/or supplemented as follows:
1. Premises. The Premises and certain improvements thereupon shall be and
are hereby modified as shown on the site plan attached hereto as
REVISED EXHIBIT A-1. REVISED EXHIBIT A-1 replaces and is hereby
substituted for Exhibit A-1 attached to the First Amendment to Lease.
Tenant acknowledges that the Premises are a part of a development which
will include four buildings and associated appurtenant improvements,
all as shown on REVISED EXHIBIT A-1. Tenant acknowledges and agrees
that the Premises will be subject to and benefitted by various
non-exclusive easements for ingress, egress and access over the private
drives serving the project, and certain exclusive easements for
utilities and other purposes, provided that the same shall not
interfere with the use and enjoyment of the Premises, as contemplated
herein.
2. Lease Term. Landlord and Tenant are parties to a lease agreement dated
December 2, 1998 (the "New Lease"), covering certain premises and a new
building to be constructed thereon located adjacent to the Premises,
all as shown on REVISED EXHIBIT A-1. The parties agree that the term of
the Lease shall be adjusted such that the term of the Lease shall be
coterminous with the term of the New Lease. More particularly, upon the
commencement date of the New Lease, the term of the Lease shall be
extended and shall run for a period of one hundred fifty-six (156)
months commencing on the commencement date of the New Lease. If the
commencement date of the New Lease is other than the first day of a
calendar month, then the term of the Lease shall continue in full force
and effect for a period of one hundred fifty-six (156) months from and
after the first day of the month next succeeding the commencement date
of the New Lease. When the commencement date of the New Lease has been
established, the parties shall execute an addendum to this Second
Amendment to Lease, confirming the term and expiration date of the
Lease.
1 Exhibit 2.4
<PAGE>
3. Subsection 4(b) of the Lease and Section 3 of the First Amendment to
Lease are hereby deleted in their entirety and replaced with the
following:
"Base Rent. The Base Rental for the Premises during the remaining term
of this Lease shall be as follows:
Monthly Per
Period Base Rent Square Foot
------ --------- -----------
11/1/98 - 07/31/00 $28,021.63 $6.89
08/1/00 - 07/31/03 $29,445.08 $7.24
08/1/03 - 12/31/06 $30,665.18 $7.54
01/1/07 - New Lease expiration date $32,698.68 $8.04
Option Term:
------------
60 months following the
New Lease expiration date market market
Landlord and Tenant agree that the as built area of the Premises is
48,804 square feet."
4. Future Development. Upon the execution of this Second Amendment to
Lease by both parties, Tenant's and Landlord's obligations under
Section 5 of the First Amendment to Lease are satisfied, and said
section is null and void and shall be of no further force and effect.
5. Remodeling Allowance. Landlord agrees to provide Tenant with a one time
allowance for remodeling the Premises. Landlord's maximum contribution
towards the costs of remodeling will be based upon the time that such
remodeling occurs, in accordance with the following schedule:
Period of Maximum Allowance
Remodeling Expenditure Amount Per Square Foot
---------------------- ----------------------
1/1/01 - 12/31/02 $3.00
1/1/03 - 12/31/04 $3.75
1/1/05 - 12/31/06 $4.50
1/1/07 - 12/31/08 $5.25
The allowance shall apply towards Tenant's actual remodeling costs and
shall be payable to Tenant upon completion of remodeling and receipt by
Landlord of evidence of payment under normal and customary construction
lending procedures. Landlord shall not be required to provide any
allowance on costs submitted for reimbursement after December 31, 2010.
6. Guaranty. Landlord has required, as a condition to its execution of
this Second Amendment to Lease, that Fair, Isaac and Company,
Incorporated unconditionally guarantee the full performance of Tenant's
obligations under the Lease, as amended. Tenant agrees to deliver such
guaranty, in the form of EXHIBIT E attached hereto and incorporated
herein by reference, within ten (10) days following the full execution
of this Second Amendment to Lease by Landlord and Tenant. In the event
Tenant fails to deliver such guaranty, Landlord may, at its option,
terminate this Second Amendment to Lease upon five (5) days written
notice to Tenant.
7. Sections 6, 7 and 8 of the Lease are deleted in their entirety and are
replaced with the following:
"Option to Extend. Subject to the terms and conditions hereinafter set
forth, Tenant shall have the option to extend the term of this Lease
for one (1) additional sixty (60) month term ("Option Term") upon and
pursuant to the same conditions contained herein. This option may be
exercised by written notice of exercise from Tenant to Landlord given
not less than one (1) year prior to the expiration of the Lease Term.
Tenant may exercise this option only if: (i) no condition of default
exists with respect to Tenant's performance of its obligations under
the Lease; and (ii) Tenant
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<PAGE>
simultaneously exercises its options to extend under the New Lease and
under the Existing Lease covering the premises located at 4295
Lexington Avenue North in Arden Hills, Minnesota (as defined in Section
14.12 of the New Lease). Base Rent for the Option Term shall be at the
fair market rate for comparable space in the north suburban geographic
area. The fair market rent shall be agreed upon by Tenant and Landlord
within sixty (60) days of Tenant's notice to Landlord of its
irrevocable intent to exercise its option to extend set forth herein.
The fair market rental rate shall be determined in accordance with the
definition set forth in Section 7 of the Existing Lease dated May 1,
1995 and amended December 30, 1996 for the premises located at 4295
Lexington Avenue North in Arden Hills, Minnesota. In the event that
Landlord and Tenant fail to agree to the fair market rental rate in the
time period set forth herein, then the fair market rent shall be
established in accordance with the arbitration procedures set forth in
Section 8 of the Existing Lease for the premises located at 4295
Lexington Avenue North in Arden Hills, Minnesota. If Tenant fails to
exercise this option as aforesaid, this option shall be null and void
and of no further force and effect."
8. Miscellaneous. Except as expressly stated herein, the Lease shall
remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
Lease to be executed the day and year first above written.
LANDLORD: TENANT:
CSM CORPORATION DYNAMARK, INC.
BY: _______________________________ BY: _______________________________
ITS: _______________________________ ITS: _______________________________
3
CERTIFICATE
I, Peter L. McCorkell, the duly elected and acting Secretary of Fair,
Isaac and Company, Incorporated, a Delaware corporation ("the Company"), do
hereby certify that the following resolutions are true and correct copies of
resolutions which were duly adopted by the Board of Directors of the Company at
a meeting held on September 29, 1998:
RESOLVED, for fiscal 1999, the revenue and profit factors for the
Company's Officers' Incentive Plan, the Exempt Employees' Bonus Plan
and other plans using said factors shall be as follows:
[] Incentive Plan Profit Margin results:
o 9% margin minimum tolerable (P = -0.5)
o 14% margin acceptable ("on target"; P = 0.0)
o 19% margin excellent (P = 0.5)
o 24% margin outstanding (P = 1.0)
[] Incentive Plan Revenue Growth results:
o 9% growth minimum tolerable (P = -0.5)
o 17% growth acceptable ("on target"; P = 0.0)
o 25% growth excellent (P = 0.5)
o 33% growth outstanding (P = 1.0)
The multiplier formula shall remain:
Multiplier = 1 + 1.5 x P + 0.5 x R
I further certify that the foregoing resolutions have not been rescinded,
modified or amended since their adoption and are currently in full force and
effect.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the
Company this 16th day of December, 1998.
________________________________________
Peter L. McCorkell
Secretary
1
Exhibit 10.1
Exhibit E
FAIR, ISAAC AND COMPANY, INCORPORATED
1987 STOCK OPTION PLAN
1. PURPOSE.
The Plan is intended to provide incentive to the employees of the
Corporation and its Subsidiaries, to encourage such individuals' proprietary
interest in the Corporation, to encourage such individuals to remain in the
service of the Corporation or its Subsidiaries and to attract new employees with
outstanding qualifications.
2. DEFINITIONS.
(a) "Board" shall mean the Board of Directors of The Corporation, as
constituted from time to time.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the committee appointed by the Board in
accordance with Section 4.
(d) "Corporation" shall mean Fair, Isaac and Company, Incorporated, a
California corporation.
(e) "Employee" shall mean an individual who is an employee (within the
meaning of section 3401(c) of the Code and the regulations thereunder) of the
Corporation or of a Subsidiary.
(f) "Exercise Price" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as specified by the Committee in the
applicable stock option agreement.
(g) "Fair Market Value" shall mean the market price of Stock,
determined by the Committee as follows:
(i) If Stock was traded over-the-counter on the date in question but
was not classified as a national market issue, then the Fair Market Value
shall be equal to the mean between the last reported representative bid and
asked prices quoted by the NASDAQ system for such date;
1
Exhibit 10.2
<PAGE>
(ii) If Stock was traded over-the-counter on the date in question and
was classified as a national market issue, then the Fair Market Value shall
be equal to the last-transaction price quoted by the NASDAQ system for such
date;
(iii) If Stock was traded on a stock exchange on the date in question,
then the Fair Market Value shall be equal to the closing price reported by
the applicable composite-transactions report for such date; and
(iv) If none of the foregoing provisions is applicable, then the Fair
Market Value shall be determined by the Committee in good faith on such
basis as it deems appropriate.
In all cases, the determination of Fair Market Value by the Committee shall be
conclusive and binding on all persons.
(h) "Incentive Stock Option" shall mean an option described in section
422A(b) of the Code.
(i) "Nonstatutory Stock Option" shall mean an option not described in
sections 422 (b), 422A(b), 423(b) or 424(b) of the Code.
(j) "Option" shall mean an Incentive Stock Option or Nonstatutory Stock
Option granted pursuant to the Plan and entitling the holder to purchase Shares.
(k) "Optionee" shall mean an individual who holds an Option.
(l) "Plan" shall mean this Fair, Isaac and Company, Incorporated 1987
Stock Option Plan, as it may be amended from time to time.
(m) "Purchase Price" shall mean the Exercise Price multiplied by the
number of Shares with respect to which an option is exercised.
(n) "Share" shall mean one share of Stock, as adjusted in accordance
with Section 10 (if applicable).
(o) "Stock" shall mean the Common Stock of the Corporation.
(p) "Subsidiary" shall mean any corporation, if the Corporation and/or
one or more other Subsidiaries own at least 50% of the total combined voting
power of all classes of outstanding stock in such corporation. A corporation
that attains the status of a Subsidiary on a date after the adoption of the Plan
shall be considered a Subsidiary commencing as of such date.
2
<PAGE>
(q) "Test Rate" shall mean the lowest annual rate of interest which
will not result in the imputation of additional interest under the applicable
provision of the Code.
(r) "Total and Permanent Disability" shall mean that the Optionee is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted, or can be expected to last, for a continuous period
of not less than 12 months.
3. EFFECTIVE DATE.
The Plan was adopted by the Board on May 13, 1987. The Plan remains
subject to the approval of the Corporation's stockholders pursuant to Section
14.
4. ADMINISTRATION.
(a) Committee Membership.
The Plan shall be administered by the Committee. The Committee shall be
appointed by the Board and shall consist only of disinterested directors. The
Board may from time to time remove members from, or add members to, the
Committee. Vacancies on the Committee, however caused, shall be filled by the
Board. The Board shall appoint one of the members of the Committee as chairman.
The Committee shall hold meetings at such times and places as it may determine.
Acts of a majority of the Committee at which a quorum is present, or acts
reduced to or approved in writing by a majority of the members of the Committee,
shall be the valid acts of the Committee.
(b) Committee Responsibilities.
The Committee shall from time to time at its discretion select the
Employees to whom Options are to be granted, determine the number of Shares to
be optioned to each Optionee, determine the Exercise Price thereof, designate
such Options as Incentive Stock Options or Nonstatutory Stock Options, and
determine the other terms and conditions of such Options. The interpretation and
construction by the Committee of any provision of the Plan or of any Option
granted thereunder shall be final. No member of the Committee shall be liable
for any action or determination made in good faith with respect to the Plan or
any Option granted thereunder.
3
<PAGE>
(c) Disinterested Directors.
A member of the Board shall be deemed to be "disinterested" only if he
or she, at the time of his or her appointment to the Committee and within the 12
preceding months, was not eligible, under this Plan or under any other plan of
the-Corporation or an affiliate of the Corporation, for the purchase of stock,
for the grant of rights or options to purchase stock, or for the grant of stock
appreciation rights.
5. ELIGIBILITY.
(a) Eligible Classes.
The Optionees shall be such Employees (who may be officers or employee
directors) as the Committee may select, subject to the terms and conditions set
forth below.
(b) Ten-Percent Shareholders.
An Employee who owns more than 10% of the total combined voting power
of all classes of outstanding stock of the Corporation or any of its
Subsidiaries shall not be eligible to receive an Incentive Stock Option, unless
(i) the Exercise Price of the Shares subject to such Option is at least 110% of
the Fair Market Value of such Shares on the date of grant and (ii) the term of
such Option does not exceed five years from the date of grant.
(c) Attribution Rules.
For purposes of (b) above, in determining stockownership, an Employee
shall be deemed to own the stock owned, directly or indirectly, by or for his or
her brothers, sisters, spouse, ancestors and lineal descendants. Stock owned,
directly or indirectly, by or for a corporation, partnership, estate or trust
shall be deemed to be owned proportionately by or for its shareholders, partners
or beneficiaries. Stock with respect to which such Employee holds an option
shall not be counted.
(d) Outstanding Stock.
For purposes of (b) above, "outstanding stock" shall include all stock
actually issued and outstanding immediately after the grant of the Incentive
Stock Option to the Optionee. "Outstanding stock" shall not include shares
authorized for issuance under outstanding options held by the Optionee or by any
other person.
4
<PAGE>
6. STOCK.
The aggregate number of Shares which may be issued upon exercise of
Options under the Plan shall not exceed 350,000. The number of Shares subject to
Options outstanding at any time shall not exceed the number of Shares then
remaining available for issuance under the Plan. In the event that any
outstanding Option for any reason expires or is terminated, the Shares allocable
to the unexercised portion of such Option may again be made subject to Options.
The limitation established by this Section 6 shall be subject to adjustment in
the manner provided in Section 10 upon the occurrence of an event specified
therein.
7. TERMS AND CONDITIONS OF OPTIONS.
(a) Stock Option Agreements.
Options shall be evidenced by written stock option agreements in such
form as the Committee shall from time to time determine. Such agreements shall
comply with and be subject to the terms and conditions set forth below. However,
the provisions of all stock option agreements executed under the Plan need not
be identical.
(b) Number of Shares.
Each Option shall specify the number of Shares to which it pertains and
shall provide for the adjustment of such number in accordance with Section 10.
The Option shall also specify whether it is an Incentive Stock Option or a
Nonstatutory Stock Option.
(c) Exercise Price.
Each Option shall specify the Exercise Price. The Exercise Price under
a Nonstatutory Stock Option shall not be less than 85% of the Fair Market Value
on the date of grant. The Exercise Price under any Incentive Stock Option shall
not be less than 100% of the Fair Market Value on the date of grant and, in the
case of an Incentive Stock Option granted to an Optionee described in Section
5(b), shall not be less than 110% of the Fair Market Value on the date of grant.
5
<PAGE>
(d) Medium and Time of Payment.
The Purchase Price shall be payable in full in United States dollars
upon the exercise of the Option, except that the Committee may determine that
all or part of the Purchase Price can be paid (i) by the surrender of Shares in
good form for transfer, owned for 12 months or more by the person exercising the
Option and having a Fair Market Value on the date of exercise equal to that
portion of the Purchase Price which is being paid with Shares, or (ii) with a
full-recourse promissory note executed by the Optionee. The interest rate and
other terms and conditions of such note shall be as specified by the Committee;
provided, however, that such note shall have a term of not more than five years,
shall be payable in full within 90 days after the Optionee ceases to be an
Employee and shall bear interest at a rate not less than the Test Rate. The
Committee may require that the Optionee pledge his or her Shares to the
Corporation for the purpose of securing the repayment of such note. Payment in
the form of a promissory note shall be permissible only if the person executing
such note then is an Employee.
(e) Withholding Taxes.
As a condition to the exercise of an Option or the disposition of
Shares acquired under the Plan, the Optionee shall make such arrangements as the
Committee may require for the satisfaction of any Federal, state or local
withholding tax obligations that may arise in connection with such exercise or
disposition.
(f) Term and Nontransferability of Options.
Each option shall specify the date when all or any installment thereof
is to become exercisable. The Option shall also specify its term, which shall
not exceed 10 years from the dateof grant and, in the case of an Incentive Stock
Option granted to an Optionee described in Section 5(b), shall not exceed five
years from the date of grant.
During the lifetime of the Optionee, the Option shall be exercisable
only by the Optionee and shall not be assignable or transferable. In the event
of the Optionee's death, the Option shall not be transferable other than by will
or by the laws of descent and distribution.
(g) Termination of Service (Except by Death).
If an Optionee ceases to be an Employee for any reason other than his
or her death, then the Optionee shall have the right to exercise an Option (to
the extent not previously exercised and not expired) at any time within 90 days
after the date when he or she ceases to be an Employee, but only to the extent
that, on such date, the Optionee's right to exercise then such Option has
accrued pursuant to the terms of the applicable stock option agreement. The
Committee, in the applicable stock option agreement,
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<PAGE>
may replace such period of 90 days with any other period.
For purposes of this Subsection (g), the Employee relationship shall be
deemed to continue while the Optionee is on military leave, sick leave or other
bona fide leave of absence (to be determined in the sole discretion of the
Committee). The foregoing notwithstanding, in the case of an Incentive Stock
Option, the Employee relationship shall not be deemed to continue beyond the
90th day after the Optionee ceased active employment as a common-law employee,
unless the Optionee's reemployment rights are guaranteed by statute or by
contract.
(h) Death of Optionee.
If an Optionee dies while an Employee and has not fully exercised an
Option, then such Option (to the extent not previously exercised and not
expired) may be exercised at any time within 12 months after the Optionee's
death by the executors or administrators of his or her estate or by any person
or persons who have acquired such Option directly from the Optionee by bequest
or inheritance, but only to the extent that, at the date of the Optionee's
death, the Optionee's right to exercise such Option had accrued pursuant to the
terms of the applicable stock option agreement.
If an Optionee dies after the Employee relationship terminated, but
within the period during which an Option could have been exercised under (g)
above, and has not fully exercised such Option, then such Option (to the extent
not previously exercised and not expired) may be exercised at any time within 12
months after the Optionee's death by the executors or administrators of his or
her estate or by any person or persons who have acquired such Option directly
from the Optionee by bequest or inheritance, but only to the extent that, at the
date of termination of the Employee relationship, the Optionee's right to
exercise such Option had accrued pursuant to the terms of the applicable stock
option agreement.
(i) Rights as a Shareholder.
An Optionee, or a transferee of an Optionee, shall have no rights as a
shareholder with respect to any Shares covered by his or her Option until the
date of the issuance of a stock certificate for such Shares. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property), distributions or other rights for which the record date is
prior to the date when such stock certificate is issued, except as provided in
Section 10.
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<PAGE>
(j) Modification, Extension and Renewal of Options.
Within the limitations of the Plan, the Committee may modify, extend or
renew outstanding Options or accept the cancellation of outstanding Options (to
the extent not previously exercised) for the granting of new Options in
substitution therefor. The foregoing notwithstanding, no modification of an
Option shall, without the consent of the Optionee, alter or impair any rights or
obligations under such Option.
(k) Other Provisions.
The stock option agreements authorized under the Plan may contain such
other provisions not inconsistent with the terms of the Plan (including, without
limitation, restrictions upon the exercise of the Option or the transferability
of Shares) as the Committee may deem advisable.
8. LIMITATION ON ISO AWARDS.
No Incentive Stock Options shall be granted to an Optionee under the
Plan if the aggregate Fair Market Value of the Stock subject to his or her
Incentive Stock Options which become exercisable for the first time during any
one calendar year (under all plans of the Corporation, any parent corporation or
a Subsidiary) would exceed $100,000. For purposes of this Section 8, the Fair
Market Value of a Share shall be determined as of the date when the Incentive
Stock Option covering such Share is granted.
9. TERM OF PLAN.
Options may be granted pursuant to the Plan until May 12, 1997, or
until such earlier date as the Board may determine at its sole discretion.
10. RECAPITALIZATIONS.
Subject to any required action by stockholders, the number of Shares
covered by the Plan as provided in Section 6, the number of Shares covered by
each outstanding Option and the Exercise Price thereof shall be adjusted
proportionately for any increase or decrease in the number of issued Shares
resulting from a subdivision or consolidation of Shares or the payment of a
stock dividend or any other increase or decrease in the number of issued Shares
effected without receipt of consideration by the Corporation.
Subject to any required action by stockholders, if the Corporation is
the surviving corporation in any merger or consolidation, each outstanding
Option shall pertain to the securities to which a holder of the number of Shares
subject to the Option would have been entitled. A dissolution or liquidation of
the Corporation or a merger or
8
<PAGE>
consolidation in which the Corporation is not the surviving corporation shall
cause each outstanding Option to terminate, unless the agreement of merger or
consolidation provides for the assumption thereof by the surviving corporation;
provided, however, that each Optionee shall have the right to exercise his or
her Options in full immediately prior to the date of such dissolution,
liquidation, merger or consolidation, but only to the extent that such Options
have not previously been exercised, have not expired and are not assumed by the
surviving corporation.
To the extent that the foregoing adjustments relate to securities of
the Corporation, such adjustments shall be made by the Committee, whose
determination shall be conclusive and binding on all persons.
Except as expressly provided in this Section 10, the Optionee shall
have no rights by reason of any subdivision or consolidation of shares of stock
of any class, the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class or by reason of any
dissolution, liquidation, merger or consolidation or spin-off of assets or stock
of another corporation, and any issue by the Corporation of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number or Exercise Price of Shares subject to an Option.
The grant of an Option pursuant to the Plan shall not affect in any way
the right or power of the Corporation to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
11. SECURITIES LAW REQUIREMENTS.
(a) Legality of Issuance.
No Shares shall be issued upon the exercise of any Option unless and
until the Corporation has determined that (i) it and the Optionee have taken all
actions required to register the Shares under the Securities Act of 1933, as
amended (the "Act"), or to perfect an exemption from the registration
requirements thereof; (ii) any applicable listing requirement of any stock
exchange on which Stock is listed has been satisfied; and (iii) any other
applicable provision of state or Federal law has been satisfied.
(b) Restrictions on Transfer; Representations of Optionee.
Regardless of whether the offering and sale of Shares under the Plan
have been registered under the Act or have been registered or qualified under
the securities laws of any state, the Corporation may impose restrictions upon
the sale, pledge or other transfer of such Shares (including the placement of
appropriate legends on stock certificates) if, in the judgment of the
Corporation and its counsel, such restrictions are necessary or desirable in
order to achieve compliance with the provisions of the Act, the
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securities laws of any state or any other law. In the event that the sale of
Shares under the Plan is not registered under the Act but an exemption is
available which requires an investment representation or other representation,
each Optionee shall be required to represent that such Shares are being acquired
for investment, and not with a view to the sale or distribution thereof, and to
make such other representations as are deemed necessary or appropriate by the
Corporation and its counsel. Stock certificates evidencing Shares acquired under
the Plan pursuant to an unregistered transaction shall bear an appropriate
restrictive legend.
Any determination by the Corporation and its counsel in connection with
any of the matters set forth in this Section 11 shall be conclusive and binding
on all persons.
(c) Registration or Qualification of Securities.
The Corporation may, but shall not be obligated to, register or qualify
the sale of Shares under the Act or any other applicable law. The Corporation
shall not be obligated to take any affirmative action in order to cause the sale
of Shares under the Plan to comply with any law.
(d) Removal of Legends.
If, in the opinion of the Corporation and its counsel, any legend
placed on a stock certificate representing Shares issued under the Plan is no
longer required, the holder of such certificate shall be entitled to exchange
such certificate for a certificate representing the same number of Shares but
lacking such legend.
12. AMENDMENT OF THE PLAN.
The Board may from time to time, with respect to any Shares at the time
not subject to Options, suspend or discontinue the Plan or revise or amend it in
any respect whatsoever except that, without the approval of the Corporation's
shareholders, no such revision or amendment shall:
(a) Increase the number of Shares subject to the Plan, except as
provided in Section 10;
(b) Materially change the designation in Section 5 with respect to
the class of Employees eligible to receive Incentive Stock
Options; or
(c) Amend this Section 12 to defeat its purpose.
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13.APPLICATION OF FUNDS.
The proceeds received by the Corporation from the sale of Stock
pursuant to the exercise of an Option will be used for general corporate
purposes.
14. APPROVAL OF SHAREHOLDERS.
The adoption of the Plan and any amendment described in Section 12
shall be subject to approval by the affirmative vote of the holders of a
majority of the outstanding shares of the Corporation entitled to vote or by the
unanimous written consent of all holders of the outstanding shares of the
Corporation entitled to vote. In the event that the Plan is not approved by
stockholders within 12 months after adoption by the Board, any Option
theretofore granted shall be null and void.
15. EXECUTION.
To record the adoption of the Plan by the Board, effective as of May
13, 1987, the Corporation has caused its authorized officers to affix the
corporate name hereto.
FAIR, ISAAC AND COMPANY,
INCORPORATED
By _____________________________
By _____________________________
11
SMITH RANCH PLAZA
OFFICE BUILDING LEASE
1. PARTIES. This Lease, dated, for reference purposes only, October 20, 1983, is
made by and between S.R.P. Limited Partnership, a California Limited Partnership
(herein called "Landlord") and Fair, Isaac & Company, Incorporated, (herein
called "Tenant").
2. PREMISES. Landlord does hereby lease to Tenant and Tenant hereby leases from
Landlord those certain premises (herein called "Premises") consisting of 25,994
rentable square feet including corridation and restrooms, as outlined in red on
Exhibit A-1 attached hereto, being situated on the first, second and third
floors of that certain building known as 120 North Redwood Drive, Suite 300, San
Rafael, California 94903.
Said Lease is subject to the terms, covenants and conditions herein set forth
and the Tenant covenants as a material part of the consideration for this Lease
to keep and perform each and all of said terms, covenants and conditions by it
to be kept and performed and that this Lease is made upon condition of said
performance.
3. TERM. The term of this Lease shall be for five (5) years, commencing on the
lst day of May, 1984, and terminating on the 30th day of April, 1989.
4. POSSESSION. If the Landlord, for any reason whatsoever, cannot deliver
possession of the said Premises to the Tenant at the commencement of the term
hereof, this Lease shall not be void or voidable, nor shall Landlord be liable
to Tenant for any loss or damage resulting therefrom, nor shall the expiration
date of the above term be in any way extended, but in that event, all rent shall
be abated during the period between the commencement of said term and the time
when Landlord delivers possession; except that, should Landlord fail to deliver
possession two or more months beyond any date agreed herein or subsequently as
the date of possession, Tenant may declare this Lease to be terminated and all
sums paid to Landlord by Tenant shall be promptly refunded and Tenant shall have
no further obligations to Landlord under this Lease. Failure of Tenant to
exercise this option at the end of the first two months delay or at any later
time, shall not be deemed a waiver of the right to exercise the option at any
other date should possession not be delivered.
In the event that Landlord shall permit Tenant to occupy the Premises prior to
the commencement date of the term, such occupancy shall be subject to all the
provisions of this Lease. Said early possession shall not advance the
termination date hereinabove provided.
5. BASIC RENT. Tenant agrees to pay to Landlord, as rental, without prior notice
or demand, for the Premises the sum of: Thirty-Seven Thousand, Four Hundred
Thirty-One and no/100 ($37,431.00) Dollars (hereinafter called "Basic Rent"), on
or before the first day of the first full calendar month of the term hereof and
a like sum as adjusted in the manner specified in Article 6 (hereinafter called
"Adjusted Basic Rent"), on or before the first day of each and every successive
calendar month thereafter during the term hereof, except that the first month's
rent shall be paid upon the execution hereof. The Basic Rent shall be paid until
adjusted in the
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EXHIBIT 10.5
<PAGE>
manner specified in Paragraph 6. Thereafter, the prevailing Adjusted Basic Rent
shall be the amount paid. Rent for any period during the term hereof which is
for less than one (1) month shall be a prorated portion of the monthly
installment herein, based upon a thirty (30) day month. Said rental shall be
paid to Landlord, without deduction or offset in lawful money of the United
States of America, which shall be legal tender at the time of payment at the
Office of the Building, or to such other person or at such other place as
Landlord may from time to time designate in writing.
6. ADJUSTED BASIC RENT. On each annual anniversary date following the
commencement of the lease term, the rent specified in Paragraph 5 for the
ensuing twelve (12) months shall be increased by the use of the Consumer Price
Index (All Urban Consumers Component) for San Francisco-Oakland (1967=100)
published by the Bureau of Labor Statistics of the U.S. Department of Labor. The
indices used will be the latest published index prior to the commencement of the
lease term and, in subsequent years the latest published index prior to the
commencement of each such subsequent year of the lease term. The Adjusted Basic
Rent will be increased by the percentage increase, if any, between the index
used at the commencement of the lease term and that used for each subsequent
year. In no event shall the combination of increases under this Section and
Section 7 exceed a 10% increase over the combined rental under said Sections for
the immediately preceding lease year.
In case the U.S. Department of Labor shall discontinue the computation and
publication of said Consumers Price Index or the publication thereof should be
delayed so as to prevent its use hereunder at the times required, there shall be
substituted therefor by Landlord such other index or method of ascertaining
changes in the price level as, in the opinion of Landlord, most closely
resembles the Consumer Price Index and method of arriving at the index figure by
said Bureau.
7. ADDITIONAL RENT. Tenant agrees to pay to Landlord as additional rental
(hereinafter "Additional Rent") a sum equal to Tenant's Proportional share
(hereinafter defined) of Direct Costs (hereinafter defined).
For the purposes of this Article, Tenant's Proportional Share shall be a sum
equal to 61.14% of the total rentable area of the Building.
For the purposes of this Article, the term "Direct Costs" shall include: (i)
property taxes paid or incurred by Landlord consisting of all real or personal
property taxes (and any tax levied wholly or partly in lieu thereof) imposed
against the Building and all related improvements, including the adjacent walks,
parking lots, and the land upon which they are situated, but shall not include
any net income or franchise taxes; (ii) operating costs paid or incurred by
Landlord in maintaining, managing, and operating Building, its equipment, and
the adjacent walks, parking lots, landscaped areas, and the land upon which they
are located, including without limiting the generality of the foregoing, the
costs of services of both independent contractors and employees (inclusive of
employment taxes, and fringe benefits) who perform duties connected with the day
to day management, operation, maintenance, and repair of the Building, and the
costs incurred by reason of any changes in any regulations, rules, requirements,
laws, codes, directives, or similar pronouncements of any Federal, state,
county, city, or other governmental or regulatory agency which require changes
in or to the physical construction of or related equipment of or used in the
Building or the adjacent walks, parking lots, landscaped areas, and/or items
used in the operation and maintenance thereof.
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For the purposes of this Lease the term "Base Year" shall refer to and mean the
calendar year in which this Lease term commences.
For the purposes of this Article, the term "Comparison Year" shall refer to and
mean each successive calendar year of the term of this Lease after the Base
Year.
For the purposes of this Article, the term "Current Year" shall refer to and
mean each successive calendar year as it becomes the current calendar year,
beginning with the first calendar year next following the Base Year.
Each year during the term of this Lease other than the Base Year, Landlord shall
furnish to Tenant a written statement showing in reasonable detail Landlord's
Direct Costs for the applicable Comparison Year and for the Base Year, and
showing the amount, if any, of Additional Rent due from Tenant.
During the Base Year, Tenant shall pay Landlord, on or before the first day of
each month during which a payment of Additional Rent is due, a sum equal to the
total of the following two components: (a) the product of Fifteen Cents ($.15)
times the number of square feet of the Premises for which separate electrical
metering is provided, and (b) the product of Twenty-five Cents ($.25) times the
number of square feet of the Premises for which separate electrical metering is
not provided.
To compute the Additional Rent for all years other than the Base year, if the
Direct Costs paid or incurred by the Landlord for the Comparison Year are in
excess of the Annualized Additional Rent paid by Tenant for the Base Year, then
the Tenant shall pay, as Additional Rent, Tenant's Proportional Share thereof.
Upon Tenant's receipt of Landlord's statement for the first Comparison Year,
Tenant shall pay in full the total amount of Additional Rent for the first
Comparison Year, and, in addition, for the Current Year the amount of such
Additional Rent shall be used as an estimate for the Current Year. The amount of
the Additional Rent shall be divided in twelve (12) equal monthly installments
and Tenant shall pay to Landlord, concurrently with the Basic Rent or the
prevailing Adjusted Basic Rent, as the case may be, which is next due following
the receipt of said statement from Landlord, an amount equal to one (1) such
monthly installment multiplied by the number of months from January in the
Current Year in which Landlord's said statement is submitted to the month of
such statement, both months inclusive. Subsequent installments of Additional
Rent shall be payable concurrently with the Basic Rent or the prevailing
Adjusted Basic Rent, as the case may be, for the balance for that Current Year
and shall continue until the statement for the next Comparison Year is rendered.
If the next or any succeeding Comparison Year results in an increase in Direct
Costs over the immediately preceding Comparison Year, then, upon receipt of said
statement from Landlord, Tenant shall pay a lump sum equal to Tenant's
Proportional Share of the Direct Costs less the total of the monthly
installments paid during the immediately preceding Comparison Year, and the
estimated monthly installments of Additional Rent to then be paid for the
Current Year shall be adjusted to reflect such increased Direct Costs. If the
next or any succeeding Comparison Year results in a decrease in Direct Costs
over the immediately preceding Comparison Year, then, upon receipt of said
statement from Landlord, the estimated monthly installments of Additional Rent
to then be paid for Current Year shall be adjusted to reflect such decreased
Direct Costs, and the difference between Tenant's Proportional Share of the
decreased Direct Costs and the total of the monthly installments paid during the
immediately preceding
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Comparison Year shall be credited to the first (and succeeding, if applicable)
installments of Additional Rent to be paid for the Current Year.
If the term of this Lease has expired and/or Tenant has vacated the Premises,
when the final determination is made of Tenant's share of Direct Costs for the
year in which this Lease terminated, Tenant shall immediately pay any increase
due over the estimated amounts paid and, conversely, any overpayment made in the
event said costs decrease shall be immediately rebated by Landlord to Tenant.
8. SECURITY DEPOSIT. Tenant , has deposited with Landlord the sum of
Thirty-Seven Thousand, Four Hundred Thirty-One Dollars ($37,431.00). Said sum
shall be held by Landlord as security for the faithful performance by Tenant of
all the terms, covenants, and conditions of this Lease to be kept and performed
by Tenant during the term hereof. Said sum shall accrue interest at the rate of
eight percent (8%) per annum, to be compounded annually, or, at Landlord's
election, to be paid to Tenant. All references in this lease, including
references in this Paragraph 8, to the security deposit shall be deemed to refer
to said above-mentioned sum together with any accrued interest not paid by
Landlord to Tenant. 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) 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 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. If any portion of said deposit is so used or applied, Tenant shall
within five (5) days after written 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 be a material breach of this Lease. If
Landlord does so apply all or a portion of the security deposit, interest shall
be abated until such time as the applied portion is restored to its original
amount. Landlord shall not be required to keep this security deposit, or the
interest accrued thereon, separate from its general funds. If Tenant shall fully
and faithfully perform every provision of this Lease to be performed by it, the
security deposit together with said interest thereon, or any balance thereof
shall be returned and paid to Tenant (or, at Landlord's option, to the last
assignee of Tenant's interest hereunder) at the expiration of the Lease term or
at any earlier ' date at which Tenant or Landlord shall terminate this Lease at
their election as may be provided herein. In the event of termination of
Landlord's interest in this Lease, Landlord shall transfer said deposit and the
accrued interest thereon to Landlord's successor in interest, to hold under the
same conditions as did Landlord.
9. USE. Tenant shall use the premises for general office purposes of the Fair,
Isaac Companies, which purposes are known and approved by Landlord, and shall
not use or permit the Premises to be used for any other purpose without the
prior written consent of Landlord.
Tenant shall not do or permit anything to be done in or about the Premises nor
bring or keep anything therein which will in any way increase the existing rate
of or affect any fire or other insurance upon the Building or any of its
contents, or cause cancellation of any insurance policy covering said Building
or any part thereof or any of its contents. Tenant shall not do or permit
anything to be done in or about the Premises which will in any way obstruct or
interfere with the rights of other tenants or occupants of the Building or
injure or annoy them or use or allow the Premises to be used for any improper,
immoral, unlawful or objectionable purpose, nor shall
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Tenant cause, maintain or permit any nuisance in, on or about the Premises.
Tenant shall not commit or suffer to be committed any waste in or upon the
Premises.
10. COMPLIANCE WITH THE LAW. Tenant shall not use the Premises or permit
anything to be done in or about the Premises which will in any way conflict with
any law, statute, ordinance or governmental rule or regulation now in force or
which may hereafter be enacted or promulgated. Tenant shall, at its sole cost
and expense, promptly comply with all laws, statutes, ordinances and
governmental rules, regulations or requirements now in force or which may
hereafter be in force, and with the requirements of any board of fire insurance
underwriters or other similar bodies now or hereafter constituted, relating to,
or affecting the condition, use or occupancy of the Premises, excluding
structural changes not related to or affected by Tenant's improvements or acts.
The judgment of any court of competent jurisdiction or the admission of Tenant
in any action against Tenant, whether Landlord is a party thereto or not, that
Tenant has violated any law, statute, ordinance or governmental rule, regulation
or requirement, shall be conclusive of that fact as between the Landlord and
Tenant.
11. CONSTRUCTION. Prior to the commencement of the term hereof, Landlord shall
furnish and install within the premises the tenant improvements shown on Exhibit
"A" and as shown on Exhibit "B" to be dated October 31, 1983, to be attached
hereto and made a part hereof.
All work not within the normal scope of the construction trades employed in the
building construction, such as the furnishing and installing of telephone
equipment and wiring, furniture, furnishings, office equipment, trade fixtures,
carpeting (unless installed by Landlord under the first part of this paragraph),
special draperies (in addition to Building Standard horizontal slat blinds for
which no substitution is permitted), and other items of personal property, shall
be furnished and installed by the Tenant at Tenant's expense, Tenant shall adopt
a schedule in conformance with the schedule of Landlord's contractors and
conduct its work in such a manner as to maintain harmonious labor relations and
so as not to unreasonably interfere with or delay the work of the Landlord's
contractors. Tenant's contractors, subcontractors, and labor shall be acceptable
to and approved by Landlord and shall be subject to the administrative
supervision of the Landlord's general contractor. Contractors or subcontractors
engaged by Tenant shall insure, as far as may be reasonably possible, the
progress of the work without interruption on account of strikes, work stoppage
or other causes for delay. Landlord shall give reasonable access and entry to
the Premises to Tenant and its contractors and subcontractors to enable Tenant
to adapt the Premises for Tenant's use.
12. ALTERATIONS AND ADDITIONS. Tenant shall not make or suffer to be made any
alterations, additions or improvements to or of the Premises or any part thereof
without the written consent of Landlord first had and obtained and any
alterations, additions or improvements to or of said Premises including, but not
limited to, wall covering, paneling and built-in cabinet work, but excepting
movable or modular furniture and trade fixtures, shall on the expiration of the
term become a part of the realty and belong to the Landlord and shall be
surrendered with the Premises. In the event Landlord consents to the making of
any alterations, additions or improvements to the Premises by Tenant, the same
shall be made by Tenant at Tenant's sole cost and expense, and any contractor or
person selected by Tenant to make the same must first be approved of in writing
by the Landlord which approval will not be unreasonably withheld. Upon the
expiration or sooner termination of the term hereof, Tenant shall, upon written
demand by Landlord, given at least thirty (30) days prior to the end of the
term, at Tenant's sole cost and expense, promptly and with all due diligence
remove any
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alterations, additions, or improvements made by Tenant which are designated by
Landlord to be removed, and Tenant shall, forthwith and with all due diligence,
at its sole cost and expense, repair any damage to the Premises caused by such
removal.
13. REPAIRS. (a) By taking possession of the Premises, Tenant shall be deemed to
have accepted the Premises as being in good, sanitary order, condition and
repair except as may be noted in writing and delivered to Landlord within seven
(7) days of possession. Tenant shall, at Tenant's sole cost and expense, keep
the Premises and every part thereof in good condition and repair, damage thereto
from causes beyond the reasonable control of Tenant and from ordinary wear and
tear excepted. Tenant shall upon the expiration or sooner termination of the
Lease hereof surrender the Premises to the Landlord in good condition, ordinary
wear and tear and damage from causes beyond the reasonable control of Tenant
excepted. Except as specifically provided in an addendum, if any, to this Lease,
Landlord shall have no obligation whatsoever to alter, remodel, improve, repair,
decorate or paint the Premises or any part thereof and the parties hereto affirm
that Landlord has made no representations to Tenant respecting the condition of
the Premises or the Building except as specifically herein set forth.
(b) Notwithstanding the provisions of Article 13(a) hereinabove, Landlord
shall repair and maintain the structural portions of the Building, including,
without limitation, the basic plumbing, air conditioning, heating, and
electrical systems and all other improvements to the real property upon which
the Building is situated installed or furnished by Landlord, unless such
maintenance and repairs are caused in part or in whole by the act, neglect,
fault or omission of any duty by the Tenant, its agents, servants, employees or
invitees, in which case Tenant shall pay to Landlord the reasonable cost of such
maintenance and repairs. Landlord shall not be liable for any failure to make
any such repairs or to perform any maintenance unless Landlord shall fail within
five (5) days (or such shorter period as the importance or the crucial nature of
the repair may reasonably require) after notice of the need of such repairs or
maintenance is given to Landlord by Tenant, to commence and diligently prosecute
such maintenance and repair. Further notwithstanding the provisions of Article
13(a) hereinabove, Landlord shall maintain the overall appearances of the
Premises and the public areas of the building and its appurtenant property at a
high standard, specifically including, but in no way limited to, repainting or
replacing carpeting in cases where fair wear and tear have impaired their
appearance to a level inconsistent with the quality of the property. Should
Landlord fail to thus commence or diligently prosecute any maintenance or repair
hereby required by Landlord to be performed, then Tenant may cause such
maintenance or repair to be performed and deduct the cost thereof from the next
rent payable by Tenant to Landlord. Except as provided in Article 24 hereof,
there shall be no abatement of rent and no liability of Landlord by reason of
any injury to or interference with Tenant's business arising from the making of
any repairs, alterations or improvements in or to any portion of the Building or
the Premises or in or to fixtures, appurtenances and equipment therein.
14. HOLD HARMLESS. Tenant shall indemnify and hold harmless Landlord against and
from any and all claims arising from Tenant's use of the Premises for the
conduct of its business or from any activity, work, or other thing done,
permitted or suffered by the Tenant in or about the Building, and shall further
indemnify and hold harmless Landlord against and from any and all claims arising
from any breach or default in the performance of any obligation on Tenant's part
to be performed under the terms of this Lease, or arising from any act or
negligence of the Tenant, or any officer, agent, employee, guest, or invitee of
Tenant, and from all and against all costs, attorneys' fees, expenses and
liabilities incurred in or about any such claim or any action or
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proceeding brought thereon, and, in any case, action or proceeding to be brought
against Landlord by reason of any such claim, Tenant, upon notice from Landlord,
shall defend the same at Tenant's expense by counsel reasonably satisfactory to
Landlord. Tenant, as a material part of the consideration to Landlord, hereby
assumes all risk of damage to property or injury to persons, in, upon or about
the Premises, from any cause other than Landlord's negligence, and Tenant hereby
waives all claims in respect thereof against Landlord.
Landlord or its agents shall not be liable for any damage to property entrusted
to employees of the Building, nor for loss or damage to any property by theft or
otherwise, nor for any injury to or damage to persons or property resulting from
fire, explosion, falling plaster, steam, gas, electricity, water or rain which
may leak from any part of the Building or from the pipes, appliances or plumbing
works therein or from the roof, street or subsurface or from any other place
resulting from dampness or any other cause whatsoever, unless caused by or due
to the negligence of landlord, its agents, servants or employees. Landlord or
its agents shall not be liable for interference with the light or other
incorporeal hereditaments, loss of business by tenant, nor shall landlord be
liable for any latent defect in the premises or in the building. Tenant shall
give prompt notice to landlord in case of fire or accidents in the premises or
in the building or of defects therein or in the fixtures or equipment.
15. ASSIGNMENT AND SUBLETTING. Neither Tenant nor its heirs or assigns shall
either voluntarily or by operation of law, assign, transfer, mortgage, pledge,
hypothecate or encumber this Lease or any interest therein, and shall not sublet
the Premises or any part thereof, or any right or privilege appurtenant thereto,
or suffer any person (Tenant, its employees, servants, invitees, subsidiaries,
affiliates, successors, or their employees, agents, servants and invitees
excepted) to occupy or use the said Premises, or any portion thereof, without
the prior written consent of Landlord had and obtained, which consent shall not
be unreasonably withheld. Neither any change in the ownership of Tenant's stock
nor any merger, corporate reorganization or corporate acquisition involving
Tenant shall be construed to constitute an assignment within the meaning of this
Article. A consent to one assignment, subletting, occupation or use by another
person shall not be deemed to be a consent to any subsequent assignment and any
purported assignment in violation of the provisions of this Article without
Landlord's consent shall be void, and shall, at the option of the Landlord,
constitute a default under this Lease.
16. LIENS. Tenant shall keep the Premises and the property in which the Premises
are situated free from any liens arising out of any work performed, materials
furnished or obligations incurred by Tenant. Landlord may require, at Landlord's
sole option, that Tenant shall provide to Landlord, at Tenant's sole cost and
expense, a lien and completion bond in an amount equal to one and one-half (1
1/2) times any and all estimated costs of any improvements, additions, or
alterations in the Premises, to insure Landlord against any liability for
mechanics' and materialmen's liens and to insure completion of the work.
17. SUBROGATION. As long as their respective insurers so permit, Landlord and
Tenant hereby mutually waive their respective rights of recovery against each
other for any loss insured by fire, extended coverage and other property
insurance policies existing for the benefit of the respective parties. Each
party shall obtain any special endorsements, if required by their insurer to
evidence compliance with the aforementioned waiver.
18. LIABILITY INSURANCE. Tenant shall, at Tenant's expense, obtain and keep in
force during the term of this Lease a policy of comprehensive public liability
insurance insuring
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Landlord and Tenant against any liability arising out of the ownership, use,
occupancy or maintenance of the Premises and all areas appurtenant thereto. Such
insurance at all times shall be a combined single aggregate policy in an amount
of not less than One Million Dollars ($1,000,000). The limit of said insurance
shall not, however, limit the liability of the Tenant hereunder. Tenant may
carry said insurance under a blanket policy, providing, however, said insurance
by Tenant shall have a Landlord's protective liability endorsement attached
thereto. If Tenant shall fail to procure and maintain said insurance, Landlord
may, but shall not be required to, procure and maintain same, but at the expense
of Tenant. Insurance required hereunder, shall be in companies rated A+ AAA or
better in "Best's Insurance Guide." Tenant shall deliver the Landlord prior to
occupancy of the Premises copies of policies of liability insurance required
herein or certificates evidencing the existence and amounts of such insurance
with loss payable clauses satisfactory to Landlord. No policy shall be
cancellable or subject to reduction of coverage except after ten (10) days prior
written notice to Landlord. Landlord will keep the Premises insured for fire and
extended coverage equivalent to 90% or more of full replacement cost at all
times during the term of this Lease. Landlord will also maintain comprehensive
general public liability insurance. Tenant's liability insurance shall be
primary coverage and Landlord's liability insurance shall be secondary.
19. SERVICES AND UTILITIES. Provided that Tenant is not in default hereunder,
Landlord agrees to furnish to the Premises during reasonable hours of generally
recognized business days, to be determined by Landlord at his sole discretion,
and subject to the rules and regulations of the Building of which the premises
are a part, electricity for normal lighting and fractional horsepower office
machines, heat and air conditioning required in Landlord's judgment for the
comfortable use and occupation of the Premises, and janitorial service. Landlord
shall also maintain and keep lighted the common stairs, common entries and
toilet rooms in the Building. Landlord shall not be liable for, and Tenant shall
not be entitled to, any reduction of rental by reason of Landlord's failure to
furnish any of the foregoing when such failure is caused by accident, breakage,
repairs, strikes, lockouts or other labor disturbances or labor disputes of any
character, or by any other cause, similar or dissimilar, beyond the reasonable
control of Landlord. Landlord shall not be liable under any circumstances for a
loss of or injury to property, however occurring, through or in connection with
or incidental to, failure to furnish any of the foregoing. Supplementary air
conditioning units will be installed in the premises with the cost of
installation and the cost of operation and maintenance thereof to be paid by
Tenant to Landlord or public utility upon demand by Landlord or utility.
The nature of the business of Tenant is such that the use of electronic and
electrical equipment is central to the organization. As a result, Tenant will
use an amount of electrical power greater than would be used by some other
tenant not engaged in a similar business. Tenant shall not connect with electric
current except through existing electrical outlets in the Premises. If Tenant
shall require water or electric current in excess of that usually furnished or
supplied for the use of the Premises in Tenant's normal business operations,
Tenant shall first procure the written consent of Landlord, which Landlord shall
not unreasonably refuse, to the use thereof and Landlord may cause a water meter
or electrical current meter to be installed in the Premises, so as to measure
the amount of water and electric current consumed for any such use. The cost of
any such meters and of installation, maintenance and repair thereof shall be
paid for by the Tenant and Tenant agrees to pay to Landlord promptly upon demand
therefore by Landlord for all such water and electric current consumed as shown
by said meters, at the rates charged for such services by the local public
utility furnishing the same, plus any additional expense incurred in keeping
account of the water and electric current so consumed. If a separate meter is
not
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installed, such excess cost for such water and electric current will be
established by an estimate made by a utility company or electrical engineer.
Notwithstanding anything to the contrary contained in this Section 19, Landlord
shall install, as a portion of Exhibit A, "Work Agreement," excess air
conditioning and electrical distribution equipment for Tenant's heat-generating
equipment. In addition, Landlord shall provide separate metering, to the extent
feasible, of electrical consumption in Tenant's Premises, with the intent that
Tenant shall determine its own hours and methods of operation and pay for such
consumption direct to the utility.
20. PROPERTY TAXES. Tenant shall pay, or cause to be paid, before delinquency,
any and all taxes levied or assessed and which become payable during the term
hereof upon all Tenant's leasehold improvements, equipment, furniture, fixtures
and personal property located in the Premises; except that which has been paid
for by Landlord, or is the standard of the Building. In the event any or all of
the Tenant's leasehold improvements, except that which has been paid for by
Landlord, or is the standard of the Building, equipment, furniture, fixtures and
personal property shall be assessed and taxed with the Building, Tenant shall
pay to Landlord its share of such taxes within ten (10) days after delivery to
Tenant by Landlord of a statement in writing setting forth the amount of such
taxes applicable to Tenant's property.
21. RULES AND REGULATIONS. Tenant shall faithfully observe and comply with the
rules and regulations that Landlord shall from time to time promulgate. Landlord
reserves the right from time to time to make all reasonable modifications to
said rules. The additions and modifications to those rules shall be binding upon
Tenant upon delivery of a copy of them to Tenant. Landlord shall not be
responsible to Tenant for the nonperformance of any said rules and regulations
by any other tenants or occupants. Landlord agrees diligently to enforce the
Rules and Regulations with regard to all Tenants in the Building.
22. HOLDING OVER. If Tenant remains in possession of the Premises or any part
thereof after the expiration of the term hereof, with the express written
consent of Landlord, such occupancy shall be a tenancy from month to month at a
rental in the amount of the last monthly installment of Basic Rent or the
prevailing Adjusted Basic Rent, as the case may be, plus the last monthly
installment of Additional Rent, and all other charges payable hereunder, and
upon all the terms hereof applicable to a month to month tenancy.
23. ENTRY BY LANDLORD. Landlord reserves and shall at any and all times have the
right to enter the Premises for the purposes of inspection, and for that purpose
shall at all times have and retain the necessary keys with which to unlock all
doors in, upon, and about the Premises, excluding Tenant's vaults, safes, files,
and such areas as Tenant shall designate as "secure areas." Tenant shall have
the right to place Tenant's own locks on any such designated "secure areas."
Landlord shall have the right to inspect the physical status of any areas
designated as "secure areas" upon notice to Tenant and in company with a
representative of Tenant. Landlord shall have right of access to the Premises
necessary to provide janitorial and other services to be provided hereunder but
the times of such access shall be those that shall be agreed on from time to
time between Landlord and Tenant, and neither party shall withhold its agreement
unreasonably. Landlord shall have the right, upon reasonable notice, to submit
Premises to inspection by prospective purchasers or tenants. Landlord shall have
the right to enter the Premises during normal business hours of 9:00 a.m. and
5:00 p.m. during working days in order to post notices of non-responsibility.
Landlord shall have the right to enter the Premises, other
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than the secure areas, at any time Landlord deems it necessary or desirable, in
order to alter, improve, or repair the premises and may for that purpose erect
scaffolding and other necessary structures where reasonably required by the
character of the work to be performed, always providing that access by Tenant to
the Premises or freedom of movement within the Premises are not unreasonably
restricted. Landlord shall have the right to use the keys in his possession for
the purpose of entering the Premises for the purposes of alteration,
improvement, or repair. Landlord undertakes,, in those cases where alteration,
improvement, or repair can be planned in advance, to notify Tenant as far in
advance as is possible, and in those cases where an alteration, improvement, or
repair is of an emergency or other nature such that advance planning is not
possible, to notify Tenant promptly that the Premises have been entered.
Landlord shall have no liability to Tenant for any such proper entrance except
for any failure to exercise due care for Tenant's property. Tenant shall be
responsible to report to landlord any circumstance requiring action by Landlord
in any secure area.
As regards any proper entry governed by this Paragraph, Tenant hereby waives any
claim for damages or for injury or inconvenience to or interference with
Tenant's business, any loss of occupancy or quiet enjoyment of the Premises, and
any other loss occasioned thereby, other than a loss resulting from negligence
by Landlord. Any such proper entry shall not be cause for any abatement of rent.
Any proper entry to the Premises as governed by this Paragraph obtained by
Landlord by any of these said means shall not under any circumstances be
construed or deemed to be a forcible or unlawful entry into, or a detainer of,
the Premises, or an eviction of Tenant from the Premises or any portion thereof.
24. RECONSTRUCTION. In the event the Premises or the Building are damaged by
fire or other perils covered by extended coverage insurance, Landlord agrees to
forthwith repair the same; and this Lease shall remain in full force and effect,
except that Tenant shall be entitled to a proportionate reduction of all rent
payable hereunder while such repairs are being made, such proportionate
reduction to be based upon the extent to which the damage and/or the making of
such repairs shall materially interfere with the business carried on by the
Tenant in the Premises. If the damage is due to the fault and neglect of Tenant
or his employees, there shall be no abatement of rent.
In the event the Premises or the Building are damaged as a result of any cause
other than the perils covered by fire and extended coverage insurance, then
Landlord shall forthwith repair the same, provided the extent of the destruction
be less than ten percent (10%) of the then full replacement cost of the building
in which the Premises are located. In the event the destruction of the Premises
or the Building by a peril not covered by fire and extended coverage insurance
is to an extent greater than ten percent (10%) of the full replacement cost,
then Landlord shall have the option; (1) to repair or restore such damage, this
Lease continuing in full force and effect; or (2) give notice to Tenant at any
time within sixty (60) days after such damage, terminating this Lease as of the
date specified in such notice, which date shall be no less than thirty (30) and
no more than sixty (60) days after the giving of such notice. In the event of
giving such notice, this Lease shall expire and all interest of the Tenant in
the Premises shall terminate on the date so specified in such notice. If the
Premises of the Building are damaged as a result of any cause other than the
perils covered by fire and extended coverage insurance, and whether or not
Landlord elects to repair or restore such damage or to terminate this Lease as
herein provided, Tenant shall be entitled to a proportionate reduction of all
rent payable hereunder to be based
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upon the extent to which the damage and the making of such repairs, if any,
shall materially interfere with the business carried on by the Tenant in the
Premises.
Notwithstanding anything to the contrary contained in this Article, Landlord
shall not have any obligation whatsoever to repair, reconstruct or restore the
Premises (1) when the damage resulting from any casualty covered under this
Article occurs during the last twelve (12) months of the extended term of this
Lease, if any extended term there is; or (2) when the damage resulting from any
casualty covered under this Article occurs during the last twelve (12) months of
the original term of this Lease unless Tenant, within ten (10) days following
Landlord's notice to Tenant of Landlord's election not to repair such damage,
exercises Tenant's option to renew.
Landlord shall not be required to repair any injury or damage by fire or other
cause, or to make any repairs or replacements of any panels, decoration,, office
fixtures, railings, floor covering, partitions, or any other property which is
installed in the Premises by Tenant.
Except as otherwise provided in this Article, Tenant shall not be entitled to
any compensation or damages from Landlord for loss of the use of the whole or
any part of the Premises, Tenant's personal property or any inconvenience or
annoyance occasioned by such damage, repair, reconstruction or restoration,
except as caused by Landlord, Landlord's agents or employees.
25. DEFAULT. In addition to any other act or event elsewhere stated in this
Lease which will cause a default hereunder, the occurrence of any one or more of
the following acts or events shall constitute a default and breach of this Lease
by Tenant.
(a) The vacating or abandonment of the Premises by Tenant.
(b) The failure by Tenant to make any payment of rent or any other
payment required to be made by Tenant hereunder, as and when due, where such
failure shall continue for a period of three (3) days after written notice
thereof by Landlord to Tenant.
(c) The failure by Tenant to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by the
Tenant, other than described in subparagraph (b) of this Article, where such
failure shall continue for a period of thirty (30) days after written notice
thereof by Landlord to Tenant, provided, however, that if the nature of Tenant's
default is such that more than thirty (30) days are reasonably required for its
cure, then Tenant shall not be deemed to be in default if Tenant commences such
cure within said thirty (30) day period and thereafter diligently prosecutes
such cure to completion.
(d) The making by Tenant of any general assignment or general
arrangement for the benefit of creditors; or the filing by or against Tenant of
a petition to have Tenant adjudged a bankrupt, or a petition or reorganization
or arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Tenant, the same is dismissed within one hundred twenty
(120) days); or the appointment of a trustee or a receiver to take possession of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where possession is not restored to Tenant within thirty
(30) days; or the attachment, execution or other judicial seizure of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where such seizure is not discharged within thirty (30)
days.
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26. REMEDIES IN DEFAULT. In the event of any such material default or breach by
Tenant, Landlord may at any time thereafter, with or without notice or demand
and without limiting Landlord in the exercise of a right or remedy which
Landlord may have by reason of such default or breach:
(a) Terminate Tenant's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Premises to Landlord. In such event
Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant's default including, but not limited to, the cost
of recovering possession of the Premises; expenses of reletting, including
necessary renovation and alteration of the Premises; reasonable attorney's fees
and costs; any real estate commissions and costs actually paid; the worth at the
time of award by the court having jurisdiction thereof of the amount by which
the unpaid rent for the balance of the term after the time of such award exceeds
the amount of such rental loss for the same period that Tenant proves could be
reasonably avoided; that portion of the leasing commission paid by Landlord and
applicable to the unexpired term of this Lease. Unpaid installments of rent or
other sums shall bear interest from the date due at the rate of ten (10%)
percent per annum. In the event Tenant shall have abandoned the Premises,
Landlord shall have the option of (a) taking possession of the Premises and
recovering from Tenant the amount specified in this paragraph, or (b) proceeding
under the provisions of the following Article 26(b).
(b) Maintain Tenant's right to possession, in which case this Lease
shall continue in effect whether or not Tenant shall have abandoned the
Premises. In such event Landlord shall be entitled to enforce all of Landlord's
rights and remedies under this Lease, including the right to recover the rent as
it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decision of the State in which the Premises are
located.
27. EMINENT DOMAIN. If more than twenty-five percent (25%) of the floor area of
the building of which the Premises are a part shall be taken or appropriated by
any public or quasi-public authority under the power of eminent domain, Landlord
shall have the right, at its election, to terminate this Lease. If more than
twenty-five percent (25%) of the parking area appurtenant to the building is so
taken or appropriated, then either party hereto shall have the right to
terminate this lease. If any portion of the Premises is so taken or
appropriated, then Tenant shall have the right, at its election, to terminate
this Lease. In the event that there is any taking or appropriation of any
portion of the Building, or of the real property on which it is situated, and
this Lease is not terminated pursuant to the provisions hereof, any sums
thereafter due as rental under this Lease shall be equitably reduced.
Any award paid in connection with any such taking shall belong to and be paid to
Landlord, except that Tenant shall receive from the award the following:
a. A sum attributable to Tenant's improvements or alterations made to
the Premises by Tenant in accordance with this Lease, which Tenant's
improvements or alterations Tenant has the right to remove from the Premises
pursuant to the provisions of this Lease but elects not to remove; or, if Tenant
elects to remove any such Tenant's improvements or alterations, a sum for
reasonable removal or relocation costs not to exceed the market value of such
improvements or alterations.
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b. A sum paid to Tenant from the condemnor for loss of goodwill.
c. A sum attributable to that portion of the award constituting
severance damages for the restoration of the Premises, unless this Lease has
been terminated pursuant to the provisions hereof.
28. OFFSET STATEMENT. Tenant shall at any time and from time to time upon not
less than ten (10) days prior written notice from Landlord execute, acknowledge
and deliver to Landlord a statement in writing, (a) certifying that this Lease
is unmodified and in full force and effect (or, if modified, stating the nature
of such modification and certifying that this Lease as so modified, is in full
force and effect), and the date to which the rentals and other charges are paid,
and (b) acknowledging that there are not, to Tenant's knowledge, any uncured
defaults on the part of the Landlord hereunder, or specifying such defaults if
any are claimed. Any such statement may be relied upon by any prospective
purchaser or encumbrancer of all or any portion of the real property of which
the Premises are a part.
29. PARKING. Tenant shall have the right to use in common with other tenants or
occupants of the Building the parking facilities of the Building. Tenant agrees
that Tenant's employees and agents will not park in any area designated by
Landlord for visitor parking or no parking. In the event of violation of this
provision, Tenant agrees that the offending vehicle may be towed away at the
expense of Tenant. Ninety-four (94) parking spaces will be assigned to Tenant at
Tenant's or Landlord's request at such time as general parking is regularly
inadequate, which assignment shall not be unreasonably withheld.
30. AUTHORITY OF TENANT. Tenant and each individual executing this Lease on
behalf of Tenant represents and warrants that he is duly authorized to execute
and deliver this Lease.
31. GENERAL PROVISIONS.
(a) Plats and Riders. Clauses, plats and riders, if any, signed by the
Landlord and the Tenant and endorsed on or fixed to this Lease are a part
hereof.
(b) Waiver. The waiver by Landlord of any term, covenant or condition
herein contained shall not be deemed to be a waiver of such term, covenant or
condition on any subsequent breach of the same or any other term, covenant or
condition herein contained. The subsequent acceptance of rentals 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, regardless of Landlord's
knowledge of such preceding breach at the time of the acceptance of such rent.
(c) Notices. All notices and demands which may or are to be required or
permitted to be given by either party to the other hereunder shall be in
writing. All notices and demands by the Landlord to the Tenant shall be sent by
United States Mail, postage prepaid, addressed to the Tenant at the Premises, or
to such other place as Tenant may from time to time designate in a notice to the
Landlord. All notices and demands by the Tenant to the Landlord shall be sent by
United States Mail, postage prepaid, addressed to the Landlord at the Office of
the Building, or to such other person or place as the Landlord may from time to
time designate in a notice to the Tenant.
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(d) Joint Obligation. If there be more than one Tenant the obligations
hereunder imposed upon Tenants shall be joint and several.
(e) Marginal Headings. The marginal headings and titles to the Articles
of this Lease are not a part of this Lease and shall have no effect upon the
construction or interpretation of any part hereof.
(f) Time. Time is of the essence of this Lease and each and all of its
provisions in which performance is a factor.
(g) Successors and Assigns. The covenants and conditions herein
contained, subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators and assigns of the parties hereto.
(h) Recordation. Neither Landlord nor Tenant shall record this Lease or
a short form memorandum hereof without the prior written consent of the other
party.
(i) Quiet Possession. Upon Tenant paying the rent reserved hereunder
and observing and performing all of the covenants, conditions and provisions on
Tenant's part to be observed and performed hereunder, Tenant shall have quiet
possession of the Premises for the entire term hereof, subject to all the
provisions of this Lease.
(j) Late Charge. Tenant hereby acknowledges that late payment by Tenant
to Landlord or rent or other sums due hereunder will cause Landlord to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Landlord by terms of any mortgage or trust deed covering the Premises or the
Building accordingly. Accordingly, if any amounts due from Tenant shall not be
received by Landlord or Landlord's designee within ten (10) days after written
notice that said amount is past due, then Tenant shall pay to Landlord a late
charge equal to five percent (5%) of such overdue amount. The parties hereby
agree that such late charges represent a fair and reasonable estimate of the
cost that Landlord will incur by reason of the late payment by Tenant.
Acceptance of such late charges by the Landlord shall in no event constitute a
waiver of Tenant's default with respect to such overdue amount, nor prevent
Landlord from exercising any of the other rights and remedies granted hereunder.
(k) Prior Agreements. This Lease contains all of the agreements of the
parties hereto with respect to any matter covered or mentioned in this Lease,
and no prior agreements or understanding pertaining to any such matters shall be
effective for any purpose. No provision of this Lease may be amended or added to
except by an agreement in writing signed by the parties hereto or their
respective successors in interest. This Lease shall not be effective or binding
on any party until fully executed by both parties hereto.
(l) Inability to Perform. Except as provided in Paragraph 4 or Exhibit
A to this Lease, this Lease and the obligations of the Tenant hereunder shall
not be affected or impaired because the Landlord is unable to fulfill any of its
obligations hereunder or is delayed in doing so, if such inability or delay is
caused by reason of strike, labor disputes, civil disobedience, acts of God, or
any other cause beyond the reasonable control of the Landlord.
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(m) Attorneys' Fees. In the event of any action or proceeding brought
by either party against the other under this Lease, the prevailing party shall
be entitled to recover all costs and expenses including the fees of its
attorneys in such action or proceeding in such amount as the court may adjudge
reasonable.
(n) Sale of Building by Landlord. In the event of any sale of the
Building, Landlord shall be and is hereby entirely freed and relieved of all
liability under any and all of its covenants and obligations contained in or
derived from this Lease arising out of any act, occurrence or omission occurring
after the consummation of such sale; and the purchaser, at such sale or any
subsequent sale of the Building shall be deemed, without any further agreement
between the parties or their successors in interest or between the parties and
any such purchaser, to have assumed and agreed to carry out any and all of the
covenants and obligations of the Landlord under this Lease. In connection with
any such sale, Landlord agrees to obtain Purchaser's express written assumption
of this Lease.
(o) This lease shall be prior to any encumbrance recorded after the
date of this Lease affecting the Building, other improvements, and land of which
the Premises are a part. If, however, a lender requires that this Lease be
subordinate to any such encumbrance, this Lease shall be subordinate to that
encumbrance, if Landlord first obtains from the lender, in favor of tenant, a
written agreement that provides substantially the following:
"As long as Tenant performs its obligations under this Lease, no
foreclosure of, deed given in lieu of foreclosure of, or sale under the
encumbrance, and no steps or procedures taken under the encumbrance, shall
affect Tenant's rights under this Lease."
Tenant shall attorn to any purchaser at any foreclosure sale, or to any grantee
or transferee designated in any deed given in lieu of foreclosure. Tenant shall
execute the written agreement and any other documents required by the lender to
accomplish the purposes of this paragraph.
(p) Name. Tenant shall not use the name of the Building for any purpose
other than as an address of the business to be conducted by the Tenant in the
Premises.
(q) Separability. Any provision of this Lease which shall prove to be
invalid, void or illegal shall in no way affect, impair or invalidate any other
provision hereof and such other provision shall remain in full force and effect.
(r) Cumulative Remedies. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
(s) Choice of Law. This Lease shall be governed by the laws of the
State of California.
(t) Signs and Auctions. Tenant shall not place any sign upon the
Premises or Building or conduct any auction thereon without Landlord's prior
written consent.
32. OPTION TO RENEW. If Tenant is not in default under this lease as of one
hundred twenty (120) days prior to the expiration of the initial term hereof,
then Tenant shall have an option to extend the term of this lease for one
additional period of five (5) years. Such option must be exercised by Tenant by
written notice to Landlord, which notice must be given not less than one hundred
twenty (120) days prior to the expiration of the initial lease term.
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If Tenant is then in default under the terms of this Lease, or fails to exercise
said option in the manner and within the time above set forth, then this Lease
shall expire at the end of the initial five-year (5) term.
If Tenant is entitled to, and in fact does exercise this option in the manner
and within the time limits herein set forth, and if Tenant is not in default
under the terms of this lease as of the expiration of the initial five-year (5)
term, then this Lease shall automatically be extended for an additional five (5)
years, commencing at the expiration of the initial five-year (5) term, and each
and every term, provision and covenant of this Lease, except as to rental, shall
be applicable during such five-year extended term.
During such extended term, rental shall be that which would have obtained had
the original term contained the renewal period.
33. OPTION TO LEASE ADDITIONAL SPACE. Landlord shall provide Tenant notice of
any available space on the second level of the East Wing of the Building,
whereupon Tenant shall have ten days to exercise its option to lease said space
at rates and on terms equivalent to that contained in this Lease, but in no
event shall the term be less than one (1) year. Landlord further agrees to
restrict Lease terms to other Tenants on the second level of the East Wing to a
maximum of three years.
34. OPTION TO PURCHASE. If Tenant is not in default under the terms of this
Lease as of one hundred eighty (180) days prior to the expiration of the initial
five-year (5) term hereof, then Tenant shall have an option to purchase the
Building of which the leased premises are a part, on the following terms and
conditions:
(a) The option must be exercised by written notice from Tenant to
Landlord, which notice must be given not later than one hundred eighty (180)
days prior to the expiration of the initial five-year lease term. If such
written notice is not given, this option shall terminate.
(b) If Tenant exercises this option, then the purchase price, which
shall be payable in cash at the time of escrow close (unless Landlord is willing
to negotiate and accept payment terms other than cash), shall be the fair market
value of the Building. Fair market value shall be established by the agreement
of Landlord and Tenant. Provided that if they are unable to agree on or before
one hundred twenty (120) days before the expiration of the initial five-year
lease term, then Landlord and Tenant shall each appoint an appraiser, the two
appraisers shall appoint a third appraiser, and a mutual decision of any two of
said three appraisers shall establish fair market value, and thus the purchase
price for the Building.
Each party shall pay the costs and fees of their respective appraiser,
and they shall share equally in the costs and fees of the third or neutral
appraiser.
(c) Escrow shall close, and the sale shall be consummated, at any time
during the last five (5) calendar days of the initial five-year (5) lease term.
(d) Landlord reserves the right to enter into a tax deferred exchange
under IRC Section 1031. In such event, Tenant agrees to cooperate with Landlord
in consummating such tax
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deferred exchange, provided that Tenant shall not incur any costs or expenses in
connection with such tax deferred exchange.
(e) If Tenant exercises this purchase option, Tenant agrees that it
will not receive any equitable interest in the Building by reason of such
exercise of option, and that Tenant shall not thereby be entitled to any rights
as a purchaser in possession. Rather, all rights, liabilities and
responsibilities of Landlord and Tenant between the date of option exercise and
the date of escrow close shall be those of Landlord and Tenant, and shall be
determined exclusively under the provisions of this Lease, and Tenant shall have
no rights as a purchaser in possession.
(f) Time, as set forth in the various provisions of this purchase
option, is expressly declared to be of the essence of this option, and of the
purchase contract that will result from any exercise thereof.
35. BROKERS. Tenant warrants that it has had no dealings with any real estate
broker or agents in connection with the negotiation of this Lease excepting only
James C. Westenbroek and James J. Williams and it knows of no other real estate
broker or agent who is entitled to a commission in connection with this Lease.
The parties hereto have executed this Lease at the place and on the dates
specified immediately adjacent to their respective signatures.
If this Lease has been filled in, it has been prepared for submission to your
attorney for his approval. No representation or recommendation is made by the
real estate broker or its agents or employees as to the legal sufficiency, legal
effect, or tax consequences of this Lease or the transactions relating thereto.
SRP Limited Partnership
-----------------------------------
By:
--------------------------------
Address 120 N. Redwood Drive By:
------------------------------- --------------------------------
San Rafael, California "Landlord"
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Fair, Isaac & Company, Inc.
-----------------------------------
By:
--------------------------------
Address 55 Mitchell Boulevard By:
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San Rafael, California "Tenant"
- --------------------------------------
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SMITH RANCH PLAZA
WORK AGREEMENT
EXHIBIT "A" TO LEASE
FAIR, ISAAC COMPANY, INC. (hereinafter called "Tenant") and S.R.P. LIMITED
PARTNERSHIP (hereinafter called "Landlord") are executing simultaneously with
this Work Agreement, the written Lease to which this Work Agreement is attached
covering the premises described in said Lease (hereinafter called "the
premises").
To induce Tenant to enter into said Lease (which is hereby incorporated by
reference to the extent that the provisions of this agreement may apply thereto)
and in consideration of the mutual covenants hereinafter contained, Landlord and
Tenant mutually agree as follows:
1. TENANT'S PLANS AND SPECIFICATIONS
(a) Except to the extent otherwise provided in subparagraphs (b) and
(c) of this paragraph, Landlord agrees to furnish at its sole cost and expense,
all architectural, mechanical, and electrical engineering plans required for the
performance of the work (hereinafter referred to as "Building Standard Work")
hereinbelow described, including complete detailed plans and specifications for
Tenant's partition layout, reflected ceiling, heating and air conditioning,
electrical outlets and switches and telephone outlets. Design services are
limited to one schematic design plus one set of revisions based on a review of
the schematic design. Further revisions will be at the expense of the Tenant.
The layout shall be approved by each of the parties hereto and attached to this
Lease and shall become a part thereof and shall be described as Exhibit "B".
(b) It is understood and agreed that Tenant will require work
(hereinafter referred to as "Building Non-Standard Work") different from or in
addition to said Building Standard Work. In such event, any architectural,
mechanical, and electrical plans and specifications required shall be furnished,
at Tenant's sole cost and expense to Landlord's office for approval.
(c) It is understood and agreed that any interior decorating services,
such as selection of special wall coverings, fixtures, non-building standard
carpet, and any or all other decorator items required by Tenant in the
performance of said work referred to hereinabove in subparagraphs (a) and (b)
shall be at the Tenant's sole cost and expense.
(d) It is understood and agreed that all plans and specifications
referred to hereinabove in subparagraphs (a) and (b) are subject to the
Landlord's approval, which approval shall not be unreasonably withheld. Tenant
also agrees that, when requested by Landlord's office, Tenant will furnish
complete information respecting Tenant's requirements. Schematic plans will be
approved by Tenant on or before October 27, 1983, with complete plans and
specifications approved by Tenant on or before October 31, 1983.
18
<PAGE>
2. BUILDING STANDARD WORK AT LANDLORD'S COST AND EXPENSE
Landlord will, at its sole cost and expense, furnish and install Four
Hundred, Four Thousand, One Hundred, Forty-three ($404,143.00) in value of the
work as indicated on Tenant's final approved plans, which portion is defined as
"Building Standard Work".
The following categories are an indication of normal building standard.
Because of agreement on an improvement budget, these descriptions are only to
indicate type and quality of materials, and are not to be utilized as quantity
allowances.
(a) Building standard interior partitions, ceiling high, 5/8" vinyl
clad gypsum board, with rubber base on both sides of 2 1/2 " metal stud, in an
amount equal to one lineal foot per fifteen square feet of office area. Demising
partitions between tenants to be full height (floor to suspended ceiling) and
sound-insulated.
(b) Building standard full height interior doors, 3" X 9" X 1 3/4",
solid core, stain grade oak veneer face with K.D. metal frame, Baldwin Lever
latchset design, in an amount equal to one per 350 square feet of office area,
and a maximum of one building standard full height suite entrance door with
hardware including Baldwin Lever lockset design, closer and deadbolt. (All
hardware to have oil rubbed bronze finish.)
(c) Building standard two foot by four foot fluorescent fixture at a
maximum rate of one per eighty square feet of area, including switches for said
fixtures, but not to exceed one switch for each private office or room.
(d) Building standard electrical duplex wall outlets, with cover plate
in an amount equal to one duplex per one-hundred square feet of office area.
(e) Building standard telephone wall outlets, with cover plate, in an
amount equal to one per two-hundred square feet of office area.
(f) Building standard blinds on all exterior office windows.
(g) Building standard ceiling, exposed grid, mechanically suspended
white 2 X 2 tegular acoustic panels.
(h) Building standard heating, ventilating, and air conditioning, with
duct work, supply grilles, return. and thermostats, served by a water source
heat pump system to provide air conditioning suited to normal general office
occupancy, with a minimum area for each zone of seven hundred fifty square feet.
Tenant will be required to pay additional charges if its application of the
space necessitates excess zoning or capacity.
(i) Building standard carpet in colors uniform for each floor.
(j) Automatic sprinkler system with building standard recessed-type
head, chrome plated.
19
<PAGE>
3. BUILDING NON-STANDARD WORK AT TENANTIS COST AND EXPENSE
Provided Tenant's plans and specifications are furnished by the date
provided hereinabove in Paragraph l(d) and approved by Landlord, the Landlord
shall cause Tenant's "Building Non-Standard Work" to be installed by Landlord's
contractor, but at Tenant's sole cost and expense for any amount in excess of
Ninety-Five Thousand, Eight Hundred Fifty-Seven Dollars ($95,857). Prior to
commencing any such work, Landlord, its contractor, or its architects and
engineers, shall submit to Tenant a written estimate of the cost thereof. If
Tenant shall fail to approve any such estimate within ten (10) days after
submission thereof, such failure shall be deemed a disapproval thereof, and
Landlord's contractor shall not proceed with such work. Tenant agrees to pay
Landlord promptly upon being billed therefore, the cost to Landlord of all such
excess Building Non-Standard Work. Such bills may be rendered during the
progress of the performance of the work and the furnishings and installation of
the materials to which such bills relate. Landlord may require Tenant to deposit
the estimated cost of such work with Landlord prior to the commencement of such
work.
Within the demised premises Tenant may select different new materials
(except exterior window coverings) in place of "Building Standard Work"
materials which would otherwise be initially furnished and installed by Landlord
for or in the interior of the Premises under the provisions of this Work
Agreement, provided such selection is indicated on said Tenant's final plans. No
such different new materials shall be furnished and installed in replacement for
any of Landlord's "Building Standard Work" materials until Landlord, or its
contractor and/or its architects shall have advised Tenant in writing of, and
Landlord or its contractor and/or its office planning architects have agreed in
writing on, the work of such different new material and the Landlord's cost of
such replaced Landlord's "Building Standard Work" materials.
All amounts payable by Tenant to Landlord pursuant to preceding
paragraphs shall be paid by Tenant promptly after the rendering of bills
therefore by Landlord or its contractors to Tenant, it being understood that
such bills may be rendered during the progress of the performance of the work
and/or the furnishings and installation of the materials to which such bills
relate. Any such different new materials shall be surrendered by the Tenant to
the Landlord at the end of the initial or other expiration of the term of the
Lease.
4. COMPLETION AND RENTAL COMMENCEMENT DATE
If the occupancy date of the Premises is delayed by:
(a) Tenant's failure to furnish the information specified in
Paragraph 1 hereof in a timely fashion; or
(b) Tenant's request for substitution or additional improvements
or changes in materials, finisher, or installations other than
those which are not Building Standard; or
(c) Tenant's changes in the final drawings and specifications; or
20
<PAGE>
(d) A delay in performance of building standard work as a result
of Tenant's failure to approve written estimates of the cost
of non-building standard work in accordance with Paragraph 3
hereof,
then the commencement of the term of the Office Lease and the payment of rent
shall be unchanged.
LANDLORD: TENANT:
S.R.P. LIMITED PARTNERSHIP FAIR, ISAAC AND COMPANY, INC.
- --------------------------------- ---------------------------------
- --------------------------------- ---------------------------------
Dated --------------------------- ---------------------------------
21
FAIR, ISAAC AND COMPANY, INCORPORATED
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE.
The Plan is intended to provide incentive to the Non-Employee Directors
of the Corporation, to align such individuals' interests with those of the
Corporation's stockholders, to encourage such individuals to remain in the
service of the Corporation and to attract new Non-Employee Directors with
outstanding qualifications.
2. DEFINITIONS.
(a) "Board" shall mean the Board of Directors of the Corporation, as
constituted from time to time.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the committee appointed by the Board in
accordance with Section 4.
(d) "Corporation" shall mean Fair, Isaac and Company, Incorporated, a
Delaware corporation.
(e) "Exercise Price" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as determined by the Committee in
accordance with the Plan.
(f) "Fair Market Value" shall mean the market price of Stock,
determined by the Committee as follows:
(i) If Stock was traded over-the-counter on the date in
question but was not classified as a national market issue, then the
Fair Market Value shall be equal to the mean between the last reported
representative bid and asked prices quoted by the NASDAQ system for
such date;
(ii) If Stock was traded over-the-counter on the date in
question and was classified as a national market issue, then the Fair
Market Value shall be equal to the last-transaction price quoted by the
NASDAQ system for such date;
(iii) If Stock was traded on a stock exchange on the date in
question, then the Fair Market Value shall be equal to the closing
price reported by the applicable composite-transactions report for such
date; and
1
Exhibit 10.6
<PAGE>
(iv) If none of the foregoing provisions is applicable, then
the Fair Market Value shall be determined by the Committee in good
faith on such basis as it deems appropriate.
In all cases, the determination of Fair Market Value by the Committee
shall be conclusive and binding on all persons.
(g) "Non-Employee Director" shall mean a member of the Board who is not
a common-law employee of the Corporation or of a Subsidiary.
(h) "Nonstatutory Stock Option" shall mean an option not described in
sections 422(b), 422A(b), 423(b) or 424(b) of the Code.
(i) "Option" shall mean a Nonstatutory Stock Option granted pursuant to
the Plan and entitling the holder to purchase Shares.
(j) "Optionee" shall mean an individual who holds an Option.
(k) "Plan" shall mean this Fair, Isaac and Company, Incorporated Stock
Option Plan for Non-Employee Directors, as it may be amended from time to time.
(l) "Purchase Price" shall mean the Exercise Price multiplied by the
number of Shares with respect to which an Option is exercised.
(m) "Share" shall mean one share of Stock, as adjusted in accordance
with Section 9 (if applicable).
(n) "Stock" shall mean the Common Stock of the Corporation.
(o) "Subsidiary" shall mean any corporation, if the Corporation and/or
one or more other Subsidiaries own at least 50% of the total combined voting
power of all classes of outstanding stock in such corporation. A corporation
that attains the status of a Subsidiary on a date after the adoption of the Plan
shall be considered a Subsidiary commencing as of such date.
3. EFFECTIVE DATE.
The Plan was adopted by the Board on February 1, 1988. The Plan remains
subject to the approval of the Corporation's stockholders pursuant to Section
13.
4. ADMINISTRATION.
(a) Committee Membership.
2
<PAGE>
The Plan shall be administered by the Committee. The Committee shall be
appointed by the Board and shall consist only of three or more disinterested
directors. The Board may from time to time remove members from, or add members
to, the Committee. Vacancies on the Committee, however caused, shall be filled
by the Board. The Committee shall hold meetings at such times and places as it
may determine. Acts of a majority of the Committee at which a quorum is present,
or acts reduced to or approved in writing by a majority of the members of the
Committee, shall be the valid acts of the Committee.
(b) Committee Responsibilities.
The Committee shall construe the Plan and carry out its provisions.
However, the Committee shall have no discretion in selecting the Optionees or in
awarding Options. The interpretation and construction by the Committee of any
provision of the Plan or of any Option granted thereunder shall be final. No
member of the Committee shall be liable for any action or determination made in
good faith with respect to the Plan or any Option granted thereunder.
(c) Disinterested Directors.
A member of the Board shall be deemed to be "disinterested" for the
purposes of this Plan only if he or she, at all times required for purposes of
Rule 16b-3 of the Securities and Exchange Commission or any successor rule, was
not eligible for the grant of rights or options to purchase stock under this
Plan. A Non-Employee Director shall not fail to qualify as "disinterested" for
the purpose of administering any other stock option plan of the Company solely
because he or she is eligible for the grant of Options under this Plan.
5. STOCK.
The aggregate number of Shares which may be issued upon exercise of
Options under the Plan shall not exceed 40,000. The number of Shares subject to
Options outstanding at any time shall not exceed the number of Shares then
remaining available for issuance under the Plan. In the event that any
outstanding Option for any reason expires or is terminated, the Shares allocable
to the unexercised portion of such Option may again be made subject to Options.
The limitation established by this Section 5 shall be subject to adjustment in
the manner provided in Section 9 upon the occurrence of an event specified
therein.
6. ELIGIBILITY AND GRANT OF OPTIONS.
Each Non-Employee Director shall receive a single Option covering 8,000
Shares (subject to adjustment under Section 9). Such Option shall be considered
a Nonstatutory Stock Option for tax purposes. Such Option shall automatically be
granted as of the later of (a) February 1, 1988, or (b) the date on which the
Non-Employee Director completes
3
<PAGE>
his or her sixth month of continuous service as a Non-Employee Director. No
individuals other than Non-Employee Directors shall be eligible to participate
in the Plan.
7. TERMS AND CONDITIONS OF OPTIONS.
(a) Stock Option Agreements.
Options shall be evidenced by written stock option agreements in such
form as the Committee shall from time to time determine. Such agreements shall
comply with, and be subject to, the terms and conditions set forth in the Plan.
(b) Exercise Price.
Each Option shall specify the Exercise Price, which shall be equal to
100% of the Fair Market Value on the date of grant.
(c) Medium and Time of Payment.
The Purchase Price shall be payable in full in United States dollars
upon the exercise of the Option, except that all or part of the Purchase Price
may be paid by the surrender of Shares in good form for transfer, owned for 12
months or more by the person exercising the Option and having a Fair Market
Value on the date of exercise equal to that portion of the Purchase Price which
is being paid with Shares.
(d) Withholding Taxes.
As a condition to the exercise of an Option or the disposition of
Shares acquired under the Plan, the Optionee shall make such arrangements as
applicable law may require for the satisfaction of any federal, state or local
withholding tax obligations that may arise in connection with such exercise or
disposition.
(e) Exercisability, Term and Nontransferability.
Each Option shall become exercisable six months after the date of
grant, subject to Section 13. The Option shall terminate on the day before the
10th anniversary of the date of grant, except as otherwise provided in (f) or
(g) below.
During the lifetime of the Optionee, the Option shall be exercisable
only by the Optionee and shall not be assignable or transferable. In the event
of the Optionee's death, the Option shall not be transferable other than by will
or by the laws of descent and distribution.
(f) Termination of Board Membership
4
<PAGE>
If an Optionee ceases to be a member of the Board for any reason other
than his or her death, then the Optionee shall have the right to exercise an
Option (to the extent exercisable but not previously exercised and not expired)
at any time within 90 days after the date when he or she ceases to be a member
of the Board.
For purposes of this Subsection (f), status as a member of the Board
shall be deemed to continue while the Optionee is on military leave, sick leave
or other bona fide leave of absence.
Options already granted pursuant to this Plan to a Non-Employee
Director shall not be affected by reason of the Optionee thereafter becoming an
employee of the Corporation or a Subsidiary so long as he or she remains a
member of the Board.
(g) Death of Optionee.
If an Optionee dies while he or she is a member of the Board and has
not fully exercised an Option, then such Option (to the extent not previously
exercised and not expired) may be exercised in full at any time within 12 months
after the Optionee's death by the executors or administrators of his or her
estate or by any person or persons who have acquired such Option directly from
the Optionee by bequest or inheritance.
(h) Rights as a Stockholder.
An Optionee, or a transferee of an Optionee, shall have no rights as a
stockholder with respect to any Shares covered by his or her Option until the
date of the issuance of a stock certificate for such Shares. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property), distributions or other rights for which the record date is
prior to the date when such stock certificate is issued, except as provided in
Section 9.
8. TERM OF PLAN.
Options may be granted pursuant to the Plan until January 31, 1998, or
until such earlier date as the Board may determine at its sole discretion.
9. RECAPITALIZATIONS.
Subject to any required action by stockholders, the number of Shares
covered by the Plan as provided in Section 5, the number of Shares covered by
each outstanding Option and the Exercise Price thereof shall be adjusted
proportionately for any increase or decrease in the number of issued Shares
resulting from a subdivision or consolidation of Shares or the payment of a
stock dividend or any other increase or decrease in the number of issued Shares
effected without receipt of consideration by the Corporation.
5
<PAGE>
Subject to any required action by stockholders, if the Corporation is
the surviving corporation in any merger or consolidation, each outstanding
Option shall pertain to the securities to which a holder of the number of Shares
subject to the Option would have been entitled. A dissolution or liquidation of
the Corporation or a merger or consolidation in which the Corporation is not the
surviving corporation shall cause each outstanding Option to terminate, unless
the agreement or merger or consolidation provides for the assumption thereof by
the surviving corporation.
To the extent that the foregoing adjustments relate to securities of
the Corporation, such adjustments shall be made by the Committee, whose
determination shall be conclusive and binding on all persons.
Except as expressly provided in this Section 9, the Optionee shall have
no rights by reason of any subdivision or consolidation of shares of stock of
any class, the payment of any stock dividend or any other increase or decrease
in the number of shares of stock of any class or by reason of any dissolution,
liquidation, merger or consolidation or spin-off of assets or stock of another
corporation, and any issue by the Corporation of shares of stock of any class,
or securities convertible into shares of stock of any class, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number or
Exercise Price of Shares subject to an Option.
The grant of an Option pursuant to the Plan shall not affect in any way
the right or power of the Corporation to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
10. SECURITIES LAW REQUIREMENTS.
(a) Legality of Issuance.
No Shares shall be issued upon the exercise of any Option unless and
until the Corporation has determined that (i) it and the Optionee have taken all
actions required to register the Shares under the Securities Act of 1933, as
amended (the "Act"), or to perfect an exemption from the registration
requirements thereof; (ii) any applicable listing requirement of any stock
exchange on which Stock is listed has been satisfied; and (iii) any other
applicable provision of state or federal law has been satisfied.
(b) Restrictions on Transfer; Representations of Optionee.
Regardless of whether the offering and sale of Shares under the Plan
have been registered under the Act or have been registered or qualified under
the securities laws of any state, the Corporation may impose restrictions upon
the sale, pledge or other transfer of such Shares (including the placement of
appropriate legends on stock certificates) if, in the judgment of the
Corporation and its counsel, such restrictions are necessary or desirable in
order to achieve compliance with the provisions of the Act, the securities
6
<PAGE>
laws of any state or any other law. In the event that the sale of Shares under
the Plan is not registered under the Act but an exemption is available which
requires an investment representation or other representation, each Optionee
shall be required to represent that such Shares are being acquired for
investment, and not with a view to the sale or distribution thereof, and to make
such other representations as are deemed necessary or appropriate by the
Corporation and its counsel. Stock certificates evidencing Shares acquired under
the Plan pursuant to an unregistered transaction shall bear an appropriate
restrictive legend.
Any determination by the Corporation and its counsel in connection with
any of the matters set forth in this Section 10 shall be conclusive and binding
on all persons.
(c) Registration or Qualification of Securities.
The Corporation may, but shall not be obligated to, register or qualify
the sale of Shares under the Act or any other applicable law. The Corporation
shall not be obligated to take any affirmative action in order to cause the sale
of Shares under the Plan to comply with any law.
(d) Removal of Legends.
If, in the opinion of the Corporation and its counsel, any legend
placed on a stock certificate representing Shares issued under the Plan is no
longer required, the holder of such certificate shall be entitled to exchange
such certificate for a certificate representing the same number of Shares but
lacking such legend.
11. AMENDMENT OF THE PLAN.
The Board may from time to time, with respect to any Shares at the time
not subject to Options, suspend or discontinue the Plan or revise or amend it in
any respect whatsoever except that, without the approval of the Corporation's
stockholders, no such revision or amendment shall:
(a) Materially increase the benefits accruing to Optionees under the
Plan;
(b) Materially increase the number of Shares subject to the Plan,
except as provided in Section 9;
(c) Materially change the designation in Section 6 with respect to the
class of individuals eligible to receive Options; or
(d) Amend this Section 11 to defeat its purpose.
12. APPLICATION OF FUNDS.
7
<PAGE>
The proceeds received by the Corporation from the sale of Stock
pursuant to the exercise of an Option will be used for general corporate
purposes.
13. APPROVAL OF STOCKHOLDERS.
The adoption of the Plan and any amendment described in Section 11
shall be subject to approval by the affirmative vote of the holders of a
majority of the outstanding shares of the Corporation entitled to vote or by the
unanimous written consent of all holders of the outstanding shares of
the-Corporation entitled to vote. In the event that the Plan is not approved by
stockholders at or before the first annual meeting of stockholders held after
its adoption by the Board, any Option theretofore granted shall be null and
void. Any other provision of the Plan notwithstanding, no Option shall be
exercisable until the Corporation's stockholders have approved the Plan.
14. EXECUTION.
To record the adoption of the Plan by the Board, effective as of
February 1, 1988, the Corporation has caused its authorized officers to affix
the corporate name hereto.
FAIR, ISAAC AND COMPANY, INCORPORATED
By ______________________________________
President and CEO
By ______________________________________
Vice President and Secretary
8
AMENDMENT NO. 1
TO THE FAIR, ISAAC AND COMPANY, INCORPORATED
1987 STOCK OPTION PLAN
Effective as of March 1, 1988, the Fair, Isaac and Company,
Incorporated 1987 Stock Option Plan is hereby amended as follows:
Section 2(g) is amended to read as follows:
"Fair Market Value" shall mean the market price of Stock,
determined by the Committee as follows:
(i) If Stock was traded over-the-counter on the date in
question, whether or not classified as a national market issue, then
the Fair Market Value shall be equal to the mean between the last
reported representative bid and asked prices quoted by the NASDAQ
system for such date;
(ii) If Stock was traded on a stock exchange on the date in
question, then the Fair Market Value shall be equal to the closing
price reported by the applicable composite-transactions report for such
date; and
(iii) If none of the foregoing provisions is applicable, then
the Fair Market Value shall be determined by the Committee in good
faith on such basis as it deems appropriate.
To record the adoption of this amendment to the Fair, Isaac and
Company, Incorporated 1987 Stock Option Plan by the Board on August 18, 1988,
the Corporation has caused its authorized officers to affix the corporate name
hereto.
Fair, Isaac and Company, Incorporated
By ______________________________________
Peter L. McCorkell
Vice President & Secretary
EXHIBIT 10.8
AMENDMENT NO. 1
TO THE FAIR, ISAAC AND COMPANY, INCORPORATED
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
Effective as of March 1, 1988, the Fair, Isaac and Company,
Incorporated Stock Option Plan for Non-Employee Directors is hereby amended as
follows:
Section 2(f) is amended to read as follows:
"Fair Market Value" shall mean the market price of Stock,
determined by the Committee as follows:
(i) If Stock was traded over-the-counter on the date in
question, whether or not classified as a national market issue, then
the Fair Market Value shall be equal to the mean between the last
reported representative bid and asked prices quoted by the NASDAQ
system for such date;
(ii) If Stock was traded on a stock exchange on the date in
question, then the Fair Market Value shall be equal to the closing
price reported by the applicable composite-transactions report for such
date; and
(iii) If none of the foregoing provisions is applicable, then
the Fair Market Value shall be determined by the Committee in good
faith on such basis as it deems appropriate.
In all cases, the determination of Fair Market Value by the Committee
shall be conclusive and binding on all persons.
To record the adoption of this amendment to the Fair, Isaac and
Company, Incorporated Stock Option Plan for Non-Employee Directors by the Board
on August 18, 1988, the Corporation has caused its authorized officers to affix
the corporate name hereto.
Fair, Isaac and Company, Incorporated
By ______________________________________
Peter L. McCorkell
Vice President & Secretary
EXHIBIT 10.9
ADDENDUM NUMBER SEVEN TO LEASE
THIS ADDENDUM NUMBER SEVEN TO LEASE is made and entered into this 1st day of
March 1990, by and between S.R.P. Limited Partnership, (Landlord) and Fair,
Isaac and Company, Incorporated (Tenant), and shall constitute a modification of
that Lease between the parties dated October 20, 1983 (Base Lease) and as
amended on May 1, 1984, September 21, 1984, February 8, 1985, September 3, 1985,
November 21, 1985, and October 1, 1986, relating to the premises occupied by
Tenant in the building commonly known as 120 North Redwood Drive, San Rafael,
California 94903. This action constitutes both the extension of the term of the
Lease, and the expansion of Tenant into future available space.
The parties hereto agree that:
1. The leased premises shall be increased by 3,488 rentable square feet, to
include the space commonly known as Suite 350, effective upon ninety days notice
to Tenant, for possession no earlier than July 1, 1990, and no later than
October 1, 1990.
2. Tenant agrees to lease Suite 375, comprised of 2,472 rentable square feet, at
such time as that space is first available for lease, upon the same terms and
conditions as is then existing under the Lease.
3. The expiration date of the Lease for both existing and future expansion
Tenant space shall be changed to December 31, 2001.
4. The Option to Renew, contained in Paragraph 32 of the Base Lease shall be
changed such that the first option period, if exercised, shall now commence on
January 1, 2002. The Option to Renew is only available on all of the space
contained in the Lease, at the time of option exercise. This Option is personal
to Tenant and is not available to sublessee or sublessees of Tenant's leasehold.
5. The combination of Basic Rent and Additional Rent for the period of March 1,
1990, to December 31, 1990, shall be computed at the monthly rate of $1.90 per
rentable square foot, prior to a monthly credit in the amount of $2,150 for west
wing utility expense and first floor west wing janitorial expense. Therefore,
until expansion space is included in the leased premises, the monthly rent on
the existing 36,554 rentable square feet shall be $67,303.
6. Additional Rent as defined and administered by Paragraph 7 of the Lease shall
be unchanged except that Base Year shall now refer to and mean the calendar year
1990. During the revised Base Year 1990, the portion of total rent attributable
to Additional Rent shall be equal to the actual Tenant Proportional Share as
retroactively determined at the end of the Base Year.
Example: Considering only Tenant's present space, if at the end of 1990, it
is determined that Tenant's proportional share of 1990 operating expenses
on a monthly basis equaled $16,500, then that amount shall be subtracted
from the $67,303 total monthly rent,
1
Exhibit 10.11
<PAGE>
therefore providing a remainder of $50,803 as the Base Year Basic Monthly
Rent.
Then, during 1991, the $16,500 Monthly Additional Rent will be used as an
estimate of monthly operating expenses, with an adjustment at the end of
the year to reflect actual operating expenses, creating a resultant rebate
or recapture as is then determined to be appropriate, per the terms of
Paragraph 7 of the Lease.
7. Paragraph 6 "Adjusted Basic Rent," of the Base Lease shall be modified such
that the combination of increases in rent under Paragraphs 6 and 7 shall in no
event exceed a 7.5% increase over the combined rental under said Paragraphs for
the immediately preceding lease year.
8. Paragraph 9 "Use," of the Base Lease shall be modified such that "use" is
defined as "general office purposes," instead of "general office purposes of the
Fair, Isaac Companies."
9. Paragraph 24 "Reconstruction," of the Base Lease shall be modified such that
if the time period required to complete restoration of the Premises or Building
is greater than twelve months from the date of the damage, either Landlord or
Tenant shall have the right to terminate the Lease within thirty (30) days after
the date of the determination that such reconstruction will require more than
twelve months. Landlord will make such determination and notify Tenant of such
determination within sixty (60) days of the event of damage.
10. Paragraph 13.b. of the Base Lease is modified so that Landlord's obligations
with respect to repair and maintenance of the structural portions of the
building shall explicitly include any modifications required of the structural
portions of the building under then current building and fire codes.
11. All other terms and conditions of the Base Lease shall remain unchanged.
Landlord: S.R.P. Limited Tenant: Fair, Isaac and Company, Inc.
Partnership
By: _________________________________ By: _________________________________
2
LEASE
111 SMITH RANCH ROAD
San Rafael, California
THIS LEASE, dated for reference purposes only, the fifth day of
September, 1991, between
111 PARTNERS, (hereafter "Landlord")
and whose address is:
50 Bon Air Center, Suite 140
Greenbrae, California 94904
and FAIR, ISAAC AND COMPANY, INCORPORATED,
(hereafter "Tenant")
and whose address is:
120 North Redwood Drive
San Rafael, California 94903-1996
(a) Demise. Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord those certain premises (the "Premises") described as follows:
The real property described in Exhibit "A' and the office
building to be known as 111 Smith Ranch Road in San Rafael,
California (the "Building"), and shown on the site plan marked
Exhibit "B," comprising approximately 26,678 square feet
("Tenant's Leasable Area") to be constructed by Landlord in
accordance with paragraph 8 below.
(b) Terms, Covenants and Conditions. The parties agree that this lease
is made upon the following terms, covenants and conditions:
1. TERM:
(a) The term of this Lease shall commence on the later of (i) delivery
by Landlord of the Final Completion Notice described in paragraph 9 of the
Leasehold Improvements Agreement (Exhibit "D") or (ii) ninety (90) days
following the Delivery Date described in paragraph 4(e) of the Leasehold
Improvements Agreement (subject to extensions to which tenant may be entitled
under paragraph 4(b) of the Leasehold Improvements Agreement) (the "Construction
Period"). The commencement date is hereinafter referred to as the "Commencement
Date," The term of this Lease shall expire at midnight June 30, 2001 unless
Tenant shall exercise the option to renew provided for herein.
(b) Landlord shall use reasonable efforts to substantially complete
those improvements referred to in the Leasehold Improvements Agreement as
"Landlord's Work" and to deliver possession of the Premises to Tenant by April
1, 1992 ("Delivery Date").
The Delivery Date may be extended on account of delays as set forth in
Article 11 of the Leasehold Improvements Agreement
1 Exhibit 10.13
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2. MINIMUM RENT:
a) Tenant and Landlord have entered into a loan agreement concurrently
with the execution of this Lease whereby Tenant has agreed to loan Landlord
funds to be used for the construction of the Building. Said loan will be
represented by a note ('Note") secured by a deed of trust encumbering the
Premises. Tenant agrees to pay Landlord monthly rent equal to the monthly
payments payable under the Note including both principal and interest,
commencing upon the Commencement Date and continuing throughout the term of this
Lease. In the event the loan is not fully funded upon commencement of the lease
term and monthly installments are increased to provide for repayment of
additional advances, concurrently with the increase in monthly note installments
the monthly rent shall be increased. Monthly rent payments shall continue in the
manner provided for in the Note notwithstanding any prepayment by Landlord of
the Note. Such monthly rent is herein referred to as the "Note Rent."
(b) In addition to the Note Rent Tenant promises to pay monthly rent as
set forth below for the use of the land ("Land Rent") as follows:
First twelve months of the term: $3,750.00 per month
Second twelve months of the term: $5,417.00 per month
Third twelve months of the term: $7,500.00 per month
Fourth twelve months of the term: $7,917.00 per month
Fifth twelve months of the term: $8,333.00 per month
Sixth twelve months of the term: $9,167.00 per month
During the Seventh twelve months of the term, the land rent shall be
the greater of $9,167,00 per month or $9,167 per month multiplied by a fraction
the numerator of which is the Index (as hereinafter defined) published nearest
but prior to the 73rd month of the term and the denominator of which is the
Index published for the month of June 1991.
Commencing with the 85th month of the term and at the end of each
twelfth (12th) month thereafter during the term of this Lease, the Land Rent for
the ensuing twelve (12) month period (the "Adjustment Period".) shall be an
amount equal to the greater of (i) the Land Rent in effect immediately prior to
the commencement of such Adjustment Period (without regard to any temporary
abatement of rental then in effect pursuant to the provisions of this Lease), or
(ii) the product obtained by multiplying the Land Rent in effect immediately
prior to the commencement of such Adjustment Period (without regard to any
temporary abatement of rental then in effect pursuant to the provisions of this
Lease) by a fraction, the numerator of which is the Index published nearest but
prior to the commencement date of such Adjustment Period and the denominator of
which is the Index published for the month which is twelve (12) months earlier.
The term "Index" as used herein shall mean the Consumer Price Index For
All Urban Consumers, San Francisco-Oakland-San Jose, 1982-84 = 100, published by
the Bureau of Labor Statistics of the U.S. Department of Labor. If the Bureau of
Labor Statistics revises the above Consumer Price Index, the parties agree that
the Bureau of Labor Statistics will be the sole judge of the comparability of
successive indexes.
(c) The total of the Note Rent and the Land Rent is referred to herein
as the Minimum Rent. Tenant agrees to pay the Minimum Rent to Landlord without
offset or deduction (except as
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provided herein), prior notice or demand in advance at Landlord's address on the
first day of each month commencing upon the commencement of the lease term and
continuing upon the first day of each calendar month thereafter throughout the
lease term. If Tenant's obligation to pay rent commences other than on the first
day of a calendar month, the first month's Minimum Rent shall be prorated
accordingly and paid at the commencement of the obligation to pay rent.
Landlord's address shall be as set forth above, or as from time to time
designated by Landlord to Tenant in writing. Upon Landlord's request, Tenant
will co-sign Landlord's written confirmation of the lease commencement date and
the Note Rent.
(d) Tenant shall make payment of Minimum Rent and other payments to
Landlord in lawful money of the United States; provided, if any such payment
made by a check, draft or money order is returned to Landlord due to
insufficient funds, or otherwise, Landlord shall have the right, at any time
thereafter, upon written notice to Tenant, to require Tenant to make all
subsequent payments in cash, by cashier's certified check, wire transfer or by
money order.
(e) It is expressly understood and agreed that Tenant's timely payment
of Minimum Rent and all other rents, charges and amounts of any kind provided in
this Lease is an unconditional obligation of Tenant, and one on which Landlord
is relying in order to meet the financial obligations of the Building. Tenant's
obligation to pay shall be continuous throughout the term of the Lease, even
during the pendency of any dispute resolution process which may arise during the
term hereof.
3. ADDITIONAL RENT, LATE CHARGE AND DEFAULT INTEREST:
(a) All taxes, insurance premiums, maintenance charges, and other costs
and expenses payable hereunder by Tenant (together with any late charge or
interest that may accrue thereon in the event of Tenant's failure to pay the
same) and all damages, costs and expenses which Landlord may incur by reason of
Tenant's default hereunder shall be deemed to be "Additional Rent'. In the event
of non-payment by Tenant of any Additional Rent, Landlord shall have all of the
rights and remedies with respect thereto as Landlord has for the non-payment of
Minimum Rent. The term "rentals" or "rental" as used in this Lease shall mean
Minimum Rent, and Additional Rent.
(b) Tenant acknowledges that the late payment by Tenant of any rentals
due hereunder will cause Landlord to incur certain costs and expenses not
contemplated under this Lease, the exact amount of which will be extremely
difficult or impractical to ascertain. Such costs and expenses include, without
limitation, administrative and collection costs and processing and accounting
expenses. Accordingly, if any rental payable hereunder is not received by
Landlord from Tenant within ten (10) days after notice that the same is overdue,
Tenant shall immediately pay to Landlord, without prior notice or demand. a late
charge equal to four percent (4%) of the amount then delinquent. Landlord and
Tenant agree that this late charge represents a reasonable estimate of such
costs and expenses and is fair compensation to landlord for its losses sustained
by reason of Tenant's failure to make timely payment. In no event shall this
provision for the payment of a late charge be deemed to grant to Tenant a grace
period or extension of time within which to pay any rental due hereunder or
prevent Landlord from exercising any right or remedy available to Landlord upon
Tenant's failure to pay such rental when due, including the right to terminate
this Lease.
(c) If any rental remains delinquent for a period in excess of thirty
(30) days, in addition to
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the late charge provided hereinabove, Tenant shall pay to Landlord interest on
any rental that is not paid when due at the lesser of twelve percent (12%) per
annum or the maximum interest rate permitted by law, from the 30th day following
the date such amount became due, until paid.
(d) If Tenant shall fail to pay Minimum Rent within ten (10) days
following the due date thereof on any three (3) or more occasions during any
twelve (12) month period during the lease term, Landlord shall have the right,
in addition to any other rights or remedies it may have hereunder, to require
Tenant thereafter to pay Minimum Rent in quarterly installments in advance.
4. RESERVE FOR RE-LEASING AND SECURITY DEPOSIT:
(a) Tenant shall pay to Landlord a monthly amount upon the first
anniversary of the Commencement Date and continuing upon the first day of each
calendar month thereafter, an amount which with accrued interest shall be
sufficient to create the Re-leasing Reserve at the end of the lease term. The
monthly payments shall be deposited into a separate federally insured interest
bearing trust account or accounts. Such accounts shall remain Tenant's funds
subject to Landlord's rights under this paragraph 4.
(b) The Re-leasing Reserve shall be equal to the sum of the following:
1. Twelve monthly payments due under the Note payable to
Tenant (whether or not the Note shall have been prepaid.)
2. Real property taxes, personal property taxes, and any
assessments payable for the 12-month period commencing at the expiration of the
lease term ('Reserve Term").
3. Insurance premiums for fire and extended coverage and
public liability insurance payable for the Reserve Term.
4. Estimated costs of maintenance and repair of the Premises
during the Reserve Term.
(c) Landlord may pay from the Re-leasing Reserve after termination of
this lease all of the costs and expenses included in the Releasing Reserve until
the Re-leasing Reserve is fully expended or eighty-five (85) percent of the
Tenant's Leasable Area has been re-leased. Landlord shall deliver to Tenant a
monthly accounting of all amounts paid from the Re-leasing Reserve. Any balance
remaining shall be returned to Tenant. Said payments of costs may extend for
more than one (1) year following the expiration of this lease, but shall not
include any costs or expenses payable by new tenants in the Premises.
(d) This paragraph sets forth the calculation of the monthly amount
paid by Tenant to Landlord to create the Re-leasing Reserve and Security Deposit
defined above. The monthly payment shall be determined by Landlord as provided
herein during the first full calendar month of the term, and then recalculated
every twelve (12) months thereafter throughout the term of this Lease. Upon
Landlord's determination of the monthly amount, Landlord shall promptly notify
Tenant, who shall commence payment of said monthly amount beginning with the
first day of the immediately following calendar month.
4
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The Re-leasing Reserve ("RLR") amount at the end of the
initial lease term shall be:
LP + (OM x (1 + C/100) n) = RLR
Where LP is the total of the monthly loan payments under the note payable to
Tenant during the previous twelve (12) months, OM is the total of average annual
operation and maintenance costs as defined in paragraphs 4(b)2 through 4(b)4
based on known and estimated costs for the previous twelve months, C is the
percentage change in the Consumer Price Index For All Urban Consumers, San
Francisco-Oakland Area-San Jose (1982-1984 = 100) ("Index") during the last
twelve months, and N is the number of months remaining until expiration of the
initial term of this Lease divided by twelve.
The payment (MPRLR) into the reserve shall be:
(RLR - (CB x (1 + 1/100) n) 100 = MPRLR
------------------------
((1 + 1/100 ) n -1) x 12
where I is the average annual percentage interest rate earned on the Re-leasing
Reserve in all accounts during the previous twelve months, CB is the current
balance including accrued interest in the Re-leasing Reserve account, and the
other figures are as defined in paragraph (2) above. For the first calculation,
the parties agree that I shall be equal to the three-month Treasury Bill rate
(10) days prior to the Commencement Date.
Notwithstanding paragraphs (b) through (d), MPRLR shall not be
less than zero and shall be rounded up to the nearest whole dollar.
For example purposes only, assume CB is $50,000, LP is
$228,000, OM is $80,000, C is 5%, N is 8 and I is 7%. RLR is $346,196. MPRLR
rounded up to the nearest whole dollar is $2,115.00.
(e) The Re-leasing Reserve shall also constitute a Security Deposit for
the payment of all amounts payable by Tenant to Landlord hereunder. If Tenant
shall fail to pay any sum due to Landlord, Landlord may, but shall not be
required to, pay such amount from the Re-leasing Reserve. Tenant shall promptly
repay to Landlord for deposit into the Re-leasing Reserve any such amount paid
to Landlord.
5. COMMON AREAS AND LANDLORD'S COST OF MAINTENANCE:
(a) Areas within the outer property lines of the demised Premises,
exclusive of the interior building areas which are exclusively leased to Tenant,
and including such other areas that are the responsibility of Landlord to
maintain as required by the City of San Rafael, shall be known as "Common
Areas". The Common Areas shall be available for the use of by Landlord, its
employees, and invitees. Notwithstanding any other provision in this Lease,
Landlord shall have the right from time to time to make changes in additions to,
and deletions from the Common Areas, and to alter the purposes to which any of
them may be devoted, all without consent from Tenant, provided any such change,
addition, deletion or alteration of purpose would not materially and adversely
affect Tenant's continued ability to operate its business from the Premises in
accordance with its rights
5
<PAGE>
under this Lease (except for temporary disruption to Tenant's business caused by
construction activity). The use of the Common Areas shall at all times be
subject to such reasonable rules and regulations as Landlord may establish in
accordance with paragraph 15 below.
(b) Beginning concurrently with the date of commencement of Tenant's
obligation to pay Minimum Rent, Tenant shall pay the total cost of maintaining
the Common Areas and all portions of the Building which Landlord is required to
maintain in accordance with paragraph 9. For purposes of this paragraph 5,
maintenance costs (collectively "Common Area Charges") shall include all
reasonable general maintenance, upkeep, lighting, cleaning, repairs to and
replacements of improvements in the Common Areas, including, but not limited to,
operation, maintenance and repair of the underground utility systems, roof,
canopies, awnings, and building exterior painting and maintenance, building roof
repairs, fire sprinkler maintenance and inspection, repairs to the electrical
system, pavement repairs and striping, central heating, ventilation and air
conditioning (HVAC) maintenance, planting and landscaping, parking lot striping,
pavement repairs, sealing and replacement, lighting repairs and rubbish removal,
security services and police protection, including traffic control, if
necessary, public liability and property damage insurance premiums for the
Building, improvements required by law for the operation of the Building,
insurance premiums as set forth in paragraph 26 below, personal property taxes,
depreciation (if owned) or rental payments (if rented) on maintenance and
operating machinery and equipment, and a Management Fee to be paid to Landlord
to compensate it for the supervision of such maintenance, billing and collection
of Tenant's charges. Landlord's Management Fee shall be $958 per month. Such
Management Fee shall be increased in the same manner as the Land Rent as
provided in paragraph 3(b) except that the adjustment shall be made annually
commencing with the thirteenth month of the lease term. Expenditures for any of
the foregoing which are of a capital nature, as determined in accordance with
generally accepted accounting principles, such as but not limited to major
parking lot rehabilitation or replacement, shall be prorated over the useful
life of the improvement or facility so replaced, and there shall be included in
Common Area Charges only that pro rata portion of such expenditure as is
properly allocable to the lease term. Tenant shall pay Landlord the sum of $222
per month, increased annually in the same manner as Landlord's management fee,
to establish a maintenance reserve. Expenditures of a capital nature shall first
be paid from the maintenance reserve and only Tenant's pro rata share of the
excess shall be included in Tenant's Common Area charges. Any Common Area
Charges paid by Tenant which are subsequently reimbursed to Landlord by
insurance or condemnation proceeds shall be reimbursed to Tenant within thirty
(30) days following Landlord's receipt of such proceeds. Any Common Area charges
which relate to offsite maintenance, such as expenses relating to the adjacent
pond in the open space area, shall be prorated between Landlord's Retail Center
and the Premises on the basis of the rentable square footage contained in each
parcel. Landlord agrees that the manner and method of operation, maintenance,
upkeep and repair of the Building and Common Areas shall be in a first class
manner consistent with other first class office buildings located in Marin
County. All expenses shall be characterized and accounted for in accordance with
generally accepted accounting principles. All reasonable costs incurred by
Landlord in good faith shall be conclusive and finally binding upon Tenant.
(c) Notwithstanding any contrary provisions of the preceding paragraph,
the following costs and expenses are to be excluded from Operating Expenses:
1) Repairs of capital nature occasioned by fire, earthquake.
windstorm, or other casualty;
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2) Leasing commissions, accountants' or attorneys' fees and
other costs and expenses incurred in connection with proposals and negotiations
to lease space in the Building or legal fees or costs in connection with any
particular dispute or litigation with a tenant in the Building;
3) Fees paid to Landlord or to subsidiaries or affiliates of
Landlord for services for the Building to the extent the same exceeds the cost
of such services if rendered by unaffiliated third parties on a competitive
basis;
4) Landlord's general corporate overhead and general
administrative expenses;
5) Rentals and other related expenses incurred in the capital
leasing of air conditioning systems, elevators or other Building equipment
ordinarily considered to be of a capital nature, where such capital leasing is
in lieu of other forms of financing the acquisitions of such systems, elevators
or equipment;
6) Advertising and promotional expenditures;
7) Penalties or fines assessed against Landlord or the
Building for violations of any governmental order, law, rule or regulation
applicable thereto, not caused by Tenant;
8) Costs of correcting material construction defects in the
Building.
Tenant's obligation for Common Area Charges shall be
determined and billed monthly by Landlord and shall be payable by Tenant within
ten (10) days from the receipt of the bill.
6. TAXES:
Tenant shall pay at the times and in the manner set forth below, all
real estate taxes, general and special assessments, license fees, levies,
charges, expenses, impositions and Environmental Surcharges, as more fully
described below, including any real estate tax consultant expense incurred for
the purpose of maintaining equitable tax assessments on the Building so long as
the engagement of such consultant, and the consultant's fee, have been approved
by Tenant, payable with respect to the Premises and the Common Areas as follows:
(a) "Real estate taxes, general and special assessments, license fees,
charges, expenses, impositions" shall mean such taxes, assessments, levies and
charges levied, assessed or imposed:
(i) upon or with respect to, or which shall be or may become
liens upon the Premises, the Building, or any portion of them or any interest of
Landlord in them or under this Lease specifically excluding only payments due
for the Smith Ranch subdivision improvement bonds now a lien upon the Premises:
(ii) upon or against, or which shall be measured by, or shall
be or may because liens upon, any rents or rent income, as such, payable to or
on behalf of Landlord, in connection with the Premises or any portion of them or
any interest of Landlord in them; or
(iii) upon or with respect to the ownership, possession,
leasing, operation. management, maintenance, alteration, repair, rebuilding, use
or occupancy by Tenant of the
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Premises or any portion of them or any building or improvement of which they are
a part; or
(iv) upon this transaction or any document to which Tenant is
a party creating or transferring an interest or any estate in the Premises; or
(v) upon or against Landlord or any interest of Landlord in
the Premises in any manner and for any reason whether similar or dissimilar to
the foregoing; under or by virtue of any present or future law, ordinance,
regulation or other requirement of any governmental or quasi-governmental
authority, regardless of whether now customary or within the contemplation of
the parties hereto and regardless of whether resulting from increased rate
and/or valuation, or whether extraordinary or ordinary, general or special,
unforeseen or foreseen, or similar or dissimilar to any of the foregoing.
(b) "Environmental Surcharge" shall mean and include any and all
expenses, taxes, charges or penalties imposed by the Federal Department of
Energy, Federal Environmental Protection Agency, The Federal Clean Air Act, or
any regulations promulgated thereunder, or any other local, state or federal
governmental agency or entity now or hereafter vested with the power to impose
taxes. assessments, or other types of surcharges as a means of controlling or
abating environmental pollution or the use of refuse services, energy or water
in regard to the use, operation or occupancy of the Building, excluding any
amounts attributable to conditions caused by Landlord or its agents or which
predate the Delivery Date.
(c) All of the items set forth in subparagraphs (a) and (b) above are
sometimes collectively referred to in this Lease as "taxes."
(d) It is the intention of the parties that insofar as it may lawfully
be done, the provisions of this paragraph should be construed to provide that
the amount of rent reserved to Landlord under this Lease shall be net of all
taxes charges to Landlord, except such non-real estate taxes as Landlord may
from time to time be required to pay on such rent in common with other ordinary
income received by Landlord in the regular course of its business. In the event
it shall be unlawful for Tenant to reimburse Landlord for such taxes, then the
Minimum Rent payable hereunder shall be increased pro rata to net Landlord the
same amount that would have been payable to Landlord prior to the imposition of
any such taxes.
(f) Beginning at the commencement of the term of this Lease, Tenant
shall pay to Landlord taxes not less than twenty-one (21) days prior to the date
when such taxes become delinquent. Landlord shall submit to Tenant a bill for
such taxes, together with true copies of the tax bill at least thirty (30) days
prior to such payment being due to Landlord. If the law expressly permits the
payment of any or all of the above items in installments (whether or not
interest accrues on the unpaid balance) Tenant may, at Tenant's election,
utilize the permitted installment method, but shall pay each installment with
interest before delinquency.
(g) Landlord shall advise Tenant promptly of all notices pertaining to
taxes. Notwithstanding anything to the contrary in this Lease, Tenant shall have
the right to contest in good faith the imposition of any tax, a portion of which
is to be paid by Tenant, provided that:
(i) Tenant shall bear the responsibility for timely protests,
legal actions, etc., as may be required for an effective protest:
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(ii) If Landlord has paid such tax, Tenant shall not withhold
its payment to Landlord of such tax; and
(iii) Tenant shall indemnify Landlord against any loss, cost,
damage or expense which may arise from such contest by indemnity in form and
content satisfactory to Landlord
(iv) Tenant shall pay, or cause to be paid, prior to
delinquency, directly to the taxing authority, any and all taxes levied,
assessed or which become payable during the lease term upon Tenant's leasehold
improvements, equipment, furniture, fixtures and other personal property located
in the Premises.
7. UTILITIES:
(a) From the commencement of the term of this Lease, and throughout the
term of this Lease, Tenant shall pay for all public and other utilities and
related services rendered or furnished to the Premises, including, but not
limited to, water, hot water, gas, electricity, telephone, heat, light, sewer,
refuse or garbage collection or disposal, and related deposits.
(b) Tenant understands that the Marin Municipal Water District ("MMWD")
which supplies water to the Building may limit the amount of water available.
The allocation based on estimates by MMWD, shall be 2.08 acre feet per year for
potable water and 1.1 acre feet per year for reclaimed water used for
landscaping subject to such changes in allocation during the term of the Lease
as the MMWD may make. If tenant's usage exceeds such allocation, tenant shall be
responsible to reimburse Landlord for all penalties or surcharges which may be
imposed by the MMWD on account of such excess use. If necessary to protect the
water allocation available to the Building, Landlord shall have the right to
terminate water service after Tenant has used the full amount available to it
for the billing or other measurement period established by the MMWD. Such
termination of service shall not relieve tenant of any of its obligations under
this lease. Landlord Agrees that such right will not be exercisable unless
Tenant has actual notice from Landlord of the amount of the current allocation,
of the magnitude of Tenant's usage, and the fact that failure by Tenant to
adhere to the allocation level would threaten the building's water allocation.
(c) Landlord shall maintain the necessary mains, conduits, wires and
cables to bring utilities to the Premises and the cost of such maintenance shall
be included as part of Common Area Charges under paragraph 6 above.
(d) Landlord shall not be liable in damages, consequential or
otherwise, nor shall there be any rent abatement, arising out of any
interruption whatsoever in utility services which is due to causes beyond
Landlord's reasonable control, including, but not limited to fire, accident,
strike, governmental authority, acts of God, or other causes beyond the
reasonable control of Landlord or any temporary interruption in such service
which is necessary to the making of alterations, repairs, or improvements to the
Building or any part of it.
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8. CONSTRUCTION:
(a) The work for construction of the Premises is set forth in the
Leasehold Improvements Agreement (Exhibit "D"). Landlord shall have the sole
responsibility for planning and executing Landlord's Work included in the Shell
Plans and Specifications described in the Leasehold Improvements Agreement.
Tenant shall prepare plans and specifications for Tenant Improvements and shall
construct said improvements as set forth in the provisions of the Leasehold
Improvements Agreement. Tenant is granted a Tenant Improvement Allance in an
amount and subject to provisions set forth in the Leasehold Improvements
Agreement.
(b) All construction work required or permitted by this Lease, whether
by Landlord or by Tenant, shall be done in a good and workmanlike manner, and in
compliance with all applicable laws and all lawful ordinance, regulations and
orders of governmental authority and insurers of the Premises. Either party may
inspect the work of the other at reasonable times and shall promptly give notice
to the other of observed defects.
(c) Tenant's original installation of equipment and furnishings and all
alterations and additions at any time thereafter undertaken by Tenant in
accordance with Paragraph 11 below shalI be performed by licensed contractors
approved by Landlord, in such a manner as to avoid any labor dispute which
causes or is likely to cause stoppage or impairment of work, deliveries or any
other services to the Building or any occupant thereof. In the event there shall
be any such stoppage or impairment which is caused by any such labor dispute or
potential labor dispute, Tenant shall immediately undertake such action as may
be necessary to eliminate such dispute or potential dispute, including, without
limitation, (i) removing all disputants from the job site until such time as the
labor dispute no longer exists, (ii) seeking an injunction in the event of a
breach of contract between Tenant and Tenant's contractor, and (iii) filing
appropriate unfair labor practice charges in the event of a union jurisdictional
dispute. Any work to be performed before Landlord's Work is finished shall be
coordinated with Landlord's Work.
Before starting any work, Tenant shall (i) obtain all required
licenses and permits; (ii) deliver to Landlord a statement of the names of all
contractors and subcontractors and the estimated cost of all labor and material
to be furnished by them; (iii) cause Tenant's contractors to carry workmen's
compensation insurance covering all the contractors' and subcontractors'
employees, and public liability insurance with liability limits of the least
$500,000-$1,000,000, and property damage insurance with limits of $100,000, both
general and vehicular (all such insurance to be written by companies licensed to
do business in the State of California, and insuring Landlord and Tenant as well
as the contractors); and (iv) deliver to Landlord certificates of all such
insurance, providing that such insurance may not be canceled without thirty (30)
days prior written notice to Landlord. Landlord shall have the right from time
to time during the lease term to increase the minimum liability limits specified
above, to meet changed circumstances as described in paragraph 27 below. At all
times Tenant shall keep the Premises free from and clear of mechanics' liens.
9. REPAIRS:
Landlord shall maintain all of the demised Premises, excluding the
Building, and shall maintain the roof, exterior structural walls, foundation as
to load bearing integrity, fire sprinklers, electrical panels, and HVAC system.
All of Landlord's costs of maintenance shall be subject to reimbursement
pursuant to paragraph 5 hereof.
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Tenant shall, at its sole cost, keep and maintain (including
replacements if necessary) the Building, and every part thereof (except as noted
in the preceding paragraph) and all appurtenances in clean, good and sanitary
order, condition and repair, and Tenant expressly waives any and all rights it
might otherwise have under the law to make repairs or replacements at the
expense of the Landlord. Tenant shall keep its sewers and drains (and use the
same only for designated purposes) open and clear and shall keep the sidewalks
and Common Areas adjacent to the Premises clean and free of all debris. Tenant
agrees that it will paint, varnish, wallpaper, or otherwise redecorate or
renovate the interior of the Premises and Tenant's trade fixtures when necessary
to maintain the Premises in a first-class condition. Landlord for the benefit of
Tenant will enforce all rights to repair or replacement of defective work under
contracts for the construction of the Building or Tenant's Improvements. On the
last day of the term, or at any sooner termination of this Lease, Tenant shall
also surrender to Landlord the Premises in good and sanitary condition and
repair, but with reasonable use, wear and tear, or damage by fire, act of God or
by the elements excepted; and Tenant also agrees to remove all of its signs and
trade fixtures which Tenant has the right to remove from the Premises, restoring
any damage caused by such removal. Repairs to the premises required to be made
by Tenant under the provisions of this lease must be completed whether or not
they are due to either conditions existing upon the commencement of the lease,
or use during the term of the lease.
During the term of this Lease Landlord shall keep in force
preventative maintenance contracts with qualified contractors covering all
heating and air conditioning equipment and elevator equipment which serves the
Premises.
10. ALTERATIONS:
Tenant may, from time to time, make non-structural alterations and
additions to the interior of the Premises in accordance with plans and
specifications first approved in writing by Landlord which approval shall not be
unreasonably withheld or delayed. Landlord may disapprove such plans if they
will result in unusual expense to re-adapt the Premises to normal office use on
lease termination, unless Tenant agrees to restore the Premises to its original
configuration prior to lease termination. All such changes shall become at once
part of the Premises and belong to Landlord. except for trade fixtures, which
may be removed by Tenant, upon termination or expiration of this Lease term.
Landlord can elect within thirty (30) days before expiration of the term, or
within five (5) days after expiration of the term, to require Tenant to remove
any alterations made by Tenant where Landlord's written approval was conditioned
upon and reserved such right. If Landlord so elects, Tenant at its sole cost
shall restore the premises to the condition of the premises prior the
installation of such alterations designated by Landlord at its election, before
the last day of the term, or within thirty (30) days after notice of the
election is given, whichever is later. Tenant shall have no right to remove any
fighting fixtures or any portion of the HVAC system or electrical system whether
or not such equipment would otherwise be a trade fixture of Tenant.
If Tenant makes any alterations to the premises as provided in this
paragraph, the alteration shall not be commenced until three (3) working days
after Landlord has received notice from Tenant stating the date the installation
of the alterations is to commence so that Landlord can post and record an
appropriate Notice of Non-Responsibility.
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11. SIGNS AND DECORATIONS:
Tenant shall not place or permit to be placed, any sign, marquee,
awning, decoration, window covering or other attachment on or to the roof,
windows (inside or outside), doors (inside or outside), visible portions of
inside walls or exterior walls of the Premises or at any other location in or
adjacent to the Building without the prior written consent of Landlord, which
consent shall not be unreasonably withheld or delayed. Landlord may, without
liability to Tenant, enter upon the Premises and remove any such sign, marquee,
awning, decoration, window covering or attachment affixed in violation of this
paragraph, and Tenant agrees to pay the cost of any such removal. Tenant shall
not exhibit or affix flags, pennants, banners or similar items on or to the
exterior of the Premises or the building of which the Premises are a part. Also,
no advertising medium shall be utilized by Tenant which can be heard or
experienced outside the Premises, including without limitation, flashing lights,
searchlights, loudspeakers, phonographs, radios or television.
12. USE:
Tenant agrees to use and occupy the Premises continuously during the
term of this Lease for General office use (including the use of computers,
printers, copiers, modems and similar equipment and for shipping and receiving
of supplies, materials and mail which is not inconsistent with such office use),
food service for Tenant's employees and business guests, and not for any other
purpose.
13. PARKING:
There is a cross easement between the Premises and the adjoining Retail
Center for ingress and egress and for parking in the areas shown in Exhibit "B."
Tenant shall not permit its employees to park in the areas designated as visitor
or short-term parking in Exhibit "B." Landlord shall have the right to establish
reasonable rules governing the use of the visitor or short-term parking areas
including limitations on the duration of parking privileges.
14. RULES AND REGULATIONS:
Tenant and Tenant's employees and invitees shall faithfully observe and
comply with any reasonable rules and regulations governing the Building as may
from time to time be established by Landlord.
15. COMPLIANCE WITH LAW:
Except as otherwise provided in this Lease, Tenant, shall, at Tenant's
sole cost and expense, fully, diligently and in a timely manner, comply with all
"Applicable Law," which term is used in this Lease to include all laws, rules,
regulations, ordinances, directives, covenants, easements and restrictions or
record, permits, the requirements of any applicable fire insurance underwriting
or rating bureau, and the reasonable recommendations of Landlord's engineers
and/or consultants, relating in any manner to the Premises (including but not
limited to matters pertaining to (i) industrial hygiene, (ii) environmental
conditions on, in, under or about the Premises, including soil and groundwater
conditions, (iii) the use, generation, manufacture, production, installation,
maintenance, removal, transportation, storage, spill or release of any Hazardous
Substance or storage tank), and (iv) traffic, circulation or parking of motor
vehicles of Tenant, its employees and invitees now in effect
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or which may hereafter come into effect, and whether or not reflecting a change
in policy from any previously existing policy. Tenant shall, within five (5)
days after receipt of Landlord's written request, provide Landlord with copies
of all documents and information, including, but not limited to, permits,
registrations, manifests, applications, reports and certificates, evidencing
lessee's compliance with any Applicable Law specified by Landlord, and shall
immediately upon receipt, notify Landlord in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure by Tenant or the
Premises to comply with any Applicable Law.
16. PROHIBITED USES:
(a) No use shall be made or permitted to be made of the Premises, or
acts done, or materials stored or used in, which would increase the existing
rate of insurance upon the building in which the Premises are located over the
standard rate of insurance prevailing in the area of the Building, or cause a
cancellation of any insurance policy covering all or part of such building, nor
shall Tenant sell, or permit to be kept, used, or sold in or about the Premises,
any article which may be prohibited by the form of fire insurance policy
provided in paragraph 29(g) below, as it may provide from time to time. Tenant
shall, at its sole cost and expense, comply with any and all requirements
pertaining to the Premises by any insurance organization or company necessary
for the maintenance of reasonable fire and public liability insurance,
(b) From and after the date of commencement of the lease term, Tenant
shall keep the Premises, and every part thereof, in a clean and wholesome
condition, free from any objectionable noise, odors or nuisances, and shall
comply with all health, safety and police regulations in all respects.
17. HAZARDOUS SUBSTANCES:
A. Reportable Uses Require Consent. The term "Hazardous Substance' as used in
this lease shall mean any product, substance, chemical, material or waste whose
presence, nature, quantity and/or intensity of existence, use, manufacture,
disposal, transportation, spill, release or effect, either by itself or in
combination with other materials expected to be on the Premises, which is
either: (i) potentially injurious to the public health, safety or welfare, the
environment or the Premises, (ii) regulated or monitored by any governmental
authority, or (iii) a basis for liability of Landlord to any governmental agency
or third party under any applicable statute or common law theory. Hazardous
Substance shall include, but not be limited to, hydrocarbons, petroleum,
gasoline, crude oil or any products, by-products or fractions thereof. Tenant
shall not engage in any activity in, on or about the Premises which constitutes
a Reportable Use (as hereinafter defined) of Hazardous Substances without the
express prior written consent of Landlord and compliance in a timely manner (at
Tenant's sole cost and expense with all Applicable Law (as defined in paragraph
13. "Reportable Use" shall mean (i) the installation or use of any above or
below ground storage tank, (ii) the generation, possession, storage, use,
transportation, or deposal of a Hazardous Substance that requires a permit from,
or with respect to which a report, notice, registration or business plan is
required to be filed with, any governmental authority. Reportable Use shall also
include Tenant's being responsible for the presence in, on or about the Premises
of a Hazardous Substance with respect to which any Applicable Law requires that
a notice be given to persons entering or occupying the Premises or neighboring
properties. Notwithstanding the foregoing, Tenant may, without Landlord's prior
consent, but in compliance with all Applicable Law, use any ordinary and
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customary materials reasonably required to be used by Tenant in the normal
course of Tenant's business permitted on the Premises, so long as such use is
not a Reportable Use and does not expose the Premises or neighboring properties
to any meaningful risk of contamination or damage or expose Landlord to any
liability therefor. In addition, Landlord may (but without any obligation to do
so) condition its consent to the use or presence of any Hazardous Substance,
activity or storage tank by Tenant upon Tenant's giving Landlord such additional
assurances as Landlord, in its reasonable discretion, deems necessary to protect
itself, the public, the Premises and the environment against damage,
contamination or injury and/or liability therefrom or therefore, including, but
not limited to, the installation (and removal on or before Lease expiration or
earlier termination) of reasonably necessary protective modifications to the
Premises (such as concrete encasement) and/or the deposit of an additional
Security Deposit under paragraph 4 hereof.
(b) Duty to Inform Landlord. If Tenant knows, or has reasonable cause
to believe, that a Hazardous Substance, or a condition involving or resulting
from same, which is a Reportable Use has come to be located in, on, under or
about the Premises, other than as previously consented to by Landlord, Tenant
shall immediately give written notice of such fact to Landlord. Tenant shall
also immediately give Landlord a copy of any statement, report, notice,
registration, application, permit, business plan, license, claim, action or
proceeding given to, or received from, any governmental authority or private
party, or persons entering or occupying the Premises, concerning the presence,
spill, release, discharge of, or exposure to, any Hazardous Substance or
contamination in, on, or about the Premises, including but not limited to all
such documents as may be involved in any Reportable Uses involving the Premises.
(c) Indemnification. Tenant shall indemnify, protect, defend and hold
Landlord, its agents, employees, and the Premises, harmless from and against any
and all loss of rents and/or damages, liabilities, judgements, costs, claims,
liens, expenses, penalties, permits and reasonable attorney's and consultant's
fees arising out of or involving any Hazardous Substance or storage tank brought
onto the Premises by or for Tenant or under Tenant's control. Tenant's
obligations under this Paragraph shall include, but not be limited to, the
effects of any contamination or injury to person, property of the environment
created or suffered by Tenant, and the cost of investigation (including
consultant's and attorney's fees and testing), removal, remediation, restoration
and/or abatement thereof, or of any contamination therein involved, and shall
survive the expiration or earlier termination of this Lease. No termination,
cancellation or release agreement entered into by Landlord and Tenant shall
release Tenant from its obligations under this Lease with respect to Hazardous
Substances or storage tanks, unless specifically so agreed by Landlord in
writing at the time of such agreement.
Landlord shall indemnify, protect, defend and hold Tenant harmless with
respect to any Hazardous Substance brought upon the Premises by Landlord or its
Agents or existing upon the Delivery Date to the same extent and in the same
manner.
18. VOLUNTARY SURRENDER:
The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work a merger, but shall, at the option of
Landlord, either (i) terminate all or any existing subleases or subtenancies, or
(ii) operate as an assignment to Landlord of any or all such subleases or
subtenancies.
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19. NOTICES:
All notices to be given to Tenant may be given in writing personally or
by depositing the same in the United States mail, postage prepaid, and addressed
to Tenant at Tenant's address given on page 1 of this Lease, or at such other
address as Tenant may indicate from time to time during the term of this Lease.
Notice by Tenant to Landlord shall be in writing and deposited in the
United States mail, postage prepaid, addressed to Landlord at the address
specified on Page 1 of this lease, or such other address as Landlord may
indicate from time to time during the term of this lease.
20. DELIVERY OF POSSESSION: HOLDING OVER:
(a) Immediately upon expiration or sooner termination of the lease
term, Tenant shall vacate and deliver to Landlord possession of the Premises,
and except as provided in the next sentence, all Tenant improvements and
alterations, broom clean, in good condition and in substantially the same
condition as they were in the commencement of this Lease, or when installed, if
later, normal wear and tear excepted. Prior to such delivery, Tenant shall
remove all personal property and alterations that Tenant has the right to remove
or is obligated to remove under the provisions of Paragraph 11 and shall repair
all damage caused and perform all restoration necessary as a result of the
removal of any alterations or personal property.
(b) If Tenant has vacated the premises Landlord may elect to retain or
dispose of in any manner any alterations or personal property that Tenant does
not remove from the Premises on expiration or sooner termination of the lease
term as allowed or required by this Lease. Title to any such alterations or
personal property that Landlord elects to retain or dispose of after Tenant has
vacated the Premises shall vest in Landlord. Tenant waives all claims against
Landlord for damage or injury to Tenant resulting from Landlord's retention of
any such alteration or personal property and shall indemnify and hold Landlord
harmless from liability for damages and all costs and expenses incurred by
Landlord in defending claims to any such alterations or personal property
asserted by any other person. Tenant shall reimburse Landlord upon demand for
Landlord's reasonable costs of storing, removing, and/or disposing of any such
alterations or personal property.
(c) If Tenant fails to vacate and deliver possession of the Premises on
the expiration or earlier termination of the lease term, as required under
subparagraph (a) above, Tenant shall hold Landlord harmless from all damages
resulting from Tenant's failure to so vacate and deliver possession of the
Premises, including, without limitation, claims made by a succeeding tenant
resulting from Tenant's failure to vacate and deliver possession of the Premises
and any rental loss suffered by Landlord. Tenant understands that the
termination date of this lease was selected to occur prior to expected vacancies
in other buildings in the vicinity and that consequently any delay in vacating
the Premises may substantially adversely affect Landlord's ability to re-lease
the Premises.
(d) If Tenant, with Landlord's consent, remains in possession of the
Premises after expiration of the lease term, such possession by Tenant shall be
deemed to be a month-to-month tenancy terminable on thirty (30) days notice
given at any time by either party. All provisions of this Lease, except those
pertaining to term, and option to extend, if any, shall apply to the
month-to-month tenancy, provided that the Minimum Rent shall be one-hundred
twenty-five percent (125%) of
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the minimum rent payable during the last month of the lease term.
(e) Tenant shall vacate and deliver possession of the Premises free of
all liens, charges, or encumbrances resulting from any act or omission on
Tenant's part and free and clear of all violations thereon placed by any
federal, state, municipal or other agency or authority, and shall indemnify
Landlord against any and all loss, expense, damage, costs, or attorneys' fees
arising out of Tenant's failure to do so.
21. ENTRY BY LANDLORD:
Tenant shall permit Landlord and its agents to enter the Premises at
reasonable times upon reasonable notice for any of the following purposes: to
inspect the same; to maintain the Building to make repairs, alterations or
additions to any portion of the Building; to post notices of non-responsibility
for alterations, additions or repairs undertaken by Tenant; to install a leasing
signs upon the Premises during the final one hundred twenty (120) days of the
lease term; to show the Premises to prospective purchasers or lenders and,
during the final one hundred eighty (180) days of the lease term, to prospective
Tenants: and to install, use and maintain pipes, ducts, conduits, wires and
appurtenant meters and equipment in the Premises. Landlord may exercise such
right of entry without any abatement of rent to Tenant for any loss of occupancy
or quiet enjoyment of the Premises unless Landlord is negligent or acts with
willful disregard of Tenant's business interests when making such entry, or if
the need for such repairs arise from the negligent or willful act of Landlord,
its employees or agents.
22. LANDLORD'S CONVEYANCE:
If during the term of this Lease Landlord, its successors or assigns,
conveys all or part of its interest in the Premises, then from and after the
effective date of the conveyance, Landlord shall be released and discharged from
any and all obligations under this Lease with respect to the interest so
conveyed, except those already accrued. If Landlord conveys, assigns and sells
all its interest in the Premises to a third party, Tenant shall attorn to such
party as if it had been named as Landlord under this Lease,
23. ASSIGNMENT AND SUBLETTING:
Tenant shall not assign this lease or sublet any portion of the
Premises without the prior written consent of Landlord. No such assignment or
subletting shall relieve Tenant of its obligations hereunder. Landlord shall not
unreasonably withhold such consent. In determining whether or not to consent,
Landlord may consider all relevant factors, including but not limited to, the
financial responsibility of the proposed tenant, the nature of the tenant's
business, any modifications to the building which might be required, any
increased burden upon the parking facilities, traffic, water usage, or other
factors which affect Landlord as the owner of the Premises and adjacent
property. Tenant shall reimburse Landlord for all reasonable legal and other
expenses incurred by Landlord in reviewing such requests for consent.
24. SUCCESSORS:
All the terms, covenants and conditions of this Lease shall be binding
upon and inure to the
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benefit of the heirs, executors, administrators, successors and assigns of the
parties hereto, and in the case of Tenant, all amounts due and payable hereunder
shall be the obligation of such heirs, executors, administrators and assigns,
regardless of the time period to which such amounts relate. Nothing in this
paragraph shall be deemed to permit any assignment, subletting, occupancy or use
contrary to the provisions of paragraph 23 above.
25. INDEMNIFICATION AND LIABILITY INSURANCE:
Landlord, its managing agent, and architects shall not be liable to
Tenant, its officers, agents, employees, customers, invitee or third parties for
loss or damage to property, including goods, wares and merchandise, for lost
profits, or for injury or death to persons in, on, or about the Premises, and
Tenant agrees to indemnify and hold Landlord, its managing agent, and architects
harmless from and on account thereof no matter how arising or by whom caused,
except for such loss or damage as may be caused by the negligence or willful act
or omission of Landlord, its agents, architects or employees for which Landlord
shall be liable and for which Landlord shall indemnify Tenant. Tenant
acknowledges that the provisions of Paragraph 37 below require Tenant to pay all
Landlord's, its managing agent's and architect's costs, expenses and fees
resulting from any action associated with such loss, damage, injury or death,
unless caused by Landlord's negligence or willful act.
During the term of this Lease, Tenant shall maintain in full force and
effect with insurance companies with general policy holder's rating of not less
than A and a financial rating of not less than X as rated in the most current
available "Best's" Insurance Reports, licensed to do business in the state in
which the Building is located, comprehensive liability insurance policies
applicable to the Premises and Tenant's activities, including contractual, with
limits of liability per person, per occurrence and for property damage at least
equal to a combined single limit policy of $1,000,000. The minimum limits
specified above are the minimum amounts required by Landlord, and may be revised
by Landlord from time to time, but not more frequently than once each year, when
reasonably necessary to meet changed circumstances, including, without
limitation (i) changes in the purchasing power of the dollar, (ii) changes
indicated by the amount of plaintiffs; verdicts in personal injury actions in
the State of California, or (iii) changes consistent with the standards required
by Landlords of other similar buildings located in the County in which the
Building is located. Such liability insurance shall be primary and not
contributing to any insurance carried by Landlord, and Landlord's insurance (if
any) shall be in excess thereof.
Tenant shall cause Landlord and its managing agent to be named as
additional insured, and certificates evidencing such coverage and providing that
the insurance may not be cancelled without thirty (30) days' prior written
notice to Landlord shall be delivered to Landlord prior to Tenant taking
possession of the Premises or entering to commence fixturization.
26. INSURANCE PREMIUMS:
Tenant shall pay to Landlord as part of Common Area Charges provided
for in Paragraph 6 above, all premiums paid by Landlord for the property damage
insurance policy described in Paragraph 28(g) below, or an appropriate pro rata
share of the premiums if the policy insures more than the Premises. Provided,
however, that Tenant's liability for the payment of premiums for earthquake
insurance shall not exceed $10,000 per annum increased in the same manner as the
Management Fee as provided in paragraph 5(b), and the earthquake insurance must
provide for a deductable of five percent (5%) or less of the damage.
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27. SUBROGATION WAIVER:
With respect to all policies of insurance which are required by the
provisions of this Lease Landlord and Tenant each agree to obtain a clause or
endorsement denying to the insurer rights of subrogation against the other party
to the extent such rights have been waived by the insured under the provisions
of this Lease.
Each party, notwithstanding any provisions of this Lease to the
contrary, waives any right of recovery against the other for injury or loss due
to hazards covered by insurance to the extent of the insurance coverage required
by this Lease.
28. DAMAGE AND DESTRUCTION:
(a) If the Building is destroyed or materially damaged (i.e., to the
extent of five percent (5%) or more of the then full replacement cost) from a
cause not insured against under Landlord's casualty insurance policy, with
extended coverage, Landlord shall have the right to terminate this Lease by
giving written notice of termination to Tenant within thirty (30) days after the
date of such damage or destruction. If the Lease is not so terminated, then
Landlord shall diligently proceed to repair and restore the Building.
(b) If the Building is materially damaged or destroyed from a cause
covered by Landlord's casualty insurance referred to above, and they may be
repaired or restored within one hundred fifty (150) days after commencement of
repair or restoration, then Landlord shall diligently proceed to repair and
restore the Premises. If Landlord determines that the Premises cannot be
repaired or restored within such a period. then Landlord shall have the right to
terminate this Lease by written notice to Tenant given within sixty (60) days
after the date of such damage or destructions, and Tenant's obligation to pay
rent and other charges under this Lease shall terminate as of the date of the
damage or destruction, or the date Tenant ceases to do business at the Premises,
whichever date is later.
(c) If the Building is damaged to the extent of fifty percent (50%) or
more of its replacement cost, Landlord may elect to terminate this Lease by
written notice to Tenant given within sixty (60) days after the date of such
destruction.
(d) If in any case which is the subject of this paragraph 29, the
Premises or any portion thereof is rendered unfit for use and occupancy and this
Lease is not terminated as provided above, a just proportion of the Minimum Rent
in light of the nature and extent of the damage shall be abated until the
Premises, excluding any fixtures or items installed or paid for by Tenant which
Tenant is entitled or required to remove under this Lease, have been restored by
Landlord as provided above.
(e) Except as expressly provided otherwise in this Lease, damage to or
destruction of the Premises shall not terminate this Lease or result in any
abatement or rentals payable hereunder. Tenant waives any right of offset
against its rental obligations provided by any statute or rule of law in
connection with Landlord's duties of repair and restoration under the provisions
of this Lease.
(f) Landlord's duties of repair and restoration under the provisions of
this Lease shall extend only to those portions of the Premises insured under
Landlord's casualty insurance with
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extended coverage endorsements and Landlord shall not be responsible for any
loss, damage, or destruction to Tenant's to fixtures, inventory or other
Tenant-owned property.
(g) Landlord shall obtain and maintain in force a standard fire and
extended risk insurance policy with Landlord as insured, insuring the Premises
and building of which it is a part in amounts and in form satisfactory to
Landlord, which may also include, at Landlord's option, rental continuation for
a period of twelve (12) months, earthquake (subject to the provisions of
paragraph 26), flood, demolition, increased cost of construction due to changes
in building codes, and such other coverage as Landlord deems prudent or as may
be required under the terms of any mortgage or deed of trust at any time
encumbering the Building of which the Premises form a part. Any proceeds of such
insurance shall be payable to Landlord and used for repair and reconstruction of
the improvements, if Landlord is obligated under this Lease to repair or
reconstruct, subject to any requirements as to the disposition of the proceeds
that may be imposed by the beneficiary under any mortgage or deed of trust at
any time encumbering the Building.
(h) Tenant shall obtain and maintain in force a standard fire and
extended coverage insurance policy on all of Tenant's personal property, in an
amount equal to their full replacement value.
29. DEFAULT:
(a) The following events shall constitute events of default by Tenant:
(i) Abandonment of the Premises; or dispossession of Premises
by power of law or otherwise;
(ii) failure to pay any installment of Minimum Rent, or
Additional Rent on the date when any such payment is due, with such a failure
continuing for a period of ten (10) days after written notice of such
delinquency, except that in the case of Minimum Rent, no written notice of
delinquency shall be required:
(iii) assignment or subletting in violation of the provisions
of paragraph 23;
(iv) failure by Tenant to perform any other covenants,
agreements or obligations required of Tenant under this Lease with such a
failure continuing for thirty (30) days after written notice of such failure:
provided, however, if the nature of the failure is such that it cannot with the
exercise of reasonable diligence be cured within said thirty (30) day period,
then Tenant shall not be in default hereunder if it shall promptly commence such
cure (in any event within said thirty-day period) and thereafter pursue the same
to completion with diligence and continuity; provided, further, however, if such
failure is of a nature which adversely affects the health and safety of users of
the Building, obstructs or impedes the flow of pedestrian and vehicular traffic
through the Common Areas, or adversely affects the appearance of the Building,
and can with the exercise of reasonable diligence be cured within a shorter
period of time, then the applicable cure period following notice shall be such
shorter period of time. If on three (3) or more occasions during any period of
twelve (12) consecutive months during the lease term Tenant shall fail to
perform any obligation hereunder which adversely affects the health and safety
of the Common Areas, and regardless of whether such prior failures shall have
been cured within the required time period, then, commencing on the fourth such
failure, no prior notice shall be required;
(vi) a general assignment by Tenant for the benefit of
creditors;
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(vii) the filing of a voluntary petition in bankruptcy by
Tenant or the filing of an involuntary petition by Tenant's creditors, with such
a petition remaining undischarged for a period of ninety (90) days;
(viii) the appointment of a receiver to take possession of
substantially all of Tenant's assets or of the Premises, with such a
receivership remaining undissolved for a period of ninety (90) days;
(ix) the attachment, execution or other judicial seizure of
substantially all of Tenant's assets or the Premises, with such an attachment,
execution or other seizure remaining unreleased or undischarged for a period of
ninety (90) days after the levy thereof;
(x) the chronic delinquency by Tenant in the payment of
rentals due hereunder, with "chronic delinquency" meaning the failure by Tenant
to pay any rental by the required due date on seven (7) or more occasions during
any 12-month period.
(b) Upon any of the above events of default or any other breach of this
Lease by, then Landlord, besides other rights or remedies it may have under this
Lease or by law, shall have the right to: (i) immediately terminate this Lease
and Tenant's right to possession of the Premises by giving Tenant written notice
that this Lease is terminated, in which event, upon such termination, Landlord
shall have the right to recover from Tenant the sum of; (A) the worth at the
time of award of the unpaid rent which has been earned at the time of
termination; (B) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that Tenant affirmatively proves
could have been reasonably avoided; (C) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that Tenant affirmatively proves
could be reasonably avoided; (D) any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant's failure to perform
Tenant's obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom; and (E) all such other amounts in addition
to or in lieu of the foregoing as may be permitted from time to time under
applicable law; or (ii) have this Lease continue in effect for so long as
Landlord does not terminate this Lease and Tenant's right to possession of the
Premises, in which event Landlord shall have the right to enforce all of
Landlord's rights and remedies under this Lease, including the right to recover
all rentals payable by Tenant under this Lease as they become due, or (iii)
without terminating this Lease, make such alterations and repairs as may be
necessary in order to relet the Premises, and relet the Premises or any part
thereof for such term or terms (which may be for a term extending beyond the
term of this Lease) and at such rental or rentals and upon such other terms and
conditions as Landlord in its sole discretion may deem advisable. Upon each such
reletting all rent and other sums received by Landlord from such reletting shall
be applied, first, to the payment of any indebtedness other than rentals due
hereunder from Tenant to Landlord: second, to the payment of any costs and
expenses of such reletting, including reasonable brokerage fees and attorney's
fees and of costs of such alterations and repairs; third, to the payment of
rentals due and unpaid hereunder; and the residue, if any, shall be held by
Landlord and applied in payment of future rentals payable by Tenant hereunder as
the as the same may become due and payable hereunder. If the rent and other sums
received from such reletting during any month are less than the rental to be
paid during that month by Tenant hereunder, Tenant shall pay such
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deficiency to Landlord; if such rent and other sums shall be more, Tenant shall
have no right to the excess. Such deficiency shall be calculated and paid
monthly. No re-entry or taking possession of the Premises by Landlord shall be
construed as an election on its part to terminate this Lease unless a written
notice of such intention is given to Tenant or unless the termination thereof is
decreed by a court of competent jurisdiction. Notwithstanding any such reletting
without termination, Landlord may at any time thereafter elect to terminate this
Lease for such previous breach. Should Landlord at any time terminate this Lease
for any breach, in addition to any other remedies it may have, it may recover
from Tenant all damages it may incur by reason of such breach, including the
cost of recovering the Premises and reasonable attorneys' fees, all of which
amounts shall be immediately due and payable from Tenant to Landlord. The
failure or refusal of Landlord to relet the Premises shall not affect Tenant's
liability. At its option, Landlord may request the appointment of a receiver for
Tenant to take possession of the Premises and to exercise all rights of Landlord
herein relating to the taking of possession of and reletting the Premises, and
to apply any rent and other sums collected from the Premises accordingly. The
terms "entry" and "re-entry" are not limited to their technical meanings. For
the purpose of this paragraph: "worth at the time of award" as defined in
Subparagraphs (b) (i) (A) and (B) shall be computed by allowing interest at the
rate of ten percent (10%) per annum, and for Subparagraph (i)(c) shall be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%).
(c) Upon any such event of default or breach, all of Tenant's fixtures,
furniture, equipment, improvements, additions, alterations, and other personal
property shall remain on the Premises and, during the length of such default or
breach, Landlord shall have the right to take the exclusive possession of them
and to use them, rent or charge free, or to remove and store the same in a
public warehouse or elsewhere at the cost of and for the account of Tenant,
until all defaults are cured or, at Landlord's option at any time during the
remaining term of this Lease, to require Tenant to immediately remove the same.
(d) The waiver by Landlord of any breach of any term, covenant or
condition of this Lease shall not be deemed to be a waiver of any other term,
covenant or condition or any subsequent breach of the same or any other term,
covenant, or condition. The subsequent acceptance of rent 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.
30. RIGHT OF LANDLORD 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 cost and
expense and without any abatement of rent. If Tenant fails to pay any sum of
money required to be paid by it hereunder to third parties or fails to perform
any other act on its part to be performed hereunder and such failure continues
for ten (10) days after notice thereof by Landlord, Landlord may, without
waiving or releasing Tenant from any obligations of, make any such payment or
perform any such other act on Tenant's behalf. All sums so paid by Landlord and
all necessary incidental costs, together with interest on all of the foregoing
at the default rate specified in Paragraph 4(c) above from the date of such
payment by Landlord, shall be payable to Landlord on demand.
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31. CONDEMNATION:
(a) If during the lease term, the Premises, or any substantial portion
thereof (i.e., ten percent (10%)) or more of the gross leasable area), are
damaged by action of public or other authority or are taken by eminent domain,
or if Landlord receives compensable damage by reason of anything lawfully done
in pursuance of public or other authority in connection with the Premises, this
Lease shall terminate at Landlord's election, which election may be made whether
or not Landlord's entire interest has been divested. If only a part of the
Premises is taken and the remainder is insufficient for Tenant's purposes or, in
case of such damage or taking, if the time needed to do the construction work
necessary to put the Premises or such remainder in proper condition for use and
occupation is reasonably estimated to exceed six (6) months, or if Landlord does
not commence within sixty (60) days after the damage or the surrender of the
part taken and proceed with reasonable diligence to do such work, Tenant may
terminate this Lease, without penalty, by written notice given to Landlord
within thirty (30) days after the right to terminate arises. If in any such case
the Premises are rendered unfit for use and occupation and the Lease is not so
terminated, a just proportion of the Minimum Rent according to the nature and
extent of the injury shall be abated until the Premises (or in case of a taking
what may remain thereof, excluding any fixtures or items installed or paid for
by Tenant which Tenant is entitled or required to remove by agreement, have been
put by Landlord in proper condition for use and occupation; and, in case of a
taking which permanently reduces the area of the Premises, a just proportion of
the Minimum Rent shall be abated for the remainder of the lease term.
(b) The entire award or compensation in such proceedings, whether for a
total or partial taking or for diminution in the value of the leasehold or for
the fee, shall belong to and be the property of Landlord; provided, however,
that Tenant shall be entitled to recover from the condemnor such compensation as
may be separately awarded by the condemnor to Tenant, or recoverable from the
condemnor by Tenant in its own right, for the taking of trade fixtures and
equipment owned by Tenant (meaning personal property, excluding fixtures,
whether or not attached to the real property, which may be removed without
injury to the Premises) for business goodwill and for Tenant's relocation
expenses. Each party waives any statutory right in conflict with the provisions
of this Paragraph 33, including, without limitations rights under California
Code of Civil Procedure Section 1265.130.
(c) If the Premises or any part of them are taken for temporary use:
(i) this Lease, including Tenants' obligation to pay all
rentals hereunder, shall be and remain in full force and effect, and
(ii) Tenant shall be entitled to receive such portion or
portions of any award made for such use with respect to the period of the taking
which is within the lease term, provided that is such taking remains in force at
the expiration or earlier termination of this Lease, Tenant shall then pay to
Landlord a sum equal to the reasonable cost of performing Tenant's obligations
under Paragraph 10 above with respect to surrender of the Premises and upon such
payment shall be excused from such obligations.
32. OPTION TO RENEW: So long as Tenant shall not be in default at the time of
the exercise of the option, Landlord grants to Tenant the option to renew the
Lease for an additional term of five (5) years commencing upon the day following
the expiration date of the initial term upon the following terms and conditions:
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(a) The option shall be exercised by written notice to Landlord from
Tenant delivered not more than one year prior to the commencement of the renewal
term, and not less than nine months prior to the commencement of the renewal
term. The notice shall be accompanied by Tenant's financial statements for its
most recent fiscal year and any subsequent interim periods for which Tenant has
issued financial statements. If such financial statements indicate that Tenant's
financial condition is not satisfactory to reasonably ensure payment of rent
under the Lease for the option term, Landlord may refuse to honor the exercise
of such option. In the event that the option is not exercised within the time
provided, it shall expire.
(b) If the option is exercised, during the renewal term, the minimum
rent (in lieu of the Note Rent and the Land Rent) shall be equal to ninety-five
percent (95%) of the fair rental value of the premises at the date of the
commencement of the renewal term. In determining the fair rental value, the term
of the Lease, and all the other terms and conditions of the Lease shall be
considered. The fair rental value shall be determined on the basis of the fair
rental value of a rentable square foot of comparable office space in Marin
County. No consideration shall be given to the fact that Tenant shall occupy the
entire building.
Upon the exercise of the option, the parties shall make an
attempt to determine the fair rental value of the premises. In the event that
they are unable to do so within a period of two (2) months from the exercise of
the option, each party shall appoint an appraiser who shall be a licensed
appraiser or a licensed commercial real estate broker doing business in Marin
County, with at least five years experience in commercial leasing of comparable
property in Marin County. The two appraisers shall meet and attempt to determine
the fair rental value of the premises. If they are unable to agree within a
period of thirty (30) days thereafter, the two shall choose a third appraiser
who shall be similarly qualified. The third appraiser shall determine the fair
rental value of the premises and his determination shall be binding upon the
parties. Provided, however, that the fair rental value of the premises shall not
be less than the rental paid during the last lease year of the initial term, nor
less than the fair rental value proposed by the appraiser appointed by Tenant,
and shall not be more than the fair rental value proposed by the appraiser
appointed by Landlord.
If either party shall fail to appoint its appraiser at the
time provided, or if the two appraisers shall fail to appoint the third
appraiser within the time provided, upon application by either party, the
appraisers shall be appointed by the president of the Marin County Board of
Realtors.
Each party shall pay the compensation of its appointed
appraiser and one-half the compensation of the third appraiser.
(c) The rent shall be adjusted annually in accordance with changes in
the Index as described in paragraph 2 commencing one year from the commencement
date of the renewal term using a base Index which shall be the Index last
published prior to the commencement of the renewal term and an adjustment index
which shall be the Index last published prior to the adjustment date.
(d) All the remaining terms and conditions of the Lease shall apply,
including, but not limited to, the provisions for payment of additional rent in
the form of common area charges, taxes, insurance, and maintenance of the
building.
No additions shall be made to the Re-leasing Reserve provided
for herein, but the reserve shall be maintained and shall be available to
Landlord at the expiration of the renewal term.
(e) In the event the option is exercised, Landlord shall use its best
efforts to obtain a new
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loan to be secured by the premises sufficient to repay the balance of Note and
the costs of refinancing. If Landlord is unable to secure a loan providing for
monthly payments of interest and principal sufficient to amortize the principal
over a term of not less than twenty-five (25) years which does not exceed
eighty-five percent (85%) of the net operating income from the building, and due
in not less than seven (7) years from the Commencement Date of the Renewal Term
then as a condition for the renewal of the Lease, Tenant shall be required to
extend the maturity date of the Note for a period of five (5) years from the
date the Note is otherwise due, or in the alternative, cancel the option and
vacate the premises at the end of the then current term. If Tenant proposes to
assign the Note to a third party during the extension period of the Note,
Landlord agrees to terminate its right to offset payments under the Note against
rent due, if financial statements submitted by Tenant indicate that Tenant has
sufficient income to pay the rent under the Lease. Such termination shall be
effective upon assignment of the Note by Tenant. Net operating income means the
Minimum Rent less the expenses of operating the Demised Premises to the extent
not reimbursed by Tenant and specifically excluding any interest or principal
loan payments or depreciation.
In the event that the foregoing option to renew is exercised,
Tenant shall have two additional five-year options to renew upon the same terms
and conditions with the fair rental value of the premises to be determined in
the same manner at the time each option is exercised.
In the event that Tenant fails to exercise an option, all
subsequent options shall terminate.
33. FIRST RIGHT OF NEGOTIATION: In the event that Landlord shall elect to sell
the building during the term of the Lease, Tenant shall have the first right to
negotiate for the purchase upon the following terms and conditions:
Prior to listing the building for sale, and prior to
negotiation with respect to sale to any third party, Landlord shall give written
notice to Tenant that Landlord wishes to sell the building, and shall advise
Tenant of the proposed sale price and other terms and conditions of the sale.
For a period of thirty (30) days thereafter, Landlord and Tenant shall negotiate
in good faith for the purchase and sale of the building. In the event that no
agreement is reached during said time, Landlord may list the building and may
offer the building for sale to third parties without any further obligation to
Tenant except that if Landlord proposes to make sale of the building for a sale
price which is more than ten percent (10%) less than the last price offered to
Tenant, Landlord shall give written notice of such proposed price to Tenant, and
within a period of five (5) working days thereafter, Tenant may elect to
purchase the building at the reduced price and upon the terms and conditions
proposed.
In the event that Landlord receives an unsolicited offer for
purchase of the building which Landlord wishes to accept, Landlord shall give
Tenant written notice of such offer and shall include a copy of the offer in the
notice. Within ten (10) working days following submission of the offer, Tenant
shall have the option to purchase the building from Landlord upon the same terms
and conditions as are offered by such third party.
This provision shall not apply to the sale of an undivided
interest in the property, nor to a dissolution or reorganization of the
partnership so long as the existing partners retain more than a fifty percent
(50%) beneficial interest in the building.
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In the event that the proposed sale provides for a tax
deferred exchange to be made, as a condition for the purchase, Tenant shall be
required to cooperate with Landlord in connection with such exchange.
34. SUBORDINATION:
This lease is and shall be prior to any encumbrance recorded after the
date of this Lease affecting the premises. If, however, a lender requires that
this Lease be subordinate to any such encumbrance, this Lease shall be
subordinate to the encumbrance if Landlord first obtains from the lender a
written statement that provides substantially as follows:
"As long as Tenant performs its obligations under this Lease, no
foreclosure of, deed given in lieu of foreclosure of, or sale under the
encumbrance, and no steps or procedures taken under the encumbrance,
shall affect Tenant's rights under this Lease. Tenant shall attom to
any purchaser at any foreclosure sale, or to any grantee or transferee
designated in any deed in lieu of foreclosure so long as such party
executed a document indicating that it will recognize Tenant's rights
under the Lease, provide quite enjoyment of the Premises to Tenant so
long as Tenant is not in default, and shall perform the obligations of
Landlord hereunder."
Tenant shall execute any written agreement or other documents required
by the lender to accomplish the purpose of this paragraph.
35. LANDLORD DEFAULT; MORTGAGEE PROTECTION:
(a) In the event Landlord shall neglect or fail to perform or observe
any of the terms covenants, or conditions contained in this Lease on it part to
be performed or observed within thirty (30) days after written notice of default
(or if more than thirty (30) days shall be required because of the nature of the
default, if Landlord shall fail to commence within such thirty (30) day period
and thereafter proceed diligently to cure such default after written notice
thereof), then, in that event, Landlord shall be liable to Tenant for any and
all damages sustained by Tenant as a result of Landlord's breach.
(b) If Landlord shall fail to perform any covenant, term or condition
of this Lease on Landlord's part to be performed, and as a consequence of its
default, Tenant shall recover a money judgment against Landlord, such judgment
shall be satisfied solely out of (i) the proceeds of sale received upon
execution of such judgment levied against the right, title and interest of
Landlord in the Building and its interest in the underlying realty; (ii) the
rents or other income from the Building receivable by Landlord; (iii) the
consideration received by landlord from the sale or other disposition of all or
any part of Landlord's right, title and interest in and to said property; and
(iv) any condemnation awards or insurance proceeds. It is expressly understood
and agreed that neither Landlord nor any partner of Landlord shall be personally
liable for any deficiency if the proceeds of the sale or disposition of
Landlord's interest in the Building is insufficient for the payment of any such
judgment, and Tenant shall not institute any further action, suit, or similar
demand against Landlord, or any partner of Landlord, for or on the account of
such deficiency. Nothing contained herein shall limit the personal liability of
Landlord or its partners for acts of gross negligence or for willful acts.
(c) Tenant agrees to give the holder of any mortgage or deed of trust
encumbering the Premises, by registered mail, a copy of any notice of default
served upon Landlord, provided Tenant has previously been notified in writing of
the identity and address of the holder of any such mortgage or deed of trust.
Tenant further agrees that if Landlord has failed to cure any default
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giving rise to such notice within the time period provided for in this Lease,
then the holder of such mortgage or deed of trust shall have an additional
ninety (90) days in which to cure such default or, if such default cannot with
the exercise or reasonable diligence be cured within such time period, then such
additional time as may be necessary (including time to obtain possession of the
Premises by power of sale or judicial foreclosure, if such should be necessary
to effect a cure) if within such ninety (90) days the holder of such mortgage or
deed of trust has commenced and is diligently pursuing the remedies necessary to
cure such default.
36. FINANCIAL AND OFFSET STATEMENTS:
Tenant agrees to furnish to Landlord, upon seven (7) business days
prior written notice, a financial statement including a balance sheet and
statement of income and expense for Tenant's last fiscal year, and its most
recent quarterly and year to date statement, and Tenant shall have the right to
deliver copies of such financial statements to any person from whom Landlord has
accepted a bona fide purchase offer for Landlord's Building, or for the purpose
of obtaining a loan to be secured by Landlord's Building.
Tenant shall at any time, and from time to time, not later than seven
(7) business days following Landlord's written request therefore, execute,
acknowledge, and deliver to Landlord, without charge, a statement in writing, in
a form provided by Landlord, certifying the date of commencement of this Lease,
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 modified and
stating the date of the modifications) and further stating the dates to which
the Minimum Rent and other charges have been paid, and setting forth such other
matters as may reasonably by requested by Landlord.
37. ARBITRATION:
Except as provided in this paragraph, if there shall be any dispute between
Tenant and Landlord with respect to the interpretation of this /ease, or with
respect to any claim of liability to the other party with respect to this lease,
or with respect to any matter arising out of the occupation of the premises by
Tenant, the matter shall be submitted to arbitration under the Commercial rules
of Arbitration of the American Arbitration Association, and the hearing shall be
held at San Rafael, California. In connection with such arbitration, the parties
shall have the right to discovery as set forth in Section 1283.05 of the
California Code of Civil Procedure. This provision for arbitration shall not
apply with respect to any action brought by Landlord for unlawful detainer of
the premises.
INITIALS:
- --------------- --------------- --------------- ---------------
38. ATTORNEY'S FEES:
If Landlord must join in any litigation or arbitration brought by or
against Tenant in order to protect an interest of Landlord, or if Landlord is
joined as a party in any litigation commenced by or against Tenant, Tenant shall
pay all costs, expenses, and attorney's fees incurred by Landlord, its managing
agent, its architects, or their insurance carriers in connection with such
litigation unless such litigation determines that Landlord has committed a
breach of this Lease and adjudicates that Landlord is a liable party. If any
action at law or in equity is brought between Landlord and Tenant
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to enforce any of the provisions and/or rights under this Lease, Landlord and
Tenant hereby expressly waive the right, if any, to trial by jury in order to
avoid the time delays inherent in such process, and Landlord and Tenant agree
that the unsuccessful party to such litigation shall pay to the successful party
all costs and expenses, including reasonable attorney's fees, incurred by such
successful party, and if such successful party recovers judgment in any such
action or preceding, such costs, expenses and attorney's fees shall be included
in and as part of such judgment.
39. ENTIRE AGREEMENT:
This Lease and the Leasehold Improvements Agreement constitute the
entire agreement between Landlord and Tenant, and there are no other agreements,
oral or written, that would modify the terms set forth in this Lease. Except as
otherwise expressly provided herein, any later agreement that would purport to
renew, extend, modify, amend or terminate this Lease shall be of no force or
effect unless in writing and executed by both Landlord and Tenant.
40. HAZARDOUS MATERIALS DISCLOSURE & BROKER DISCLAIMER:
Various construction materials may contain items that have been or may
in the future be determined to be hazardous (toxic) or undesirable and may need
to be specially treated/handled or removed. For example, some transformers and
other electrical components contain PCBs, and asbestos has been used in
components such as fire-proofing, heating and cooling systems, air duct
insulation spray-on and tile acoustical materials, linoleum, floor tiles,
roofing, dry wall and plaster. Due to prior or current uses of the Property or
in the area, the Property may have hazardous or undesirable metals, minerals,
chemicals, hydrocarbons, or biological or radioactive items in soils, water,
building components, above or below-ground containers or elsewhere in areas that
may or may not be accessible or noticeable. Such items may leak or otherwise be
released. Real estate agents have no expertise in the detection or correction of
hazardous or undesirable items. Expert inspections are necessary. Current or
future laws may require clean up by past, present and/or future owners and/or
operators. It is the responsibility of the Landlord and Tenant to retain
qualified experts to detect and correct such matters and to consult with legal
counsel of their choice to determine what provisions, if any, they may wish to
include in transaction documents regarding the Property.
To the best of Landlord's knowledge, no asbestos or other hazardous
materials and undesirable substances are contained in the Property. Landlord is
required under California Health and Safety Code Section 25915 et seq. to
disclose reports and surveys regarding asbestos to certain persons, including
their employees, contractors, co-owners, purchasers and tenants. Buyers/Tenants
have similar disclosure obligations. Landlord and Tenant have additional
hazardous materials disclosure responsibilities to each other under California
Health and Safety Code Section 25359.7 and other California laws. Consult your
attorney regarding this matter. The brokers in this transaction are not
qualified to assist you in this matter or provide you with other legal or tax
advice.
LANDLORD REPRESENTS AND WARRANTS THAT TO THE BEST OF ITS KNOWLEDGE, NO
ASBESTOS OR OTHER HAZARDOUS MATERIALS ARE OR WILL BE CONTAINED IN THE PREMISES.
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41. MISCELLANEOUS:
(a) The table of contents and marginal captions in this Lease are for
convenience of reference only and shall not in any way limit or be deemed to
construe or interpret the terms and provisions hereof.
(b) Time is of the essence of this Lease and of all its provisions,
except with respect to the delivery of possession of the Premises, which is
governed by paragraph 1 above.
(c) As used herein, the words "Landlord" and "Tenant" shall include the
plural as well as the singular. Words used in the neuter gender shall include
the masculine and feminine, as the context may require. If there is more than
one Landlord or Tenant, the obligations imposed upon Landlord or Tenant shall be
joint and several.
(d) This Lease shall be construed and enforced in accordance with the
laws of the State of California.
(e) All acts concerning this Lease, the Premises, or the Building,
shall be performed on behalf of Landlord only by a partner of Landlord, if
Landlord is a Partnership, or an officer of Landlord, if Landlord is a
corporation, unless written notice to the contrary is given to Tenant.
(f) If any provision of this Lease, or the application of it to any
person or circumstances, shall to any extent be invalid or unenforceable, the
remainder of this Lease, or the application of such provision to any such person
or circumstances other than those as to which it is invalid or unenforceable,
shall not be affected, and each provision of this Lease shall be valid and
enforceable to the fullest extent permitted by law.
(g) Landlord and Tenant acknowledge and agree that the only real estate
broker(s) involved in the negotiation of this Lease was were the Grubb & Ellis
Company is acting as agent for and representing only Landlord and not as agent
for Tenant, and Damner Pike acting as the agent for and representing only Tenant
and not as agent for Landlord.
(h) Tenant acknowledges that it is aware that the agent for the
Landlord, Roger A. Smith, is also a principal in this transaction with a
forty-five percent (45%) ownership interest. Tenant further acknowledges that
another principal in the transaction, Michael J. Smith, is a California licensed
real estate broker, and Daniel Ross is a California licensed real estate
salesperson.
(i) This Lease imposes numerous financial and other obligations on
Landlord and Tenant, and each of them was urged, and had ample time, to consult
an attorney before entering this Agreement. No representation or recommendation
is made by the Landlord, the real estate brokers or their agents or employees as
to the legal sufficiency, legal effect, or tax consequences of this lease or the
transaction relating thereto; the parties shall rely solely upon the advice of
their own attorneys as to the legal and tax consequences of this lease.
(j) The persons executing this lease on behalf of the parties hereby
covenant and warrant that (i) they are duly authorized by appropriate resolution
and/or the articles and by-laws of said corporation to execute this Lease and
thereby bind Landlord and Tenant to all the terms and conditions thereof, (ii)
Tenant is a duly qualified corporation and all steps have been taken prior to
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the execution of this Lease to qualify Tenant to do business in the state where
the Building is situated, (iii) all franchise and corporate taxes have been paid
as of the date of execution, (iv) all future forms, reports, fees and other
documents necessary to comply with applicable laws will be filed when due, and
(v) Landlord is a duly existing California general partnership.
(k) During the entire lease term Tenant shall maintain a business
license as required by the municipality in which the Building is located.
(l) All agreements by Tenant contained in this Lease, whether expressed
as covenants or conditions, shall be construed to be both covenants and
conditions, conferring upon Landlord in the event of the breach thereof the
right to terminate this Lease.
(m) All exhibits attached to this Lease shall be deemed to be
incorporated herein by the individual reference to each such exhibit, and all
such exhibits shall be deemed to be a part of this Lease as though set forth in
full herein.
42. RIGHT TO MONTH-TO-MONTH TENANCY:
In the event that (a) Tenant has not exercised an option to extend in
accordance with the provisions of Paragraph 32; and (b) the Note described in
Paragraph 2(a) has not been repaid or assigned to a third party; and (c)
Landlord has been unsuccessful in executing any new leases three (3) months
prior to the expiration of the then current term of the lease, Tenant shall have
the right to remain in the premises on a month-to-month basis at 95% of the fair
rental value of the premises. The fair rental value shall be determined as
provided for in Paragraph 32. Tenant must exercise this right in writing not
later than eighty-five (85) days prior to the expiration of the current term.
IN WITNESS WHEREOF, the parties have executed this Lease or, as the
case may be, have caused their duly authorized officers to execute this Lease,
on the date last written below.
LANDLORD: TENANT:
111 PARTNERS FAIR, ISAAC AND COMPANY,
INCORPORATED
By:______________________________ By:______________________________
Michael J. Smith
Date:____________________________ Date:____________________________
By:______________________________
Roger A. Smith
Date:____________________________
By:______________________________
Daniel C. Ross
Date:____________________________
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EXHIBIT A
PROPERTY DESCRIPTION
111 Smith Ranch Road
San Rafael, California
- --------------------------------------------------------------------------------
ALL THAT CERTAIN REAL PROPERTY situated in the City of San Rafael, County of
Marin, State of California described as follows:
PARCEL ONE:
Parcel 3B, as shown upon that certain Parcel map entitled "Parcel Map, Lot 3 of
Map of Smith Ranch, Northerly Portion 17 R.M. 39, San Rafael, Marin County,
California", filed for record __________ in Book __________ of parcel Maps, at
Page __________, Marin County Records.
Reserving therefrom an easement for access, parking, drainage and public
utilities over that portion of the herein described property lying within the
boundaries of that certain, "Mutual Access and Parking Easement, D.E. & P.U.E.",
as shown upon the filed map referred to above.
Said easement to be appurtenant to and for the benefit of Parcel 3A, as shown
upon the filed map referred to above.
PARCEL TWO:
An easement for access. parking,. drainage and public utility purposes over that
portion of Parcel 3A, lying within the boundaries of that certain, "Mutual
Access and Parking Easement, D.E. &, P.U.E., as said parcel and easement are
shown upon that certain Parcel Map entitled, "Parcel Map, Lot 3 of Map of Smith
Ranch. Northerly Portion 17 R.M. 39, San Rafael, Marin County, California",
filed for record __________ in Book __________ of Parcel Maps at Page
__________, Marin County Records.
PARCEL THREE:
An easement for storm drainage purposes more particularly described as follows:
Beginning at the Easterly terminus of the course "South 81(degree) 38' 00" East,
536.00 feet": said point being on the Northery line of Smith Ranch Road and the
Southerly line of Lot 3, as shown and delineated on that certain map entitled.
"Map of Smith Ranch - Northerly Portion", filed for record in Book 17 of Record
Maps at Page 39, Marin County Records: thence leaving said Northerly line of
said Smith Ranch Road (17 R.M. 39) along the Easterly line of said Lot 3 (17
R.M. 39) the following courses and distances; Easterly along a tangent curve to
the left whose center bears North 8(degree) 22' 00" East, having, a radius of
20.00 feet, through a central angle of 90(degree) 00' 00", an arc length of
31.42 feet and thence North 8(degree) 22' 00" East, 23.00 feet, thence leaving,
said Easterly line of said Lot 3 (17 R.M. 39) South 13(degree) 12' 17" East,
46-24 feet to said Northerly line of said Smith Ranch Road (17 R.M. 39), thence
along said Northerly line of said Smith Ranch Road (17 R.M. 39) North 81(degree)
37' 00" West, 37.00 feet to the point of beginning.
30 Exhibit 10.13
<PAGE>
PARCEL FOUR:
An easement for storm drainage over a strip of land 10 feet in width and being 5
feet on each side of the following described line:
Beginning at the Easterly terminus of the course "South 81(degree) 38' 00" East,
536.00 feet"; said point being on the Northerly line of Smith Ranch Road and the
Southerly line of Lot 3, as shown and delineated on that certain Map entitled,
"Map of Smith Ranch Northerly Portion", filed for record in Book 17 of Record
Maps at Page 39, Marin County Records; thence leaving said Northerly line of
said Smith Ranch Road (17 R.M. 39) along the Easterly line of said Lot 3 (17
R.M. 39) the following courses and distances; Easterly along a tangent curve to
the left whose center bears North 8(degree) 22' 00" East, having a radius of
20.00 feet, through a central angle of 90(degree) 00' 00", an arc length of
31.42 feet, and thence North 8(degree) 22' 00" East, 128.00 feet to the true
point of beginning; thence leaving said Easterly line of said Lot 3 (17 R.M. 39)
South 81(degree) 38' 00" East 60.00 feet to the Westerly line of Parcel D, as
shown on said "Map of Smith Ranch -Northerly Portion" (17 R.M. 39), being the
terminus of this easement.
PARCEL FIVE:
An easement for access and public utility purposes more particularly described
as follows:
Beginning at the Easterly terminus of the course "South 81(degree) 38' 00" East,
536.00 feet" said point being on the Northerly line of Smith Ranch Road and the
Southerly line of Lot 3, as shown and delineated on that certain Map entitled,
"Map of Smith Ranch - Northerly Portion", filed for record in Book 17 of Record
Maps at Page 39, Marin County Record; thence leaving said Northerly line of said
Smith Ranch Road (17 R.M. 39) along the Easterly line of said Lot 3 (17 R.M. 39)
the following courses and distances, Easterly along a tangent curve to the left
whose center bears North 8(degree) 22' 00" East, having a radius of 20.00 feet,
through a central angle of 90(degree) 00' 00", an arc length of 31.42 feet,
thence North 8(degree) 22' 00" East, 271.13 feet and thence Northeasterly along
a tangent curve to the left whose center bears North 81(degree) 38' 00" West,
having, a radius of 670 feet. through a central angle of 2(degree) 00' 00", an
arc length of 23.39 feet; thence leaving said Eastery line of said Lot 3 (17
R.M. 39) South 81(degree) 38' 00" East, 27.41 feet, thence South 8(degree) 22'
00" West. 141.15 feet; thence Southerly along a tangent curve to the left whose
center bears South 81(degree) 38' 00" East. having a radius of 292.00 feet,
through a central angle of 10(degree) 59' 17", an arc length of 56.00 feet;
thence Southerly along a reverse curve to the right whose center bears. South
87(degree) 22' 43" West, having a radius of 308.00 feet, through a central angle
of 10(degree) 59' 17", an arc length of 59.07 feet; thence South 8(degree)22'
00" West, 59.00 feet to said Northerly line of said Smith Ranch Road; thence
along said Northerly line of said Smith Ranch Road (17 R.M. 39) North 81(degree)
38' 00" West, 58.00 feet to the point of beginning.
31
<PAGE>
Exhibit B
- ---------
Site Plan
- ---------
111 Smith Ranch Road
San Rafael, California
Exhibit C
- ---------
Floor Plan
- ----------
(Page 1 of 2)
Office Building
111 Smith Ranch Road
San Rafael, California
Exhibit C
- ---------
Floor Plan
- ----------
(Page 2 of 2)
Office Building
111 Smith Ranch Road
San Rafael, California
32
<PAGE>
SCHEDULE A
SHELL PLANS AND SPECIFICATIONS
111 Smith Ranch Road
San Rafael, California
- --------------------------------------------------------------------------------
1. GENERAL PROVISIONS:
a. Shell plans and Specifications shall be subject to applicable
governmental codes and ordinances.
b. The building shell shall have the approximate dimensions shown
on Exhibit C, Floor Plan, attached to this Lease.
c. All work not described herein shall be considered tenant
improvements and shall be constructed by tenant as provided
for in the Leasehold Improvements Agreement.
d. The atrium/lobby, bathrooms, janitor closet(s), mechanical
rooms, both staircases and elevator shall be completed with
all necessary finishes as part of the shell construction.
2. LANDSCAPING & SITE WORK:
To be completed in accordance with plans and specifications already
prepared and submitted to the City of San Rafael by Glanville &
Associates, Oberkamper and Associates, and Forsher & Guthrie. Tenant
acknowledges receipt of a copy of said plans and its approval thereof.
3. FOUNDATIONS:
As required by the Geotechnical Report, 101, 111 Smith Ranch Road
(Parcel 3), San Rafael, California, dated January 11, 1991, prepared by
Miller Pacific Engineering Group. Tenant acknowledges receipt of a copy
of said report.
a. Continuous exterior footings with isolated column footings on
compacted fill.
b. Additional footings may be required for architectural
features.
33
<PAGE>
4. SUBSTRUCTURE:
a. Slab on grade: Minimum of 5" thick, reinforced with
reinforcing bars (not welded wire mesh) over a membrane vapor
barrier and above a compacted aggregate base.
5. SUPERSTRUCTURE:
a. Columns, beams and brace frames; tubular steel. Roofs and
Floors: Wood frame of purlins, sub-purlins and plywood
diaphragms.
b. Lateral steel brace frames will be exposed as necessary on
both levels. Steel columns will be located along exterior
window line, aligned with window mullions where feasible.
c. Floor has been designed for the following load conditions:
Live loads: 50 pounds per square foot
Partitions: 10 pounds per square foot
Deadloads:
Structure 13 pounds per square foot
Gypcrete 13 pounds per square foot
Misc. 4 pounds per square foot
TOTAL: 100 pounds per square foot
---------------------------------------------------
6. EXTERIOR CLOSURE:
a. Exterior walls: Framing: 2'x6' wood studs and/or 2'x4' metal
studs and plywood sheathing; Finish: Exterior insulation
finish system (Drivit or other similar system), 6" thick, with
a fine uniform texture, grey (exact color to be determined).
This system will provide for all required wall insulation.
b. Glazing: Continuous butt-joint glass (at exterior), 5'-6"
high, sealed at each joint. All frames to be Medium Bronze,
anodized. All glazing to be tinted light gray and windows
shall be double paned on the south and west sides of the
building. All doors and windows at the main and easterly
accesses to the building will be a storefront system, finished
similarly to the glazing system. The lobby glazing will not be
double paned.
34
<PAGE>
c. Light weight metal trim elements to be fabricated of aluminum,
painted finish.
7. ROOFING:
a. Roof covering; multi-ply built-up with granular ballast.
c. Insulation; roll type batt insulation will be incorporated
between roof framing members.
8. CONVEYING:
a. One completed hydraulic passenger elevator. Must meet
California Title 24 Accessibility Standards.
9. MECHANICAL:
a. Plumbing; completed men's and women's toilet rooms will be on
each floor. The men's room will be furnished with one handicap
toilet, one handicap height urinal, one standard height urinal
and two handicap lavatories set in a counter. The womens' room
will be furnished with one handicap toilet, one standard
toilet and two handicap lavatories set in a counter.
b. Fire Protection: A fire sprinkler system for office hazard
shall be installed with distribution and coverage necessary
for shell space and for completed bathrooms, lobbies, and
stairwells, and mechanical room. Said system to include an
alarm system as required by municipal codes.
C. HVAC: Multiple zone package system (Variable-air-volume). Base
equipment shall be roof mounted, and connected to utilities,
and distributed to shell space. If the HVAC system is changed
from these specifications at the request of Tenant, any
increased cost shall be deleted from the budget for tenant
improvements.
10. ELECTRICAL:
a. Service and distribution; 1,600 amp service, panel board and
feeders shall be installed. Tenant may increase the size of
said service with any increased cost to be deleted from the
budget for tenant improvements.
b. Special Electrical: Alarm systems and emergency lighting as
required
35
<PAGE>
by codes and conditions of approval for completed shell, Cable
TV and telephone conduits will be provided from right-of-way
to the mechanical room.
11. INTERIOR CONSTRUCTION:
a. Interior doors: Janitor closet, mechanical room, bathrooms,
fire doors as required for shell.
b. Wall finishes. Lobby: combination of paint and vinyl wall
covering. Toilet rooms: ceramic tile and paint. Secondary
staircase: Painted sheet rock. Mechanical Room: unpainted
sheetrock.
c. Floor finishes: Lobby and secondary exit: combination of
carpet and tile. Toilet rooms: ceramic tile. Easterly stairs:
glue down commercial carpet.
d. Ceiling finishes. Lobby areas and toilet rooms, "5/8" gypsum
board, painted.
12. OTHER:
a. Complete shell shall be left free of debris and broom clean at
completion by shell contractor.
36
<PAGE>
SCHEDULE B
INTERIOR PLANS AND SPECIFICATIONS
111 Smith Ranch Road
San Rafael, California
- --------------------------------------------------------------------------------
Tenant shall use the standards and materials listed below in the construction of
its Tenant Improvements: All items not listed here shall be selected by Tenant
subject to the provisions of this Leasehold Improvements Agreement.
DOORS: Full height (3'0" wide), solid core, laminate finish.
HARDWARE: Mortise lock and latches to be used, with auto
closures installed as required by code.
CEILING: Suspended T-Bar with 2'x2' or 2'x4' tiles. Grid to be
1" white metal. Ceiling height to be per Shell Plans
and Specifications.
LIGHTS: Fluorescent 2'x4' or 2'x2' parabolic, 3 lamp
multi-cell fixtures with aluminum finished grid to be
used in general purpose office areas.
WINDOW COVERINGS: 1" metal miniblinds on exterior windows.
FIRE SPRINKLERS: Semi-recessed heads with white trim.
EXCEPTIONS: Tenant may deviate from the above standards where
required for special purpose areas of the Building,
for example computer rooms or lunch rooms.
FINISHES: Tenant may select colors finishes, material and other
details ("Finishes") regarding the final appearance
of its Tenant Improvements, except Landlord may
withhold its approval of said Finishes, as provided
for in Paragraph 6(b) of this Leasehold Improvements
Agreement if they are not similar to those used in
other, first class office building in Marin County.
37
<PAGE>
EXHIBIT D
LEASEHOLD IMPROVEMENTS AGREEMENT
--------------------------------
111 Smith Ranch Road
San Rafael, California
This Leasehold Improvements Agreement (this "Agreement") is
made as of the day __________ of August, 1991, between 111 PARTNERS, a
California general partnership having an address at 50 Bon Air Center, Suite
140, Greenbrae, California 94904 ("Landlord"), and FAIR, ISAAC AND COMPANY,
INCORPORATED, a corporation, having an address at 120 North Redwood Drive, San
Rafael, CA 94903-1996 ("Tenant").
1. The Lease and the Demised Premises. Upon and subject to the terms
and conditions herein contained, Landlord and Tenant are entering into a "Lease"
of even date herewith (herein called the "Lease"), whereby Landlord shall lease
to Tenant, and Tenant shall lease from Landlord, upon and subject to the terms,
covenants, provisions and conditions of the Lease, certain premises which are
commonly known as 111 Smith Ranch Road, San Rafael, California (the "Project").
The Project consists of the Building, the landscaping and the parking area.
2. Construction of the Proiect. Landlord at its sole cost and expense
agrees to commence construction as soon as possible and diligently to continue
construction of the Project. The Project shall be constructed by Landlord in
substantial compliance with the plans and specifications to be prepared by
Forsher and Guthrie, (the Shell Plans and Specifications"). The Shell Plans and
Specifications shall provide for the construction of a first class office
building and shall be in accordance with the approvals heretofore granted by the
City of San Rafael. The final Shell Plans and Specifications shall be subject to
the reasonable approval of tenant. Such approval shall not be unreasonably
withheld or delayed. If written work or any defects therein, nor shall such
exercise be deemed notice of disapproval has not been delivered to Landlord
within ten (10) working days following delivery of the Shell Plans and
Specifications or within five (5) working days following delivery of any
proposed changes to the Shell Plans or Specifications, Tenant shall be deemed to
have approved the Shell Plans and Specifications or such change.
Landlord's Work shall consist of the completion of the work
included in the Shell Plans and Specifications which shall include all items set
forth in Schedule "A" hereto.
3. Inspection by Tenant. During the course of construction of
Landlord's work, Tenant or Tenant's representative shall at all times have the
right to inspect the construction. No exercise by Tenant of its right to inspect
the construction shall be deemed to affect the rights and obligations of
Landlord and Tenant with respect to the
38
<PAGE>
work or any defects therein, nor shall such exercise be deemed an assumption by
Tenant of any responsibility for the quality of the work.
4. Completion of Landlord's Work and Delivery of the Demised
Premises.
(a) Substantial Completion. For purposes of the Lease and this
Leasehold Improvements Agreement, "substantially complete the Building" means
completing the Building in a manner sufficient to permit Tenant to commence and
prosecute the construction of its Tenant Improvements in a reasonably efficient
manner. Landlord shall be deemed to have substantially completed the Building
notwithstanding the fact that certain items of Landlord's work are not complete,
even if such items of Landlord's work may delay certain aspects of Tenant's
work, so long as Tenant will have the ability to perform its work in a
reasonably efficient manner.
(b) Target Date for Completion. Landlord agrees to use its
best efforts to substantially complete the Building by April 1, 1992.
In the event that the construction activities in connection
with Landlord's Work in or about the Building, or the state of completion (or
lack thereof) of Landlord's Work in or about the Building, results in any delay
in or interference with Tenant's work, then:
(i) the 90-day Tenant's Construction Period (as
referred to in paragraph 1 (a) of the Lease) shall be extended one day for each
day of such delay; and
(ii) Landlord shall reimburse Tenant for all
additional costs incurred as a result of such delay or interference.
(c) Inquiries by Tenant as to Progress. Between the date of
execution of the Lease and the date Landlord substantially completes the
Building, Landlord agrees to respond to inquires from Tenant regarding the
progress on the Project and the estimated date of substantial completion.
(d) Notice of Substantial Completion. When Landlord
substantially completes the Building, Landlord shall (i) give Tenant written
notice (the "Substantial Completion Notice") and (ii) deliver the Demised
Premises to Tenant for purposes of constructing its tenant improvements. The
fact that the balance of the Project has not been completed shall not prevent
Landlord from delivering the Substantial Completion Notice to Tenant and
delivering the Demised Premises to Tenant for the purpose of constructing its
tenant improvements, if Tenant and its contractors are provided reasonable means
of access to the Demised Premises.
(e) Delivery Date. The Delivery Date shall be the date which
is the earlier of: (i) ten (10) days after the date on which Tenant actually
received the Substantial
39
<PAGE>
Completion Notice; or, (ii) the date upon which Tenant enters the Demised
Premises to commence the construction of its tenant improvements.
5. Compensation for Delay in Completion of the Building.
If Landlord does not give Tenant the Substantial Completion
Notice by June 1, 1992 (which date shall be subject to postponement in
accordance with the provisions of paragraph 11 below) Landlord agrees that
Tenant shall be entitled to an additional one (1) day of free rent for each day
beyond June 1, 1992, until Landlord has given to Tenant the Substantial
Completion Notice. Subject to the provisions of paragraph 10, such free rent
shall constitute liquidated damages and the sole remedy of Tenant for the delay
in possession, and Tenant hereby waives any claim against Landlord for any
consequential or other damages or losses incurred by reason of any such delay.
Such free rent shall be applied as soon as possible after the date on which
rental otherwise becomes payable under the Lease. As used in this Leasehold
Improvements Agreement, the term "free rent" shall mean a forgiveness of the
Land Rent, as prorated on a daily basis for the period described.
6. Construction by Tenant of Interior Improvements.
(a) Construction by Tenant. Following the Commencement Date,
Tenant shall construct its tenant improvements in the Demised Premises in
accordance with plans and specifications to be approved by Landlord pursuant to
the provisions of paragraph 6(b) below and in a good and workmanlike manner
using new first-class materials.
(b) Approval of Interior Plans and Specifications. Prior to
commencing such construction, Tenant shall submit to Landlord for Landlord's
approval a complete set of plans and specifications for the tenant improvements.
Landlord agrees that it will not unreasonably withhold its approval of Tenant's
plans and specifications and will provide Tenant with detailed reasons for the
basis of any objection to Tenant's plans and specifications. Landlord may
withhold its approval of proposed tenant improvements which could not be altered
without substantial expense to re-lease the Building after the termination of
this Lease. Notwithstanding the foregoing, Landlord's approval shall not be
withheld because such plans do not provide for corridor separations or demising
interior walls. The Interior Plans and Specifications shall include the items
set forth in Schedule "S" hereto. If Landlord does not respond to Tenant's
request for approval within ten (10) business days of Landlord's receipt of the
Tenant's plans and specifications (or any resubmittal of the plans and
specifications), then Tenant's plans and specifications will be deemed approved.
(c) Approval of Contractors. Any contractor chosen by Tenant
to perform the Tenant improvement work shall be subject to the prior approval of
Landlord. Landlord agrees that it will not unreasonably withhold its approval of
Tenant's contractor and will provide Tenant with specific reasons for the basis
of any objection to Tenant's
40
<PAGE>
contractor. If Landlord does not respond to Tenant's request for approval within
seven (7) business days of Landlord's receipt of Tenant's proposed contractor,
then Tenant may give to Landlord a written notice stating the failure of
Landlord to respond to the prior request and further stating that if Landlord
does not respond to such request within three (3) business days from the receipt
by Landlord of such second notice, then Tenant's proposed contractor will be
deemed approved. If Landlord does not respond to such request within three (3)
business days from the receipt by Landlord of such second notice, then Tenant's
proposed contractor shall be deemed approved. Tenant shall have the right to
submit a list of not more than six (6) proposed contractors to Landlord for
Landlord's approval in accordance with the procedures outlined in this paragraph
6.(c).
(d) Certain Bidders. Tenant agrees that, it shall give a set of plans
and specifications for the tenant improvements to Ross/Donovan Company, and the
company shall be given not less than ten (10) business days in which to bid or
deliver to Tenant a proposal for constructing the tenant improvements. However,
nothing herein shall obligate Tenant to consider such bid or negotiate with such
contractor, it being understood that Tenant shall have the right to select its
own contractor (subject only to the limitation set forth in paragraph 6.(c)
above) on such terms and in such manner as Tenant in its sole and absolute
discretion shall determine.
(e) Control of Contractors and Avoidance of Labor Disputes. Landlord
may refuse to approve a contractor or supplier if Landlord reasonably believes
that the presence of such contractor or supplier at the Demised Premises may
cause labor or other difficulties for Landlord or its contractors. In the event
that Landlord permits Tenant to enter or commence work in the Demised Premises
prior to substantial completion of the Building, Tenant shall immediately take
such actions as may be necessary to resolve any labor disputes which may arise
by reason of Tenant's work or the presence or use of its contractors or
suppliers on the job, including, without limitation, the removal of any
non-union contractors or suppliers from the job.
(f) Inspection by Landlord. During the course of constructing the
tenant improvements, Landlord or Landlord's representative shall at all times
have the right to inspect the construction. Any inspection by Landlord of
Tenant's construction or improvements shall not be deemed an acceptance by
Landlord of such construction nor shall it impose upon Landlord any liability
whatsoever for any defects in such construction or improvements. Landlord shall
not be entitled to charge Tenant any fee for Landlord's approval or
participation on the design and construction process for the construction of
Tenant's improvements in the Demised Premises or any out of pocket expenses in
connection therewith.
(g) Changes in the Interior Plans and Specifications. Tenant shall have
the right to make changes in the approved plans and specifications subject to
the limitations on alterations as set forth in paragraph 10 of the Lease and to
the right of Landlord to approve such modifications in the same manner as the
original plans and specifications.
41
<PAGE>
7. Tenant Improvement Allowance.
(a) Initial Build-out. In connection with Tenant's initial
build out of the Tenant's Improvements, Landlord agrees to pay to Tenant the sum
of $618,500 or the cost of Tenant's Improvements whichever is the lesser
("Tenant Improvements Allowance") to pay Tenant's architectural, space planning
and engineering fees and for the cost of constructing the tenant improvements.
Landlord shall pay to Tenant the Tenant Improvement Allowance in periodic
progress payments within thirty (30) days after delivery to Landlord of
invoices, and lien releases or waivers conditional only upon payment; provided,
however, Tenant's requests for progress payments shall not at any time average
more than one for each month of Tenant's Construction Period which has then
elapsed.
(b) Indemnity by Tenant. Tenant hereby agrees to indemnify,
defend and hold Landlord harmless from all demands, claims, causes of action or
judgments and all reasonable expenses incurred in investigating or resisting the
same for injury to persons, for loss of life or damage to property occurring on
the Demised Premises resulting from Tenant's work in the Demised Premises
(except to the extent such injury, loss of life or damage to property is the
direct result of the negligence or willfully wrongful act of Landlord or its
agents, employees or contractors), and Tenant agrees to provide Landlord with a
certificate of insurance confirming that Tenant is maintaining adequate
comprehensive general public liability insurance covering Tenant's obligation
under this paragraph and naming Landlord as an additional insured.
8. Storage of Materials by Tenant. Tenant may request in writing that
Landlord permit Tenant to store construction materials in the Demised Premises
prior to the delivery by Landlord to Tenant of the Notice of Substantial
Completion. The request by Tenant shall set forth the nature and quantity of the
materials which Tenant wishes to store and may state the location within the
Demised Premises where Tenant suggests that such materials be stored. Landlord
shall permit Tenant to store such materials in the Demised Premises if, in the
reasonable opinion of Landlord and Landlord's contractor, the storage of such
materials will not present a material inconvenience to Landlord or Landlord's
contractor or any subcontractor in the completion of the work required of
Landlord by this Leasehold Improvements Agreement. In the event that the storage
of such materials would present such a material inconvenience, then Landlord may
refuse to permit Tenant to store such materials. In the event that Landlord
permits the materials to be stored in the Demised Premises, Landlord may specify
the location within the Demised Premises where the materials may be stored, and
may later and from time to time require that Tenant move the materials to
another location within the Demised Premises at the expense of Tenant, should
such a move be required for the convenience of Landlord's contractor or any
subcontractor, and Tenant shall promptly cause such materials to be moved within
the Demised Premises to the new location specified by Landlord. In the event
that Tenant does store materials in the Demised Premises prior to the giving by
Landlord of the Notice of Substantial Completion, Tenant shall indemnify, defend
and hold Landlord harmless from: (i) all demands, claims, causes of action or
judgments and
42
<PAGE>
all reasonable expenses incurred in investigating or resisting the same for
injury to persons, for loss of life or damage to property occurring arising from
or in connection with Tenant's storage of materials in the Demised Premises;
and, (ii) the effects of any mechanics or other liens or claims which may attach
to the Project or be claimed against Landlord by reason of the storage of such
materials in the Demised Premises.
9. Project Completion. Notices of Completion and Defects. Following
delivery of the Demised Premises to Tenant for the purposes of constructing its
tenant improvements, Landlord agrees to diligently continue with the completion
of Landlord's Work in accordance with this Leasehold Improvements Agreement.
Tenant shall not be required to commence its business activities in the
Premises, nor shall any rental obligations commence under the lease until
Landlord's Work has been completed.
In the event Landlord has not completed Landlord's Work thirty
(30) days after Tenant has completed its Tenant Improvements, subject to
postponement in accordance with the provisions of paragraph 11 of this Leasehold
Improvements Agreement, Landlord agrees that Tenant shall be entitled to an
additional one (1) day of free rent for each day beyond said thirty (30) day
period, until Landlord has given to Tenant the Final Completion Notice. Subject
to the provisions of paragraph 10 of this Leasehold Improvements Agreement, such
free rent shall constitute liquidated damages and the sole remedy of Tenant for
the delay in possession, and Tenant hereby waives any claim against Landlord for
any consequential or other damages or losses incurred by reason of any such
delay. Such free rent shall be applied as soon as possible after the date on
which rental otherwise becomes payable under the Lease. As used in this
Leasehold Improvements Agreement, the term "free rent" shall mean a forgiveness
of the Land Rent, as prorated on a daily basis for the period described.
Upon the completion of Landlord's Work, Landlord shall give
Tenant written notice of such completion (the "Final Completion Notice"), and
Tenant shall be deemed to have fully accepted Landlord's Work as satisfactorily
completed in accordance with all requirements of this Leasehold Improvements
Agreement and shall further be deemed to have waived any defects in Landlord's
Work, except to the extent that:
(i) Tenant shall furnish Landlord with a list (the "Punch
List") within thirty (30) days after the receipt by Tenant of the Final
Completion Notice, which Punch List shall specify the items of construction
which have not been completed, and
(ii) Tenant shall furnish Landlord with a list (the "Defect
List") within one (1) year the date of receipt of the Final Completion Notice
specifying any defects in the construction of Landlord's Work which were
discovered prior to the end of such one (1) year period.
Landlord shall promptly undertake and complete the repair of
each of the items on the Punch List and the Defect List, except those, if any,
which do not have a material adverse affect upon the use, appearance or safety
of the Demised
43
<PAGE>
Premises by Tenant. Nothing in this paragraph 9 shall be deemed to affect or
limit the obligations of Landlord to repair or maintain the structural
components or any other portions of the Buildings which Landlord is required to
repair or maintain under the provisions of the Lease.
10. Termination.
In the event that a grading permit for grading of the site is
not issued by September 15, 1991, or in the event substantial Site Work has not
commenced by October 15, 1991, or in the event that a building permit for the
construction of the Building is not issued by December 31, 1991, Tenant may
terminate all of the obligations under this Agreement and the Lease by written
notice to Landlord delivered within five (5) days thereafter. If the permit is
not issued or if construction is not commenced by such dates, and if Tenant
elects to terminate this Lease, the obligations of the parties under this
Agreement and the Lease shall terminate.
11. Delays.
(a) Tenant Caused Delays. If a delay shall occur in the
substantial completion of construction as the result of:
(i) any delay of Tenant in approving any
modifications to the Shell Plans or Specifications submitted to Tenant for its
approval;
(ii) any request by Tenant that Landlord delay any
element, or the completion, of construction;
(iii) any request for a change by Tenant in the Shell
Plans and Specifications or the plans and specifications for the tenant
improvements;
(iv) any breach or default by Tenant in the
performance of Tenant's obligations under the Lease or this Leasehold
Improvements Agreement;
(v) any interference by Tenant or its agents or
contractors with the prosecution by Landlord of its work;
(vi) any reasonably necessary displacement of any
construction from its place in Landlord's construction schedule resulting from
any of the causes for delay described above and the fitting of such construction
back into such schedule; or
(vii) any delay in obtaining any approval or permit
from the City of San Rafael or any other governmental entity or any utility
company or district resulting from any other delay referred to in this paragraph
11. (a); then:
44
<PAGE>
a. any such delay in the substantial
completion of construction shall extend all dates for the completion by Landlord
of ail or any part of its work by one (1) day for each day of such delay;
b. Tenant shall reimburse Landlord within
thirty (30) days from demand for all reasonable additional costs incurred by
Landlord as a result of such delays (including, without limitation, increased
design costs, increased construction costs and increased financing costs arising
by reason of the resulting delays, if any, in the construction schedule); and,
c. the Delivery Date and the Commencement
Date shall each be deemed to have occurred one (1) day sooner than the day upon
which the conditions for the occurrence of each such date are actually fulfilled
for each day of such delay. Landlord shall notify Tenant in writing of the
existence of any of the above delays of which Landlord has knowledge within ten
(10) business days after the event causing the commencement of such delay
occurs. In the event that Landlord fails to give such a notice to Tenant within
ten (10) business days of the commencement of such delay, then the delay shall
be deemed to have commenced on the date upon which such notice is actually
given. Landlord shall use Landlord's reasonable efforts to minimize the length
of any such delay.
(b) Other Delays. In the event that Landlord shall be delayed
in or prevented from the performance of any act by reason of strikes, lockouts,
unusual delays in transportation, unavailability of materials, acts or omissions
of contractors and subcontractors, failure or unavailability of power,
unavailability of fuel, restrictive governmental laws or regulations, fire or
other casualty, inclement weather, riots, insurrections, the act, failure to act
or default of the other party, war or other reason beyond its control, then
performance of such act shall be excused for the period of the delay and the
period for the performance of such act shall be extended for a period equivalent
to the period of such delay. Notwithstanding the foregoing, lack of funds shall
not be deemed to be a cause beyond the control of Landlord.
12. Disputes. Any dispute arising under this Agreement (including
without limitation any dispute as to the cost or duration of a Tenant Caused
Delay) shall be determined by arbitration in accordance with the construction
arbitration rules of the American Arbitration Association.
13. Notices. Any notice or other communication which either party
hereto shall desire or be required to give pursuant to the provisions of this
Leasehold Improvements Agreement shall be given and deemed received in the
manner provided in Article 19 of the Lease.
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14. Assignment.
(a) By Tenant. This Agreement and Tenant's rights hereunder
shall not be assigned by Tenant except to a permitted assignee of ail of
Tenant's rights under the Lease, and any other purported assignment by Tenant
shall be null and void and of no force and effect.
(b) By Landlord. This Agreement and Landlord's rights
hereunder shall not be assigned by Landlord except to a successor to Landlord's
title to the Project and any other purported assignment by Landlord shall be
null and void and of no force and effect; provided, however, that nothing
contained in this Section shall apply to nor restrict Landlord from executing
and delivering any collateral assignment, pledge or security interest which is
granted in connection with any financing secured by a lien against the Project.
(c) Written Agreement. If a party shall duly assign its rights
hereunder, the assignee shall execute, acknowledge and deliver to the other
party an agreement in form and substance reasonably satisfactory to the other
party whereby the assignee shall assume the obligations of this Agreement on the
part of the assignor to be performed or observed.
15. Waiver of Certain Remedies.
(a) No Offset. No sum payable to Tenant as the result of any
breach or default by Landlord under this Agreement shall be deducted from or
offset against any minimum rent or additional rent or other sums payable under
the Lease, and no such breach or default by Landlord under this Agreement shall
excuse Tenant from the performance of any of its obligations under the Lease or
relieve Tenant of any of its liabilities thereunder. Nothing in this
subparagraph (a) shall be deemed to affect any express right of Tenant to
terminate the Lease in accordance with the provisions of this Leasehold
Improvements Agreement.
(b) No Consequential Damages. Any failure by Landlord to
complete the Project shall not give rise to any claim or cause of action or
remedy other than as set forth in this Leasehold Improvement Agreement. Tenant
waives all claims for consequential or other damages arising from any such
failure.
16. Limitation on Landlord Liability.
(a) Basic Limitation. Except as otherwise provided in below in
this paragraph 16, if Landlord shall fail to perform any covenant, term or
condition of this Leasehold Improvements Agreement on Landlord's part to be
performed, and as a consequence of its default, Tenant shall recover a money
judgment against Landlord, such judgment shall be satisfied solely out of:
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(i) the proceeds of sale received upon execution of
such judgment levied against the right, title and interest of Landlord in the
Project;
(ii) the rents or other income from the Project
receivable (but not received) by Landlord;
(iii) the consideration received by Landlord from the
sale or other disposition of all or any part of Landlord's right, title and
interest in and to the Project; and,
(iv) any condemnation awards or insurance proceeds
receivable in respect of the Project.
(b) No Personal Liability. It is expressly understood and
agreed that neither Landlord nor any employee or partner in or of Landlord shall
be personally liable for any deficiency if the proceeds of the sale or
disposition of Landlord's interest in the Project is insufficient for the
payment of any such judgment, and Tenant shall not institute any further action,
suit, or similar demand against Landlord, or any employee or partner of
Landlord, for or on the account of such deficiency. The foregoing
notwithstanding, Tenant may seek to recover any consideration received by
Landlord from the sale or other disposition of all or any part of Landlord's
right, title and interest in and to said property and any condemnation awards or
insurance proceeds thereafter received by Landlord or any partner of Landlord,
provided that any action to recover such proceeds is commenced by the filing of
a complaint and the service of summons within ninety (90) days of the receipt by
Tenant of actual notice of a sale or disposition of the Project by Landlord.
(c) Effect of Limitation. The limitations set forth in this
paragraph 16 shall not apply to Tenant's right to recover liquidated damages as
provided in paragraph 5 above.
17. Conflicts and Conformity with Lease. To the extent which this
Agreement fails to provide the rights and obligations of Landlord and Tenant
relative to any matter, the rights and obligations of Landlord and Tenant
relative to such matters shall be governed by the Lease. If there shall be any
conflict between this Agreement and the Lease, the provisions of this Agreement
shall prevail.
18. Attorney Fees. Each party shall pay to the other all amounts for
costs, including, but not limited to, the other party's attorneys fees and
amounts paid to any collection agency, or reasonably incurred by the other party
in connection with any breach or default beyond applicable grace and notice
periods by the first party under this Leasehold Improvements Agreement or
incurred in order to enforce the terms or provisions of this Leasehold
Improvements Agreement. Such amounts shall be payable within thirty (30) days of
demand. In addition, if any action shall be instituted by either Landlord or
Tenant for the enforcement or interpretation of any of its rights or remedies in
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or under this Lease, the prevailing party shall be entitled to recover from the
losing party all costs incurred by the prevailing party in said action and any
appeal therefrom, including reasonable attorneys fees and costs to be fixed by
the court or arbitrators therein. In the event Landlord or Tenant is made a
party to any litigation between the other party and any third party, then the
other party shall pay all costs and attorneys fees incurred by or imposed upon
the first party in connection with such litigation; provided, however, if the
first party is ultimately held to be liable, then the first party shall
reimburse the other party for the cost of any attorneys fees paid by the other
party on behalf of the first party.
19. Waiver. Waiver by a party of any breach of any term, covenant or
condition contained in this Leasehold Improvements Agreement shall not be deemed
to be a waiver of such term, covenant or condition or of any subsequent breach
of the same or of any other term, covenant, or condition contained in this
Agreement. A party's consent to, or approval of, any act shall not be deemed to
render unnecessary the obtaining of a party's consent to, or approval of, any
subsequent act by the other party. The acceptance by a party of rent or other
sums payable under the Lease by the other party in amounts less than that owed
by the other party shall not be deemed a waiver of the amounts not paid or a
waiver of any other breach or default under this Agreement or the Lease, other
than failure of the other party to pay the particular rent or other sum so
accepted, regardless of the first party's knowledge of such preceding breach at
the time of acceptance of such rent, or sum equivalent to rent.
20. Captions. The captions of the paragraphs of this Leasehold
Improvements Agreement are for convenience of reference only, are not a part of
this Leasehold Improvements Agreement, and shall not be deemed in any way to
define or limit the terms and provisions of the paragraph to which they refer.
21. Governing Law. This Leasehold Improvements Agreement shall be
construed and enforced in accordance with the laws of the State of California.
22. Miscellaneous Matters.
(a) Covenants and Conditions. The covenants of Tenant set
forth in this Leasehold Improvements Agreement shall be deemed also to be
conditions.
(b) Relationship of Landlord and Tenant. Nothing in this
Leasehold Improvements Agreement shall be deemed or construed as creating a
partnership, joint venture or agency between Tenant and Landlord or any
relationship between them other than that of landlord and tenant.
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IN WITNESS WHEREOF, the parties have entered into this agreement upon
the date above written.
LANDLORD: TENANT:
111 PARTNERS FAIR, ISAAC AND COMPANY, INC.
By:________________________________ By:_________________________________
Michael J. Smith
Date:______________________________ Date:_______________________________
By:________________________________
Roger A. Smith
Date:______________________________
By:________________________________
Date:______________________________
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SCHEDULE A
SHELL PLANS AND SPECIFICATIONS
111 Smith Ranch Road
San Rafael, California
- --------------------------------------------------------------------------------
1. GENERAL PROVISIONS:
a. Shell plans and Specifications shall be subject to applicable
governmental codes and ordinances.
b. The building shell shall have the approximate dimensions shown
on Exhibit C, Floor Plan, attached to this Lease.
c. All work not described herein shall be considered tenant
improvements and shall be constructed by tenant as provided
for in the Leasehold Improvements Agreement.
d. The atrium/lobby, bathrooms, janitor closet(s), mechanical
rooms, both staircases and elevator shall be completed with
all necessary finishes as part of the shell construction.
2. LANDSCAPING & SITE WORK:
To be completed in accordance with plans and specifications already
prepared and submitted to the City of San Rafael by Glanville &
Associates, Oberkamper and Associates, and Forsher & Guthrie. Tenant
acknowledges receipt of a copy of said clans and its approval thereof.
3. FOUNDATIONS:
As required by the Geotechnical Report, 101, 111 Smith Ranch Road
(Parcel 3), San Rafael, California, dated January 11, 1991, prepared by
Miller Pacific Engineering Group. Tenant acknowledges receipt of a copy
of said report.
a. Continuous exterior footings with isolated column footings on
compacted fill.
b. Additional footings may be required for architectural
features.
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4. SUBSTRUCTURE:
a. Slab on grade: Minimum of 5" thick, reinforced with
reinforcing bars (not welded wire mesh) over a membrane vapor
barrier and above a compacted aggregate base.
5. SUPERSTRUCTURE:
a. Columns, beams and brace frames; tubular steel. Roofs and
Floors: Wood frame of purlins, sub-purlins and plywood
diaphragms.
b. Lateral steel brace frames will be exposed as necessary on
both levels. Steel columns will be located along exterior
window line, aligned with window mullions where feasible.
c. Floor has been designed for the following load conditions:
Live loads: 50 pounds per square foot
Partitions: 10 pounds per square foot
Deadloads:
Structure 13 pounds per square foot
Gypcrete 13 pounds per square foot
Misc. 4 pounds per square foot
TOTAL: 100 pounds per square foot
------------------------------------------------------------
6. EXTERIOR CLOSURE:
a. Exterior walls: Framing: 2'x6' wood studs and/or 2'x4' metal
studs and plywood sheathing; Finish: Exterior insulation
finish system (Drivit or other similar system), 6" thick, with
a fine uniform texture, grey (exact color to be determined).
This system will provide for all required wall insulation.
b. Glazing: Continuous butt-joint glass (at exterior), 5'-6"
high, sealed at each joint. All frames to be Medium Bronze,
anodized. All glazing to be tinted light gray and windows
shall be double paned on the south and west sides of the
building. All doors and windows at the main and easterly
accesses to the building will be a storefront system, finished
similarly to the glazing system. The lobby glazing will not be
double paned.
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c. Light weight metal trim elements to be fabricated of aluminum,
painted finish.
7. ROOFING:
a. Roof covering; multi-ply built-up with granular ballast.
b. Insulation; roll type batt insulation will be incorporated
between roof framing members.
8. CONVEYING:
a. One completed hydraulic passenger elevator. Must meet
California Title 24 Accessibility Standards.
9. MECHANICAL:
a. Plumbing; completed men's and women's toilet rooms will be on
each floor. The men's room will-be furnished with one handicap
toilet, one handicap height urinal, one standard height urinal
and two handicap lavatories set in a counter. The womens' room
will be furnished with one handicap toilet, one standard
toilet and two handicap lavatories set in a counter.
b. Fire Protection: A fire sprinkler system for office hazard
shall be installed with distribution and coverage necessary
for shell space and for completed bathrooms, lobbies, and
stairwells, and mechanical room. Said system to include an
alarm system as required by municipal codes.
c. HVAC: Multiple zone package system (Variable-air-volume). Base
equipment shall be roof mounted, and connected to utilities,
and distributed to shell space. If the HVAC system is changed
from these specifications at the request of Tenant, any
increased cost shall be deleted from the budget for tenant
improvements.
10. ELECTRICAL:
a. Service and distribution; 1,600 amp service, panel board and
feeders shall be installed. Tenant may increase the size of
said service with any increased cost to be deleted from the
budget for tenant improvements.
b. Special Electrical: Alarm systems and emergency lighting as
required
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by codes and conditions of approval for completed shell. Cable
TV and telephone conduits will be provided from right-of-way
to the mechanical room.
11. INTERIOR CONSTRUCTION:
a. Interior doors: Janitor closet, mechanical room, bathrooms,
fire doors as required for shell.
b. Wall finishes. Lobby: combination of paint and vinyl wall
covering. Toilet rooms: ceramic tile and paint. Secondary
staircase: Painted sheet rock. Mechanical Room: unpainted
sheetrock.
c. Floor finishes: Lobby and secondary exit: combination of
carpet and tile. Toilet rooms: ceramic tile. Easterly stairs:
glue down commercial carpet.
d. Ceiling finishes. Lobby areas and toilet rooms, "5/8" gypsum
board, painted.
12. OTHER:
a. Complete shell shall be left free of debris and broom clean at
completion by shell contractor.
53
CONSTRUCTION LOAN AGREEMENT
THIS AGREEMENT, made as of September 5, 1991, by and between 111
PARTNERS, a California general partnership ("Borrower"), and FAIR, ISAAC AND
COMPANY, INCORPORATED, a Delaware corporation ("Lender"),
W I T N E S S E T H:
Recital of Facts:
A. Borrower owns the real property described in Exhibit A attached
hereto and made a part hereof ("Property").
B. Borrower proposes to construct on the Property the improvements
described in Exhibit B attached hereto and made a part hereof ("Improvements")
in accordance with the plans and specifications described in Exhibit B, as such
plans and specifications may be amended in accordance with this Agreement
("Plans and Specifications"), and has requested a loan from Lender for the
purpose of constructing the Improvements on the Property in accordance with the
Plans and Specifications.
NOW, THEREFORE, Borrower and Lender agree as follows:
ARTICLE 1
Loan
1.1 Loan. Upon and subject to the terms of this Agreement, Lender
agrees to lend to Borrower and Borrower agrees to borrow from Lender the
principal sum of three million dollars ($3,000,000) ("Loan") to finance the
construction of the Improvements and for the other purposes provided in the Loan
Documents (as hereinafter defined).
1.2 Loan Documents. Borrower shall deliver to Lender concurrently with
execution and delivery of this Agreement the documents, properly executed and in
recordable form if requested by Lender, described in Exhibit C attached hereto
and made a part hereof (collectively "Loan Documents"). The terms "Note" and
"Deed of Trust" shall have the meanings defined in Exhibit C.
1.3 Effective Date. The date of the Loan Documents is for reference
purposes only. The effective date ("Effective Date") of delivery and transfer to
Lender of the security under the Loan Documents and of Borrower's and Lender's
obligations under the Loan Documents is the date the Deed of Trust is recorded
in the office of the County Recorder of the County where the Property is
located.
1.4 Formation and Organizational Documents. Borrower has previously
delivered to Lender the following formation and organizational documents:
Partnership Agreement dated June 1, 1990, among Michael J. Smith, Roger A. Smith
and Daniel C. Ross and Statement of Partnership dated August 26, 1991, and
recorded on August 27, 1991, as Instrument No. 91-054475 of Official Records of
Marin County. Borrower hereby certifies to Lender that (a) the foregoing
documents are all of the relevant formation and organizational documents of
1
Exhibit 10.14
<PAGE>
Borrower; (b) such documents remain in full force and effect; and (c) such
documents have not been amended or modified.
1.5 Opinion of Legal Counsel. Borrower shall cause to be furnished to
Lender on the Effective Date, at Borrower's expense, an opinion of legal counsel
approved by Lender covering such matters relating to Borrower and the Loan
Documents as Lender may request.
1.6 Acceleration Upon Loss of Security. If at any time the Deed of
Trust ceases to be a valid first lien upon the Property and the Improvements,
all sums remaining unpaid and owing to Lender under the Note and the other Loan
Documents shall automatically become immediately due and payable and Lender's
obligation to disburse the remaining portion of the Loan which is then
undisbursed, if any, shall terminate.
1.7 Tax Service. Lender is authorized to secure, at Borrower's expense,
a tax service contract which shall provide tax information on the Property to
Lender for the term of the Loan.
1.8 Management of Property. Borrower shall not enter into any agreement
providing for the management, leasing or operation of the Property or the
Improvements without the prior written consent of Lender.
1.9 Further Encumbrance. Without the prior written consent of Lender,
Borrower shall not receive any other financing for the development of the
Property or the construction of the Improvements and shall not further encumber
the Property or the Improvements, except as permitted by and in compliance with
the Note.
ARTICLE 2
Disbursement
2.1 Conditions Precedent. Lender shall not be obligated to make any
disbursements or take any other action under the Loan Documents unless all of
the following conditions precedent are satisfied at the time of such action:
(a) There exists no Default, as defined this Agreement, or
default or event of default as defined in any of the other Loan
Documents, or event, omission or failure of condition which would
constitute such a default or event of default after notice or lapse of
time, or both; and
(b) The undisbursed Loan proceeds, together with all sums (if
any) to be provided by Borrower as shown in Exhibit D attached hereto
and made a part hereof, shall at all times be not less than the amount
which Lender from time to time determines reasonably necessary to: (i)
pay, through final completion, all costs of development, construction
and leasing of the Property and the Improvements in accordance with the
Loan Documents; (ii) pay all sums which may accrue under the Loan
Documents through final completion of the Improvements; and (iii)
enable Borrower to perform and satisfy all of the covenants of Borrower
contained in the Loan Documents through final completion of the
Improvements. If Lender determines at any time that such funds are not
sufficient for such purposes, Borrower may satisfy this
2
<PAGE>
condition by depositing with Lender the amount of such deficiency in
the Account (as hereinafter defined) within five (5) days after
Lender's written demand; and
(c) Borrower has delivered to Lender all of the Loan Documents
and all other documents, instruments, policies, and forms of evidence
or other materials requested by Lender pursuant to this Agreement or
any of the other Loan Documents.
2.2 Account. If required by Lender, a non-interest bearing demand
deposit account in Borrower's and Lender's names ("Account") will be opened by
Lender with a bank selected by Lender and administered in accordance with this
Agreement. The proceeds of the Loan and Borrower's Funds (as hereinafter
defined), when qualified for disbursement, shall be deposited into the Account,
if opened, or otherwise disbursed to or for the benefit or account of Borrower,
as determined by Lender, under the terms of this Agreement.
2.3 Borrower's Funds. Except as otherwise provided in this Agreement,
all funds which are deposited with Lender pursuant to section 2.1(b) hereof
("Borrower's Funds") or any other provision of the Loan Documents shall be
deposited in the Account, and controlled by Lender, for disbursement under this
Agreement.
2.4 Pledge and Assignment. As security for performance of Borrower's
obligations under the Loan Documents, Borrower irrevocably pledges and assigns
to Lender, and grants to Lender a security interest in, all monies at any time
deposited in the Account.
2.5 Disbursement. Subject to the conditions set forth in section 2.1
hereof, the proceeds of the Loan and Borrower's Funds shall be disbursed in
accordance with Exhibit E attached hereto and made a part hereof. Disbursements
made after the deposit of Borrower's Funds shall be made from Borrower's Funds
until depleted.
2.6 Disbursed Funds. All disbursements of the Loan and Borrower's Funds
shall be held by Borrower in trust and applied by Borrower solely for the
purposes for which the funds have been disbursed. Lender is not obligated to
monitor or determine Borrower's use or application of such disbursements.
2.7 Disbursement Authorization. Disbursements hereunder may be made by
Lender to the Account or disbursed to or for the benefit or account of Borrower,
as determined by Lender, upon the written request of any one (1) of the
following persons, Michael J. Smith, Roger A. Smith, or Daniel C. Ross, who are
authorized to request disbursements until written notice of Borrower's
revocation of such authority is received by Lender.
ARTICLE 3
Construction
3.1 Commencement and Completion. Borrower shall commence construction
of the Improvements without delay immediately after, but not before, the
Effective Date, shall diligently continue construction to completion, and shall
complete
3
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construction of the Improvements (other than the interior improvements for which
Lender is responsible pursuant to the Lease (the "Lease") dated September 5,
1991, between Borrower, as landlord, and Lender, as tenant) on or before April
1, 1992.
3.2 Construction. Borrower shall construct the Improvements in a good
and workmanlike manner in accordance with the Plans and Specifications and the
recommendations of any soils or engineering report approved by Lender. In
constructing the Improvements, Borrower shall comply with all applicable laws,
ordinances, rules, regulations, building restrictions, recorded covenants and
restrictions, and requirements of all regulatory authorities having jurisdiction
over the Improvements or the Property (collectively "Requirements"). If
necessary, the Plans and Specifications shall be modified to comply with the
Requirements, subject to the provisions of section 3.3 hereof.
3.3 Plans and Specifications. Except as otherwise provided in this
Article 3, there shall be no change in the Plans and Specifications without
Lender's prior written approval. Requests for approval shall be submitted on a
change order form acceptable to Lender signed by Borrower and, if required by
Lender, the project architect and the general contractor, accompanied by working
drawings and a written narrative of the proposed change. As conditions to its
approval, (a) Lender may require satisfactory evidence of the cost of the
proposed change and the time necessary to complete the proposed change and (b)
to the extent Lender determines that the proposed change will result in
increased cost, Lender may require Borrower to deposit Borrower's Funds in the
amount of the increased cost into the Account in accordance with section 2.1(b)
hereof. Borrower acknowledges that this approval process may result in delays.
Upon Lender's request, Borrower, the project architect and the general
contractor shall initial the copy of the Plans and Specifications delivered to,
and approved by, Lender as a true copy of the Plans and Specifications for the
Improvements. Borrower shall maintain at all times a full set of working
drawings for the Improvements available for inspection by Lender. Within ten
(10)days after Lender's request, Borrower shall deliver to Lender complete
as-built Plans and Specifications for the completed Improvements.
3.4 Changes in Plans and Specifications. The prior written consent of
Lender shall not be required for any changes in the Plans and Specifications
unless such change (a) constitutes a material change in the building material or
equipment specifications or the architectural or structural design, value, or
quality of any of the Improvements, or (b)would result in an increase in any
item of construction cost in excess of one thousand dollars ($1,000) for any
single change or in excess of ten thousand dollars ($10,000) for all such
changes in such items of construction cost, or (c) would affect the structural
integrity, quality of building material or equipment, or overall efficiency of
operating systems or utility systems of the Improvements. Notwithstanding the
foregoing, Borrower shall submit all proposed changes in the Plans and
Specifications to Lender at least ten (10) days prior to the commencement of
construction relating to such proposed change, whether or not any such change is
subject to Lender's approval.
3.5 Construction Information; Inspections. Lender is expressly
authorized to contact any contractor, subcontractor or material supplier and, at
all reasonable times, to enter the Property and inspect the Improvements and the
work of construction in order to verify information disclosed pursuant to this
section or for any other purpose. From time to time, and within ten (10) days
after Lender's request, Borrower shall deliver to Lender:
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(a) A complete list stating (i) the name, address and
telephone number of each contractor, subcontractor and material
supplier to be employed or used for construction of the Improvements
and (ii) the dollar amount, including changes, if any, of each contract
and subcontract, and the portion thereof, if any, paid through the date
of such list; and
(b) Copies of each contract and subcontract identified in such
list, including any changes thereto; and
(c) A cost breakdown, in a form acceptable to Lender, stating
the estimated total cost of constructing the Improvements, and that
portion, if any, of each cost item (i) which has been incurred and (ii)
which has been paid, all as of the date of such cost breakdown; and
(d) A construction progress schedule, in a form acceptable to
Lender, showing the progress of construction and the estimated
sequencing and completion time for uncompleted work, all as of the date
of such schedule; and
(e) With respect to any item designated above which has been
previously delivered, such update thereof as Lender may request.
3.6 Prohibited Contracts. Without Lender's prior written consent,
Borrower shall not contract for any materials, furnishings, equipment, fixtures
or other parts or components of the Improvements, or other property for the use
or occupancy of the Property or the Improvements, if any third party retains or
purports to retain any interest (other than lien rights, if any, created by
operation of law) in such items after their delivery to the Property. Borrower
shall have five (5) days to effect the removal of any such retained interest.
3.7 Liens and Stop Notices. If a claim of lien is recorded affecting
the Property or the Improvements or a bonded stop notice is served upon Lender
which affects the Loan or Borrower's Funds, Borrower shall, within twenty (20)
days after such recording or service or within five (5) days after Lender's
demand (whichever last occurs): (a) pay and discharge the same; or (b) effect
the release thereof by recording or delivering to Lender a surety bond in
sufficient form and amount; or (c) provide Lender with other assurance which
Lender deems, in its sole discretion, to be satisfactory for the payment of such
lien or bonded stop notice and for the full and continuous protection of Lender
from the effect of such lien or bonded stop notice.
3.8 Construction responsibilities. Borrower shall be solely responsible
for all aspects of Borrower's business and conduct in connection with the
Property and the Improvements,including, but not limited to, the quality and
suitability of the Plans and Specifications and their compliance with the
Requirements, the supervision of the work of construction, the qualifications,
financial condition and performance of all architects, engineers, contractors,
material suppliers, consultants and property managers, and the accuracy of all
applications for payment and the proper application of all disbursements. Lender
is not obligated to supervise, inspect or inform Borrower or any third party of
any aspect of the construction of the Improvements or any other matter referred
to in this section. Any inspection or review by Lender is to determine whether
Borrower is properly discharging its obligations to Lender and may not be relied
upon by Borrower or any third party. Lender owes no duty of care to Borrower or
any third party to
5
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protect against, or to inform Borrower or any third party of, any negligent,
faulty, inadequate or defective design or construction of the Improvements.
3.9 Improvement District. Without Lender's prior written consent,
Borrower shall not, directly or indirectly, advocate or assist in the
incorporation of any of the Property or the Improvements into any improvement or
other assessment district.
3.10 Delay. Borrower shall promptly notify Lender in writing of any
event causing delay or interruption of construction or the timely completion of
construction. The notice shall specify the particular work delayed and the cause
and period of each delay.
3.11 Surveys. At Lender's request, Borrower shall deliver to Lender:
(a) a perimeter survey of the Property; (b) upon completion of the foundations
of the Improvements, a survey showing the location of the Improvements on the
Property and showing that the Improvements are located entirely within the
Property and do not encroach upon any easement or breach or violate any of the
Requirements; and (c) upon completion of the Improvements, an as-built survey
acceptable to a title insurer for purposes of issuing an ALTA Loan Policy of
title insurance. All such surveys shall be made and certified by a registered
engineer or licensed surveyor.
3.12 Force Majeure. The time within which construction of the
Improvements must be completed shall be extended for a period of time equal to
the period of any delay directly affecting the construction work which is caused
by fire, earthquake, inclement weather, strike, lockout, acts of public enemy,
riot, insurrection, or governmental regulation of the sale or transportation of
materials, supplies or labor, provided Borrower furnishes Lender with written
notice of any such delay within seven (7) days after the occurrence of any such
delay. In no event, however, shall the time for completion of the Improvements
(other than the interior improvements for which Lender is responsible pursuant
to the Lease) be extended beyond July 1, 1992.
3.13 Construction Agreement. Borrower and a general contractor approved
by Lender ("Contractor") will enter into a construction agreement ("Construction
Agreement"), pursuant to which Contractor will construct the Improvements in
accordance with the Plans and Specifications. Borrower shall require Contractor
to perform in accordance with the Construction Agreement and shall not amend,
modify or terminate the duties of Contractor under the Construction Agreement
without Lender's prior written consent. Upon Lender's request, Borrower shall
execute an assignment of the Construction Agreement to Lender as security for
Borrower's obligations under the Loan Documents and shall cause the Contractor
to consent to any such assignment.
3.14 Architect's Agreement. Borrower and Forsher & Guthrie
("Architect") have entered into the Standard Form of Agreement Between Owner and
Architect for Designated Services dated August 21, 1991 ("Architect's
Agreement"), pursuant to which Architect is to design and supervise construction
of the Improvements. Borrower shall require Architect to perform in accordance
with the Architect's Agreement and shall not amend, modify or terminate the
duties of Architect under the Architect's Agreement without Lender's prior
written consent. Upon Lender's request, Borrower shall execute an assignment of
the Architect's Agreement and the Plans and Specifications to Lender as security
for Borrower's obligations under
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the Loan Documents and shall cause the Architect to consent to any such
assignment.
3.15 Bonds. Within five (5) days after Lender's request, Borrower shall
procure from a surety acceptable to Lender, and deliver to Lender, dual obligee
performance and labor and material payment bonds in a form, substance and amount
acceptable to Lender and, if requested by Lender, cause any such bond to be
recorded and the Construction Agreement to be filed in the office of the County
Recorder of the County where the Property is located.
3.16 Contractors. Lender may, but shall not be obligated to, disapprove
any contractor, subcontractor or material supplier whom Lender deems financially
or otherwise unqualified. The absence of any such disapproval shall not
constitute a representation of qualifications.
3.17 Completion of Plans and Specifications. Notwithstanding the
foregoing provisions of Articles 1, 2 and 3, Borrower and Lender recognize that
the Plans and Specifications (Exhibit B), the Financial Requirement
Analysis.(Exhibit D) and the Disbursement Plan (Exhibit E) have not been
completed as of the date of this Agreement and will not be completed as of the
Effective Date. Accordingly, Exhibits B, D and E attached to this Agreement are
incomplete. Borrower shall, on or before November 1, 1991, (a) cause complete
Plans and Specifications for the Improvements to be prepared, (b) prepare a
final construction cost budget based on the complete Plans and Specifications,
(c) enter into the Construction Agreement with the Contractor consistent with
the complete Plans and Specifications and the final construction cost budget,
and (d) obtain all required building permits for construction of the
Improvements. The complete Plans and Specifications, the final construction cost
budget, the Contractor and the Construction Agreement shall be subject to the
prior written approval of Lender. Upon such approval by Lender, Borrower and
Lender each shall execute and deliver an amendment to this Agreement containing
Exhibits B, D and E, which shall become part of this Agreement, on the basis of
the complete Plans and Specifications and the final construction cost budget
approved by Lender. The total amount of the Loan shall not exceed three million
dollars ($3,000,000), and Borrower shall pay all costs over three million
dollars ($3,000,000) necessary to complete the Improvements in accordance with
this Agreement.
3.18 Grading and Drainage work. Borrower has submitted to Lender, and
Lender has approved, plans for the grading and drainage work, which consist of
Sheet 1 (improvement plan), Sheets 2 and 3 (grading and drainage plans) and
Sheet 4 (signing and striping plan for the parking area) dated August 1, 1991,
prepared by Oberkamper & Associates. The portion of the Loan allocated to such
grading and drainage work is three hundred six thousand two hundred dollars
($306,200). Borrower shall commence such grading and drainage work promptly
after the Effective Date, Borrower shall perform such grading and drainage work
in accordance with such approved plans, and Lender shall disburse such portion
of the Loan allocated to such grading and drainage work pursuant to this
Agreement as the work progresses.
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ARTICLE 4
Insurance
4.1 Title Insurance. Borrower shall, at Borrower's expense, procure
from a title insurer satisfactory to Lender a 1970 LP-10 ALTA Loan Policy of
title insurance ("Title Policy"), with any endorsements Lender may require,
insuring Lender, in the principal amount of the Loan, of the validity and the
priority of the lien of the Deed of Trust upon the Property and the
Improvements, subject only to matters approved by Lender in writing. During the
term of the Loan, Borrower shall, at Borrower's expense, procure and deliver to
Lender, within five (5) days after Lender's request, such other endorsements to
the Title Policy as Lender may require.
4.2 Hazard Insurance. Borrower shall procure and maintain a policy of
builder's risk completed value hazard insurance, with a vandalism and malicious
mischief endorsement and such other endorsements as Lender may require, in an
amount acceptable to Lender. Lender shall be named under a Lender's Loss Payable
Endorsement (form 438BFU) attached to the policy. At Lender's request, the
policy shall contain an agreed value clause sufficient (as determined by Lender)
to eliminate any risk of co-insurance.
4.3 Liability Insurance. Borrower shall procure and maintain a policy
of comprehensive public liability insurance and property damage insurance with
limits as required by Lender, insuring against liability for injury or death to
any person and property damage occurring on the Property or in the Improvements
from any cause whatsoever. The policy shall name Lender as an additional
insured.
4.4 Blanket Coverage. Lender may accept, at its option, blanket
insurance policies in satisfaction of Borrower's obligations to provide
insurance.
4.5 General. Borrower shall procure and maintain all other insurance
required by the Requirements, the Deed of Trust or applicable law. Lender shall
receive the originals of all required insurance policies, or other evidence of
insurance acceptable to Lender. Borrower shall maintain all required insurance
until the Loan is repaid. All insurance policies shall provide that the
insurance shall not be cancellable or materially changed without thirty (30)
days' prior written notice to Lender. All insurance policies shall be issued by
licensed insurance companies acceptable to Lender.
ARTICLE 5
Representations and warranties
Borrower hereby represents and warrants to Lender as of the Effective
Date and continuing thereafter as follows:
5.1 Authority. Borrower has complied with all laws and regulations
concerning its organization, existence and transaction of business. Borrower has
the right and power to own and develop the Property and construct the
Improvements as contemplated in the Loan Documents. Borrower has, or at all
appropriate times shall have, properly obtained all permits, licenses and
approvals necessary to construct, occupy, operate and lease the Improvements,
and complied with the Requirements and all other applicable statutes, laws,
regulations and ordinances.
5.2 Enforceability. Borrower is authorized to execute, deliver and
perform under the Loan Documents, which are legal, valid and binding obligations
of Borrower, enforceable in accordance with their respective terms.
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5.3 No Violation. Borrower's undertakings in the Loan Documents do not
violate any of the Requirements or any other applicable statute, law, regulation
or ordinance or any order or ruling of any court or governmental entity, or
conflict with, or constitute a breach or default under, any agreement by which
Borrower is, or the Property and the Improvements are, bound or regulated.
Borrower is not in violation of any statute, law, regulation or ordinance, or of
any order of any court or governmental entity. There are no claims, actions or
proceedings pending or, to Borrower's knowledge, threatened against Borrower or
affecting the Property or the Improvements.
5.4 Financial Information. All financial information delivered to
Lender, including, without limitation, information relating to the financial
condition of Borrower, the Property, the Improvements, or partners of Borrower,
fairly and accurately represents such financial condition and has been prepared
in accordance with generally accepted accounting principles consistently
applied, unless otherwise noted in such information. No material adverse change
in such financial condition has occurred.
5.5 Accuracy. All reports, documents, instruments, information and
forms of evidence delivered to Lender concerning the Loan or required by the
Loan Documents are accurate, correct and sufficiently complete to give Lender
true and accurate knowledge of their subject matter, and do not contain any
misrepresentation or omission.
5.6 Adequacy of Loan. The undisbursed Loan proceeds, together with
Borrower's Funds and all other sums (if any) to be provided by Borrower as shown
in Exhibit D, are sufficient to do all of the things specified in section 2.1(b)
hereof.
5.7 Taxes. Borrower has filed all required federal, state, county and
municipal tax returns and has paid all taxes owed and payable, and Borrower
knows of no basis for additional assessment with respect to any taxes.
5.8 Utilities. All utility services, including, without limitation,
gas, water, sewer, drainage, electrical and telephone, necessary for the
development, construction and occupancy of the Property and the Improvements are
available at or within the boundaries of the Property, or Borrower has taken all
steps necessary to assure that all utility services will be available upon
completion of the Improvements.
5.9 Compliance. Borrower is familiar with all Requirements. The
development of the Property and the construction of the Improvements will
conform to and comply with the Requirements and the Plans and Specifications.
ARTICLE 6
Default
6.1 Default. The following shall constitute a "Default" under the Loan
Documents:
(a) Monetary. (i) Borrower's failure to pay when due any sums
payable under the Note or any of the other Loan Documents; or (ii)
Borrower's failure
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to deposit any Borrower's Funds as and when required under section
2.1(b) hereof; or
(b) Construction; Use. (i) Any material deviation in the work
of construction from the Plans and Specifications or the Requirements
or the appearance or use of defective workmanship or materials in
constructing the Improvements, and Borrower's failure to remedy the
same to Lender's satisfaction within ten (10) days after Lender's
written demand to do so; or (ii) the cessation of construction of the
Improvements prior to completion for a continuous period of more than
fifteen (15) days (except as caused by events for which delay may be
permitted under Article 3 hereof); or (iii) the prohibition, enjoining
or delaying (in any manner) of the construction of any of the
Improvements in accordance with the Loan Documents for a continuous
period of more than thirty (30) days; or (iv) the curtailment in
availability to the Property or the Improvements of utilities or other
public services necessary for the full occupancy and utilization of the
Improvements for a continuous period of more than thirty (30) days; or
(c) Liens, Attachment; Condemnation. (i) The filing of any
claim of lien against the Property or the Improvements or the service
on Lender of any bonded stop notice relating to the Loan and the
continuance of the claim of lien or bonded stop notice for twenty (20)
days without discharge, satisfaction or provision for payment being
made in accordance with Article 3 hereof; or (ii) the condemnation,
seizure or appropriation of, or occurrence of an uninsured casualty
with respect to, any material (as determined by Lender in its sole and
absolute discretion) portion of the Property or the Improvements; or
(iii) the sequestration or attachment of, or any levy or execution
upon, any of the Property or the Improvements, any other collateral
provided by Borrower under any of the Loan Documents, any monies in the
Account, or any substantial portion of the other assets of Borrower,
which is not released, expunged or dismissed prior to the earlier of
thirty (30)days after sequestration, attachment or execution or the
sale of such other assets affected thereby; or
(d) Performance of obligations. Borrower's failure to perform
its obligations under any of the Loan Documents; provided, however,
that if a specific time is provided in the Loan Documents for the
curing of such failure, Borrower's failure to perform will not
constitute a Default until the specified time period expires; or
(e) Representations and Warranties. (i) The failure of any of
Borrower's representations or warranties in any of the Loan Documents,
except as to adverse change in financial condition, to be true within
fifteen (15) days, or other period as may be provided, after notice by
Lender; or (ii) any material adverse change in the financial condition
of Borrower or any other person or entity in any manner obligated to
Lender under the Loan Documents from the financial condition
represented to Lender as of the Effective Date; or
(f) Voluntary Bankruptcy; Insolvency; Dissolution. (i)
Borrower's filing of a petition for relief under the Bankruptcy Reform
Act of 1978, as amended or recodified ("Bankruptcy Code"), or under any
other present or future state or federal law regarding bankruptcy,
reorganization or other relief to debtors (collectively, "Debtor
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Relief Law"); or (ii) Borrower's filing any pleading in any involuntary
proceeding under the Bankruptcy Code or other Debtor Relief Law, which
admits the jurisdiction of the court or the petition's material
allegations regarding Borrower's insolvency; or (iii) Borrower's making
a general assignment for the benefit of creditors; or (iv) Borrower's
applying for, or the appointment of, a receiver, trustee, custodian or
liquidator of Borrower or any of its property; or (v) the filing by or
against Borrower of a petition seeking the liquidation or dissolution
of Borrower or the commencement of any other procedure to liquidate or
dissolve Borrower; or
(g) Involuntary Bankruptcy. Borrower's failure to effect a
full dismissal of any involuntary petition under the Bankruptcy Code or
any other Debtor Relief Law that is filed against Borrower or in any
way restrains or limits Borrower or Lender regarding the Loan, the
Property or the Improvements prior to the earlier of the entry of any
order granting relief sought in the involuntary petition or thirty (30)
days after the date of filing of the petition; or
(h) Partners; Guarantors. The occurrence of an event specified
in section 6.1(f) or section 6-1(g) hereof as to any person or entity
in any manner obligated to Lender under the Loan Documents
6.2 Acceleration. Upon the occurrence of a Default specified in
sections 6.1(a) through 6.1(e) hereof, inclusive, Lender may, at its option,
declare all sums owing to Lender under the Note and the other Loan documents
immediately due and payable. Upon the occurrence of a Default specified in
section 6.1(f), 6.1(g) or 6.1(h) hereof, or upon the occurrence of any default
or event of default specified in any of the Loan Documents which provides that
acceleration shall be automatic, all sums owing to Lender under the Loan
Documents shall automatically become immediately due and payable. Upon
acceleration, Lender may, in addition to other uses permitted under the Loan
Documents, apply undisbursed Loan proceeds and any sums in the Account to the
sums owing to Lender under the Loan Documents.
6.3 Disbursement by Lender. Upon the occurrence of a Default which is
occasioned by Borrower's failure to pay money, Lender may, but shall not be
obligated, to make such payment from Loan proceeds, Borrower's Funds, or other
funds of Lender. If such payment is made from proceeds of the Loan or from
Borrower's Funds, Borrower shall deposit with Lender, upon written demand issued
pursuant to section 2.1(b) hereof, an amount equal to such payment. If such
payment is made from funds of Lender, Borrower shall repay such funds upon
demand issued pursuant to section 6.6 hereof. In either case, the Default with
respect to which any such payment has been made by Lender shall not be deemed
cured until such deposit or repayment (as the case may be) has been made by
Borrower.
6.4 Lender's Completion of Construction. If Default occurs, Lender may,
upon five (5) days' written notice to Borrower, and with or without legal
process, take possession of the Property and the Improvements, remove Borrower
and all agents, employees and contractors of Borrower from the Property and the
Improvements, complete the work of construction, and market and sell or lease
the Property and the Improvements. Borrower irrevocably appoints Lender as its
attorney-in-fact, which agency is coupled with an interest. As attorney-in-fact,
Lender may, in Borrower's name, take or omit to take any action Lender may deem
appropriate, including, without limitation, exercising Borrower's rights under
the Loan Documents and all contracts concerning the Property or the
Improvements.
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6.5 Cessation of Construction. If Lender determines that the
Improvements are not being constructed in accordance with the Plans and
Specifications, the Requirements or the Loan Documents, Lender may order all
construction on any of the Improvements affected by the condition of
nonconformance immediately stopped. After such order, Borrower shall not allow
any construction work, other than corrective work, to be performed on any of the
Improvements affected by the condition of nonconformance until Lender notifies
Borrower in writing that the nonconforming condition has been corrected.
6.6 Repayment of Funds Advanced. If Lender spends its funds in
exercising any of its rights or remedies under the Loan Documents, the amount of
funds spent shall be payable to Lender upon demand, together with interest at
the rate applicable to the principal balance of the Note after default or
maturity as specified therein, from the date the funds were spent. Until repaid,
such amounts shall have the security afforded disbursements under the Note.
6.7 Right of Contest. Borrower may contest in good faith any claim,
demand, levy or assessment (other than liens and stop notices, provision for
which is made in Article 3 hereof) by any person other than Lender which would
constitute a Default if (a) Borrower pursues the contest diligently and in a
manner which Lender determines is not prejudicial to Lender and does not impair
the rights of Lender under any of the Loan Documents and (b) if requested by
Lender, Borrower deposits with Lender any funds or other forms of assurance
Lender in good faith from time to time determines appropriate to protect Lender
from the consequences of the contest being unsuccessful. Borrower's compliance
with this section shall operate to prevent such claim, demand, levy or
assessment from becoming a Default.
ARTICLE 7
Miscellaneous Provisions
7.1 Expenses. Borrower shall pay within five (5) days Lender's demand
all reasonable and necessary expenses incidental to making the Loan, including,
without limitation, preclosing and closing expenses, commitment fees,
architectural and engineering review expenses, appraisal fees, construction
inspection fees and attorneys' fees, incurred by Lender; provided, however, that
Borrower shall not be required to pay more than the total amount of sixty-two
thousand five hundred dollars ($62,500) on account of such expenses.
7.2 Financial Information. Within one hundred twenty (120) days after
the end of Borrower's tax year, Borrower shall deliver to Lender a current
signed financial statement, income and expense statement and balance sheet of
Borrower. Borrower shall also deliver to Lender such quarterly, periodic or
other financial information as Lender may request. If Borrower has audited
financial information prepared, Borrower shall deliver to Lender copies of that
information within five (5) days after its preparation. All financial reports
shall be prepared in accordance with generally accepted accounting principles
consistently applied, or other form acceptable to Lender.
7.3 Indemnity. Borrower indemnifies Lender against, and holds Lender
harmless from, any losses, damages, liabilities, claims, demands, actions,
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judgments, court costs and legal or other expenses (including attorneys' fees
and disbursements) which Lender may incur as a direct or indirect consequence
of: (i) the making of the Loan, except for violations of laws or regulations by
Lender; or (ii) Borrower's failure to perform any obligations as and when
required by this Agreement or any of the other Loan Documents; or (iii) any
failure at any time of any of Borrower's representations or warranties to be
true and correct; or (iv) any act or omission by Borrower, any contractor,
subcontractor or material supplier, or any engineer, architect or other person
or entity with respect to any of the Property or the Improvements. Borrower
shall pay immediately upon Lender's demand any amounts owing under this
indemnity together with interest from the date the indebtedness arises until
paid at the rate of interest applicable to the principal balance of the Note
after default or maturity as specified therein. Borrower's duty to indemnify
Lender shall survive the release and cancellation of the Note and the
reconveyance or partial reconveyance of the Deed of Trust.
7.4 Books and Records. Borrower shall maintain complete books of
account and other records for the Property and the Improvements and for
disbursement and use of the Loan proceeds and Borrower's Funds, and the same
shall be available for inspection and copying by Lender.
7.5 Further Assurances. At Lender's request and at Borrower's expense,
Borrower shall execute, acknowledge and deliver any other instruments and
perform any other acts necessary, desirable or proper (as determined by Lender)
to carry out the purposes of the Loan Documents or to perfect and preserve any
liens created by the Loan Documents.
7.6 Form of Documents. The form and substance of all documents,
instruments, and forms of evidence to be delivered to Lender under the terms of
any of the Loan Documents shall be subject to Lender's approval and shall not be
modified, superseded or terminated in any respect without Lender's prior written
approval.
7.7 No Third Parties Benefited. No person other than Lender and
Borrower and their permitted successors and assigns shall have any right of
action under any of the Loan Documents.
7.8 Notices. All written notices and demands under the Loan Documents
shall be deemed served upon delivery or, if mailed, upon receipt after deposit
in United States Postal Service by certified mail, postage prepaid, and
addressed to the address of Borrower or Lender appearing below. Notice of change
of address may be given in the same manner, provided Borrower's address shall be
in the State of California.
7.9 Authority to File Notices. Borrower irrevocably appoints and
authorizes Lender, as Borrower's attorney-in-fact, which agency is coupled with
an interest, to execute and/or record in Lender's or Borrower's name any
notices, instruments or documents that Lender deems appropriate to protect
Lender's interest under any of the Loan Documents.
7.10 Actions. Lender may commence, appear in or defend any action or
proceeding purporting to affect the Property, the Improvements, the Loan
Documents or the rights, duties or liabilities of Borrower or Lender under the
Loan Documents. In exercising this right, Lender may incur and pay costs and
expenses,
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including, without limitation, attorneys' fees and court costs, and Borrower
agrees to pay all such expenses so incurred or paid.
7.11 Relationship of Parties. The relationship of Borrower and Lender
under the Loan Documents is, and shall at all times remain, solely that of
borrower and lender. No partnership, joint venture or fiduciary relationship of
any kind or nature whatsoever exists between Borrower and Lender and Borrower
and Lender are not members of any joint or common enterprise. Lender neither
undertakes nor assumes any responsibility or duty to Borrower or to any third
party with respect to the Property, the Improvements or the Loan, except as
expressly provided in the Loan Documents.
7.12 Lender's Delay. Lender shall not be liable in any way for Lender's
failure to perform or delay in performing under the Loan Documents, and Lender
may suspend or terminate all or any portion of Lender's obligations under the
Loan Documents if Lender's delay or failure results directly or indirectly from,
or is based upon, the action, inaction, or purported action, of any governmental
or local authority, or any war (whether declared or not), rebellion,
insurrection, strike, lock-out, boycott or blockade (whether presently in
effect, announced or in the sole judgment of Lender deemed probable), or any
other cause or event beyond Lender's control.
7.13 Attorneys' Fees; Enforcement. If any attorney is engaged by Lender
to enforce, construe or defend any provision of any of the Loan Documents, or as
a consequence of any Default or event of default under the Loan Documents, with
or without the filing of any legal action or proceeding, Borrower shall pay to
Lender, immediately upon demand, the amount of all attorneys' fees and
disbursements incurred by Lender in connection therewith, together with interest
thereon from the date of such demand at the rate of interest applicable to the
principal balance of the Note after default or maturity as specified therein.
7.14 Assignment. Borrower shall not assign Borrower's interest under
any of the Loan Documents, or in any monies due or to become due thereunder,
without Lender's prior written consent. Any assignment made without Lender's
consent shall be void. Borrower recognizes that this is not an ordinary loan and
that Lender would not make this Loan except in reliance on Borrower's expertise
and reputation, Lender's knowledge of Borrower, and Lender's understanding that
this Agreement is more in the nature of an agreement involving personal services
than a standard loan where Lender would rely on security which already exists.
In this instance, the Improvements are not constructed and Lender is relying on
Borrower's expertise and prior experience to develop the Property and construct
the Improvements in accordance with the terms of the Loan Documents.
7.15 Disclosure of Information. If Lender elects to sell participations
in the Loan, Lender may forward to each participant and prospective participant
all documents and information relating to the Loan and all parties thereto,
whether furnished by Borrower or otherwise.
7.16 Signs. Lender may place on the Property signs stating that Lender
is providing construction financing.
7.17 Lender's Agents. Lender may designate an agent, representative or
independent contractor to exercise any of Lender's rights under the Loan
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Documents. Any reference to Lender in any of the Loan Documents shall include
Lender's agents, employees, representatives or independent contractors.
7.18 Severability. If any provision of the Loan Documents shall be
determined by a court of competent jurisdiction to be invalid, illegal or
unenforceable, that portion shall be deemed severed from the Loan Documents and
the remaining parts shall remain in full force as though the invalid, illegal or
unenforceable portion were not part of the Loan Documents.
7.19 Heirs, Successors and Assigns. The terms of the Loan Documents
shall be binding upon and inure to the benefit of the heirs, personal
representatives, successors and assigns of the parties; provided however, that
this section does not waive the provisions of section 7.14 hereof.
7.20 Rights Cumulative, No Waiver. All Lender's rights and remedies
provided in the Loan Documents, granted by law or otherwise, are cumulative and
may be exercised by Lender at any time. Lender's exercise of any right or remedy
shall not constitute a cure of any Default unless all sums then due and payable
to Lender under the Loan Documents are repaid and Borrower has cured all other
Defaults. No waiver shall be implied from any failure of Lender to take, or any
delay by Lender in taking, action concerning any Default or failure of condition
under the Loan Documents, or from any previous waiver of any similar or
unrelated Default or failure of condition. Any waiver or approval under any of
the Loan Documents must be in writing and shall be limited to its specific
terms.
7.21 Time. Time is of the essence of each term of the Loan Documents.
7.22 Headings. All headings appearing in any of the Loan Documents are
for convenience only and shall be disregarded in construing the Loan Documents.
7.23 Governing Law. The Loan Documents shall be governed by, and
construed in accordance with, the laws of the State of California.
7.24 Integration; Interpretation. The Loan Documents contain or
expressly incorporate by reference the entire agreement of the parties with
respect to the matters contemplated herein and supersede all prior negotiations.
The Loan Documents shall not be modified except by written instrument executed
by all parties. Any reference in any of the Loan Documents to the Property or
the Improvements shall include all or any parts of the Property or the
Improvements. Any reference to the Loan Documents in any of the Loan Documents
includes any amendments, renewals or extensions approved in writing by Lender.
Any reference in this Agreement to the Loan Documents shall include all or any
of the provisions of this Agreement and the other Loan Documents unless
otherwise specified.
7.25 Joint and Several Liability. The liability of all persons and
entities who are in any manner obligated under any of the Loan Documents shall
be joint and several.
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7.26 Incorporation. Exhibits A, B, C, D and E, all attached hereto, are
incorporated into this Agreement.
IN WITNESS WHEREOF, Borrower and Lender have executed this Construction
Loan Agreement as of the date first hereinabove written.
111 PARTNERS, a California general
partnership
By________________________________
Michael J. Smith
General Partner
By________________________________
Roger A. Smith
General Partner
By________________________________
Daniel C. Ross
General Partner
Borrower's Address:
50 Bon Air Center, Suite 140
Greenbrae, CA 94904
Attn: Roger A. Smith
FAIR, ISAAC AND COMPANY,
INCORPORATED, a Delaware corporation
By________________________________
Gerald de Kerchove
Executive Vice President
Lender's Address:
120 North Redwood Drive
San Rafael, CA 94903-1996
Attn: Michael C. Gordon
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EXHIBIT A
CONSTRUCTION LOAN AGREEMENT
(Description of Property)
All of the real property in the City of San Rafael, County of Marin, State of
California, described as follows:
PARCEL ONE:
Parcel 3B, as shown upon that certain Parcel Map entitled "Parcel Map, Lot 3 of
Map of Smith Ranch, Northerly Portion 17 R.M. 39, San Rafael, Marin County,
California", filed for record August 13, 1991 in Book 25 of Parcel Maps, at Page
18, Marin County Records.
Reserving thereform an easement for access, parking, drainage and public
utilities over that portion of the herein described property lying within the
boundaries of that certain, "Mutual Access and Parking Easement, D.E. & P.U.E.",
as shown upon the filed map referred to above.
Said easement to be appurtenant to and for the benefit of Parcel 3A, as shown
upon the filed map referred to above.
PARCEL TWO:
An easement for access, parking, drainage and public utility purposes over that
portion of Parcel 3A, lying within the boundaries of that certain, "Mutual
Access and Parking Easement, D.E. & P.U.E.", as said parcel and easement are
shown upon that certain Parcel Map entitled, "Parcel Map, Lot 3 of Map of Smith
Ranch, Northerly Portion 17 R.M. 39, San Rafael, Marin County, California",
filed for record August 13, 1991 in Book 25 of Parcel Maps, at Page 18, Marin
County Records.
PARCEL THREE:
An easement for storm drainage purposes more particularly described as follows:
Beginning at the Easterly terminus of the course "South 81(0) 38' 00" East,
536.00 feet"; said point being on the Northerly line of Smith Ranch Road and the
Southerly line of Lot 3, as shown and delineated on that certain map entitled,
"Map of Smith Ranch - Northerly Portion", filed for record in Book 17 of Record
Maps at Page 39, Marin County Records; thence leaving said Northerly line of
said Smith Ranch Road (17 RM 39) along the Easterly line of said Lot 3 (17 RM
39)the following courses and distances; Easterly along a tangent curve to the
left whose center bears North 8(0) 22' 00" East, having a radius of 20.00 feet,
through a central angle of 90(0) 00' 00", an arc length of 31.42 feet and thence
North 8(0) 22' 00' East, 23.00 feet; thence leaving said Easterly line of said
Lot 3 (17 RM 39) South 13(0) 12' 17" East 46.24 feet to said Northerly line of
said Smith Ranch Road (17 RM 39); thence along said Northerly line of said Smith
Ranch Road (17 RM 39) North 81(0) 38' 00' West, 37.00 feet to the point of
beginning.
17
<PAGE>
PARCEL FOUR:
An easement for storm drainage over a strip of land 10 feet in width and being 5
feet on each side of the following described line:
Beginning at the Easterly terminus of the course "South 81(0) 38' 00" East,
536.00 feet"; said point being on the Northerly line of Smith Ranch Road and the
Southerly line of Lot 3, as shown and delineated on that certain Map entitled,
"Map of Smith Ranch Northerly Portion", filed for record in Book 17 of Record
Maps at Page 39, Marin County Records; thence leaving said Northerly line of
said Smith Ranch Road (17 RM 39) along the Easterly line of said Lot 3 (17 RM
39) the following courses and distances; Easterly along a tangent curve to the
left whose center bears North 8(0) 22' 00" East, having a radius of 20.00 feet,
through a central angle of 90(0) 00' 00", an arc length of 31.42 feet, and
thence North 8(0) 22' 00" East, 128 feet to the true point of beginning; thence
leaving said Easterly line of said Lot 3 (17 RM 39) South 81(0) 38' 00' East
60.00 feet to the Westerly line of Parcel D, as shown on said "Map of Smith
Ranch - Northerly Portion" (17 RM 39), being the terminus of this easement.
PARCEL FIVE:
An easement for access and public utility purposes more particularly described
as follows:
Beginning at the Easterly terminus of the course "South 81(0) 38' 00' East,
536.00 feet"; said point being on the Northerly line of Smith Ranch Road and the
Southerly line of Lot 3, as shown and delineated on that certain Map entitled,
"Map of Smith Ranch - Northerly Portion", filed for record in Book 17 of Record
Maps at Page 39, Marin County Records; thence leaving said Northerly line of
said Smith Ranch Road (17 RM 39) along the Easterly line of said Lot 3 (17 RM
39) the following courses and distances; Easterly along a tangent curve to the
left whose center bears North 8(0) 22' 00" East, having a radius of 20.00 feet,
through a central angle of 90(0) 00' 00", an arc length of 31.42 feet; thence
North 8(0) 22' 00" East, 271.13 feet and thence Northeasterly along a tangent
curve to the left whose center bears North 81(0) 38' 00" West, having a radius
of 670 feet, through a central angle of 2(0) 00' 00", an arc length of 23.39
feet; thence leaving said Easterly line of said Lot 3 (17 RM 39) South 81(0) 38'
00" East, 27.41 feet; thence South 8(0) 22' 00' West, 141.15 feet; thence
Southerly along a tangent curve to the left whose center bears South 81(0) 38'
00' East, having a radius of 292 feet, through a central angle of 10(0) 59' 17",
an arc length of 56.00 feet; thence Southerly along a reverse curve to the right
whose center bears, South 87(0) 22' 43" West, having a radius of 308.00 feet,
through a central angle of 10(0) 59' 17", an arc length of 59.07 feet; thence
South 8(0) 22' 00" West, 59.00 feet to said Northerly line of said Smith Ranch
Road; thence along said Northerly line of said Smith Ranch Road (17 RM 39) North
81(0) 38' 00" West, 58.00 feet to the point of beginning.
18
<PAGE>
EXHIBIT B
CONSTRUCTION LOAN AGREEMENT
(Description of Improvements and
Plans and Specifications)
1. Description of Improvements. The Improvements consist of a general
purpose two-story office building, fully air conditioned and sprinklered, with
one elevator, of steel and wood frame construction, tar and gravel roof,
containing approximately 24,944 square feet of usable area (approximately 26,362
square feet of gross building area), with on-site parking for 89 vehicles and
fully landscaped grounds, together with all appurtenances, fixtures, equipment
and interior tenant improvements.
2. Description of Plans and Specifications. The Plans and
Specifications described below were prepared for use by Borrower and Contractor
in constructing the Improvements, and Borrower hereby represents and warrants to
Lender that the description of the Plans and Specifications set forth below is
accurate and complete.
Latest
Revision
Description Date
(Sheet(s) or Page(s)) Prepared By Date if any
- --------------------- ----------- ---- ------
19
<PAGE>
EXHIBIT C
CONSTRUCTION LOAN AGREEMENT
(Loan Documents)
The loan documents numbered 1 through 8, inclusive, below, and
amendments, modifications and supplements thereto which have received the prior
written consent of Lender, and any documents executed in the future that are
approved by Lender and that recite that they are "Loan Documents" for purposes
of this Agreement, are collectively referred to as the "Loan Documents":
1. This Agreement;
2. Promissory Note of even date herewith, in the original principal
amount of the Loan, made by Borrower and payable to the order of Lender
("Note");
3. Construction Deed of Trust, Assignment of Rents and Security
Agreement of even date herewith executed by Borrower, as trustor, to California
Land Title Company of Marin, a California corporation, as trustee, for the
benefit of Lender, as beneficiary ("Deed of Trust");
4. Assignment of Lessor's Interest in Leases of even date herewith
executed by Borrower in favor of Lender;
5. Environmental Indemnity of even date herewith executed by Borrower
in favor of Lender;
6. State of California Uniform Commercial Code - Financing Statement -
Form UCC-1 executed by Borrower, as debtor, in favor of Lender, as secured
party; and
7. Assignment of Architect's/Engineer's Agreements and Plans and
Specifications and Architect's/Engineer's Consent of even date herewith executed
by Borrower and Architect in favor of Lender.
20
<PAGE>
EXHIBIT D
CONSTRUCTION LOAN AGREEMENT
(Financial Requirement Analysis)
The financial analysis set forth herein represents an analysis of the
total costs necessary, in Borrower's estimation, to perform Borrower's
obligations under the Loan Documents through final completion of the
Improvements. Column A, "Total Costs," sets forth Borrower's representation of
the maximum costs for each Item specified in Column A. Column B, "Costs Paid By
Borrower," sets forth Borrower's representation of costs that Borrower has paid
or has caused to be paid from other sources of funds for each Item specified in
Column B. Column C, "Costs To Be Paid By Borrower," sets forth Borrower's
representation of costs that Borrower will pay or will cause to be paid from
other sources of funds for each Item specified in Column C. Column D,
"Disbursement Budget," sets forth the portion of the Loan and Borrower's Funds
which has been allocated for each Item specified in Column D and will be
disbursed pursuant to the terms, covenants, conditions and provisions of Exhibit
E and the Loan Documents. Unless specified otherwise, all references to Columns
or Items in this Agreement refer to Columns or Items in this Exhibit D.
21
<PAGE>
<TABLE>
FINANCIAL REQUIREMENT ANALYSIS
<CAPTION>
- -------------------------------------------- -------------------- -------------------- ----------------------- ---------------------
(A) TOTAL COSTS (B) COSTS PAID (C) COSTS TO BE (D) DISBURSEMENT
BY BORROWER PAID BY BORROWER BUDGET (a) (b)
- -------------------------------------------- -------------------- -------------------- ----------------------- ---------------------
<S> <C> <C> <C> <C>
1. LAND COST
- -------------------------------------------- -------------------- -------------------- ----------------------- ---------------------
*2. Construction Costs of
Improvements
($____ sq. ft)
*3. Tenant Improvement Costs
($____ sq. ft)
*4. Site Work Costs
($____ sq. ft)
*5. Offsite Costs
($____ sq. ft)
6. Architect and Engineering Fees
7. Government Fees (permits,
bonds, etc.)
8. Operating Costs during
construction (job supervision,
utilities, etc.)
*9. Contingency Reserve
(____% of #'s 2-5)
10. Other Hard Costs
a. _____________
b. _____________
c. _____________
11. TOTAL HARD COSTS
(Lines 2-10) $ $ $ $
- -------------------------------------------- -------------------- -------------------- ----------------------- ---------------------
12. Interest Reserve
13. Taxes during construction
14. Insurance during construction
15. Lender Loan Fee
16. Permanent Loan Fee
17. Title, Recording and
Escrow expenses
18. Legal Fees
19. Promotion and Advertising
20. Commission Expense
21. Organization Expenses
(developer overhead)
22. Soft Costs Contingency
23. Other Soft Costs:
a. _____________
b. _____________
c. _____________
24 TOTAL SOFT COSTS
(Lines 12-23) $ $ $ $
- -------------------------------------------- -------------------- -------------------- ----------------------- ---------------------
25. CUMULATIVE TOTALS
(Lines 1, 11 & 24) $ $ $ $
- -------------------------------------------- -------------------- -------------------- ----------------------- ---------------------
<FN>
Footnotes:
(a) Borrower's Funds in the amount of $__________ are included in the total
shown on line #25 of the Disbursement Budget. Unless specified otherwise,
all such funds shall be disbursed prior to any disbursement of Loan
proceeds.
(b) These funds will be available on or after the Effective Date as defined
in the Construction Loan Agreement.
* Items requiring retention.
</FN>
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
EXHIBIT E
CONSTRUCTION LOAN AGREEMENT
(Disbursement Plan)
A. Timing of Disbursements. On or about the ____( ) day of each month,
or at such other times as Lender may deem appropriate, Borrower shall submit to
Lender a written itemized statement ("Application for Payment"), signed by
Borrower, setting forth:
1. A description of the work performed, materials supplied and costs
incurred or due for which disbursement is requested with respect to any line
item ("Item") shown in Column D ("Disbursement Budget") of the Financial
Requirement Analysis attached as Exhibit D to this Agreement; and
2. The total amount incurred, expended or due for each requested Item
less prior disbursements.
Each Application for Payment by Borrower shall constitute a
representation and warranty by Borrower that Borrower is in compliance with all
the conditions precedent specified in section 2.1 of this Agreement.
B. Lender's Right to Condition Disbursements. Lender shall have the
right to condition any disbursement upon Lender's receipt and approval of the
following:
1. The Application for Payment and an itemized requisition for payment
of Items 2 through 10 as shown in the Disbursement Budget ("Hard Costs");
2. Bills, invoices, documents of title, vouchers, statements, payroll
records, receipts and any other documents evidencing the total amount expended,
incurred or due for any requested Items;
3. Evidence of Borrower's use of a lien release, joint check and
voucher system acceptable to Lender for payments or disbursements to any
contractor, subcontractor, materialman, supplier or lien claimant;
4. Architect's, inspector's or engineer's periodic certifications of
the percentage or stage of construction that has been completed and its
conformance to the Plans and Specifications and the Requirements based upon any
such architect's, inspector's or engineer's periodic, physical inspections of
the Property and the Improvements;
5. Waivers and releases of mechanics' liens, stop notice claims,
equitable lien claims or other lien claim rights;
6. Evidence of Borrower's compliance with the provisions of sections
3.2 and 5.1 of this Agreement;
23
<PAGE>
7. Valid, recorded Notice(s) of Completion for the Improvements or any
portions of the Improvements for which Notice(s) of Completion may be recorded
under applicable law;
8. The Architect's and Engineer's, if any, Certificate of Substantial
Completion prior to the final retention disbursement of Hard Costs
9. Any other document, requirement, evidence or information that Lender
may request under any provision of the Loan Documents; and
10. In the event that any Application for Payment includes the cost of
materials stored on the Property ("Onsite Materials"), such Application for
Payment shall include each of the following: (a) evidence that the Onsite
Materials have been paid for in full by Borrower; (b) evidence that the Onsite
Materials are insured as required hereunder; and (c) evidence that the Onsite
Materials are stored in an area on the Property for which adequate security is
provided against theft and vandalism. Borrower acknowledges that this approval
process may result in disbursement delays and Borrower consents to all such
delays.
C. Periodic Disbursements. The Disbursement Budget (Column D) shall be
disbursed by Lender into the Account or to or for the benefit or account of
Borrower, as determined by Lender, periodically as follows:
1. Land Cost. The portion allocated to Land Cost, Column D, Item ____,
initially totaling ____dollars ($____), shall be disbursed as follows:
____________________________.
2. Construction Costs, Site Work Costs and Offsite Costs. The portion
allocated to Construction Costs, Site Work Costs and Offsite Costs, Column D,
Items ____, initially totaling ____ dollars ($____), shall be disbursed as
construction progresses for the payment of Construction Costs, Site Work Costs
and Offsite Costs Items up to ninety percent (90%) of the amount allocated for
any requested Item less prior disbursements. The remaining ten percent (10%) of
the amounts allocated to Construction Costs, Site Work Costs and Offsite Costs
Items shall be disbursed after the Improvements are fully completed in
accordance with the Plans and Specifications and the Requirements, the statutory
lien period has expired, and Lender has received a lien-freeLP-10 re-write of
the Title Policy and evidence satisfactory to Lender of lien-free final
completion.
3. Tenant Improvement Costs. The portion allocated to Tenant
Improvement Costs, Column D, Item ____,initially totaling ____dollars ($____),
shall be disbursed as construction progresses for the payment of Tenant
Improvement Costs up to the maximum of the lower of ____ dollars ($____) per
square foot or the actual cost per square foot of completed Tenant Improvements
less prior disbursements. The remaining ____dollars ($____) of the amount
allocated to Tenant Improvement Costs shall be disbursed after the Tenant
Improvements are fully completed in accordance with tenant improvement plans and
specifications (that have previously been approved in writing by Lender) and the
Requirements, the statutory lien period has expired, and Lender has received a
lien-free LP-10 re-write of the Title Policy and evidence satisfactory to Lender
of lien-free final completion.
24
<PAGE>
4. Architect and Engineering Fees. The portion allocated to Architect
and Engineering Fees, Column D, Item ____, initially totaling ____ dollars
($____ ), shall be disbursed for the payment of Architect and Engineering Fees.
5. Government Fees. The portion allocated to Government Fees, Column D,
Item ____ , initially totaling ____ dollars ($____), shall be disbursed for the
payment of Government Fees.
6. Operating Costs. The portion allocated to Operating Costs, Column D,
Item ____, initially totaling ____ dollars ($____), shall be disbursed for the
payment of Operating Costs incurred during construction as Operating Costs
become due and payable.
7. Contingency Reserve. The portion allocated to Contingency Reserve,
Column D, Item ____, initially totaling ____ dollars ($____), and any increases
in the Contingency Reserve pursuant hereto, shall be reallocated periodically to
such other Items as Borrower shall, from time to time, request in writing and
Lender shall approve in writing. After any such reallocation, the portion of the
Contingency Reserve that has been reallocated will be disbursed in accordance
with the provisions governing the disbursement of the Item(s) to which such
portion of the Contingency Reserve has been allocated. If the actual cost or a
revised guaranteed cost of an Item is less than the maximum amount of the
Disbursement Budget allocated to any such Item, then any such excess amounts may
be reallocated to the Contingency Reserve from time to time upon Borrower's
written request and Lender's written approval. Any amounts reallocated to this
Item will be disbursed in accordance with this paragraph. The increase,
reallocation or depletion, or refusal of Lender to increase, reallocate or
deplete, the Contingency Reserve shall not release Borrower from any of
Borrower's obligations under the Loan Documents.
8. Other Hard Costs. The portion allocated to Other Hard Costs, Column
D, Item ____, initially totaling ___ dollars ($____), shall be disbursed as
construction progresses for the payment of Other Hard Costs.
9. Interest Reserve. The portion allocated to Interest Reserve, Column
D, Item ____, initially totaling ____ dollars ($____), shall be disbursed
directly to Lender for the payment of interest which accrues and becomes due
under the Note during construction. Lender is hereby authorized to charge the
Loan directly for such interest payments as they become due. Lender shall
provide Borrower with a monthly interest statement. Depletion of the Interest
Reserve shall not release Borrower from any of Borrower's obligations under the
Loan Documents, including, without limitation, paying interest accruing under
the Note and depositing Borrower's Funds with Lender pursuant to section 2.1(b)
of this Agreement.
10. Taxes. The portion allocated to Taxes, Column D, Item ____,
initially totaling ____ dollars ($____), shall be disbursed for the payment of
Taxes incurred during construction as Taxes become due and payable. Funds with
Lender pursuant to section 2.1(b) of this Agreement.
11. Insurance. The portion allocated to Insurance, Column D, Item ____,
initially totaling ____ dollars ($____), shall be periodically disbursed for the
payment of Insurance premiums during construction as Insurance premiums become
due and payable.
25
<PAGE>
12. Lender Loan Fee. The portion allocated to Lender Loan Fee, Column
D, Item____, initially totaling ____ dollars ($____), shall be disbursed
directly to Lender for Borrower's credit on the Effective Date for the payment
of Lender's Loan Fee.
13. Permanent Loan Fee. The portion allocated to Permanent Loan Fee,
Column D, Item ____, initially totaling ____ dollars ($____), shall be disbursed
for the payment of a Permanent Loan Fee for permanent financing.
14. Title, Recording and Escrow Expenses. The portion allocated to
Title, Recording and Escrow Expenses, Column D, Item ____, initially totaling
____ dollars ($____), shall be disbursed for the payment of Title, Recording and
Escrow Expenses.
15. Legal Fees. The portion allocated to Legal Fees, Column D, Item
____, initially totaling ____ dollars ($____), shall be disbursed for the
payment of Legal Fees.
16. Promotion and Advertising. The portion allocated to Promotion and
Advertising, Column D, Item ____, initially totaling ____ dollars ($____), shall
be disbursed for the payment of Promotion and Advertising expenses.
17. Commission Expense. The portion allocated to Commission Expense,
Column D, Item ____, initially totaling ____ dollars ($____), shall be disbursed
for the payment of Commission Expense.
18. Organization Expense. The portion allocated to Organization
Expense, Column D, Item ____, initially totaling ____ dollars ($____), shall be
disbursed for the payment of Organization Expense incurred during construction
as Organization Expense becomes due and payable.
19. Soft Costs Contingency. The portion allocated to Soft Cost
Contingency, Column D, Item ____, initially totaling ____ dollars ($____), shall
be periodically reallocated, at the written request of Borrower and with the
written approval of Lender, within the Disbursement Budget, Column D, Items , or
disbursed for cost overruns that have been approved by Lender for Column D,
Items , in accordance with paragraphs hereof, depending upon the intended use of
any such funds.
20. Other Soft Costs. The portion allocated to Other Soft Costs, Column
D, Item ___, initially totaling ____ dollars ($____), shall be disbursed for the
payment of Other Soft Costs.
26
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE is made and entered into effective as of the 2nd
day of December, 1998, between CSM CORPORATION, a Minnesota corporation,
("Landlord") and DYNAMARK, INC., a Minnesota corporation, ("Tenant").
RECITALS
First: The Landlord and Tenant entered into a lease dated March 11, 1997,
covering certain premises located at 4265 Lexington Avenue North,
Arden Hills, Minnesota (the "Lease").
Second: The parties have executed a First Amendment to Lease, dated
September 24, 1997, extending the term of the Lease and
documenting increased construction costs payable by Tenant under
the Lease.
Third: The parties wish to execute this Second Amendment to Lease to
confirm their agreement to certain matters related thereto:
AGREEMENT
In consideration of the above stated premises and the mutual covenants
hereinafter contained, the parties hereby agree that the Lease is modified,
amended, and/or supplemented as follows:
1. Premises. The Premises and certain improvements thereupon shall be and
are hereby modified as shown on the site plan attached hereto as
REVISED EXHIBIT A. REVISED EXHIBIT A replaces and his hereby
substituted for Exhibit A attached to the First Amendment to Lease.
Tenant acknowledges that the Premises are a part of a development which
will include four buildings and associated appurtenant improvements,
all as shown on REVISED EXHIBIT A. Tenant acknowledges and agrees that
the Premises will be subject to and benefitted by various non-exclusive
easements for ingress, egress and access over the private drives
serving the Project, and certain exclusive easements for utilities and
other purposes, provided that the same shall not interfere with the use
and enjoyment of the Premises, as contemplated herein.
2. Lease Term. Landlord and Tenant are parties to a lease agreement dated
December 2, 1998 (the "New Lease"), covering certain premises and a new
building to be constructed thereon located adjacent to the Premises,
all as shown on REVISED EXHIBIT A. The parties agree that the term of
the Lease shall be adjusted such that the term of the Lease shall be
coterminous with the term of the New Lease. More particularly, upon the
commencement date of the New Lease, the term of the Lease shall be
extended and shall run for a period of one hundred fifty-six (156)
months commencing on the commencement date of the New Lease. If the
commencement date of the New Lease is other than the first day of a
calendar month, then the term of the Lease shall continue in full force
and effect for a period of one hundred fifty-six (156) months from and
after the first day of the month next succeeding the commencement date
of the New Lease. When the commencement date of the New Lease has been
established, the parties shall execute an addendum to this Second
Amendment to Lease, confirming the term and expiration date of the
Lease.
3. Subsection 1.5 of the Lease is hereby deleted in its entirety and
replaced with the following:
1 Exhibit 10.23
<PAGE>
"Base Rent. The Base Rental for the Premises during the remaining term
of this Lease shall be as follows:
Monthly Per
Period Base Rent Square Foot
------ --------- -----------
11/1/98 - 07/31/02 $24,062.50 $8.75
08/01/02 - 12/31/06 $25,437.50 $9.25
01/01/07 - New Lease expiration date $26,812.50 $9.75
Option Term:
------------
60 months following the
New Lease expiration date market market
Landlord and Tenant agree that the as built area of the Premises is
33,000 square feet."
4. Remodeling Allowance. Landlord agrees to provide Tenant with a one time
allowance for remodeling the Premises. Landlord's maximum contribution
towards the costs of remodeling will be based upon the time that such
remodeling occurs, in accordance with the following schedule:
Period of Maximum Allowance
Remodeling Expenditure Amount Per Square Foot
---------------------- ----------------------
1/1/01 - 12/31/02 $3.00
1/1/03 - 12/31/04 $3.75
1/1/05 - 12/31/06 $4.50
1/1/07 - 12/31/08 $5.25
The allowance shall apply towards Tenant's actual remodeling costs and
shall be payable to Tenant upon completion of remodeling and receipt by
Landlord of evidence of payment under normal and customary construction
lending procedures. Landlord shall not be required to provide any
allowance on costs submitted for reimbursement after December 31, 2010.
5. Guaranty. Landlord has required, as a condition to its execution of
this Second Amendment to Lease, that Fair, Isaac and Company,
Incorporated unconditionally guarantee the full performance of Tenant's
obligations under the Lease, as amended. Tenant agrees to deliver such
guaranty, in the form of EXHIBIT E attached hereto and incorporated
herein by reference, within ten (10) days following the full execution
of this Second Amendment to Lease by Landlord and Tenant. In the event
Tenant fails to deliver such guaranty, Landlord may, at its option,
terminate this Second Amendment to Lease upon five (5) days written
notice to Tenant.
6. Section 1.4(B) of the Lease is deleted in its entirety and is replaced
with the following:
"Option to Extend. Subject to the terms and conditions hereinafter set
forth, Tenant shall have the option to extend the term of this Lease
for one (1) additional sixty (60) month term ("Option Term") upon and
pursuant to the same conditions contained herein. This option may be
exercised by written notice of exercise from Tenant to Landlord given
not less than one (1) year prior to the expiration of the Lease Term.
Tenant may exercise this option only if: (i) no condition of default
exists with respect to Tenant's performance of its obligations under
the Lease; and (ii) Tenant simultaneously exercises its options to
extend under the New Lease and under the Existing Lease covering the
premises located at 4295 Lexington Avenue North in Arden Hills,
Minnesota (as defined in Section 14.12 of the New Lease). Base Rent for
the Option Term shall be at the fair market rate for comparable space
in the north suburban geographic area. The fair market rent shall be
agreed upon by Tenant and Landlord within sixty (60) days of Tenant's
notice to Landlord of its irrevocable intent to exercise its option to
extend set forth herein. The fair market rental rate shall be
determined in accordance with the definition set forth in Section 7 of
the
2
<PAGE>
Existing Lease dated May 1, 1995 and amended December 30, 1996 for the
premises located at 4295 Lexington Avenue North in Arden Hills,
Minnesota. In the event that Landlord and Tenant fail to agree to the
fair market rental rate in the time period set forth herein, then the
fair market rent shall be established in accordance with the
arbitration procedures set forth in section 8 of the Existing Lease for
the premises located at 4295 Lexington Avenue North in Arden Hills,
Minnesota. If Tenant fails to exercise this option as aforesaid, this
option shall be null and void and of no further force and effect."
7. Miscellaneous. Except as expressly stated herein, the Lease shall
remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
Lease to be executed the day and year first above written.
LANDLORD: TENANT:
CSM CORPORATION DYNAMARK, INC.
BY: _______________________________ BY: _______________________________
ITS: _______________________________ ITS: _______________________________
3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PARTICIPATION AGREEMENT
Among
FAIR, ISAAC AND COMPANY, INC.
And
LEASE PLAN NORTH AMERICA, INC.
And
THE PARTICIPANTS NAMED HEREIN
And
ABN AMRO BANK N.V.,
as Agent for the Participants
May 15, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. INTERPRETATION.............................................2
1.01. Definitions................................................2
1.02. Rules of Construction......................................2
SECTION 2. LEASE FACILITY.............................................2
2.01. Acquisition, Lease, Amount Limitations, Etc. ..............2
2.02. Participation Agreement....................................4
2.03. Advance Requests...........................................5
2.04. Fees.......................................................7
2.05. Funding of Advances........................................7
2.06. Sharing of Payments........................................8
2.07. Other Payment Terms.......................................11
2.08. Commitment Reductions.....................................12
2.09. Extensions................................................13
2.10. Nature of the Transactions................................14
2.11. Security..................................................15
2.12. Change of Circumstances...................................18
2.13. Taxes on Payments.........................................20
2.14. Funding Loss Indemnification..............................21
2.15. Replacement of Participants...............................22
SECTION 3. CONDITIONS PRECEDENT......................................22
3.01. Initial Acquisition Advance...............................22
3.02. Tract 2 Acquisition Advance...............................22
3.03. Improvement/Expense Advances..............................23
3.04. Other Conditions Precedent................................23
3.05. Covenant to Deliver.......................................23
SECTION 4. REPRESENTATIONS AND WARRANTIES............................23
4.01. Lessee's Representations and Warranties...................23
4.02. Lessor's Representations and Warranties...................29
4.03. Participants' Representations and Warranties..............30
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TABLE OF CONTENTS
(continued)
Page
SECTION 5. COVENANTS.................................................31
5.01. Lessee's Affirmative Covenants............................31
5.02. Lessee's Negative Covenants...............................34
5.03. Lessee's Financial Covenants..............................41
5.04. Lessor's Covenants........................................42
5.05. Participants' Covenants...................................43
SECTION 6. LESSOR, AGENT AND THEIR RELATIONS WITH PARTICIPANTS.......43
6.01. Appointment of Agent......................................43
6.02. Powers and Immunities.....................................43
6.03. Reliance..................................................44
6.04. Defaults..................................................44
6.05. Indemnification...........................................44
6.06. Non-Reliance..............................................44
6.07. Resignation or Removal of Agent...........................45
6.08. Authorization.............................................45
6.09. Lessor and Agent in their Individual Capacities...........45
SECTION 7. MISCELLANEOUS.............................................46
7.01. Notices...................................................46
7.02. Expenses..................................................48
7.03. Indemnification...........................................48
7.04. Waivers; Amendments.......................................49
7.05. Successors and Assigns....................................49
7.06. Setoff....................................................53
7.07. No Third Party Rights.....................................53
7.08. Partial Invalidity........................................53
7.09. JURY TRIAL................................................53
7.10. Counterparts..............................................54
7.11. No Joint Venture, Etc. ...................................54
7.12. Usury Savings Clause......................................54
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TABLE OF CONTENTS
(continued)
Page
7.13. Confidentiality...........................................54
7.14. Governing Law.............................................54
7.15. Consent to Jurisdiction...................................55
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TABLE OF CONTENTS
(continued)
Page
SCHEDULES
I Participants
II Pricing Grid
1.01 Definitions
1.02 Rules of Construction
3.01 Conditions Precedent to Initial Acquisition Advances
3.02 Conditions Precedent to Tract 2 Acquisition Advances
4.01(f) Environmental Reports
4.01(q) Subsidiaries
4.01(u) Property Representations
4.01(x) Budget
5.02(a) Existing Indebtedness
5.02(b) Existing Liens
5.02(d) Investment Policy
EXHIBITS
A Land
B Lease Agreement
C Purchase Agreement
D Construction Agency Agreement
E Acquisition Request
F Improvement/Expense Advance Request
G(1) 364-Day Commitment Extension Request
G(2) Lease Extension Request
H Assignment of Construction Agreements
I Cash Collateral Agreement
J Assignment of Lease
K Lessor Deed of Trust
L Lessor Security Agreement
M Assignment Agreement
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PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT (this "Agreement" herein), dated as of May
15, 1998, is entered into by and among:
(1) FAIR, ISAAC AND COMPANY, INC., a Delaware corporation
("Lessee");
(2) LEASE PLAN NORTH AMERICA, INC., an Illinois corporation
("Lessor");
(3) Each of the financial institutions from time to time
listed in Schedule I hereto, as amended from time to time (such financial
institutions to be referred to collectively as the "Participants"); and
(4) ABN AMRO BANK N.V., acting through its San Francisco
International Branch, as agent for the Participants (in such capacity, "Agent").
RECITALS
A. Lessee has requested Lessor and the Participants to provide to
Lessee a lease facility pursuant to which:
(1) Lessor would (a) purchase the land described in Part 1 of
Exhibit A (as more fully defined in Schedule 1.01, the "Tract 1 Land"),
(b) purchase the land described in Part 2 of Exhibit A (as more fully
defined in Schedule 1.01, the "Tract 2 Land" and collectively with the
Tract 1 Land, or individually, as the case may be, the "Land"), (c)
lease to Lessee the Land, (c) appoint Lessee as Lessor's agent to make
certain improvements on the Land (which improvements will be owned by
Lessor), (d) make advances to finance such improvements and to pay
certain related expenses and (e) grant to Lessee the right to purchase
the Land and such improvements; and
(2) The Participants would participate in such lease facility
by (a) funding the purchase price and other advances to be made by
Lessor and (b) acquiring participation interests in the rental and
certain other payments to be made by Lessee.
B. Lessor and the Participants are willing to provide such lease
facility upon the terms and subject to the conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
EXHIBIT 10.38
<PAGE>
SECTION 1. INTERPRETATION.
1.01. Definitions. Unless otherwise indicated in this Agreement or any
other Operative Document, each term set forth in Schedule 1.01, when used in
this Agreement or any other Operative Document, shall have the respective
meaning given to that term in Schedule 1.01 or in the provision of this
Agreement or other document, instrument or agreement referenced in Schedule
1.01.
1.02. Rules of Construction. Unless otherwise indicated in this
Agreement or any other Operative Document, the rules of construction set forth
in Schedule 1.02 shall apply to this Agreement and the other Operative
Documents.
SECTION 2. LEASE FACILITY.
2.01. Acquisition, Lease, Amount Limitations, Etc.
(a) Acquisition, Lease, Etc. Subject to the terms and
conditions of this Agreement (including the limitations set forth in
Subparagraph 2.01(b)):
(i) On a date specified by Lessee pursuant to
Subparagraph 2.03(a) for the acquisition of the Tract 1 Land
(the "Closing Date"):
(A) Lessor shall purchase (with funds provided by
the Participants) the Tract 1 Land, together with any
Appurtenant Rights thereto, all Improvements thereto and
other related property;
(B) Immediately upon the purchase by Lessor of such
property, Lessor and Lessee shall execute (i) a Lease
Agreement in the form of Exhibit B (the "Lease
Agreement"), pursuant to which Lessor will lease to
Lessee such property, (ii) a Purchase Agreement in the
form of Exhibit C (the "Purchase Agreement"), pursuant to
which Lessor grants to Lessee the right to purchase such
property and (iii) a Construction Agency Agreement in the
form of Exhibit D (the "Construction Agency Agreement"),
pursuant to which Lessee agrees to construct certain
improvements to such property;
(ii) On a date specified by Lessee pursuant to
Subparagraph 2.03(a) for the acquisition of the Tract 2 Land
(the "Tract 2 Acquisition Date"):
(A) Lessor shall purchase (with funds
provided by the Participants) the Tract 2 Land,
together with any Appurtenant Rights thereto, all
Improvements thereto and other related property; and
(B) Immediately upon the purchase and
acquisition by Lessor of such property, Lessor and
Lessee shall execute amendments to the Lease
Agreement, the Purchase Agreement and the
Construction Agency
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Agreement to the extent necessary to add such property to
the property covered thereby; and
(iii) During the period (the "Commitment Period")
beginning on the date of this Agreement and ending on the date
which is 30 months after the date hereof (the "Outside
Completion Date") or, if earlier, the first Business Day of
the first full calendar month immediately succeeding the
earlier of (A) the Completion Date and (B) the date on which
the Unused Total Commitment is $0 (the earlier of the Outside
Completion Date and such first Business Day to be referred to
as the "Commitment Termination Date"), Lessor shall, at the
request of Lessee, make additional advances to Lessee (with
funds provided by the Participants) to pay Permitted
Improvement Costs and Permitted Transaction Expenses
("Improvement/Expense Advances").
(b) Amount Limitations. The advances made by Lessor to
purchase the Land (the "Acquisition Advances") and the
Improvement/Expense Advances made by Lessor (the Acquisition Advances
and the Improvement/Expense Advances to be referred to collectively as
the "Advances") shall be subject to the following limitations:
(i) Until Lessee delivers to Lessor the Plans and
Specifications for all New Improvements to be constructed on
the Property pursuant to Subparagraph 5.01(h) and a revised
Expiration Date Appraisal for each Tract of Property (if
required by Subparagraph 5.01(h)), the aggregate amount of all
portions of all Advances made by Lessor which are allocated to
any Line Item in the Budget, as set forth in the Schedule to
the Acquisition Request or the Improvement/Expense Advance
Request for such Advance pursuant to clause (v) of
Subparagraph 2.03(a) or clause (i)(D) of Subparagraph 2.03(b),
as applicable, shall not exceed shall not exceed 110% of such
Line Item of the Budget:
(ii) Until Lessee delivers to Lessor the Plans and
Specifications for all New Improvements to be constructed on
the Property pursuant to Subparagraph 5.01(h) and a revised
Expiration Date Appraisal for each Tract of Property (if
required by Subparagraph 5.01(h)), the aggregate amount of all
Advances made by Lessor shall not exceed the lesser of (A)
aggregate amount of the Budget or (B) the Expiration Date
Appraisal as delivered on the Closing Date;
(iii) After Lessee delivers to Lessor the Plans and
Specifications for all New Improvements to be constructed on
the Property pursuant to Subparagraph 5.01(h) and a revised
Expiration Date Appraisal for each Tract of Property (if
required by Subparagraph 5.01(h)), the aggregate amount of all
Advances made by Lessor for such Tract of Property (including
the Acquisition Advance and all Improvement/Expense Advances
for such Tract of Property) shall not exceed the Expiration
Date Appraisal for such Tract of Property;
(iv) The aggregate amount of all Advances made during
the period commencing on the date of this Agreement and ending
on the date 364 days
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thereafter (the "364-Day Commitment Termination Date") shall
not exceed Sixteen Million Dollars ($16,000,000) (the "364-Day
Commitment"); and;
(v) The aggregate amount of all Advances made during
the period commencing on the date of this Agreement and ending
on the Commitment Termination Date (such period to be referred
to as the "Commitment Period") shall not exceed Fifty-Five
Million Dollars ($55,000,000) (the "Total Commitment").
Of the Total Commitment, Thirty-Nine Million Dollars
($39,000,000) (the "Thirty Month Commitment") is available at
any time during the entire Commitment Period. Unless otherwise
directed by Lessee, all Advances made by Lessor on or prior to
the 364-Day Commitment Termination Date shall be allocated
first to the 364-Day Commitment and, after the 364-Day
Commitment is reduced to zero, to the Thirty-Month Commitment.
All Advances made by Lessor after the 364-Day Commitment
Termination Date shall be allocated to the Thirty-Month
Commitment, whether or not the 364-Day Commitment has been
reduced to zero.
(c) Tranches. Each Advance shall consist of a Tranche A
Portion, a Tranche B Portion and a Tranche C Portion. For accounting
purposes, the Tranche A Portion and Tranche B Portion of each Advance
shall constitute debt and the Tranche C Portion shall constitute
equity.
2.02. Participation Agreement.
(a) Advances. Each Participant severally, unconditionally and
irrevocably agrees with Lessor to participate in each Advance made by
Lessor in an amount equal to such Participant's Proportionate Share of
such Advance; provided, however, that the aggregate amount of each
Participant's Proportionate Share of all Advances shall not exceed such
Participant's Commitment. Each Participant shall fund its Proportionate
Share of each Advance as provided in Subparagraph 2.05(a). Each
Participant's Proportionate Share of each Advance shall consist of such
Participant's Tranche A Portion, Tranche B Portion and Tranche C
Portion of such Advance.
(b) Payments. In consideration of each Participant's
participation in each Advance made by Lessor, such Participant shall
participate in the payments made by Lessee under this Agreement and the
other Operative Documents as provided in Paragraph 2.06.
(c) Other Rights of Participants and Agent.
(i) Until all amounts payable to Agent and
Participants under this Agreement and the other Operative
Documents are paid in full, Lessee shall deliver all notices
for Lessor under this Agreement and the other Operative
Documents to Agent at the office or facsimile number and
during the hours specified in Paragraph 7.01. Agent shall
promptly furnish to Lessor and each Participant copies of each
such notice and, in the case of each request for an
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<PAGE>
Advance, shall notify each Participant of the amount of such
Participant's Proportionate Share of the Advance requested
thereby.
(ii) Lessor is not an agent for Participants or Agent
and may exercise or refrain from exercising its rights under
this Agreement and the other Operative Documents in its
discretion; provided, however that, until all amounts payable
to Agent and Participants under this Agreement and the other
Operative Documents are paid in full, (A) Lessor shall,
subject to the limitations set forth in Section VI, be
required to act or to refrain from acting upon instructions of
the Required Participants as provided in Paragraph 6.03 and
(B) Agent may exercise any or all of the rights and remedies
of Lessor, and shall be entitled to the other benefits
afforded Lessor, under this Agreement and the other Operative
Documents.
(iii) Neither Agent nor any Participant shall have
any right, title or interest in the Property except for the
Lien therein granted to Agent, for the benefit of the
Participants, in the Lessor Deed of Trust, the Assignment of
Lease and the Lessor Security Agreement.
2.03. Advance Requests.
(a) Acquisition Request. Lessee shall request Lessor to
purchase the Land by delivering to Agent an irrevocable written request
in the form of Exhibit E, appropriately completed (the "Acquisition
Request"), which specifies, among other things:
(i) The Tract of Land to be purchased;
(ii) The amount of such requested Acquisition
Advance, including the amount of the Acquisition Price and the
Permitted Transaction Expenses (which may include expenses
previously paid by Lessee) included in such Acquisition
Advance;
(iii) The date selected by Lessor as the Acquisition
Date for such purchase, which shall be, (A) in the case of the
Acquisition Advance to purchase the Tract 1 Land (the "Initial
Acquisition Advance"), on a Business Day on or prior to May
31, 1998 and (B) in the case of the Acquisition Advance to
purchase the Tract 2 Land (the "Tract 2 Acquisition Advance"),
on a date that is a Business Day on or prior to July 1, 1999;
(iv) The Portions into which such Advance(s) is (are)
to be divided and the Rental Period for each Portion; and
(v) If Lessee has not yet delivered the Plans and
Specifications as required by Subparagraph 5.01(h) and any
revised Expiration Date Appraisal required by Subparagraph
5.01(h), a Schedule to such Acquisition Request setting forth
by reference to Line Items in the Budget the purpose for which
each portion of such Advance will be utilized and a
reconciliation by Line Items in the Budget of all Advances
made prior to the date of such Advance.
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(b) Improvement/Expense Advance Requests. Lessee shall request
Lessor to make each Improvement/Expense Advance by delivering to
Lessor:
(i) An irrevocable written request in the form of
Exhibit F, appropriately completed (an "Improvement/Expense
Advance Request"), which specifies, among other things:
(A) The amount of such Advance, which shall
be in the amount of $500,000 or an integral multiple
of $100,000 in excess thereof;
(B) The date of such Advance, which shall be
the Closing Date or the first Business Day of a
month;
(C) The Permitted Improvement Costs and
Permitted Transaction Expenses to be paid by such
Advance and the Tract(s) of Land for which payable;
and
(D) If Lessee has not yet delivered the
Plans and Specifications as required by Subparagraph
5.01(h) and any revised Expiration Date Appraisal
required by Subparagraph 5.01(h), a Schedule to such
Improvement/Expense Advance Request setting forth by
reference to Line Items in the Budget the purpose for
which each portion of such Advance will be utilized
and a reconciliation by Line Items in the Budget of
all Advances made prior to the date of such Advance.
(ii) If the proceeds of such Advance are to be used
to purchase Related Goods:
(A) A Supplement to Exhibit B to the Lease
Agreement in the form of Exhibit B(1) to the Lease
Agreement (an "Exhibit B Supplement"), which contains
a description of such Related Goods; and
(B) Bills of sale for all such Related Goods
showing Lessor as the purchaser.
Lessee shall not request more than one (1) Improvement/Expense Advance
in any calendar month.
(c) Delivery of Advance Requests. Etc. Lessee shall deliver to
Lessor the Acquisition Request for the Initial Acquisition Advance at
least three (3) Business Days before the Closing Date and the
Acquisition Request for the Tract 2 Acquisition Advance at least three
(3) Business Day before the Tract 2 Acquisition Date. Lessee shall
deliver each Improvement/Expense Advance Request to Lessor at least
three (3) Business Days before the date of such Advance. The
Acquisition Requests and Improvement/Expense Advance Requests
(collectively, "Advance Requests") shall be delivered by first-class
mail or facsimile as required by Subparagraph 2.02(c) and Paragraph
7.01; provided, however, that Lessee shall promptly deliver to Lessor
the original of any Advance Request initially delivered by facsimile.
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(d) Capitalization of Base Rent During Commitment Period. On
each Scheduled Rent Payment Date occurring under the Lease Agreement
during the Commitment Period, the Base Rent due on such Scheduled Rent
Payment Date shall be capitalized by automatically treating the amount
of such Base Rent as an Improvement/Expense Advance made on such
Scheduled Rent Payment Date. Agent shall notify Lessee, Lessor and each
Participant of the amount of the Base Rent due on each such Scheduled
Rent Payment Date and so treated as an Improvement/Expense Advance.
2.04. Fees.
(a) Agent's Fees. Lessee shall pay to Agent, for its own
account, agent's fees in the amounts and at the times set forth in the
Agent's Fee Letter (the "Agent's Fees").
(b) Commitment Fees. Lessee shall pay to Agent, for the
ratable benefit of the Participants as provided in clause (ii) of
Subparagraph 2.06(c), commitment fees (the "Commitment Fees") as
follows:
(i) Lessee shall pay Commitment Fees of twenty one
hundredths of one percent (0.20%) per annum on the daily
average Unused 364-Day Commitment for the 364-Day Commitment
Period.
(ii) Lessee shall pay Commitment Fees of thirty
hundredths of one percent (0.30%) per annum on the daily
average Unused Thirty-Month Commitment for the entire
Commitment Period.
Lessee shall pay the Commitment Fees in arrears on the first Business
Day in each January, April, July and October (commencing July, 1998)
and on the Commitment Termination Date (or if the Total Commitment is
cancelled on a date prior to such day, on such prior date).
(c) 364-Day Commitment Extension Fee. If Lessor and the
Participants consent to any extension of the 364-Day Commitment
Termination Date requested by Lessee pursuant to Subparagraph 2.09(a),
Lessee shall pay to Agent, for the ratable benefit of Lessor and the
Participants as provided in clause (iii) of Subparagraph 2.06(c), an
extension fee (the "364-Day Commitment Extension Fee") equal to one
tenth of one percent (0.10%) of the Unused 364-Day Commitment on the
original 364-Day Commitment Termination Date. Lessee shall pay the
364-Day Commitment Extension Fee on or prior to the original 364-Day
Commitment Termination Date.
2.05. Funding of Advances.
(a) Participant Funding and Disbursement. Each Participant
shall, before 11:00 a.m. on the date of each Advance, make available to
Agent at its office specified in Paragraph 7.01, in same day or
immediately available funds, such Participant's Proportionate Share of
such Advance. After Agent's receipt of such funds and upon fulfillment
of the applicable conditions set forth in Section 3, Agent will
promptly disburse such funds on behalf of Lessor, in same day or
immediately available funds, as
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directed by Lessee in the Advance Request for such Advance. Each
Acquisition Advance shall be disbursed to an escrow or other account
established for payment of the Acquisition Price and any related
Permitted Transaction Expenses pursuant to the Acquisition Agreement or
otherwise as directed by Lessee in the Acquisition Advance Request.
Each Improvement/Expense Advance shall be disbursed as directed by
Lessee in the Advance Request for such Improvement/Expense Advance.
(b) Participant Failure to Fund. Unless Agent shall have
received notice from a Participant prior to the date of any Advance
that such Participant will not make available to Agent such
Participant's Proportionate Share of such Advance, Agent may assume
that such Participant has made such portion available to Agent on the
date of such Advance in accordance with Subparagraph 2.05(a), and Agent
may, in reliance upon such assumption, disburse the full amount of such
Advance on such date; provided, however, that neither Agent nor Lessor
shall have any obligation to make an Advance requested hereunder in an
amount which exceeds the aggregate amount of funds actually received by
Agent from the Participants on account of their respective
Proportionate Shares of such Advance. If any Participant does not make
the amount of its Proportionate Share of any Advance available to Agent
on or prior to the date such Advance is made, Agent promptly shall
notify such Participant of such failure and such Participant shall pay
to Agent, on demand, interest which shall accrue on such amount until
made available to Agent at rates equal to (i) the daily Federal Funds
Rate during the period from the date of such Advance through the third
Business Day thereafter and (ii) the Base Rate plus two percent (2.0%)
thereafter. A certificate of Agent submitted to any Participant with
respect to any amounts owing under this Subparagraph 2.05(b) shall be
conclusive absent manifest error. If any Participant's Proportionate
Share of any Advance is not in fact made available to Agent by such
Participant within three (3) Business Days after the date of such
Advance, Lessee shall pay to Agent, on demand, an amount equal to such
Proportionate Share together with interest thereon, for each day from
the date such amount was made available to Lessee until the date such
amount is repaid to Agent, at a per annum rate equal to the Base Rate.
(c) Participants' Obligations Several. The failure of any
Participant to fund its Proportionate Share of any Advance shall not
relieve any other Participant of its obligation hereunder to fund its
Proportionate Share of such Advance, and no Participant shall be
responsible for the failure of any other Participant to fund its
Proportionate Share of any Advance on the date of such Advance.
2.06. Sharing of Payments.
(a) Outstanding Lease Amount or any Portion thereof. Lessor
shall share payments applied to reduce the Outstanding Lease Amount or
any Portion thereof as follows:
(i) Each payment of the Outstanding Lease Amount or
any Portion thereof derived from the purchase price paid by
Lessee (or an Assignee Purchaser) to purchase the Property
pursuant to the Purchase Agreement shall be
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shared by the Participants pro rata according to their
respective Outstanding Participation Amounts at the time of
such payment.
(ii) Each payment of the Outstanding Lease Amount or
any Portion thereof derived from the Residual Value Guaranty
Amount paid by Lessee pursuant to the Purchase Agreement shall
be shared first by the Tranche A Participants pro rata
according to their respective Outstanding Tranche A
Participation Amounts at the time of such payment; second, if
any amounts remain after all Outstanding Tranche A
Participation Amounts are paid in full, by the Tranche B
Participants pro rata according to their respective
Outstanding Tranche B Participation Amounts at the time of
such payment; and third, if any amounts remain after all
Outstanding Tranche A Participation Amounts and all
Outstanding Tranche B Participation Amounts are paid in full,
by the Tranche C Participants pro rata according to their
respective Outstanding Tranche C Participation Amounts at the
time of such payment.
(iii) Each payment of the Outstanding Lease Amount or
any Portion thereof derived from:
(A) the purchase price paid by a Designated
Purchaser to purchase the Property pursuant to the
Purchase Agreement;
(B) the Indemnity Amount paid by Lessee
pursuant to the Purchase Agreement; or
(C) Casualty Proceeds or Condemnation
Proceeds related to any of the Property;
Shall be shared first by the Tranche B Participants pro rata
according to their respective Outstanding Tranche B
Participation Amounts at the time of such payment; second, if
any amounts remain after all Outstanding Tranche B
Participation Amounts are paid in full, by the Tranche A
Participants pro rata according to their respective
Outstanding Tranche A Participation Amounts at the time of
such payment; and third, if any amounts remain after all
Outstanding Tranche B Participation Amounts and all
Outstanding Tranche A Participation Amounts are paid in full,
by the Tranche C Participants pro rata according to their
respective Outstanding Tranche C Participation Amounts at the
time of such payment.
(iv) Each payment of the Outstanding Lease Amount or
any Portion thereof derived from the purchase price paid by
any other Person to purchase the Property (whether after the
retention of such Property by Lessor following the Expiration
Date of the Lease Agreement, upon foreclosure or otherwise)
shall be shared first by the Tranche B Participants pro rata
according to their respective Outstanding Tranche B
Participation Amounts at the time of such payment; second, if
any amounts remain after all Outstanding Tranche B
Participation Amounts are paid in full, by the Tranche A
Participants pro rata according to their
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respective Outstanding Tranche A Participation Amounts at the
time of such payment; and third, if any amounts remain after
all Outstanding Tranche B Participation Amounts and all
Outstanding Tranche A Participation Amounts are paid in full,
by the Tranche C Participants pro rata according to their
respective Outstanding Tranche C Participation Amounts at the
time of such payment.
(v) Each payment of the Outstanding Lease Amount or any
Portion thereof derived from Cash Collateral shall be shared
(i) by the Tranche A Participants alone pro rata according to
their respective Outstanding Tranche A Participation Amounts
at the time of such payment, if such payment is made after the
purchase of the Property by a Designated Purchaser pursuant to
the Marketing Option in the Purchase Agreement or (ii) by all
Participants pro rata according to their respective
Outstanding Participation Amounts at the time of such payment
if such payment is made in any other circumstance.
(b) Base Rent. Each payment applied to Base Rent shall be
shared by the Participants which funded the Outstanding Lease Amount or
any Portion thereof pro rata according to (i) the respective
Outstanding Participation Amounts so funded by such Participants, (ii)
the dates on which such Participants so funded such amounts and (iii)
for Base Rent accruing at a Fixed Rental Rate, the respective Fixed
Rate Quotes of such Participants. (If any Participant fails to provide
a Fixed Rate Quote for determining any Fixed Rate for any Rental
Period, such Participant shall, for the purposes of this Subparagraph
2.06(b), be deemed to have provided a Fixed Rate Quote equal to such
Fixed Rate.)
(c) Supplemental Rent. Lessor shall share each payment applied
to Supplemental Rent among the Lessor Parties as follows:
(i) Each payment applied to Agent's Fees shall be
solely for the account of Agent.
(ii) Each payment applied to Commitment Fees shall be
shared by the Participants pro rata according to (A) their
respective Proportionate Shares and (B) in the case of each
Participant which becomes a Participant hereunder after the
date hereof, the date upon which such Participant so became a
Participant.
(iii) Each payment applied to the 364-Day Commitment
Extension Fee shall be shared by the Participants pro rata
according to their respective Proportionate Shares on the date
of such payment.
(iv) Each payment applied to reimburse any Lessor
Party for any fees, costs and expenses incurred by such Lessor
Party shall be solely for the account of such Lessor Party.
(v) Each payment of interest (other than Base Rent)
shall be shared among the Lessor Parties owed the amount upon
which such interest accrues pro rata according to (A) the
respective amounts so owed such Lessor Parties and (B) the
dates on which such amounts became owing to such Lessor
Parties.
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(vi) All other payments under this Agreement and the
other Operative Documents shall be for the benefit of the
Person or Persons specified.
(d) Disproportionate Payments, Etc. If any Participant shall
obtain any payment (whether voluntary, involuntary, through the
exercise of any right of setoff, or otherwise) on account of amounts
owed to it in excess of its ratable share of payments on account of
such amounts obtained by all Participants entitled to such payments,
such Participant shall forthwith purchase from the other Participants
such participations in the payments to be made under the Operative
Documents as shall be necessary to cause such purchasing Participant to
share the excess payment ratably with each of them; provided, however,
that if all or any portion of such excess payment is thereafter
recovered from such purchasing Participant, such purchase shall be
rescinded and each other Participant shall repay to the purchasing
Participant the purchase price to the extent of such recovery together
with an amount equal to such other Participant's ratable share
(according to the proportion of (i) the amount of such other
Participant's required repayment to (ii) the total amount so recovered
from the purchasing Participant) of any interest or other amount paid
or payable by the purchasing Participant in respect of the total amount
so recovered. Lessee agrees that any Participant so purchasing a
participation from another Participant pursuant to this Subparagraph
2.06(d) may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of setoff) with respect to such
participation as fully as if such Participant were the direct creditor
of Lessee in the amount of such participation.
2.07. Other Payment Terms.
(a) Place and Manner of Payments by Lessee. Lessee shall make
all payments due to any Lessor Party under this Agreement and the other
Operative Documents by payments to Agent, for the account of such
Person, at Agent's office, located at the address specified in
Paragraph 7.01, with each payment due to a Participant to be for the
account of such Participant's Applicable Participating Office. Lessee
shall make all payments in lawful money of the United States and in
same day or immediately available funds not later than 11:00 a.m. New
York time on the date due. Agent shall promptly disburse to the
appropriate Person each such payment received by Agent for such Person.
(b) Date. Whenever any payment due under this Agreement or any
other Operative Document shall fall due on a day other than a Business
Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall be included in the computation of
Rent, interest or fees, as the case may be. Whenever this Agreement or
any other Operative Document requires a payment to be made by Lessee
but fails to specify a time for such payment to be made, such payment
shall be due and payable ten (10) days after demand for such payment is
made upon Lessee by the applicable party.
(c) Late Payments. If any amounts required to be paid by
Lessee under this Agreement or any other Operative Document (including
Rent, interest, fees or other amounts) remain unpaid after such amounts
are due, Lessee shall pay interest on the
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aggregate, outstanding balance of such amounts from the date due until
those amounts are paid in full at a per annum rate equal to the Base
Rate plus two percent (2.0%), such rate to change from time to time as
the Base Rate shall change.
(d) Application of Payments. All payments under this Agreement
and the other Operative Documents shall be applied first to unpaid
fees, costs and expenses then due and payable under this Agreement or
any other Operative Document, second to the accrued Base Rent then due
and payable under this Agreement or any other Operative Document and
finally to reduce the Outstanding Lease Amount or any Portion thereof.
(e) Failure to Pay Agent. Unless Agent shall have received
notice from Lessee at least one (1) Business Day prior to the date on
which any payment is due to Lessor or the Participants under this
Agreement or the other Operative Documents that Lessee will not make
such payment in full, Agent may assume that Lessee has made such
payment in full to Agent on such date and Agent may, in reliance upon
such assumption, cause to be distributed to the appropriate Persons on
such due date an amount equal to the amount then due such Persons. If
and to the extent Lessee shall not have so made such payment in full to
Agent, each such Person shall repay to Agent forthwith on demand such
amount distributed to such Person together with interest thereon, for
each day from the date such amount is distributed to such Person until
the date such Person repays such amount to Agent, at (i) the Federal
Funds Rate for the first three (3) days and (ii) the Base Rate plus two
percent (2.0%) thereafter, such rate to change from time to time as the
Base Rate shall change. A certificate of Agent submitted to any Person
with respect to any amounts owing by such Person under this
Subparagraph 2.07(e) shall be conclusive absent manifest error.
2.08. Commitment Reductions.
(a) Reduction or Cancellation of Commitments. Lessee may, at
any time prior to the 364-Day Commitment Termination Date in the case
of the 364-Day Commitment or the Commitment Termination Date in the
case of the Thirty-Month Commitment, upon five (5) Business Days
written notice to Lessor, permanently reduce the 364-Day Commitment or
the Thirty-Month Commitment by the amount of One Million Dollars
($1,000,000) or an integral multiple of One Hundred Thousand Dollars
($100,000) in excess thereof or cancel the 364-Day Commitment or the
Thirty-Month Commitment in its entirety. Any reduction of the 364-Day
Commitment or the Thirty-Month Commitment shall result in a
corresponding reduction of the Total Commitment.
(b) Effect of Commitment Reductions. From the effective date
of any reduction of the 364-Day Commitment or the Thirty-Month
Commitment, the Commitment Fees shall be computed on the basis of the
364-Day Commitment or the Thirty-Month Commitment as so reduced. Once
reduced or cancelled, the 364-Day Commitment, the Thirty-Month
Commitment and the Total Commitment may not be increased or reinstated
without the prior written consent of Lessor and all Participants. Any
reduction of the 364-Day Commitment, the Thirty-Month Commitment or the
Total Commitment pursuant to this Paragraph 2.08 shall be applied
ratably to reduce each Participant's Commitment pro rata in accordance
with its Proportionate Share.
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2.09. Extensions.
(a) 364-Day Commitment Extension. Lessee may request Lessor to
extend the 364-Day Commitment Termination Date for an additional period
of six (6) months by appropriately completing, executing and delivering
to Agent a written request in the form of Exhibit G(1) (a "364-Day
Commitment Extension Request"). Lessee shall deliver the 364-Day
Commitment Extension Request to Agent not more than six (6) months and
not less than two (2) months before the original 364-Day Commitment
Termination Date. Agent shall promptly deliver to Lessor and each
Participant three (3) copies of each 364-Day Commitment Extension
Request received by Agent. If Lessor or a Participant, in its sole and
absolute discretion, consents to the 364-Day Commitment Extension
Request, such Person shall evidence such consent by executing and
returning two (2) copies of the 364-Day Commitment Extension Request to
Agent not later than the ten (10) Business Days after receipt of the
364-Day Commitment Extension Request. Any failure by Lessor or any
Participant so to execute and return a 364-Day Commitment Extension
Request shall be deemed a denial thereof. If Lessee shall deliver a
364-Day Commitment Extension Request to Lessor pursuant to the first
sentence of this Subparagraph 2.09(a), then not later than fifteen (15)
Business Days after receipt of the 364-Day Commitment Extension
Request, Agent shall notify Lessee, Lessor and the Participants in
writing whether (i) Agent has received a copy of the 364-Day Commitment
Extension Request executed by Lessor and each Participant, in which
case the definition of "364-Day Commitment Termination Date" set forth
in Subparagraph 2.01(a) shall be deemed extended to the date which is
six (6) months after the original 364-Day Commitment Termination Date
(subject to receipt by Agent of the 364-Day Commitment Extension Fee),
or (ii) Agent has not received a copy of the 364-Day Commitment
Extension Request executed by Lessor and each Participant, in which
case such 364-Day Commitment Extension Request shall be deemed denied.
Lessee acknowledges that neither Lessor nor any Participant has
promised (either expressly or implicitly), or has any obligation or
commitment, to extend or consent to the extension of the 364-Day
Commitment Termination Date at any time.
(b) Lease Extension. Lessee may, on the terms and conditions
provided herein, request Lessor to extend the Scheduled Expiration Date
for (i) three consecutive and sequential one year periods (each of
which is referred to herein as a "One Year Extension"), or (ii) one
three year period (the "Three Year Extension"), provided that after
giving effect to any such extension, the remaining scheduled term of
the Lease shall not exceed five (5) years. A request by Lessee for the
Three Year Extension shall preclude any request for a One Year
Extension and any request for a One Year Extension shall preclude any
request for the Three Year Extension. Each One Year Extension or the
Three Year Extension shall be requested by Lessee by appropriately
completing, executing and delivering to Agent a written request in the
form of Exhibit G(2), together with an attachment thereto setting forth
the terms upon which Lessee would propose for the requested extension
(a "Lease Extension Request"). Lessee shall deliver each Lease
Extension Request to Agent not less than six (6) months before the then
current Scheduled Expiration Date. Agent shall promptly deliver to
Lessor and each Participant three (3) copies of each Lease Extension
Request received by Agent. If Lessor or a Participant, in its sole and
absolute discretion, consents to a Lease Extension Request,
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such Person shall evidence such consent by executing and returning two
(2) copies of such Lease Extension Request to Agent not later than the
earlier of (i) the last Business Day which is not less than five (5)
months prior to the then current Scheduled Expiration Date or (ii) two
(2) months after the date Agent receives the Lease Extension Request.
Any failure by Lessor or any Participant so to execute and return a
Lease Extension Request shall be deemed a denial thereof. Agent shall
promptly notify Lessee if any Participant has denied such extension
request, and Lessee may seek to obtain an Eligible Assignee to replace
such Participant pursuant to Paragraph 2.15. Lessee shall deliver a
Lease Extension Request to Lessor pursuant to the first sentence of
this Subparagraph 2.09(b), then not later than the last Business Day
which is not less than four (4) months prior to the then current
Scheduled Expiration Date, Agent shall notify Lessee, Lessor and the
Participants in writing whether (i) Agent has received a copy of the
Lease Extension Request executed by Lessor and each Participant
(including any Replacement Participant), in which case the definition
of "Scheduled Expiration Date" set forth in Subparagraph 2.02(a) of the
Lease Agreement shall be deemed extended to the date which is one (1)
year after the then current Scheduled Expiration Date in the case of a
One Year Extension, or three (3) years after the then current Scheduled
Expiration Date in the case of the Three Year Extension (subject to the
receipt by Agent of any amounts payable by Lessee in connection with
such extension), or (ii) Agent has not received a copy of the Lease
Extension Request executed by Lessor and each Participant, in which
case such Lease Extension Request shall be deemed denied. Lessee
acknowledges that neither Lessor nor any Participant has promised
(either expressly or implicitly), or has any obligation or commitment,
to extend or consent to the extension of the Scheduled Expiration Date
at any time and that any such extension shall be subject to then
applicable market, interest and credit conditions.
2.10. Nature of the Transactions. Lessee and the Lessor Parties intend
that the transactions evidenced by this Agreement and the other Operative
Documents constitute operating leases pursuant to FASB 13 for accounting
purposes and loans secured by the Property for federal, state and local income
tax purposes and bankruptcy law purposes. To the extent that this Agreement and
the other Operative Documents reflect the lease form alone, they do so for
convenience only. Lessee and the Lessor Parties intend that the Operative
Documents have the dual form referred to in the first sentence of this
paragraph, notwithstanding the use of the lease form alone.
(a) Tax Treatment. For purposes of all income, franchise and
other taxes imposed upon or measured by income, Lessee and Lessor
Parties intend that the transactions evidenced by the Operative
Documents shall be treated as loans by the Participants (through
Lessor) to Lessee secured by the Property, with Lessee as owner of the
Property. Lessee and the Lessor Parties may only take deductions,
credits, allowances and other reporting positions on their respective
returns, reports and statements which are consistent with such
treatment, unless required to do otherwise by an appropriate taxing
authority or after a clearly applicable change in applicable
Governmental Rules; provided, however, that if an appropriate taxing
authority or a clearly applicable change in applicable Governmental
Rules requires any Lessor Party to take such an inconsistent position,
such Lessor Party shall promptly notify Lessee.
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(b) Other Legal Treatment. For purposes of bankruptcy law,
Lessee and Lessor Parties also intend that the transactions evidenced
by the Operative Documents shall be treated as loans by the
Participants (through Lessor) to Lessee secured by the Property, with
Lessee as owner of the Property. Consistent with such treatment, Lessee
and the Lessor Parties intend that, among other things for such
purposes, (i) the Advances be treated as loans to Lessee by the
Participants (through Lessor); (ii) the Advances be secured by the
Property and the Lessor Parties have the rights and remedies of secured
lenders; (iii) Base Rent be treated as interest on the Advances; (iv)
Lessee be required to pay on the Expiration Date only the Residual
Value Guaranty Amount, the Indemnity Amount and the other amounts
required by Subparagraph 4.06(b) of the Purchase Agreement (or
Subparagraph 4.06(c) if Lessor is retaining the Property) if Lessee
exercises the Marketing Option in accordance with the Purchase
Agreement; and (v) Lessee be required to pay on the Expiration Date the
Outstanding Lease Amount or any Portion thereof and all other amounts
outstanding under this Agreement and the other Operative Documents
(including amounts required by Subparagraph 4.06(a) of the Purchase
Agreement) if the Lease Agreement is terminated prior to its Scheduled
Expiration Date after an Event of Default occurs under the Lease
Agreement or if Lessee fails to or is otherwise not entitled to
exercise the Marketing Option in accordance with the Purchase
Agreement.
(c) No Reliance by Lessee. Lessee acknowledges and agrees that
no Lessor Party has made any representations or warranties to Lessee
concerning the tax, accounting or legal characteristics of the
Operative Documents and that Lessee has obtained and relied upon such
tax, accounting and legal advice concerning the Operative Documents as
it deems appropriate.
(d) Modification of Operative Documents. Lessee and
the Lessor Parties shall amend or modify this Agreement and the other
Operative Documents to the extent necessary for the transaction
evidenced by this Agreement and the other Operative Documents to
qualify as an operating lease pursuant to FASB 13 for accounting
purposes if, and only if, such amendments and modifications do not
adversely affect either Lessee or any Lessor Party in its sole and
absolute discretion .
2.11. Security.
(a) Lessee Obligations.
(i) To the extent that the transaction evidenced by
the Lease Agreement, Purchase Agreement and other Operative
Documents is treated as a loan by the Participants (through
Lessor) to Lessee secured by the Property, with Lessee as
owner of the Property pursuant to Paragraph 2.10, the Lessee
Obligations shall be secured by the Real Property Collateral
and the Personal Property Collateral (collectively, the
"Property Collateral") as provided in Subparagraphs 2.07(a)
and 2.07(b) of the Lease Agreement and in an Assignment of
Construction Agreements in the form of Exhibit H, duly
executed by Lessee (the "Assignment of Construction
Agreements").
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(ii) In addition to the Property Collateral, the
Lessee Obligations may be secured, at Lessee's election, by a
Cash Collateral Agreement in the form of Exhibit I, duly
executed by Lessee (the "Cash Collateral Agreement"), and Cash
Collateral delivered to Agent or Participants pursuant to the
Cash Collateral Agreement. If Lessee elects to deliver any
Cash Collateral pursuant to the Cash Collateral Agreement to
decrease the Applicable Margin for the LIBOR Rental Rate or
the Fixed Rental Rate, Lessee shall deliver to Agent, five (5)
Business Days' prior to the delivery of such Cash Collateral,
notice of such election and an opinion of its counsel in form
and substance reasonably satisfactory to Lessor regarding the
Cash Collateral Agreement and such Cash Collateral and shall
deliver such Cash Collateral only on a Scheduled Rent Payment
Date. Lessee shall have the option to pledge and withdraw Cash
Collateral on any Scheduled Rent Payment Date; provided,
however, that in order to withdraw Cash Collateral Lessee
shall certify that no Default or Event of Default has occurred
and is continuing and that all other conditions of the Cash
Collateral Agreement have been complied with. Cash Collateral
shall consist of eurodollar deposits or U.S. treasury
securities with a maturity of less than two (2) years. In the
event that U.S. treasury securities are pledged, Lessee shall
be entitled to a credit for purposes of determining any
decrease in the Applicable Margin, in the amount of ninety
five percent (95%) of the market value of the U.S. treasury
securities pledged on the day such pledge is made. Lessee
shall bear all breakage or other related costs associated with
the Cash Collateral or any withdrawal thereof.
In the event that Cash Collateral is withdrawn from the Cash
Collateral Agreement after having been deposited thereunder,
at the time of such withdrawal, Lessee shall pay to Lessor a
withdrawal fee equal to the Applicable Withdrawal Percentage,
as defined below, multiplied by the amount of the Cash
Collateral withdrawn multiplied by a fraction the denominator
of which shall be 360 and the numerator of which shall be the
number of days (but not more that 180 days) that such Cash
Collateral had been on deposit pursuant to the Cash Collateral
Agreement. "Applicable Withdrawal Percentage" means 0.5%, in
the case Level 1 pricing (as set forth in the Pricing Grid) is
in effect of the date of withdrawal, and 0.75%, in the case
Level 2 pricing (as set forth in the Pricing Grid) is in
effect of the date of withdrawal. In the event that Cash
Collateral is deposited under the Cash Collateral Agreement in
different tranches, for purposes of computing the fee provided
for in the previous sentence, sums withdrawn from the Cash
Collateral Agreement shall be deemed to have been withdrawn on
a first in first out basis.
Lessor, Agent and the Participants shall have a full right of
offset against the Cash Collateral at all times in the amount
of the Tranche A Participation Amount, the Tranche B
Participation Amount and the Tranche C Participation Amount;
provided that there shall be no right or offset against the
Cash Collateral for the Tranche B Participation Amount and the
Tranche C Participation Amount if the Lessee elects and
completes the Marketing Option.
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(iii) Lessee shall deliver to Lessor and Agent such
additional mortgages, deeds of trust, security agreements,
pledge agreements, lessor consents and estoppels (containing
appropriate mortgagee and lender protection language) and
other instruments, agreements, certificates, opinions and
documents (including Uniform Commercial Code financing
statements and fixture filings and landlord waivers) as Lessor
or Agent may reasonably request to (A) grant, perfect,
maintain, protect and evidence security interests in favor of
Lessor or Agent in the Property Collateral and Cash Collateral
prior to the Liens or other interests of any Person, except in
the case of the Property Collateral for Permitted Property
Liens; and (B) otherwise establish, maintain, protect and
evidence the rights provided to Lessor and Agent in the
Property Collateral and Cash Collateral. Lessee shall fully
cooperate with Lessor and Agent and perform all additional
acts reasonably requested by Lessor or Agent to effect the
purposes of this Subparagraph 2.11(a).
(b) Lessor Obligations.
(i) The Lessor Obligations shall be secured by the
following:
(A) An Assignment of Lease Agreement and
Purchase Agreement in the form of Exhibit J, duly
executed by Lessor (the "Assignment of Lease");
(B) A Construction Deed of Trust with
Assignment of Rents, Security Agreement and Fixture
Filing in the form of Exhibit K, duly executed by
Lessor (the "Lessor Deed of Trust"); and
(C) A Security Agreement in the form of
Exhibit L, duly executed by Lessor (the "Lessor
Security Agreement").
(ii) Lessor shall deliver to Agent such additional
mortgages, deeds of trust, security agreements, pledge
agreements, lessor consents and estoppels (containing
appropriate mortgagee and lender protection language) and
other instruments, agreements, certificates, opinions and
documents (including Uniform Commercial Code financing
statements and fixture filings and landlord waivers) as Agent
may reasonably request to (A) grant, perfect, maintain,
protect and evidence security interests in favor of Agent in
Lessor's rights in the Property Collateral and Cash
Collateral; and (B) otherwise establish, maintain, protect and
evidence the rights provided to Agent in the Property
Collateral and Cash Collateral. Lessor shall fully cooperate
with Agent and perform all additional acts reasonably
requested by Agent to effect the purposes of this Subparagraph
2.11(b).
(iii) Lessee hereby consents to the Assignment of
Lease, the Lessor Deed of Trust and the Lessor Security
Agreement; the Liens granted to Agent therein; and all other
Liens granted to Agent in any of the Operative Documents and
the Property to secure the Lessor Obligations.
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2.12. Change of Circumstances.
(a) Inability to Determine Rates. If, on or before the first
day of any Rental Period for any Portion, (i) any Participant shall
advise Agent that the LIBOR Rental Rate for such Rental Period and
Portion cannot be adequately and reasonably determined due to the
unavailability of funds in or other circumstances affecting the London
interbank market, (ii) any Participant shall advise Agent that the
LIBOR Rental Rate for such Rental Period and Portion does not
adequately and fairly reflect the cost to such Participant of funding
its share of such Portion or (iii) if Lessee has requested a Fixed
Rental Rate for such Rental Period and Portion, any Participant shall
advise Agent that such Participant is unable to provide a Fixed Rate
Quote due to the unavailability of funds in or other circumstances
affecting the domestic interbank market, Agent shall immediately give
notice of such condition to Lessee, Lessor and the other Participants.
After the giving of any such notice (and until Agent shall otherwise
notify Lessee and Lessor that the circumstances giving rise to such
condition no longer exist), the LIBOR Rental Rate or Fixed Rental Rate,
as the case may be, shall be unavailable and the Rental Rate for each
Rental Period shall be one of the other rental rates then available.
(b) Illegality. If, after the date of this Agreement, the
adoption of any Governmental Rule, any change in any Governmental Rule
or the application or requirements thereof (whether such change occurs
in accordance with the terms of such Governmental Rule as enacted, as a
result of amendment or otherwise), any change in the interpretation or
administration of any Governmental Rule by any Governmental Authority,
or compliance by Lessor or any Participant with any request or
directive (whether or not having the force of law) of any Governmental
Authority (a "Change of Law") shall make it unlawful or impossible for
any Participant to fund or maintain its portion of the Outstanding
Lease Amount or any Portion thereof at the LIBOR Rental Rate or a Fixed
Rental Rate, such Participant shall immediately notify Agent and Agent
shall immediately notify Lessee, Lessor and the other Participants of
such Change of Law. After the giving of any such notice (and until
Agent shall otherwise notify Lessee and Lessor that such Change of Law
is no longer in effect), the LIBOR Rental Rate or Fixed Rental Rate, as
the case may be, shall be unavailable and the Rental Rate for each
Rental Period shall be one of the other rental rates then available.
(c) Increased Costs. If, after the date of this Agreement, any
Change of Law:
(i) Shall subject Lessor or any Participant to any
tax, duty or other charge with respect to the Outstanding
Lease Amount or any Portion thereof thereof shall change the
basis of taxation of Base Rent payments by Lessee to Lessor or
any Participant under this Agreement or any other Operative
Document (except for changes in the rate of taxation on the
overall net income of Lessor or any Participant imposed by its
jurisdiction of incorporation or any jurisdiction in which it
maintains an office); or
(ii) Shall impose, modify or hold applicable any
reserve (excluding any Reserve Requirement or other reserve to
the extent included in the calculation of the LIBOR Rental
Rate), special deposit or similar requirement against assets
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held by, deposits or other liabilities in or for the account
of, advances or loans by, or any other acquisition of funds by
Lessor or any Participant for its portion of the Outstanding
Lease Amount or any Portion thereof; or
(iii) Shall impose on Lessor or any Participant any
other condition related to the Outstanding Lease Amount or any
Portion thereof, Base Rent or Lessor's or such Participant's
commitments hereunder;
And the effect of any of the foregoing is to increase the cost to
Lessor or such Participant of funding or maintaining its portion of the
Outstanding Lease Amount or any Portion thereof or commitments or to
reduce any amount receivable by Lessor or such Participant hereunder;
then Lessee shall from time to time within thirty (30) days after
demand by Lessor or such Participant, pay to Lessor or such Participant
additional amounts sufficient to reimburse Lessor or such Participant
for such increased costs or to compensate Lessor or such Participant
for such reduced amounts; provided, however, that Lessee shall have no
obligation to make any payment to any demanding party under this
Subparagraph 2.12(c) on account of any such increased costs or reduced
amounts relating to any Rental Period that ended more than six (6)
months prior to such demanding party's first demand for payment (or, if
any increased costs or reduced amounts do not relate to a particular
Rental Period, on account of any such increased costs or reduced
amounts realized by the demanding party more than six (6) months prior
to its first demand for payment). A certificate setting forth in
reasonable detail the amount of such increased costs or reduced
amounts, submitted by Lessor or such Participant to Lessee shall
constitute prima facie evidence of such costs or amounts. The
obligations of Lessee under this Subparagraph 2.12(c) shall survive the
payment and performance of the Lessee Obligations and the termination
of this Agreement.
(d) Capital Requirements. If, after the date of this
Agreement, Lessor or any Participant determines that (i) any Change of
Law affects the amount of capital required to be maintained by such
Person or any other Person controlling such Person (a "Capital Adequacy
Requirement") and (ii) the amount of capital maintained by such Person
or such other Person which is attributable to or based upon the
Advances, the commitments or this Agreement must be increased as a
result of such Capital Adequacy Requirement (taking into account such
Person's or such other Person's policies with respect to capital
adequacy), Lessee shall pay to such Person or such other Person, within
thirty (30) Business Days after demand of such Person, such amounts as
such Person or such other Person reasonably shall determine are
necessary to compensate such Person or such other Person for the
increased costs to such Person or such other Person of such increased
capital; provided, however, that Lessee shall have no obligation to
make any payment to any demanding party under this Subparagraph 2.12(d)
on account of any such increased costs relating to any Rental Period
that ended more than six (6) months prior to such demanding party's
first demand for payment (or, if any increased costs or reduced amounts
do not relate to a particular Rental Period, on account of any such
increased costs or reduced amounts realized by the demanding party more
than six (6) months prior to its first demand for payment). A
certificate of Lessor or any Participant setting forth in reasonable
detail the computation of any such increased costs, delivered by such
Person to Lessee shall constitute prima facie evidence of such costs.
The obligations of Lessee
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under this Subparagraph 2.12(d) shall survive the payment and
performance of the Lessee Obligations and the termination of this
Agreement.
(e) Mitigation. If Lessor or any Participant becomes aware of
(i) any Change of Law which will make it unlawful or impossible for
such Person to fund or maintain its portion of the Outstanding Lease
Amount or any Portion thereof at the LIBOR Rental Rate or (ii) any
Change of Law or other event or condition which will obligate Lessee to
pay any amount pursuant to Subparagraph 2.12(c) or Subparagraph
2.12(d), such Person shall notify Lessee and Agent thereof as promptly
as practical. If any Person has given notice of any such Change of Law
or other event or condition and thereafter becomes aware that such
Change of Law or other event or condition has ceased to exist, such
Person shall notify Lessee and Agent thereof as promptly as practical.
Each Person affected by any Change of Law which makes it unlawful or
impossible for such Person to fund or maintain its portion of the
Outstanding Lease Amount or any Portion thereof at the LIBOR Rental
Rate or to which Lessee is obligated to pay any amount pursuant to
Subparagraph 2.12(c) or Subparagraph 2.12(d) shall use reasonable
commercial efforts (including changing the jurisdiction of its
Applicable Participating Office) to avoid the effect of such Change of
Law or to avoid or materially reduce any amounts which Lessee is
obligated to pay pursuant to Subparagraph 2.12(c) or Subparagraph
2.12(d) if, in the reasonable opinion of such Person, such efforts
would not be disadvantageous to such Person.
2.13. Taxes on Payments.
(a) Payments Free of Taxes. All payments made by Lessee under
this Agreement and the other Operative Documents shall be made free and
clear of, and without deduction or withholding for or on account of,
any present or future Indemnified Taxes, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority.
If any Indemnified Taxes are required to be withheld from any amounts
payable to any Lessor Party hereunder or under the other Operative
Documents, the amounts so payable to such Lessor Party shall be
increased to the extent necessary to yield to such Lessor Party (after
payment of all Indemnified Taxes) the Base Rent or any such other
amounts payable hereunder at the rates or in the amounts specified in
this Agreement and the other Operative Documents. Whenever any
Indemnified Taxes are payable by Lessee, as promptly as possible
thereafter, Lessee shall send to Agent for its own account or for the
account of Lessor or such Participant, as the case may be, a certified
copy of an original official receipt received by Lessee showing payment
thereof. If Lessee fails to pay any Indemnified Taxes when due to the
appropriate taxing authority or fails to remit to Agent the required
receipts or other required documentary evidence, Lessee shall indemnify
the Lessor Parties for any incremental taxes, interest or penalties
that may become payable by the Lessor Parties as a result of any such
failure. The obligations of Lessee under this Subparagraph 2.13(a)
shall survive the payment and performance of the Lessee Obligations and
the termination of this Agreement.
(b) Withholding Exemption Certificates. On or prior to the
Closing Date or, if such date does not occur within thirty (30) days
after the date of this Agreement, by the end of such 30-day period,
Lessor, if it is not incorporated under the laws of the United
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States of America or a state thereof, and each Participant which is not
incorporated under the laws of the United States of America or a state
thereof shall deliver to Lessee and Agent two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224 (or successor
applicable form), as the case may be, certifying in each case that
Lessor or such Participant, as the case may be, is entitled to receive
payments under this Agreement and the other Operative Documents without
deduction or withholding of any United States federal income taxes.
Each Person which delivers to Lessee and Agent a Form 1001 or 4224
pursuant to the immediately preceding sentence further undertakes to
deliver to Lessee and Agent two further copies of Form 1001 or 4224 (or
successor applicable forms), or other manner of certification or
procedure, as the case may be, on or before the date that any such form
expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form previously delivered by it
to Lessee and Agent, and such extensions or renewals thereof as may
reasonably be requested by Lessee or Agent, certifying in the case of a
Form 1001 or 4224 that such Person is entitled to receive payments
under this Agreement and the other Operative Documents without
deduction or withholding of any United States federal income taxes,
unless in any such cases an event (including without limitation any
change in treaty, law or regulation) has occurred prior to the date on
which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent Lessor or a Participant
from duly completing and delivering any such form with respect to it
and Lessor or such Participant advises Lessee and Agent that it is not
capable of receiving payments without any deduction or withholding of
United States federal income tax.
(c) Mitigation. If any Lessor Party claims any additional
amounts to be payable to it pursuant to this Paragraph 2.13, such
Lessor Party shall use reasonable commercial efforts to file any
certificate or document requested in writing by Lessee (including
copies of Internal Revenue Service Form 1001 (or successor forms)
reflecting a reduced rate of withholding) or to change the jurisdiction
of its Applicable Participating Office if the making of such a filing
or such change in the jurisdiction of its Applicable Participating
Office would avoid the need for or materially reduce the amount of any
such additional amounts which may thereafter accrue and if, in the
reasonable opinion of a Participant, in the case of a change in the
jurisdiction of its Applicable Participating Office, such change would
not be disadvantageous to such Person.
(d) Tax Returns. Nothing contained in this Paragraph 2.13
shall require any Lessor Party to make available any of its tax returns
(or any other information relating to its taxes which it deems to be
confidential).
2.14. Funding Loss Indemnification. If Lessee shall (a) pay all or any
portion of the Outstanding Lease Amount or any Portion thereof on any day other
than the last day of a Rental Period therefor (whether an optional payment, a
mandatory payment or otherwise) or (b) cancel or otherwise fail to consummate
any Advance Request which has been delivered to Agent (whether as a result of
the failure to satisfy any applicable conditions or otherwise), Lessee shall,
upon demand by Lessor or any Participant, reimburse such Person for and hold
such Person harmless from all costs and losses incurred by such Person as a
result of such payment, cancellation or failure. Lessee understands that such
costs and losses may include, without limitation, losses incurred by Lessor or a
Participant as a result of funding and other contracts
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entered into by such Person to fund its portion of the Outstanding Lease Amount
or any Portion thereof. Each Person demanding payment under this Paragraph 2.14
shall deliver to Lessee, with a copy to Agent, a certificate setting forth the
amount of costs and losses for which demand is made, which certificate shall set
forth in reasonable detail the calculation of the amount demanded. Such a
certificate so delivered to Lessee shall constitute prima facie evidence of such
costs and losses. The obligations of Lessee under this Paragraph 2.14 shall
survive the payment and performance of the Lessee Obligations and the
termination of this Agreement.
2.15. Replacement of Participants. If any Participant shall (a) become
a Defaulting Participant more than once, (b) continue as a Defaulting
Participant for more than five (5) Business Days at any time, (c) deliver,
pursuant to Subparagraph 2.12(b), a notice of a Change of Law which does not
affect Majority Participants, (d) demand any payment under Subparagraph 2.12(c),
2.12(d) or 2.13(a) for a reason which is not applicable to Majority
Participants, or (e) deny a Lease Extension Request made pursuant to
Subparagraph 2.09(b), then Agent may (or upon the written request of Lessee if
no Event of Default has occurred and is continuing, shall) replace such
Participant (the "affected Participant"), or cause such affected Participant to
be replaced, with another financial institution (the "replacement Participant")
satisfying the requirements of an Eligible Assignee under Subparagraph 7.05(b),
by having the affected Participant sell and assign all of its rights and
obligations under this Agreement and the other Operative Documents to the
replacement Participant pursuant to Subparagraph 7.05(b); provided, however,
that if Lessee seeks to exercise such right, it must do so within sixty (60)
days after it first receives notice of the event, condition or demand giving
rise to such right, or within thirty (30) days after such notice in the case a
denial of a Lease Extension Request, and no Lessor Party shall have any
obligation to identify or locate a replacement Participant for Lessee. Upon
receipt by any affected Participant of a written notice from Agent stating that
Agent is exercising the replacement right set forth in this Paragraph 2.15, such
affected Participant shall sell and assign all of its rights and obligations
under this Agreement and the other Operative Documents to the replacement
Participant pursuant to an Assignment Agreement and Subparagraph 7.05(b) for a
purchase price equal to the sum of its portion of the Outstanding Lease Amount
or any Portion thereof, the accrued and unpaid portion of the Base Rent relating
to such portion and its ratable share of all fees to which it is entitled.
SECTION 3. CONDITIONS PRECEDENT.
3.01. Initial Acquisition Advance. The obligation of Lessor to make the
Initial Acquisition Advance (and the obligations of the Participants to fund
their respective Proportionate Shares of the Initial Acquisition Advance) is
(are) subject to receipt by Agent, on or prior to the Closing Date, of each item
listed in Schedule 3.01, each in form and substance satisfactory to Lessor,
Agent and each Participant, and with sufficient copies for, Lessor, Agent and
each Participant.
3.02. Tract 2 Acquisition Advance. The obligation of Lessor to make the
Tract 2 Acquisition Advance (and the obligations of the Participants to fund
their respective Proportionate Shares of the Tract 2 Acquisition Advance) is
(are) subject to receipt by Agent, on or prior to the Tract 2 Acquisition Date,
of each item listed in Schedule 3.02, each in form and
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substance satisfactory to Lessor, Agent and each Participant, and with
sufficient copies for, Lessor, Agent and each Participant.
3.03. Improvement/Expense Advances. The obligation of Lessor to make
each Improvement/Expense Advance (and the obligations of the Participants to
fund their respective Proportionate Shares of such Advance) is (are) subject to
(i) satisfaction of the conditions set forth in Paragraph 3.01, (ii) receipt by
Agent pursuant to Paragraph 2.03 of the Advance Request for such Advance,
appropriately completed and duly executed by Lessee, and (iii) receipt by Agent
of date-down endorsements to Agent's and Lessor's title insurance policies or
binders acceptable to Agent and Lessor.
3.04. Other Conditions Precedent. The occurrence of each Credit Event
(including the making of each Advance by Lessor and the funding of each Advance
by the Participants) is subject to the further conditions that, on the date such
Credit Event is to occur and after giving effect to such Credit Event, the
following shall be true and correct:
(a) The representations and warranties of Lessee set forth in
Paragraph 4.01 and in the other Operative Documents are true and
correct in all material respects as if made on such date (except for
representations and warranties expressly made as of a specified date,
which shall be true as of such date);
(b) No Default has occurred and is continuing or will result
from such Credit Event; and
(c) All of the Operative Documents are in full force and
effect.
The submission by Lessee to Lessor and Agent of each Advance Request, each
Notice of Rental Period Selection and a Notice of Marketing Option Exercise
shall be deemed to be a representation and warranty by Lessee that each of the
statements set forth above in this Paragraph 3.03 is true and correct as of the
date of such request and notice.
3.05. Covenant to Deliver. Lessee agrees (not as a condition but as a
covenant) to deliver to Lessor and Agent each item required to be delivered to
Lessor and Agent as a condition to each Advance if such Advance is made. Lessee
expressly agrees that the making of any Advance prior to the receipt by Lessor
and Agent of any such item shall not constitute a waiver by Lessor, Agent or any
Participant of Lessee's obligation to deliver such item, unless expressly waived
in writing.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
4.01. Lessee's Representations and Warranties. In order to induce the
Lessor Parties to enter into this Agreement and the other Operative Documents to
which they are parties, Lessee hereby represents and warrants to the Lessor
Parties as follows:
(a) Due Incorporation, Qualification, etc. Each of Lessee and
Lessee's Subsidiaries (i) is a corporation duly organized, validly
existing and in good standing under the laws of its state of
incorporation; (ii) has the power and authority to own, lease
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and operate its properties and carry on its business as now conducted;
and (iii) is duly qualified, licensed to do business and in good
standing as a foreign corporation in each jurisdiction where the
failure to be so qualified or licensed is reasonably likely to have a
Material Adverse Effect.
(b) Authority. The execution, delivery and performance by
Lessee of each Operative Document executed, or to be executed, by
Lessee and the consummation of the transactions contemplated thereby
(i) are within the power of Lessee and (ii) have been duly authorized
by all necessary actions on the part of Lessee.
(c) Enforceability. Each Operative Document executed, or to be
executed, by Lessee has been, or will be, duly executed and delivered
by Lessee and constitutes, or will constitute, a legal, valid and
binding obligation of Lessee, enforceable against Lessee in accordance
with its terms, except as limited by bankruptcy, insolvency or other
laws of general application relating to or affecting the enforcement of
creditors' rights generally and general principles of equity.
(d) Non-Contravention. The execution and delivery by Lessee of
the Operative Documents executed by Lessee and the performance and
consummation of the transactions contemplated thereby do not (i)
violate any Requirement of Law applicable to Lessee; (ii) violate any
provision of, or result in the breach or the acceleration of, or
entitle any other Person to accelerate (whether after the giving of
notice or lapse of time or both), any Contractual Obligation of Lessee;
or (iii) result in the creation or imposition of any Lien (or the
obligation to create or impose any Lien) upon any property, asset or
revenue of Lessee (except such Liens as may be created in favor of the
Lessor Parties pursuant to this Agreement or the other Operative
Documents).
(e) Approvals. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental
Authority or other Person (including, without limitation, the
shareholders of any Person) is required in connection with the
execution and delivery of the Operative Documents executed by Lessee
and the performance and consummation by Lessee of the transactions
contemplated thereby, except such as have been made or obtained and are
in full force and effect.
(f) No Violation or Default. Neither Lessee nor any of its
Subsidiaries is in violation of or in default with respect to (i) any
Requirement of Law applicable to such Person; (ii) any Contractual
Obligation of such Person (nor is there any waiver in effect which, if
not in effect, would result in such a violation or default), where, in
each case, such violation or default is reasonably likely to have a
Material Adverse Effect. Without limiting the generality of the
foregoing, except as disclosed in the reports and documents described
on Schedule 4.01(f) (the "Environmental Reports"), neither Lessee nor
any of its Subsidiaries (A) has violated any Environmental Laws, (B)
has any liability under any Environmental Laws or (C) has received
notice or other communication of an investigation or is under
investigation by any Governmental Authority having authority to enforce
Environmental Laws, where such violation, liability or investigation is
reasonably likely to have a Material Adverse Effect. No Default has
occurred and is continuing.
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(g) Litigation. Except as set forth (with estimates of the
dollar amounts involved) in Schedule 4.01(g), no actions (including,
without limitation, derivative actions), suits, proceedings or
investigations are pending or, to the knowledge of Lessee, threatened
against Lessee or any of its Subsidiaries at law or in equity in any
court or before any other Governmental Authority which (i) is
reasonably likely (alone or in the aggregate) to have a Material
Adverse Effect or (ii) seeks to enjoin, either directly or indirectly,
the execution, delivery or performance by Lessee of the Operative
Documents or the transactions contemplated thereby.
(h) Title; Possession Under Leases. Lessee and its
Subsidiaries own and have good and marketable title, or a valid
leasehold interest in, all their respective properties and assets as
reflected in the most recent Financial Statements delivered to Agent
(except those assets and properties disposed of in the ordinary course
of business or otherwise in compliance with this Agreement since the
date of such Financial Statements) and all respective assets and
properties acquired by Lessee and its Subsidiaries since such date
(except those disposed of in the ordinary course of business or
otherwise in compliance with this Agreement). Such assets and
properties are subject to no Lien, except for Permitted Liens. Each of
Lessee and its Subsidiaries has complied with all material obligations
under all material leases to which it is a party and all such leases
are in full force and effect. Each of Lessee and its Subsidiaries
enjoys peaceful and undisturbed possession under such leases.
(i) Financial Statements. The Financial Statements of Lessee
and its Subsidiaries which have been delivered to Agent, (i) are in
accordance with the books and records of Lessee and its Subsidiaries,
which have been maintained in accordance with good business practice;
(ii) have been prepared in conformity with GAAP; and (iii) fairly
present the financial conditions and results of operations of Lessee
and its Subsidiaries as of the date thereof and for the period covered
thereby. Neither Lessee nor any of its Subsidiaries has any contingent
obligations, liability for taxes or other outstanding obligations which
are material in the aggregate, except as disclosed in the audited
Financial Statements dated September 30, 1997, furnished by Lessee to
Agent prior to the date hereof, or in the Financial Statements
delivered to Agent pursuant to clause (i) or (ii) of Subparagraph 5.01.
(j) Equity Securities. All outstanding Equity Securities of
Lessee are duly authorized, validly issued, fully paid and
non-assessable. All Equity Securities of Lessee have been offered and
sold in compliance with all federal and state securities laws and all
other Requirements of Law.
(k) No Agreements to Sell Assets; Etc. Except as otherwise
permitted by Subparagraph 5.02(c) or Subparagraph 5.02(d), neither
Lessee nor any of its Subsidiaries has any legal obligation, absolute
or contingent, to any Person to sell the assets of Lessee or any of its
Subsidiaries (other than sales in the ordinary course of business), or
to effect any merger, consolidation or other reorganization of Lessee
or any of its Subsidiaries or to enter into any agreement with respect
thereto.
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(l) Employee Benefit Plans.
(i) Based upon the latest valuation of each Employee
Benefit Plan that either Lessee or any ERISA Affiliate
maintains or contributes to, or has any obligation under
(which occurred within twelve months of the date of this
representation), the current liabilities of such plan within
the meaning of ss.302(d)(7) of ERISA did not exceed the
aggregate value of the assets of such plan. Neither Lessee nor
any ERISA Affiliate has any liability with respect to any
post-retirement benefit under any Employee Benefit Plan which
is a welfare plan (as defined in section 3(1) of ERISA), other
than liability for health plan continuation coverage described
in Part 6 of Title I(B) of ERISA, which liability for health
plan contribution coverage is not reasonably likely to have a
Material Adverse Effect.
(ii) Each Employee Benefit Plan complies, in both
form and operation, in all material respects, with its terms,
ERISA and the IRC, and no condition exists or event has
occurred with respect to any such plan which would result in
the incurrence by either Lessee or any ERISA Affiliate of any
liability, fine or penalty that is reasonably likely to have a
Material Adverse Effect. Each Employee Benefit Plan, related
trust agreement, arrangement and commitment of Lessee or any
ERISA Affiliate is legally valid and binding and in full force
and effect. No Employee Benefit Plan is being audited or
investigated by any government agency or is subject to any
pending or threatened claim or suit that is reasonably likely
to have a Material Adverse Effect. Neither Lessee nor any
ERISA Affiliate nor any fiduciary of any Employee Benefit Plan
has engaged in a prohibited transaction under section 406 of
ERISA or section 4975 of the IRC.
(iii) Neither Lessee nor any ERISA Affiliate
contributes to or has any material contingent obligations to
any Multiemployer Plan. Neither Lessee nor any ERISA Affiliate
has incurred any liability (including secondary liability) to
any Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan under Section 4201 of
ERISA or as a result of a sale of assets described in Section
4204 of ERISA that is reasonably likely to have a Material
Adverse Effect. Neither Lessee nor any ERISA Affiliate has
been notified that any Multiemployer Plan is in reorganization
or insolvent under and within the meaning of Section 4241 or
Section 4245 of ERISA or that any Multiemployer Plan intends
to terminate or has been terminated under Section 4041A of
ERISA.
(m) Other Regulations. Lessee is not subject to regulation
under the Investment Company Act of 1940, the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce
Act, any state public utilities code or to any other Governmental Rule
limiting its ability to incur indebtedness.
(n) Patent and Other Rights. Lessee and its Subsidiaries own
or license under validly existing agreements all patents, licenses,
trademarks, trade names, trade secrets, service marks, copyrights and
all rights with respect thereto, which are required to conduct their
businesses as now conducted.
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(o) Governmental Charges and Other Indebtedness. Lessee and
its Subsidiaries have filed or caused to be filed all tax returns which
are required to be filed by them where failure to file is reasonably
likely to have a Material Adverse Effect. Lessee and its Subsidiaries
have paid, or made provision for the payment of, all taxes and other
Governmental Charges which have or may have become due pursuant to said
returns or otherwise and all other indebtedness, except such
Governmental Charges or indebtedness, if any, which are being contested
in good faith and as to which adequate reserves (determined in
accordance with GAAP) have been provided or which are not reasonably
likely to have a Material Adverse Effect if unpaid.
(p) Margin Stock. Lessee owns no Margin Stock which, in the
aggregate, would constitute a substantial part of the assets of Lessee,
and no proceeds of any Loan will be used to purchase or carry, directly
or indirectly, any Margin Stock or to extend credit, directly or
indirectly, to any Person for the purpose of purchasing or carrying any
Margin Stock.
(q) Subsidiaries, etc. Set forth in Schedule 4.01(q) (as
supplemented by Lessee from time to time in a written notice to Agent)
is a complete list of all of Lessee's Subsidiaries, the jurisdiction of
incorporation of each, the classes of Equity Securities of each and the
number of shares and percentages of shares of each such class owned
directly or indirectly by Lessee. To the knowledge of Lessee after
reasonable investigation, set forth on Schedule 4.01(q) (as
supplemented by Lessee from time to time in a written notice to Agent)
is a description of each partnership or joint venture in which Lessee
is a partner or a venturer. Except as disclosed on Schedule 4.01(q),
Lessee has no Subsidiaries, and to the knowledge of Lessee after
reasonable investigation Lessee is not a partner in any partnership or
a joint venturer in a joint venture.
(r) Catastrophic Events. Neither Lessee nor any of its
Subsidiaries and none of their properties is or has been affected by
any fire, explosion, accident, strike, lockout or other labor dispute,
drought, storm, hail, earthquake, embargo, act of God or other casualty
that is reasonably likely to have a Material Adverse Effect. There are
no disputes presently subject to grievance procedure, arbitration or
litigation under any of the collective bargaining agreements,
employment contracts or employee welfare or incentive plans to which
Lessee or any of its Subsidiaries is a party, and there are no strikes,
lockouts, work stoppages or slowdowns, or, to the best knowledge of
Lessee, jurisdictional disputes or organizing activities occurring or
threatened which alone or in the aggregate are reasonably likely to
have a Material Adverse Effect.
(s) Burdensome Contractual Obligations, Etc. Neither Lessee
nor any of its Subsidiaries and none of their properties is subject to
any Contractual Obligation or Requirement of Law which is reasonably
likely to have a Material Adverse Effect.
(t) No Material Adverse Effect. No event has occurred and no
condition exists which is reasonably likely to have a Material Adverse
Effect.
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(u) The Property. The representations and warranties relating
to each Tract set forth in Parts 1 and 2 of Schedule 4.01(u) are true
and correct. The following representations and warranties apply to all
Tracts on the Acquisition Date thereof:
(i) All of the Property complies and will comply at
all times (whether before commencement of any construction,
during any construction or after completion of construction of
any New Improvements) with all applicable Governmental Rules
(including Title III of the Americans with Disabilities Act;
Environmental Laws; and zoning, land use, building, planning
and fire laws, rules, regulations and codes) and Insurance
Requirements, except for violations which are not reasonably
likely to have a Material Adverse Effect. Except as disclosed
in the Environmental Reports, (A) no Hazardous Materials have
been used, generated, manufactured, stored, treated, disposed
of, transported or present on or released or discharged from
the Property in any manner that is reasonably likely to have a
Material Adverse Effect and (B) there are no claims or actions
which are reasonably likely to have a Material Adverse Effect
pending or, to Lessee's knowledge, threatened against any of
the Property by any Governmental Authority or any other Person
relating to Hazardous Materials or pursuant to any
Environmental Laws.
(ii) None of the Improvements (whether before
commencement of any construction, during any construction or
after completion of construction of any New Improvements)
encroach or will at any time encroach in any manner onto any
adjoining land, except as permitted by express written and
recorded encroachment agreements approved by Agent or as
affirmatively insured against by appropriate title insurance.
(iii) All licenses, approvals, authorizations,
consents, permits, easements and rights-of-way required for
the use of any of the Property have been obtained or, if not
yet required, will be obtained before required.
(iv) After the Closing Date, Lessor will have good
and valid fee interest in the Property, subject to no Liens
except for Permitted Property Liens.
(v) Chief Executive Office. Lessee's chief executive office is
located at 120 North Redwood Drive, San Rafael, California.
(w) Accuracy of Information Furnished. None of the Operative
Documents and none of the other certificates, statements or information
furnished to any Lessor Party by or on behalf of Lessee or any of its
Subsidiaries in connection with the Operative Documents or the
transactions contemplated thereby contains or will contain any untrue
statement of a material fact or omits or will omit to state a material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(x) The Budget attached hereto as Schedule 4.01(x) is based on
reasonable assumptions as to all legal and factual matters material to
the estimates set forth therein
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and is consistent with the provisions of the Construction Agreements
and the Operative Documents. To the best of Lessee's knowledge, the
Budget includes all costs necessary to complete the acquisition of the
Property and the construction of the New Improvements.
Lessee shall be deemed to have reaffirmed, for the benefit of the Lessor
Parties, each representation and warranty contained in this Paragraph 4.01 on
and as of the date of each Credit Event (except for representations and
warranties expressly made as of a specified date, which shall be true as of such
date).
4.02. Lessor's Representations and Warranties. In order to induce
Lessee, Agent and the Participants to enter into this Agreement and the other
Operative Documents to which they are parties, Lessor hereby represents and
warranties to Lessee, Agent and the Participants as follows:
(a) Due Incorporation, Qualification, etc. Lessor (i) is a
corporation duly organized, validly existing and in good standing under
the laws of Delaware and (ii) has the power and authority to own, lease
and operate its properties and carry on its business as now conducted.
(b) Authority. The execution, delivery and performance by
Lessor of each Operative Document executed, or to be executed, by
Lessor and the consummation of the transactions contemplated thereby
(i) are within the power of Lessor and (ii) have been duly authorized
by all necessary actions on the part of Lessor.
(c) Enforceability. Each Operative Document executed, or to be
executed, by Lessor has been, or will be, duly executed and delivered
by Lessor and constitutes, or will constitute, a legal, valid and
binding obligation of Lessor, enforceable against Lessor in accordance
with its terms, except as limited by bankruptcy, insolvency or other
laws of general application relating to or affecting the enforcement of
creditors' rights generally and general principles of equity.
(d) Non-Contravention. The execution and delivery by Lessor of
the Operative Documents executed by Lessor and the performance and
consummation of the transactions contemplated thereby do not (i)
violate any Requirement of Law applicable to Lessor; (ii) violate any
provision of, or result in the breach or the acceleration of, or
entitle any other Person to accelerate (whether after the giving of
notice or lapse of time or both), any Contractual Obligation of Lessor;
or (iii) result in the creation or imposition of any Lien (or the
obligation to create or impose any Lien) upon any property, asset or
revenue of Lessor (except such Liens as may be created in favor of
Agent pursuant to this Agreement or the other Operative Documents).
(e) Approvals. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental
Authority or other Person (including, without limitation, the
shareholders of any Person) is required in connection with the
execution and delivery of the Operative Documents executed by Lessor
and the
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performance and consummation of the transactions contemplated thereby,
except such as have been made or obtained and are in full force and
effect.
(f) Litigation. No actions (including, without limitation,
derivative actions), suits, proceedings or investigations are pending
or, to the knowledge of Lessor, threatened against Lessor at law or in
equity in any court or before any other Governmental Authority which
(i) is reasonably likely (alone or in the aggregate) to materially and
adversely affect the ability of Lessor to perform its obligations under
the Operative Documents to which it is a party or (ii) seeks to enjoin,
either directly or indirectly, the execution, delivery or performance
by Lessor of the Operative Documents or the transactions contemplated
thereby.
(g) Other Regulations. Lessor is not subject to regulation
under the Investment Company Act of 1940, the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce
Act, any state public utilities code or to any other Governmental Rule
limiting its ability to incur indebtedness.
(h) Chief Executive Office. Lessor's chief executive office is
located at 135 S. LaSalle Street, Suite 660, Chicago, Illinois, 60603.
4.03. Participants' Representations and Warranties. In order to induce
Lessee, Lessor and Agent to enter into this Agreement and the other Operative
Documents to which they are parties, each Participant hereby represents and
warranties to Lessee, Lessor and Agent as follows:
(a) Due Incorporation, Qualification, etc. Such Participant
(i) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and (ii)
has the power and authority to own, lease and operate its properties
and carry on its business as now conducted.
(b) Authority. The execution, delivery and performance by such
Participant of each Operative Document executed, or to be executed, by
such Participant and the consummation of the transactions contemplated
thereby (i) are within the power of such Participant and (ii) have been
duly authorized by all necessary actions on the part of such
Participant.
(c) Enforceability. Each Operative Document executed, or to be
executed, by such Participant has been, or will be, duly executed and
delivered by such Participant and constitutes, or will constitute, a
legal, valid and binding obligation of such Participant, enforceable
against such Participant in accordance with its terms, except as
limited by bankruptcy, insolvency or other laws of general application
relating to or affecting the enforcement of creditors' rights generally
and general principles of equity.
(d) Non-Contravention. The execution and delivery by such
Participant of the Operative Documents executed by such Participant and
the performance and consummation of the transactions contemplated
thereby do not (i) violate any Requirement of Law applicable to such
Participant; (ii) violate any provision of, or result in the breach or
the acceleration of, or entitle any other Person to accelerate (whether
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after the giving of notice or lapse of time or both), any Contractual
Obligation of such Participant; or (iii) result in the creation or
imposition of any Lien (or the obligation to create or impose any Lien)
upon any property, asset or revenue of such Participant (except such
Liens as may be created in favor of Lessor or Agent pursuant to this
Agreement or the other Operative Documents).
(e) Approvals. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental
Authority or other Person (including, without limitation, the
shareholders of any Person) is required in connection with the
execution and delivery of the Operative Documents executed by such
Participant and the performance and consummation of the transactions
contemplated thereby, except such as have been made or obtained and are
in full force and effect.
(f) Litigation. No actions (including, without limitation,
derivative actions), suits, proceedings or investigations are pending
or, to the knowledge of such Participant, threatened against such
Participant at law or in equity in any court or before any other
Governmental Authority which (i) is reasonably likely (alone or in the
aggregate) to materially and adversely affect the ability of such
Participant to perform its obligations under the Operative Documents to
which it is a party or (ii) seeks to enjoin, either directly or
indirectly, the execution, delivery or performance by such Participant
of the Operative Documents or the transactions contemplated thereby.
(g) Own Account. Such Participant is acquiring its
participation interest hereunder for its own account for investment and
not with a view to any distribution (as such term is used in Section
2(11) of the Securities Act of 1933) thereof, and, if in the future it
should decide to dispose of its participation interest, it understands
that it may do so only in compliance with the Securities Act of 1933
and the rules and regulations of the Securities and Exchange Commission
thereunder and any applicable state securities laws.
SECTION 5. COVENANTS.
5.01. Lessee's Affirmative Covenants. Until the termination of this
Agreement and the satisfaction in full by Lessee of all Lessee Obligations,
Lessee will comply, and will cause compliance, with the following affirmative
covenants, unless Lessor and Required Participants shall otherwise consent in
writing:
(a) Financial Statements, Reports, etc. Lessee shall furnish
to Agent, with sufficient copies for Lessor and each Participant, the
following, each in such form and such detail as Agent, Lessor or the
Required Participants shall reasonably request:
(i) As soon as available and in no event later than
ninety (90) days after the last day of each fiscal quarter of
Lessee (other than the last quarter of each fiscal year), a
copy of the Financial Statements of Lessee and its
Subsidiaries (prepared on a consolidated basis) for such
quarter and for the fiscal year to date, certified by the
president or chief financial officer of Lessee to present
fairly the financial condition, results of operations and
other information reflected therein
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and to have been prepared in accordance with GAAP (subject to
normal year-end audit adjustments);
(ii) As soon as available and in no event later than
one hundred, twenty (120) days after the close of each fiscal
year of Lessee, (A) copies of the audited Financial Statements
of Lessee and its Subsidiaries (prepared on a consolidated
basis) for such year, audited by independent certified public
accountants of recognized national standing acceptable to
Agent and Required Participants, (B) copies of the unqualified
opinions (or qualified opinions reasonably acceptable to Agent
and Required Participants) delivered by such accountants in
connection with all such Financial Statements and (C)
certificates of such accountants to Agent stating that in
making the examination necessary for their opinion they have
reviewed Paragraph 5.03 and have obtained no knowledge of any
violation by Lessee and its Subsidiaries of the covenants set
forth therein, or if, in the opinion of such accountants, any
such violation has occurred, a statement as to the nature
thereof;
(iii) Contemporaneously with the quarterly and
year-end Financial Statements required by the foregoing
clauses (i) and (ii), a compliance certificate of the
president or chief financial officer of Lessee (a "Compliance
Certificate") which (A) states that no Default has occurred
and is continuing, or, if any such Default has occurred and is
continuing, a statement as to the nature thereof and what
action Lessee proposes to take with respect thereto and (B)
sets forth, for the quarter or year covered by such Financial
Statements or as of the last day of such quarter or year (as
the case may be), the calculation of the financial ratios and
tests provided in Paragraph 5.03;
(iv) As soon as possible and in no event later than
five (5) Business Days after any officer of Lessee knows of
the occurrence or existence of (A) any Reportable Event under
any Employee Benefit Plan or Multiemployer Plan; (B) any
actual or threatened litigation, suits, claims or disputes
against Lessee or any of its Subsidiaries involving potential
monetary damages payable by Lessee or its Subsidiaries of
$20,000,000 or more (alone or in the aggregate), other than
any frivolous claim or litigation; (C) any other event or
condition which is reasonably likely to have a Material
Adverse Effect; or (D) any Default; the statement of the
president or chief financial officer of Lessee setting forth
details of such event, condition or Default and the action
which Lessee proposes to take with respect thereto;
(v) As soon as available and in no event later than
five (5) Business Days after they are sent, made available or
filed, copies of (A) all registration statements and reports
filed by Lessee or any of its Subsidiaries with any securities
exchange or the Securities and Exchange Commission (including,
without limitation, all 10-Q, 10-K and 8-Q reports); (B) all
reports, proxy statements and financial statements sent or
made available by Lessee or any of its Subsidiaries to its
security holders; and (C) all press releases and other similar
public concerning any material developments in the business of
Lessee or any of
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its Subsidiaries made available by Lessee or any of its
Subsidiaries to the public generally;
(vi) As soon as available, the consolidated plan and
forecast of Lessee and its Subsidiaries for such fiscal year,
including quarterly cash flow projections; and
(vii) Such other instruments, agreements,
certificates, opinions, statements, documents and information
relating to the operations or condition (financial or
otherwise) of Lessee or its Subsidiaries, and compliance by
Lessee with the terms of this Agreement and the other
Operative Documents as Agent may from time to time reasonably
request.
(b) Books and Records. Lessee and its Subsidiaries shall at
all times keep proper books of record and account in which full, true
and correct entries will be made of their transactions in accordance
with GAAP.
(c) Inspections. Lessee and its Subsidiaries shall permit any
Person designated by any Participant, upon reasonable notice and during
normal business hours, to visit and inspect any of the properties and
offices of Lessee and its Subsidiaries, to examine the books and
records of Lessee and its Subsidiaries and make copies thereof and to
discuss the affairs, finances and business of Lessee and its
Subsidiaries with, and to be advised as to the same by, their officers,
auditors and accountants, all at such times and intervals as any
Participant may reasonably request; provided, however, that, if no
Default has occurred and is continuing, Lessee shall not be required to
permit more than four (4) such visits for inspection and examination in
any fiscal year.
(d) Insurance. In addition to the insurance requirements set
forth in the Lease Agreement with respect to the Property, Lessee and
its Subsidiaries shall:
(i) Carry and maintain insurance of the types and in
the amounts customarily carried from time to time during the
term of this Agreement by others engaged in substantially the
same business as such Person and operating in the same
geographic area as such Person, including, but not limited to,
fire, public liability, property damage and worker's
compensation;
(ii) Carry and maintain each policy for such
insurance with (A) a company which has a general policy holder
of A or better and a financial rating of at least 10 from A.M.
Best and Company at the time such policy is placed and at the
time of each annual renewal thereof or (B) any other insurer
which is reasonably satisfactory to Agent; and
(iii) Deliver to Agent from time to time, as Agent
may request, schedules setting forth all insurance then in
effect.
(e) Governmental Charges and Other Indebtedness. Lessee and
its Subsidiaries shall promptly pay and discharge when due (i) all
taxes and other Governmental Charges prior to the date upon which
penalties accrue thereon, (ii) all
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Indebtedness which, if unpaid, could become a Lien upon the property of
Lessee or its Subsidiaries and (iii) all other indebtedness which, if
unpaid, is reasonably likely to have a Material Adverse Effect, except
such Indebtedness as may in good faith be contested or disputed, or for
which arrangements for deferred payment have been made, provided that
in each such case appropriate reserves are maintained to the reasonable
satisfaction of Agent.
(f) Use of Proceeds. Lessee shall not use any part of the
proceeds of any Advance, directly or indirectly, for the purpose of
purchasing or carrying any Margin Stock or for the purpose of
purchasing or carrying or trading in any securities under such
circumstances as to involve Lessee or any Lessor Party in a violation
of Regulations G, T, U or X issued by the Federal Reserve Board.
(g) General Business Operations. Each of Lessee and its
Subsidiaries shall (i) preserve and maintain its corporate existence
and all of its rights, privileges and franchises reasonably necessary
to the conduct of its business, (ii) conduct its business activities in
compliance with all Requirements of Law and Contractual Obligations
applicable to such Person, the violation of which is reasonably likely
to have a Material Adverse Effect and (iii) keep all property useful
and necessary in its business in good working order and condition,
ordinary wear and tear excepted. Lessee shall maintain its chief
executive office and principal place of business in the United States
and shall not relocate its chief executive office or principal place of
business outside of California except upon not less than ninety (90)
days prior written notice to Agent.
(h) Plans and Specifications. As soon as available, Lessee
shall deliver to Lessor and Agent a copy of the Plans and
Specifications for the New Improvements, together with a certificate of
each engineer or architect who drafted a material part of such plans
and specifications certifying that such plans and specifications are
complete and comply with all applicable laws, and either (i) a revised
Expiration Date Appraisal which conforms with such Plans and
Specifications or (ii) a certificate from the appraiser who prepared
the Expiration Date Appraisal to the effect that such Plans and
Specifications do not cause the value of any Sub-Tract to be less than
the value of such Sub-Tract as set forth in the Expiration Date
Appraisal delivered on the Closing Date.
5.02. Lessee's Negative Covenants. Until the termination of this
Agreement and the satisfaction in full by Lessee of all Lessee Obligations,
Lessee will comply, and will cause compliance, with the following negative
covenants, unless Lessor and Required Participants shall otherwise consent in
writing:
(a) Indebtedness. Neither Lessee nor any of its Subsidiaries
shall create, incur, assume or permit to exist any Indebtedness or any
Guaranty Obligations except for the following ("Permitted
Indebtedness"):
(i) The Lessee Obligations under the Operative
Documents;
(ii) Indebtedness of Lessee and its Subsidiaries
listed in Schedule 5.02(a) and existing on the date of
this Agreement;
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(iii) Indebtedness of Lessee and its Subsidiaries
arising from the endorsement of instruments for collection in
the ordinary course of Lessee's or a Subsidiary's business;
(iv) Indebtedness of Lessee and its Subsidiaries for
trade accounts payable, provided that (A) such accounts arise
in the ordinary course of business and (B) no material part of
such account is more than ninety (90) days past due (unless
subject to a bona fide dispute and for which adequate reserves
have been established);
(v) Indebtedness of Lessee and its Subsidiaries under
Rate Contracts, provided that all such arrangements are
entered into in connection with bona fide hedging operations
and not for speculation;
(vi) Indebtedness of Lessee and its Subsidiaries
under purchase money loans and Capital Leases incurred by
Lessee or any of its Subsidiaries to finance the acquisition
by such Person of real property, fixtures or equipment
provided that in each case, (A) such Indebtedness is incurred
by such Person at the time of, or not later than ninety (90)
days after, the first functional use by such Person of the
property so financed and (B) such Indebtedness does not exceed
the purchase price of the property so financed;
(vii) Subordinated Indebtedness of Lessee and its
Subsidiaries;
(viii) Indebtedness of Lessee and its Subsidiaries
under initial or successive refinancings of any Indebtedness
permitted by clause (ii) above or under replacements of lines
of credit or other credit commitments permitted by clause (ii)
above, provided that (A) the principal amount of any such
refinancing or replacement does not exceed the principal
amount of the Indebtedness being refinanced or commitment
being replaced and (B) the material terms and provisions of
any such refinancing or replacement (including redemption,
prepayment, default and subordination provisions) are not
substantially less favorable than the comparable terms of the
Indebtedness being refinanced or commitment being replaced,
except that the maturity of the new Indebtedness or commitment
may be longer;
(ix) Indebtedness of Lessee and its Subsidiaries with
respect to Surety Instruments incurred in the ordinary course
of business (including surety bonds issued to secure
obligations of Lessee and its Subsidiaries in respect of
equipment ordered from Lessee and its Subsidiaries);
(x) Guaranty Obligations of Lessee in respect of
Permitted Indebtedness of its Subsidiaries and joint ventures
described on Schedule 4.01(q);
(xi) Indebtedness of Lessee to any of its
Subsidiaries, Indebtedness of any of Lessee's Subsidiaries to
Lessee or Indebtedness of any of Lessee's Subsidiaries to any
of Lessee's other Subsidiaries, provided that (A) any
Indebtedness of Lessee to any of its Subsidiaries and any
Indebtedness of any
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of Lessee's Subsidiaries to Lessee shall be subject to
Subparagraph 5.02(j) and (B) any Indebtedness of Lessee to any
of its Subsidiaries is Subordinated Indebtedness;
(xiii) Other Indebtedness of Lessee and its
Subsidiaries, provided that the aggregate amount of such other
Indebtedness outstanding at any time does not exceed
twenty-five percent (25%) of Lessee's Tangible Net Worth on
the last day of the immediately preceding fiscal year.
(b) Liens. Neither Lessee nor any of its Subsidiaries shall
create, incur, assume or permit to exist any Lien on or with respect to
any of its assets or property of any character, whether now owned or
hereafter acquired, except for the following ("Permitted Liens"):
(i) Liens in favor of any Lessor Party securing the
Lessee Obligations;
(ii) Liens listed in Schedule 5.02(b) and existing on
the date of this Agreement;
(iii) Liens for taxes or other Governmental Charges
not at the time delinquent or thereafter payable without
penalty or being contested in good faith, provided that
adequate reserves for the payment thereof have been
established in accordance with GAAP;
(iv) Liens of carriers, warehousemen, mechanics,
materialmen, vendors, and landlords and other similar Liens
imposed by law incurred in the ordinary course of business for
sums not overdue or being contested in good faith, provided
that adequate reserves for the payment thereof have been
established in accordance with GAAP;
(v) Deposits under workers' compensation,
unemployment insurance and social security laws or to secure
the performance of bids, tenders, contracts (other than for
the repayment of borrowed money) or leases, or to secure
statutory obligations of surety or appeal bonds or to secure
indemnity, performance or other similar bonds in the ordinary
course of business;
(vi) Zoning restrictions, easements, rights-of-way,
title irregularities and other similar encumbrances, which
alone or in the aggregate are not substantial in amount and do
not materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the business
of Lessee or any of its Subsidiaries;
(vii) Banker's Liens and similar Liens (including
set-off rights) in respect of bank deposits;
(viii) Liens on any property or assets acquired, or
on the property or assets of any Persons acquired, by Lessee
or any of its Subsidiaries after the date of this Agreement
pursuant to Subparagraph 5.02(d), provided that (A) such Liens
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exist at the time such property or assets or such Persons are
so acquired and (B) such Liens were not created in
contemplation of such acquisitions;
(ix) Judgement Liens, provided that such Liens do not
have a value in excess of twenty million dollars ($20,000,000)
or such Liens are released, stayed, vacated or otherwise
dismissed within thirty (30) days after issue or levy and, if
so stayed, such stay is not thereafter removed;
(x) Rights of (A) vendors or lessors under
conditional sale agreements, Capital Leases or other title
retention agreements, provided that, in each case, (1) such
rights secure or otherwise relate to Permitted Indebtedness,
(2) such rights do not extend to any property other than
property acquired with the proceeds of such Permitted
Indebtedness and (3) such rights do not secure any
Indebtedness other than such Permitted Indebtedness and (B)
lessors under operating leases;
(xi) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of
customs duties and in connection with the importation of goods
in the ordinary course of Lessee's and its Subsidiaries'
businesses;
(xii) Liens securing Indebtedness which constitutes
Permitted Indebtedness under clause (vi) of Subparagraph
5.02(a) provided that, in each case, such Lien (A) covers only
those assets, the acquisition of which was financed by such
Permitted Indebtedness, and (B) secures only such Permitted
Indebtedness;
(xiii) Liens on the property or assets of any
Subsidiary of Lessee in favor of Lessee or any other
Subsidiary of Lessee;
(xiv) Liens incurred in connection with the
extension, renewal or refinancing of the Indebtedness secured
by the Liens described in clause (ii) or (xii) above, provided
that any extension, renewal or replacement Lien (A) is limited
to the property covered by the existing Lien and (B) secures
Indebtedness which is no greater in amount and has material
terms no less favorable to the Participants than the
Indebtedness secured by the existing Lien;
(xv) Liens on insurance proceeds in favor of
insurance companies with respect to the financing of insurance
premiums;
(xvi) Liens in inventory of Lessee and its
Subsidiaries in favor of (A) customers of Lessee and its
Subsidiaries to secure the obligations of Lessee and its
Subsidiaries in respect of equipment ordered from Lessee and
its Subsidiaries by such customers or (B) sureties that have
issued surety bonds to such customers to secure such
obligations, provided that each such Lien (1) covers only (y)
the equipment ordered by a customer pursuant to a purchase
order which has been delivered to Lessee or one of its
Subsidiaries and (z) the parts and other inventory of Lessee
and its Subsidiaries which will be used to build such
equipment, (2) secures only the obligations of Lessee and its
Subsidiaries in respect of such
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equipment and (3) terminates upon the delivery of such
equipment to such customer or the ultimate purchaser thereof
or the return to such customer of such deposit;
(xvii) Permitted Property Liens in the Property; and
(xviii) Other Liens, provided that the aggregate
amount of the Indebtedness outstanding at any time and secured
by such other Liens does not exceed fifteen percent (15%) of
Lessee's Tangible Net Worth on the last day of the immediately
preceding fiscal year;
Provided, however, that the foregoing exceptions shall not be construed
to permit any Liens, except for Permitted Property Liens, in any of the
Property.
(c) Asset Dispositions. Neither Lessee nor any of its
Subsidiaries shall sell, lease, transfer or otherwise dispose of all or
any part of its assets or property, whether now owned or hereafter
acquired, except for the following:
(i) Sales of inventory by Lessee and its Subsidiaries
in the ordinary course of their businesses;
(ii) Sales or other dispositions of surplus, damaged,
worn or obsolete equipment or inventory;
(iii) Sales or other dispositions of Investments
permitted by clause (i) of Subparagraph 5.02(e) for not less
than fair market value;
(iv) Sales or assignments of defaulted receivables to
a collection agency in the ordinary course of business;
(v) Licenses by Lessee or its Subsidiaries of its
patents, copyrights, trademarks, trade names and service marks
in the ordinary course of its business provided that, in each
case, the terms of the transaction are terms which then would
prevail in the market for similar transactions between
unaffiliated parties dealing at arm's length;
(vi) Sales or other dispositions of assets and
property by Lessee to any of Lessee's Subsidiaries or by any
of Lessee's Subsidiaries to Lessee or any of its other
Subsidiaries, provided that the terms of any such sales or
other dispositions by or to Lessee are terms which are no less
favorable to Lessee then would prevail in the market for
similar transactions between unaffiliated parties dealing at
arm's length;
(vii) Sales, for cash, in the ordinary course of
business of accounts receivable of Lessee and its Subsidiaries
and certain rights and property of Lessee and its Subsidiaries
related to the collection of or constituting proceeds of such
accounts receivable, with or without recourse, at a discount
rate not to exceed ten percent (10%), provided that the
aggregate amount of accounts receivable so sold
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by Lessee in any fiscal quarter does not exceed twenty million
dollars ($20,000,000);
(viii) Other sales, leases, transfers and disposals
of assets and property, provided that the aggregate value of
all such assets and property (based upon the book value of
such assets and property) so sold, leased, transferred or
otherwise disposed for cash of in any fiscal year does not
exceed twenty percent (20%) of Lessee's Tangible Net Worth on
the last day of the immediately preceding fiscal year;
Provided, however, that the foregoing exceptions shall not be construed
to permit any sales, leases, transfers or other disposals of any of the
Property, except as expressly permitted by the Lease Agreement.
(d) Mergers, Acquisitions, Etc. Neither Lessee nor any of its
Subsidiaries shall acquire any other Person (whether through merger
with such Person, acquisition of such Person as a Subsidiary or
otherwise) or all or substantially all of the assets of any other
Person, except that Lessee and its Subsidiaries may make any such
acquisitions if (i) the aggregate consideration paid by Lessee and its
Subsidiaries in cash for all such acquisitions after the date of this
Agreement does not exceed $50,000,000; (ii) the aggregate consideration
paid by Lessee and its Subsidiaries in stock for all such acquisitions
after the date of this Agreement does not exceed $75,000,000 (such
stock to be valued at the market value thereof at the time paid as
consideration); (iii) in any merger involving Lessee, Lessee is the
surviving corporation; and (iv) both immediately before and after
giving effect to any such acquisition, no Default shall have occurred
and be continuing.
(e) Investments. Neither Lessee nor any of its Subsidiaries
shall make any Investment except for Investments in the following:
(i) Investments in Cash Equivalents;
(ii) Investments permitted by the investment policy
of Lessee set forth in Schedule 5.02(e) or, if any changes to
the investment policy of Lessee are hereafter duly approved by
the Board of Directors of Lessee, in any subsequent investment
policy which is the most recent investment policy delivered by
Lessee to Agent with a certificate of Lessee's chief financial
officer to the effect that such investment policy has been
duly approved by Lessee's Board of Directors and is then in
effect;
(iii) Loans and other extensions of credit by Lessee
and its Subsidiaries to each other to the extent permitted by
clause (xi) of Subparagraph 5.02(a) and other types of
Investments by Lessee and its Subsidiaries to each other;
(iv) Investments consisting of loans to employees,
officers and directors, provided that the aggregate principal
amount of such loans does not exceed $10,000,000 at any time;
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(v) Investments of Lessee and its Subsidiaries in
Rate Contracts, provided that all such arrangements are
entered into in connection with bona fide hedging operations
and not for speculation;
(vi) Investments permitted by Subparagraph 5.02(d);
and
(vii) Money market mutual funds registered with the
Securities and Exchange Commission, meeting the requirement of
Rule 2a-7 promulgated under the Investment Company Act of 1940
(viii) Other Investments, provided that the aggregate
amount of such other Investments plus the aggregate cost of
all mergers and consolidations consummated, Subsidiaries
established and Subsidiaries and assets acquired by Lessee
pursuant to Subparagraph 5.02(d) does not exceed in any fiscal
year (A) $50,000,000 for any amounts paid in cash and (B)
$75,000,000 for any amounts paid with shares of common stock
of Lessee (as determined according to the stock price of such
shares on the date of transfer) and accounted for on a pooling
basis in accordance with GAAP.
(f) Dividends, Redemptions, Etc. Neither Lessee nor any of its
Subsidiaries shall pay any dividends or make any distributions on its
Equity Securities; purchase, redeem, retire, defease or otherwise
acquire for value any of its Equity Securities; return any capital to
any holder of its Equity Securities as such; make any distribution of
assets, Equity Securities, obligations or securities to any holder of
its Equity Securities as such; or set apart any sum for any such
purpose; except as follows:
(i) Either Lessee or any of its Subsidiaries may pay
dividends on its capital stock payable solely in such Person's
own capital stock;
(ii) Any Subsidiary of Lessee may pay dividends to
Lessee;
(iii) Lessee may repurchase its Equity Securities,
provided that the cost of any such repurchase, when added to
the aggregate cost of all other repurchases made pursuant to
this clause (iii) since the date of this Agreement, does not
exceed five percent (5%) of Lessee's Tangible Net Worth on the
last day of the immediately preceding fiscal year; and
(iv) Lessee may pay dividends in cash in any fiscal
year in an aggregate amount of not more than three percent of
Lessee's Tangible Net Worth on the last day of the immediately
preceding fiscal year.
(g) Change in Business. Neither Lessee nor any of its
Subsidiaries shall engage, either directly or indirectly through
Affiliates, in any business other than the business of providing
technology based services and solutions, data processing services, data
analysis services or related services.
(h) Indebtedness Payments, Etc. Neither Lessee nor any of its
Subsidiaries shall (i) prepay, redeem, purchase, defease or otherwise
satisfy in any manner prior to the
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scheduled payment thereof any Subordinated Indebtedness or (ii) amend,
modify or otherwise change any of the subordination or other provisions
of any document, instrument or agreement evidencing Subordinated
Indebtedness in a manner which adversely affects the material rights of
the Lessor Parties.
(i) ERISA. Neither Lessee nor any ERISA Affiliate shall (i)
adopt or institute any Employee Benefit Plan that is an employee
pension benefit plan within the meaning of Section 3(2) of ERISA, (ii)
take any action which will result in the partial or complete
withdrawal, within the meanings of sections 4203 and 4205 of ERISA,
from a Multiemployer Plan, (iii) engage or permit any Person to engage
in any transaction prohibited by section 406 of ERISA or section 4975
of the IRC involving any Employee Benefit Plan or Multiemployer Plan
which would subject either Lessee or any ERISA Affiliate to any tax,
penalty or other liability including a liability to indemnify, (iv)
incur or allow to exist any accumulated funding deficiency (within the
meaning of section 412 of the IRC or section 302 of ERISA), (v) fail to
make full payment when due of all amounts due as contributions to any
Employee Benefit Plan or Multiemployer Plan, (vi) fail to comply with
the requirements of section 4980B of the IRC or Part 6 of Title I(B) of
ERISA, or (vii) adopt any amendment to any Employee Benefit Plan which
would require the posting of security pursuant to section 401(a)(29) of
the IRC, where singly or cumulatively, the above would have a Material
Adverse Effect.
(j) Transactions With Affiliates. Neither Lessee nor any of
its Subsidiaries shall enter into any Contractual Obligation with any
Affiliate or engage in any other transaction with any Affiliate except
upon terms at least as favorable to Lessee or such Subsidiary as an
arms-length transaction with unaffiliated Persons.
(k) Accounting Changes. Neither Lessee nor any of its
Subsidiaries shall (i) change its fiscal year (currently October 1
through September 30) or (ii) except as required by GAAP, change its
accounting practices in any manner which would affect Lessee's
compliance with Paragraph 5.03.
(l) Capital Expenditures. Lessee and its Subsidiaries shall
not pay or incur Capital Expenditures which exceed in aggregate in any
fiscal year $50,000,000.
5.03. Lessee's Financial Covenants. Until the termination of this
Agreement and the satisfaction in full by Lessee of all Lessee Obligations,
Lessee will comply, and will cause compliance, with the following financial
covenants, unless Lessor and Required Participants shall otherwise consent in
writing:
(a) Tangible Net Worth. Lessee shall not permit its Tangible
Net Worth on the last day of any fiscal quarter (such date to be
referred to herein as a "determination date") which occurs after
December 31, 1997 (such date to be referred to herein as the "base
date") to be less than the sum on such determination date of the
following:
(i) Eighty-five percent (85%) of the Tangible Net
Worth of Lessee and its Subsidiaries on the base date;
plus
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(ii) Seventy-five percent (75%) of the sum of
Lessee's consolidated quarterly net income (ignoring any
quarterly losses, except as otherwise provided in clause (iii)
below) for each fiscal quarter after the base date through and
including the fiscal quarter ending on the determination date;
minus
(iii) the sum of Lessee's consolidated quarterly
"in-process R & D loss" for each fiscal quarter after the base
date through and including the fiscal quarter ending on the
determination date;
plus
(iv) One hundred percent (100%) of the Net Proceeds
of all Equity Securities issued by Lessee and its Subsidiaries
(to Persons other than Lessee or its Subsidiaries) during the
period commencing on the base date and ending on the
determination date; and
As used in this Subparagraph 5.03(a), "in-process R & D loss" shall
mean, with respect to any fiscal quarter in which Lessee experiences a
consolidated net loss, the lesser of (A) the amount of such net loss
and (B) the sum of all in-process research and development charges,
determined on a consolidated basis in accordance with GAAP, taken by
Lessee and its Subsidiaries during such quarter.
(b) Leverage Ratio. Lessee shall not permit its Leverage Ratio
to be greater than 1.15 to 1.00 at any time.
(c) Quick Ratio. Lessee shall not permit its Quick Ratio on
the last day of any fiscal quarter to be less than (i) 1.00 to 1.00 for
each fiscal quarter ending on June 30, 1998 and September 30, 1998 and
(ii) 1.25 to 1.00 for each fiscal quarter thereafter.
(d) Fixed Charge Coverage Ratio. Lessee shall not permit its
Fixed Charge Coverage Ratio for any consecutive four-quarter period to
be less than 2.00 to 1.00.
5.04. Lessor's Covenants. Until the termination of this Agreement and
the satisfaction in full by Lessor of all Lessor Obligations, Lessor will
comply, and will cause compliance, with the following covenants, unless Lessee
and Required Participants shall otherwise consent in writing:
(a) Use of Proceeds. Lessor shall use the proceeds of all
amounts delivered to Lessor by Participants pursuant to Subparagraph
2.05(a) solely to fund Advances.
(b) Lessor Liens. Lessor shall not create, incur, assume or
permit to exist any Lessor Lien (other than any Lien granted to Agent
or any Participant pursuant to the Operative Documents to secure the
Lessor Obligations) and shall promptly discharge, at its sole cost and
expense, any Lessor Lien on the Property (other than any Liens granted
to Agent or any Participant pursuant to the Operative Documents to
secure the Lessor Obligations); provided, however, that Lessor shall
not be required so to discharge any
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such Lessor Lien if the same is being (or promptly will be) contested
in good faith by appropriate proceedings diligently prosecuted,
provided that any such contest is completed and all Lessor Liens are
discharged on or prior to the Expiration Date.
(c) Property Disposition. Lessor shall not sell, lease,
transfer or otherwise dispose of its right, title and interest in the
Property and the Operative Documents except as provided in Subparagraph
2.11(b) or Subparagraph 7.05(d) hereof or in the Purchase Agreement or
after retaining the Property following the Expiration Date.
(d) Chief Executive Office. Lessor shall not change its chief
executive office without giving Agent prompt written notice.
5.05. Participants' Covenants. Each Participant covenants that it will
not fund its portion of any Advance with the assets of any "employee benefit
plan" (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA
or any "plan" (as defined in Section 4975(e)(1) of the IRC.
SECTION 6. LESSOR, AGENT AND THEIR RELATIONS WITH PARTICIPANTS.
6.01. Appointment of Agent. Each Participant hereby appoints and
authorizes Agent to act as its agent hereunder and under the other Operative
Documents with such powers as are expressly delegated to Agent by the terms of
this Agreement and the other Operative Documents, together with such other
powers as are reasonably incidental thereto. Lessor is not an agent for the
Participants or Agent, and neither this Agreement nor any other Operative
Document shall be construed to constitute or evidence a partnership among the
Lessor Parties or otherwise to impose upon Lessor or Agent any fiduciary duty.
6.02. Powers and Immunities. Neither Lessor nor Agent shall have any
duties or responsibilities except those expressly set forth in this Agreement or
in any other Operative Document, be a trustee for any Participant or have any
fiduciary duty to any Participant. Notwithstanding anything to the contrary
contained herein, neither Lessor nor Agent shall be required to take any action
which is contrary to this Agreement or any other Operative Document or any
applicable Governmental Rule. Neither Lessor nor Agent nor any Participant shall
be responsible to any Participant for any recitals, statements, representations
or warranties made by Lessee or any of its Subsidiaries contained in this
Agreement or in any other Operative Document, for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Operative Document or for any failure by Lessee or any of its
Subsidiaries to perform their respective obligations hereunder or thereunder.
Lessor and Agent may employ agents and attorneys-in-fact and shall not be
responsible to any Participant for the negligence or misconduct of any such
agents or attorneys-in-fact selected by it with reasonable care. Neither Lessor
nor Agent nor any of their respective directors, officers, employees, agents or
advisors shall be responsible to any Participant for any action taken or omitted
to be taken by it or them hereunder or under any other Operative Document or in
connection herewith or therewith, except for its or their own gross negligence
or willful misconduct. Except as otherwise provided under this Agreement, Lessor
and Agent shall take such action with respect to the Operative Documents as
shall be directed by the Required Participants.
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6.03. Reliance. Lessor or Agent shall be entitled to rely upon any
certificate, notice or other document (including any cable, telegram, facsimile
or telex) believed by it in good faith to be genuine and correct and to have
been signed or sent by or on behalf of the proper Person or Persons, and upon
advice and statements of legal counsel, independent accountants and other
experts selected by Lessor or Agent with reasonable care. As to any other
matters not expressly provided for by this Agreement, neither Lessor nor Agent
shall be required to take any action or exercise any discretion, but shall be
required to act or to refrain from acting upon instructions of the Required
Participants and shall in all cases be fully protected by the Participants in
acting, or in refraining from acting, hereunder or under any other Operative
Document in accordance with the instructions of the Required Participants, and
such instructions of the Required Participants and any action taken or failure
to act pursuant thereto shall be binding on all of the Participants.
6.04. Defaults. Neither Lessor nor Agent shall be deemed to have
knowledge or notice of the occurrence of any Default unless Lessor and Agent
have received a written notice from a Participant or Lessee, referring to this
Agreement, describing such Default and stating that such notice is a "Notice of
Default". If Lessor and Agent receive such a notice of the occurrence of a
Default, Agent shall give prompt notice thereof to the Participants. Lessor and
Agent shall take such action with respect to such Default as shall be reasonably
directed by the Required Participants; provided, however, that until Lessor and
Agent shall have received such directions, Lessor or Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default as it shall deem advisable in the best interest of the
Participants.
6.05. Indemnification. Without limiting the Obligations of Lessee
hereunder, each Participant agrees to indemnify Lessor and Agent, ratably in
accordance with such Participant's Proportionate Share, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may at
any time be imposed on, incurred by or asserted against Lessor or Agent in any
way relating to or arising out of this Agreement or any documents contemplated
by or referred to herein or therein or the transactions contemplated hereby or
thereby or the enforcement of any of the terms hereof or thereof; provided,
however, that no Participant shall be liable for any of the foregoing to the
extent they arise from Lessor's or Agent's gross negligence or willful
misconduct. Lessor or Agent shall be fully justified in refusing to take or in
continuing to take any action hereunder unless it shall first be indemnified to
its satisfaction by the Participants against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. The obligations of each Participant under this Paragraph 6.05 shall
survive the payment and performance of the Lessee Obligations, the termination
of this Agreement and any Participant ceasing to be a party to this Agreement
(with respect to events which occurred prior to the time such Participant ceased
to be a Participant hereunder).
6.06. Non-Reliance. Each Participant represents that it has,
independently and without reliance on Lessor, Agent, or any other Participant,
and based on such documents and information as it has deemed appropriate, made
its own appraisal of the business, prospects, management, financial condition
and affairs of Lessee and the Subsidiaries and its own decision to enter into
this Agreement and agrees that it will, independently and without reliance upon
Lessor, Agent or any other Participant, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
appraisals and decisions in taking or not
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taking action under this Agreement or any other Operative Document. Neither
Lessor nor Agent nor any of their respective affiliates nor any of their
respective directors, officers, employees, agents or advisors shall (a) be
required to keep any Participant informed as to the performance or observance by
Lessee or any of its Subsidiaries of the obligations under this Agreement or any
other document referred to or provided for herein or to make inquiry of, or to
inspect the properties or books of Lessee or any of its Subsidiaries; (b) have
any duty or responsibility to provide any Participant with any credit or other
information concerning Lessee or any of its Subsidiaries which may come into the
possession of Lessor or Agent, except for notices, reports and other documents
and information expressly required to be furnished to the Participants by Lessor
or Agent hereunder; or (c) be responsible to any Participant for (i) any
recital, statement, representation or warranty made by Lessee or any officer,
employee or agent of Lessee in this Agreement or in any of the other Operative
Documents, (ii) the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any Operative Document, (iii) the value or
sufficiency of the Property or the validity or perfection of any of the liens or
security interests intended to be created by the Operative Documents, or (iv)
any failure by Lessee to perform its obligations under this Agreement or any
other Operative Document.
6.07. Resignation or Removal of Agent. Agent may resign at any time by
giving thirty (30) days prior written notice thereof to Lessee and the
Participants, and Agent may be removed at any time with or without cause by the
Required Participants. Upon any such resignation or removal, the Required
Participants shall have the right to appoint a successor Agent, which Agent, if
not a Participant, shall be reasonably acceptable to Lessee; provided, however,
that Lessee shall have no right to approve a successor Agent if a Default has
occurred and is continuing. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from the duties and
obligations thereafter arising hereunder. After any retiring Agent's resignation
or removal hereunder as Agent, the provisions of this Section VI and any other
provision of this Agreement or any other Operative Document which by its terms
survives the termination of this Agreement shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent.
6.08. Authorization. Agent is hereby authorized by the Participants to
execute, deliver and perform, each of the Operative Documents to which Agent is
or is intended to be a party and each Participant agrees to be bound by all of
the agreements of Agent contained in the Operative Documents.
6.09. Lessor and Agent in their Individual Capacities. Lessor, Agent
and their respective affiliates may make loans to, accept deposits from and
generally engage in any kind of banking or other business with Lessee and its
Subsidiaries and affiliates as though Lessor were not Lessor hereunder and Agent
were not Agent hereunder. With respect to Advances, if any, made by Agent in its
capacity as a Participant, Agent in its capacity as a Participant shall have the
same rights and powers under this Agreement and the other Operative Documents as
any other Participant and may exercise the same as though it were not Agent, and
the terms "Participant" or "Participants" shall include Agent in its capacity as
a Participant.
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SECTION 7. MISCELLANEOUS
7.01. Notices. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Lessor, Lessee, any Participant or Agent under this Agreement or the other
Operative Documents shall be in writing and faxed, mailed or delivered, if to
Lessor, Lessee or Agent, at its respective facsimile number or address set forth
below or, if to any Participant, at the address or facsimile number specified
beneath the heading "Address for Notices" under the name of such Participant in
Part B of Schedule I (or to such other facsimile number or address for any party
as indicated in any notice given by that party to the other parties). All such
notices and communications shall be effective (a) when sent by Federal Express
or other overnight service of recognized standing, on the Business Day following
the deposit with such service; (b) when mailed, first class postage prepaid and
addressed as aforesaid through the United States Postal Service, upon receipt;
(c) when delivered by hand, upon delivery; and (d) when faxed, upon confirmation
of receipt; provided, however, that any Advance Request, Notice of Rental Period
Selection, Extension Request, Notice of Term Purchase Option Exercise, Notice of
Marketing Option Exercise or Notice of Expiration Date Purchase Option Exercise
delivered to Lessor or Agent shall not be effective until received by Lessor or
Agent.
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Lessee: Fair, Isaac and Company, Inc.
120 North Redwood Drive
San Rafael, CA 94903-1996
Attn: Peter L. McCorkell, General Counsel
Tel. No: (415) 472-2211
Fax. No: (415) 444-5029
With copies to:
Fair, Isaac and Company, Inc.
120 North Redwood Drive
San Rafael, CA 94903-1996
Attn: Chief Financial Officer
Tel. No: (415) 472-2211
Fax. No: (415) 444-5069
Fair, Isaac and Company, Inc.
120 North Redwood Drive
San Rafael, CA 94903-1996
Attn: Treasurer
Tel. No: (415) 472-2211
Fax. No: (415) 444-5069
Lessor: Lease Plan North America, Inc.
c/o ABN AMRO Bank N.V.
135 South LaSalle Street, Suite 660
Chicago, IL 60603
Attn: David M. Shipley
Tel. No: (312) 904-2183
Fax. No: (312) 904-6217
Agent: ABN AMRO Bank N.V.
Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
Tel. No: (212) 314-1724
Fax. No: (212) 314-1712
With a copy to:
ABN AMRO Bank N.V.
101 California Street, Suite 4550
San Francisco, CA 94111-5812
Attn: Jamie Dillon
Tel. No: (415) 984-3750
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Fax. No: (415) 362-3524
Each Advance Request, Notice of Rental Period Selection, Extension Request,
Notice of Term Purchase Option Exercise, Notice of Marketing Option Exercise and
Notice of Expiration Date Purchase Option Exercise shall be given by Lessee to
Agent's office located at its address referred to above during its normal
business hours; provided, however, that any such notice received by Agent after
10:00 a.m. on any Business Day shall be deemed received by Agent on the next
Business Day. In any case where this Agreement authorizes notices, requests,
demands or other communications by Lessee to any Lessor Party to be made by
telephone or facsimile, any Lessor Party may conclusively presume that anyone
purporting to be a person designated in any incumbency certificate or other
similar document received by such Lessor Party is such a person.
7.02. Expenses. Lessee shall pay on demand, whether or not any Advance
is made hereunder, (a) all reasonable fees and expenses, including reasonable
attorneys' fees and expenses, incurred by Lessor and Agent in connection with
the preparation, negotiation, execution and delivery of, the consummation of the
transactions contemplated by and the exercise of their duties under, this
Agreement and the other Operative Documents, and the preparation, negotiation,
execution and delivery of amendments and waivers hereunder and thereunder and
(b) all reasonable fees and expenses, including reasonable attorneys' fees and
expenses, incurred by the Lessor Parties in the enforcement or attempted
enforcement of any of the Lessee Obligations or in preserving any of the Lessor
Parties' rights and remedies (including all such fees and expenses incurred in
connection with any "workout" or restructuring affecting the Operative Documents
or the Lessee Obligations or any bankruptcy or similar proceeding involving
Lessee or any of its Subsidiaries). As used herein, the term "reasonable
attorneys' fees and expenses" shall include, without limitation, allocable costs
and expenses of Agent's and Participants' in-house legal counsel and staff. The
obligations of Lessee under this Paragraph 7.02 shall survive the payment and
performance of the Lessee Obligations and the termination of this Agreement.
7.03. Indemnification. To the fullest extent permitted by law, Lessee
agrees to protect, indemnify, defend and hold harmless, on an after-tax basis,
the Lessor Parties and the other Indemnitees from and against any and all
liabilities, losses, damages or expenses of any kind or nature (including
Indemnified Taxes) and from any suits, claims or demands (including in respect
of or for reasonable attorney's fees and other expenses) arising on account of
or in connection with any matter or thing or action or failure to act by
Indemnitees, or any of them, arising out of or relating to the Operative
Documents, any transaction contemplated thereby or the Property, including any
use by Lessee of the Property or the Advances, except to the extent such
liability arises from the willful misconduct or gross negligence of such
Indemnitee. Upon receiving knowledge of any suit, claim or demand asserted by a
third party that any Lessor Party believes is covered by this indemnity, such
Lessor Party shall give Lessee notice of the matter and an opportunity to defend
it, at Lessee's sole cost and expense, with legal counsel reasonably
satisfactory to such Lessor Party. Such Lessor Parties may also require Lessee
to defend the matter. Any failure or delay of any Lessor Party to notify Lessee
of any such suit, claim or demand shall not relieve Lessee of its obligations
under this Paragraph 7.03 but shall reduce such obligations to the extent of any
increase in those obligations caused solely by any such failure or
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delay that is unreasonable. The obligations of Lessee under this Paragraph 7.03
shall survive the payment and performance of the Lessee Obligations and the
termination of this Agreement.
7.04. Waivers; Amendments. Any term, covenant, agreement or condition
of this Agreement or any other Operative Document may be amended or waived if
such amendment or waiver is in writing and is signed by Lessor, Lessee and the
Required Participants; provided, however that:
(a) Any amendment, waiver or consent which (i) increases the
364-Day Commitment, Thirty-Month Commitment or Total Commitment, (ii)
extends the Scheduled Expiration Date, (iii) reduces the Rental Rate or
any fees or other amounts payable for the account of the Participants
hereunder, (iv) postpones any date scheduled for any payment of Base
Rent or any fees or other amounts payable for the account of the
Participants hereunder or thereunder, (v) amends Paragraph 2.06 or this
Paragraph 7.04, (vi) amends the definition of Required Participants or
(vii) releases Lessor's interest in any substantial part of the
Property, must be in writing and signed or approved in writing by all
Participants;
(b) Any amendment, waiver or consent which increases or
decreases the Proportionate Share of any Participant must be in writing
and signed by such Participant; and
(c) Any amendment, waiver or consent which affects the rights
or obligations of Agent must be in writing and signed by Agent.
No failure or delay by any Lessor Party in exercising any right hereunder shall
operate as a waiver thereof or of any other right nor shall any single or
partial exercise of any such right preclude any other further exercise thereof
or of any other right. Unless otherwise specified in such waiver or consent, a
waiver or consent given hereunder shall be effective only in the specific
instance and for the specific purpose for which given.
7.05. Successors and Assigns.
(a) Binding Effect. This Agreement and the other Operative
Documents shall be binding upon and inure to the benefit of Lessee,
Lessor, the Participants, Agent and their respective permitted
successors and assigns. All references in this Agreement to any Person
shall be deemed to include all successors and assigns of such Person.
(b) Participant Assignments.
(i) Any Participant may, at any time, sell and assign
to any other Participant or any Eligible Assignee
(individually, an "Assignee Participant") all or a portion of
its rights and obligations under this Agreement and the other
Operative Documents (such a sale and assignment to be referred
to herein as an "Assignment") pursuant to an assignment
agreement in the form of Exhibit M (an "Assignment
Agreement"), executed by each Assignee Participant and such
assignor Participant (an "Assignor Participant") and delivered
to Agent for its acceptance and recording in the Register;
provided, however, that:
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(A) Without the written consent of Lessor,
Agent and, if no Default has occurred and is
continuing, Lessee (which consent of Lessor, Agent
and Lessee shall not be unreasonably withheld), no
Participant may make any Assignment to any Assignee
Participant which is not, immediately prior to such
Assignment, a Participant hereunder or an Affiliate
thereof; or
(B) Without the written consent of Lessor,
Agent and, if no Default has occurred and is
continuing, Lessee (which consent of Lessor, Agent
and Lessee shall not be unreasonably withheld), no
Participant may make any Assignment to any Assignee
Participant if, after giving effect to such
Assignment, the Commitment of such Participant or
such Assignee Participant would be less than Five
Million Dollars ($5,000,000) (except that a
Participant may make an Assignment which reduces its
Commitment to zero without the written consent of
Lessor, Agent or Lessee); or
(C) Without the written consent of Lessor,
Agent and, if no Default has occurred and is
continuing, Lessee (which consent of Lessor, Agent
and Lessee shall not be unreasonably withheld), no
Participant may make any Assignment of its
Outstanding Tranche A Participation Amount or its
Outstanding Tranche B Participation Amount which does
not assign and delegate an equal pro rata interest in
(1) such Participant's Outstanding Tranche A
Participation Amount and its Outstanding Tranche B
Participation Amount, (2) such Participant's Tranche
A Percentage and its Tranche B Percentage, and (3)
such Participant's other rights, duties and
obligations relating to the Tranche A Portion and the
Tranche B Portion under this Agreement and the other
Operative Documents.
(D) Without the written consent of Lessor,
Agent and, if no Default has occurred and is
continuing, Lessee (which consent of Lessor, Agent
and Lessee shall not be unreasonably withheld), no
Tranche C Participant may make any Assignment of its
Outstanding Tranche C Participation Amount which does
not assign and delegate an equal pro rata interest in
(1) such Participant's Outstanding Tranche C
Participation Amount, (2) such Participant's Tranche
C Percentage, and (3) such Participant's other
rights, duties and obligations relating to the
Tranche C Portion under this Agreement and the other
Operative Documents.
Upon such execution, delivery, acceptance and recording of
each Assignment Agreement, from and after the Assignment
Effective Date determined pursuant to such Assignment
Agreement, (y) each Assignee Participant thereunder shall be a
Participant hereunder with a Tranche A Percentage, Tranche B
Percentage, Tranche C Percentage and Proportionate Share as
set forth on Attachment 1 to such Assignment Agreement (under
the caption "Tranche Percentages and Proportionate Shares
After Assignment") and shall have the rights, duties and
obligations of such a Participant under this Agreement and the
other Operative
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Documents, and (z) the Assignor Participant thereunder shall
be a Participant with a Tranche A Percentage, Tranche B
Percentage, Tranche C Percentage and Proportionate Share as
set forth on Attachment 1 to such Assignment Agreement (under
the caption "Tranche Percentages and Proportionate Shares
After Assignment"), or, if the Proportionate Share of the
Assignor Participant has been reduced to 0%, the Assignor
Participant shall cease to be a Participant and to have any
obligation to fund any portion of any Advance; provided,
however, that any such Assignor Participant which ceases to be
a Participant shall continue to be entitled to the benefits of
any provision of this Agreement which by its terms survives
the termination of this Agreement. Each Assignment Agreement
shall be deemed to amend Schedule I to the extent, and only to
the extent, necessary to reflect the addition of each Assignee
Participant, the deletion of each Assignor Participant which
reduces its Proportionate Share to 0% and the resulting
adjustment of Tranche A Percentages, Tranche B Percentages,
Tranche C Percentages and Proportionate Shares arising from
the purchase by each Assignee Participant of all or a portion
of the rights and obligations of an Assignor Participant under
this Agreement and the other Operative Documents. Each
Assignee Participant which was not previously a Participant
hereunder and which is not incorporated under the laws of the
United States of America or a state thereof shall, within
three (3) Business Days of becoming a Participant, deliver to
Lessee and Agent two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224 (or successor
applicable form), as the case may be, certifying in each case
that such Participant is entitled to receive payments under
this Agreement without deduction or withholding of any United
States federal income taxes.
(ii) Agent shall maintain at its address referred to
in Paragraph 7.01 a copy of each Assignment Agreement
delivered to it and a register (the "Register") for the
recordation of the names and addresses of the Participants and
the Tranche A Percentage, Tranche B Percentage, Tranche C
Percentage and Proportionate Share of each Participant from
time to time. The entries in the Register shall be conclusive
in the absence of manifest error, and Lessee, Agent and the
Participants may treat each Person whose name is recorded in
the Register as the owner of the interests recorded therein
for all purposes of this Agreement. The Register shall be
available for inspection by Lessee or any Participant at any
reasonable time and from time to time upon reasonable prior
notice.
(iii) Upon its receipt of an Assignment Agreement
executed by an Assignor Participant and an Assignee
Participant (and, to the extent required by clause (i) of this
Subparagraph 7.05(b), by Lessor, Agent and Lessee), together
with payment to Agent by Assignor Participant of a
registration and processing fee of $2,500, Agent shall (A)
promptly accept such Assignment Agreement and (B) on the
Assignment Effective Date determined pursuant thereto record
the information contained therein in the Register and give
notice of such acceptance and recordation to Lessor, the
Participants and Lessee. Agent may, from time to time at its
election, prepare and deliver to Lessor, the Participants and
Lessee a
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revised Schedule I reflecting the names, addresses and
respective Proportionate Shares of all Participants then
parties hereto.
(iv) Subject to Subparagraph 7.13(g), the Lessor
Parties may disclose the Operative Documents and any financial
or other information relating to Lessee or any Subsidiary to
each other or to any potential Assignee Participant.
(c) Participant Subparticipations. Any Participant may at any
time sell to one or more banks or other financial institutions
("Subparticipants") subparticipation interests in the rights and
interests of such Participant under this Agreement and the other
Operative Documents. In the event of any such sale by a Participant of
subparticipation interests, such Participant's obligations under this
Agreement and the other Operative Documents shall remain unchanged,
such Participant shall remain solely responsible for the performance
thereof and Lessee and the other Lessor Parties shall continue to deal
solely and directly with such Participant in connection with such
Participant's rights and obligations under this Agreement. Any
agreement pursuant to which any such sale is effected may require the
selling Participant to obtain the consent of the Subparticipant in
order for such Participant to agree in writing to any amendment, waiver
or consent of a type specified in clause (i), (ii), (iii) or (iv) of
Subparagraph 7.04(a) but may not otherwise require the selling
Participant to obtain the consent of such Subparticipant to any other
amendment, waiver or consent hereunder. Lessee agrees that any
Participant which has transferred any subparticipation interest shall,
notwithstanding any such transfer, be entitled to the full benefits
accorded such Participant under Paragraph 2.12, Paragraph 2.13, and
Paragraph 2.14, as if such Participant had not made such transfer.
(d) Lessor Assignments. Lessor may, upon one (1) month's prior
written notice to Lessee and Agent, sell and assign all of its right,
title and interest in the Property and its rights, powers, privileges,
duties and obligations under this Agreement and the other Operative
Documents, provided that:
(i) If such sale and assignment is effected after
either (A) the occurrence of a Change of Law which makes it
unlawful or unreasonably burdensome for Lessor to hold legal
or beneficial title to the Property or to perform its
obligations and duties under this Agreement and the other
Operative Documents or (B) the resignation or removal of the
Agent which was the Agent at the time Lessor became the
Lessor, the purchaser/assignee (the "successor Lessor") shall
be either (1) a Participant or an Eligible Assignee that will
not cause the transaction evidenced by this Agreement and the
other Operative Documents to lose its treatment as an
operating lease under FASB 13 or (2) a Person approved as
provided in clause (ii) below; or
(ii) If such sale and assignment is effected in any
other circumstance, the successor Lessor shall be a Person
that is (A) a financial institution or a Person controlled by
a financial institution and (B) approved in writing by Agent,
Required Participants and, if no Default has occurred and is
continuing, Lessee (which consents of Agent, Required
Participants and Lessee shall not be unreasonably withheld);
and
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(iii) The successor Lessor executes such documents,
instruments and agreements as may reasonably be necessary to
evidence its agreement to assume all of the obligations and
duties of the Lessor under this Agreement and the other
Operative Documents.
Upon the consummation of any such sale and assignment, (A) the
successor Lessor shall become the "Lessor" and shall succeed to and
become vested with all the rights, powers, privileges, duties and
obligations of the Lessor under this Agreement and the other Operative
Documents and (B) the retiring Lessor shall be discharged from the
duties and obligations of the Lessor thereafter arising under this
Agreement and the other Operative Documents. After any retiring
Lessor's discharge as the Lessor, the provisions of Section VI and any
other provision of this Agreement or any other Operative Document which
by its terms survives the termination of this Agreement shall continue
in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as the Lessor.
7.06. Setoff. In addition to any rights and remedies of the
Participants provided by law, each Participant shall have the right, with the
prior written consent of Agent, but without prior notice to or consent of
Lessee, any such notice and consent being expressly waived by Lessee to the
extent permitted by applicable law, upon the occurrence and during the
continuance of an Event of Default, to set-off and apply against the Lessee
Obligations, whether matured or unmatured, any amount owing from such
Participant to Lessee, at or at any time after, the occurrence of such Event of
Default. The aforesaid right of set-off may be exercised by such Participant
against Lessee or against any trustee in bankruptcy, debtor in possession,
assignee for the benefit of creditors, receiver or execution, judgment or
attachment creditor of Lessee or against anyone else claiming through or against
Lessee or such trustee in bankruptcy, debtor in possession, assignee for the
benefit of creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set-off shall not have been
exercised by such Participant prior to the occurrence of an Event of Default.
Each Participant agrees promptly to notify Lessee after any such set-off and
application made by such Participant, provided that the failure to give such
notice shall not affect the validity of such set-off and application.
7.07. No Third Party Rights. Nothing expressed in or to be implied from
this Agreement is intended to give, or shall be construed to give, any Person,
other than the parties hereto and their permitted successors and assigns
hereunder, any benefit or legal or equitable right, remedy or claim under or by
virtue of this Agreement or under or by virtue of any provision herein.
7.08. Partial Invalidity. If at any time any provision of this
Agreement or any other Operative Document is or becomes illegal, invalid or
unenforceable in any respect under the law or any jurisdiction, neither the
legality, validity or enforceability of the remaining provisions of this
Agreement or the other Operative Documents nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.
7.09. JURY TRIAL. EACH OF LESSEE AND THE LESSOR PARTIES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY
53
<PAGE>
WAIVES ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING TO THE OPERATIVE
DOCUMENTS IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING
TO ANY OPERATIVE DOCUMENT.
7.10. Counterparts. This Agreement may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.
7.11. No Joint Venture, Etc. Neither this Agreement nor any other
Operative Document nor any transaction contemplated hereby or thereby shall be
construed to (a) constitute a partnership or joint venture between Lessee and
any Lessor Party or (b) impose upon any Lessor Party any agency relationship
with or fiduciary duty to Lessee.
7.12. Usury Savings Clause. Nothing contained in this Agreement or any
other Operative Documents shall be deemed to require the payment of interest or
other charges by Lessee in excess of the amount the applicable Lessor Parties
may lawfully charge under applicable usury laws. In the event any Lessor Party
shall collect monies which are deemed to constitute interest which would
increase the effective interest rate to a rate in excess of that permitted to be
charged by applicable law, all such sums deemed to constitute excess interest
shall, upon such determination, at the option of Lessor, be returned to Lessee
or credited against other Lessee Obligations.
7.13. Confidentiality. No Lessor Party shall disclose to any Person any
information with respect to Lessee or any of its Subsidiaries which is furnished
pursuant to this Agreement or under the other Operative Documents, except that
any Lessor Party may disclose any such information (a) to its own directors,
officers, employees, auditors, counsel and other advisors and to its Affiliates
to the extent reasonably determined by such Lessor Party to be necessary for the
administration or enforcement of the Operative Documents; (b) to any other
Lessor Party; (c) which is otherwise available to the public; (d) if required or
appropriate in any report, statement or testimony submitted to any Governmental
Authority having or claiming to have jurisdiction over such Lessor Party; (e) if
required in response to any summons or subpoena; (f) in connection with any
litigation among the parties relating to the Operative Documents or the
transactions contemplated thereby; (g) to comply with any Requirement of Law
applicable to such Lessor Party; (h) to any Assignee Participant or
Subparticipant or any prospective Assignee Participant or Subparticipant,
provided that such Assignee Participant or Subparticipant or prospective
Assignee Participant or Subparticipant agrees to be bound by this Paragraph
7.13; or (i) otherwise with the prior consent of Lessee; provided, however, that
(i) any Lessor Party served with any summons or subpoena demanding the
disclosure of any such information shall use reasonable efforts to notify Lessee
promptly of such summons or subpoena and, if requested by Lessee and not
materially disadvantageous to such Lessor Party, to cooperate with Lessee in
obtaining a protective order restricting such disclosure, and (ii) any
disclosure made in violation of this Agreement shall not affect the obligations
of Lessee and its Subsidiaries under this Agreement and the other Operative
Documents.
7.14. Governing Law. This Agreement and the other Operative Documents
shall be governed by the laws of the State of California. Lessee hereby
unconditionally and irrevocably
54
<PAGE>
waives, to the fullest extent permitted by law, any claim to assert that the law
of any jurisdiction other than California governs this Agreement and the other
Operative Documents.
7.15. Consent to Jurisdiction. Lessee irrevocably submits to the
jurisdiction of: any state or federal court sitting in the state of California
over any suit, action, or proceeding, brought by Lessee against Lessor Parties,
arising out of or relating to this Agreement or the other Operative Documents;
and (b) any state court sitting in Marin County over any suit, action, or
proceeding, brought by Lessor Parties to exercise their STATUTORY POWER OF SALE
under this Agreement or any action brought by Lessor Parties to enforce their
rights with respect to the Collateral. Lessee irrevocably waives, to the fullest
extent permitted by law, any objection that Lessee may now or hereafter have to
the laying of venue of any such suit, action, or proceeding brought in any such
court and any claim that any such suit, action, or proceeding brought in any
such court has been brought in an inconvenient forum.
[The first signature page follows.]
55
<PAGE>
IN WITNESS WHEREOF, Lessee, Lessor, the Participants and Agent have
caused this Agreement to be executed as of the day and year first above written.
LESSEE: FAIR, ISAAC AND COMPANY, INC.
By:______________________________________
Name:_________________________________
Title:________________________________
LESSOR: LEASE PLAN NORTH AMERICA, INC.
By:______________________________________
Name:_________________________________
Title:________________________________
AGENT: ABN AMRO BANK N.V.
By:______________________________________
Name:_________________________________
Title:________________________________
By:______________________________________
Name:_________________________________
Title:________________________________
PARTICIPANTS: ABN AMRO BANK N.V.
By:______________________________________
Name:_________________________________
Title:________________________________
By:______________________________________
Name:_________________________________
Title:________________________________
KEYBANK NATIONAL ASSOCIATION
By:______________________________________
Name:_________________________________
Title:________________________________
56
<PAGE>
BANQUE NATIONALE de PARIS
By:______________________________________
Name:_________________________________
Title:________________________________
By:______________________________________
Name:_________________________________
Title:________________________________
FLEET NATIONAL BANK
By:______________________________________
Name:_________________________________
Title:________________________________
THE DAI-ICHI KANGO BANK, LIMITED
Los Angeles Agency
By:______________________________________
Name:_________________________________
Title:________________________________
57
<PAGE>
<TABLE>
SCHEDULE I
PARTICIPANTS
PART A(1)
TRANCHE PERCENTAGES AND PROPORTIONATE SHARES
PRIOR TO COMMITMENT TERMINATION DATE
<CAPTION>
- ------------------------- --------------- ------------------ -------------------- ----------------- -------------------
Participant Tranche A Tranche B Tranche C Proportionate
Percentange Percentage Percentage Share
- ------------------------- --------------- ------------------ -------------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
ABN AMRO Bank N.V. 13,350,000 22.49606373% 1.77666354% 0.0% 24.27272727%
- ------------------------- --------------- ------------------ -------------------- ----------------- -------------------
KeyBank National 15,000,000 25.27647610% 1.99625117% 0.0% 27.27272727%
Association
- ------------------------- --------------- ------------------ -------------------- ----------------- -------------------
Banque National de Paris 10,000,000 16.85098407% 1.33083411% 0.0% 18.18181818%
- ------------------------- --------------- ------------------ -------------------- ----------------- -------------------
Fleet National Bank 10,000,000 16.85098407% 1.33083411% 0.0% 18.18181818%
- ------------------------- --------------- ------------------ -------------------- ----------------- -------------------
The Dai-Ichi Kangyo 5,000,000 8.42549203% 0.66541706% 0.0% 9.09090909%
Bank, Limited
- ------------------------- --------------- ------------------ -------------------- ----------------- -------------------
Lease Plan North 1,650,000 0.0% 0.0% 3.0% 3.0%
America, Inc.
- ------------------------- --------------- ------------------ -------------------- ----------------- -------------------
Total 55,000,000 89.9% 7.1% 3.0% 100.0%
- ------------------------- --------------- ------------------ -------------------- ----------------- -------------------
</TABLE>
I-1
<PAGE>
<TABLE>
PART A(2)
TRANCHE PERCENTAGES AND PROPORTIONATE SHARES
ON AND AFTER COMMITMENT TERMINATION DATE
<CAPTION>
- ------------------------- -------------- ----------------- ------------------ ----------------- --------------------
Participant Tranche A Tranche B Tranche C Proportionate Share
Percentange Percentage Percentage
- ------------------------- -------------- ----------------- ------------------ ----------------- --------------------
<S> <C> <C> <C> <C> <C>
ABN AMRO Bank N.V. 13,350,000 20.89456420% 3.37816307% 0.0% 24.27272727%
- ------------------------- -------------- ----------------- ------------------ ----------------- --------------------
KeyBank National 15,000,000 23.47703843% 3.79568885% 0.0% 27.27272727%
Association
- ------------------------- -------------- ----------------- ------------------ ----------------- --------------------
Banque National de Paris 10,000,000 15.65135895% 2.53045923% 0.0% 18.18181818%
- ------------------------- -------------- ----------------- ------------------ ----------------- --------------------
Fleet National Bank 10,000,000 15.65135895% 2.53045923% 0.0% 18.18181818%
- ------------------------- -------------- ----------------- ------------------ ----------------- --------------------
The Dai-Ichi Kangyo 5,000,000 7.82567948% 1.26522962% 0.0% 9.09090909%
Bank, Limited
- ------------------------- -------------- ----------------- ------------------ ----------------- --------------------
Lease Plan North 1,650,000 0.0% 0.0% 3.0% 3.0%
America, Inc.
- ------------------------- -------------- ----------------- ------------------ ----------------- --------------------
Total 55,000,000 83.5% 13.5% 3.0% 100.0%
- ------------------------- -------------- ----------------- ------------------ ----------------- --------------------
</TABLE>
I-2
<PAGE>
PART B - ADDRESSES, ETC.
ABN AMRO BANK N.V.
Applicable Participating Office:
ABN AMRO Bank N.V.
San Francisco International Branch
101 California Street, Suite 4550
San Francisco, CA 94111
Address for Notices:
ABN AMRO Bank N.V.
San Francisco International Branch
101 California Street, Suite 4550
San Francisco, CA 94111
Attention: Jamie Dillon
Telephone: (415) 984-3750
Fax: (415) 362-3524
ABN AMRO North America, Inc.
Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attention: Linda Boardman
Telephone: (212) 314-1724
Fax: (212) 314-1712
Wiring Instructions:
ABN AMRO Bank N.V.
New York, New York
ABA No.: 026009580
Account Name: ABN AMRO Bank - Chicago CPU
Account No.: 650-001-1789-41
Reference: Fair, Isaac and Company, Inc. Synthetic Lease
I-3
<PAGE>
KEYBANK NATIONAL ASSOCIATION
Applicable Participating Office:
KeyBank National Association
700 Fifth Ave., 46th Floor
Seattle, Washington 98104
Address for Notices:
KeyBank National Association
700 Fifth Ave., 46th Floor
Seattle, Washington 98104
Telephone: 206-684-6085
Fax: 206-684-6035
KeyBank National Association
431 E. Parkcenter Blvd.
Boise, Idaho 83704
Telephone: 800-297-5518
Fax: 800-297-5495
Wiring Instructions:
KeyBank National Association
Seattle, Washington
Attn: Specialty Services
ABA No. 125000574
Account No.: 01500163
Reference: Fair Isaac
I-4
<PAGE>
BANQUE NATIONAL de PARIS
Applicable Participating Office:
Banque National de Paris
180 Montgomery Street, 3rd floor
San Francisco, CA 94104
Address for Notices:
Banque National de Paris
180 Montgomery Street, 3rd floor
San Francisco, CA 94104
Attn: William LaHerran, Vice President
Telephone: 415-956-0707
Fax: 415-296-8954
Banque National de Paris
Treasury Department
180 Montgomery Street, 3rd floor
San Francisco, CA 94104
Attn: Don Hart, Vice President
Telephone: 415-956-2511
Fax: 415-989-9041
Wiring Instructions:
Federal Reserve Bank of New York
ABA 026007689
Account name: Banque National de Paris, San Francisco
Account No.: 14334000176
Reference: Fair Isaac and Company
Attn: Peggy T.
I-5
<PAGE>
FLEET NATIONAL BANK
Applicable Participating Office:
Fleet National Bank
One Federal Street
Boston, MA 02110
Address for Notices:
Fleet National Bank
One Federal Street
Boston, MA 02110
Attn: Mathew M. Glauninger
Telephone: 617-346-0622
Fax: 617-346-0151
Fleet National Bank
One Federal Street
Boston, MA 02110
Attn: Pauline Kowalczyk
Telephone: 617-346-0622
Fax: 617-346-0151
Wiring Instructions:
Fleet National Bank
Boston, MA
ABA 011000138
Account No.: 1510351-03156
For further credit to: Commercial Loan Wire Suspense
Reference: Fair Isaac and Company, Inc.
I-6
<PAGE>
THE DAI-ICHI KANGYO BANK, LIMITED
Los Angeles Agency
Applicable Participating Office:
The Dai-Ichi Kango Bank Limited
Los Angeles Agency
101 California Street, Suite 4000
San Francisco, CA 94111
Address for Notices:
The Dai-Ichi Kango Bank Limited
Los Angeles Agency
101 California Street, Suite 4000
San Francisco, CA 94111
Telephone: 415-393-1813
Fax: 415-788-7868
The Dai-Ichi Kango Bank Limited
Los Angeles Agency
555 West 5th Street
Los Angeles, CA 90013
Telephone: 213-243-4774
Fax: 213-243-4896
Wiring Instructions:
The Dai-Ichi Kango Bank Limited
New York Branch
New York, NY
ABA:
Account No.: 79740111195
Attn: Credit Administration
I-7
<PAGE>
SCHEDULE II
PRICING GRID
(For LIBOR Rental Rate or Fixed Rental Rate, when not cash-secured)
LEVERAGE RATIO PRICING APPLICABLE MARGIN
PERIOD FOR TRANCHES A & B
RATIO LEVEL LIBOR RENTAL RATE
----- ----- -----------------
More than 0.85 1 0.75%
Less than or equal to 0.85 2 1.00%
EXPLANATION
1. During any period when Agent does not have, in accordance with the Cash
Collateral Agreement, a first priority perfected security interest in
Cash Collateral with a value equal to or greater than the aggregate
Outstanding Lease Amount or any Portion thereof, the Applicable Margin
with respect to the LIBOR Rental Rate will be set for each Pricing
Period and will vary depending upon whether such period is a Level 1
Period, or a Level 2 Period.
2. Each Pricing Period will be a Level 1 Period or a Level 2 Period
depending upon Lessee's Leverage Ratio for the most recent consecutive
four-fiscal quarters ending prior to the first day of such Pricing
Period.
II-1
<PAGE>
SCHEDULE 1.01
DEFINITIONS
"364-Day Commitment" shall have the meaning given to that term in
Subparagraph 2.03(b) of the Participation Agreement.
"364-Day Commitment Extension Fee" shall have the meaning given to that
term in Subparagraph 2.04(c) of the Participation Agreement.
"364-Day Commitment Period" shall have the meaning given to that term
in Subparagraph 2.03(b) of the Participation Agreement.
"364-Day Commitment Termination Date" shall have the meaning given to
that term in Subparagraph 2.03(b) of the Participation Agreement.
"ABN AMRO" shall mean ABN AMRO Bank N.V.
"Acquisition Advances" shall have the meaning given to that term in
Subparagraph 2.01(b) of the Participation Agreement.
"Acquisition Agreement" shall mean, in the case of the Tract 1 Land,
that certain Asset Sale Agreement, dated as of June 25, 1996, between PG&E, as
seller, and Village Builders, L.P., as buyer, as amended by the First Amendment
to Asset Sale Agreement dated as of August 15, 1997 and assigned by the
Assignment of Asset Sale Agreement between Village Builders, L.P. and Lessee,
and in the case of the Tract 2 Land, that certain Owner Participation,
Disposition and Development Agreement, dated on or about May 19, 1998, between
the San Rafael Redevelopment Agency, as seller, and Lessee, as buyer.
"Acquisition Date" shall mean the date on which Lessor acquires a Tract
of Land pursuant to the applicable Acquisition Agreement.
"Acquisition Price" shall mean, with respect to each Tract of Land, the
total purchase price payable by Lessor for such property on the Acquisition Date
thereof.
"Acquisition Request" shall have the meaning given to that term in
Subparagraph 2.03(a) of the Participation Agreement.
"Adjusted Net Income" shall mean, with respect to Lessee for any
period, the sum, determined on a consolidated basis in accordance with GAAP, of
the following:
(a) The net income or net loss of Lessee and its Subsidiaries
for such period before provision for income taxes;
plus
1.01-1
<PAGE>
(b) The sum (to the extent deducted in calculating net income
or loss in clause (a) above) of (i) all Interest Expenses of Lessee and
its Subsidiaries accruing during such period, (ii) all rental expenses
of Lessee and its Subsidiaries accruing during such period, (iii) all
income tax expense of Lessee and its Subsidiaries payable to any
governmental authority and accruing during such period, and (iv) all
payments of principal (or, in the case of Capital Leases, synthetic
leases or other off-balance sheet financings, amounts attributable to
principal) of Indebtedness paid or scheduled to be paid by Lessee and
its Subsidiaries during such period;
plus
(c) The sum of all charges taken by Lessee and its
Subsidiaries during such period in connection with the acquisition of
in-process research and development.
"Advances" shall have the meaning given to that term in Subparagraph
2.01(b) of the Participation Agreement.
"Advance Requests" shall have the meaning given to that term in
Subparagraph 2.03(c) of the Participation Agreement.
"Affiliate" shall mean, with respect to any Person, (a) each Person
that, directly or indirectly, owns or controls, whether beneficially or as a
trustee, guardian or other fiduciary, twenty (20%) or more of any class of
Equity Securities of such Person, (b) each Person that controls, is controlled
by or is under common control with such Person or any Affiliate of such Person
or (c) each of such Person's officers, directors, joint venturers and partners;
provided, however, that in no case shall any Lessor Party be deemed to be an
Affiliate of Lessee or any of its Subsidiaries for purposes of the Operative
Documents. For the purpose of this definition, "control" of a Person shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of voting
securities, by contract or otherwise.
"Agent" shall mean ABN AMRO, acting in its capacity as Agent for the
Participants under the Operative Documents.
"Agent's Fee Letter" shall mean the letter agreement dated as of April
6, 1998 between Lessee and Agent regarding certain fees payable by Lessee to
Agent.
"Agent's Fees" shall have the meaning given to that term in
Subparagraph 2.04(a) of the Participation Agreement.
"Alternate Rental Rate" shall mean, for any Rental Period (or portion
thereof), the per annum rate equal to the Base Rate in effect from time to time
during such period plus the Applicable Margin, such rate to change from time
during such period as the Base Rate or Applicable Margin shall change.
"Applicable Margin" shall mean:
1.01-2
<PAGE>
(a) Tranche A and Tranche B. With respect to the Outstanding
Tranche A Amount and Outstanding Tranche B Amount:
(i) No Cash Collateral. During any period when Agent
does not have, in accordance with the Cash Collateral
Agreement, a first priority perfected security interest in any
Cash Collateral securing the Lessee Obligations:
(A) The per annum margin which is determined
pursuant to the Pricing Grid and added to the LIBO
Rate with respect to the LIBOR Rental Rate or the
Fixed Rate with respect to the Fixed Rental Rate ; or
(B) Zero percent (0%) per annum with respect
to the Alternate Rental Rate;
(ii) Full Cash Collateral. During any period when
Agent has, in accordance with the Cash Collateral Agreement, a
first priority perfected security interest in Cash Collateral
that secures the Lessee Obligations and has a value equal to
or greater than the full Outstanding Lease Amount or any
Portion thereof:
(A) Twenty-five hundredths of one percent
(0.25%) per annum with respect to the LIBOR Rental
Rate or the Fixed Rental Rate; or
(B) Zero percent (0%) per annum with respect
to the Alternate Rental Rate; or
(iii) Partial Cash Collateral. During any period when
Agent has, in accordance with the Cash Collateral Agreement, a
first priority perfected security interest in Cash Collateral
that secures the Lessee Obligations but has a value less than
the full Outstanding Lease Amount or any Portion thereof:
(A) The per annum margin equal to the sum of
the following with respect to the LIBOR Rental Rate
or the Fixed Rental Rate:
(1) The product of (y) the per annum
margin which is determined pursuant to the
Pricing Grid and added to the LIBO Rate or
the Fixed Rate as the case may be (z) a
fraction, the numerator of which is the
remainder of the Outstanding Lease Amount or
any Portion thereof minus the value of the
Cash Collateral and the denominator of which
is the Outstanding Lease Amount or any
Portion thereof; plus
(2) The product of (y) twenty-five
hundredths of one percent (0.25%) per annum
above times (z) a fraction, the numerator of
which is the value of the Cash Collateral
and the denominator of which is the
Outstanding Lease Amount or any Portion
thereof; or
1.01-3
<PAGE>
(B) Zero percent (0%) per annum with respect
to the Alternate Rental Rate; and
(b) Tranche C. With respect to the Outstanding Tranche C
Amount:
(i) Two and one-half percent (2.5%) per annum with
respect to the LIBOR Rental Rate; or
(ii) Two and one-half percent (2.5%) per annum with
respect to the Alternate Rental Rate;
provided, however, that each Applicable Margin set forth in subparagraphs (a)
and (b) of this definition shall be increased by two percent (2.0%) per annum on
the date an Event of Default occurs and shall continue at such increased rate
unless and until such Event of Default is waived in accordance with the
Operative Documents.
"Applicable Participating Office" shall mean, with respect to any
Participant, (a) initially, its office designated as such in Part B of Schedule
I (or, in the case of any Participant which becomes a Participant by an
assignment pursuant to Subparagraph 7.05(b) of the Participation Agreement, its
office designated as such in the applicable Assignment Agreement) and (b)
subsequently, such other office or offices as such Participant may designate to
Agent as the office at which such Participant's interest in the Lease Agreement
will thereafter be maintained and for the account of which all payments of Rent
and other amounts payable to such Participant under the Operative Documents will
thereafter be made.
"Appraisal" shall mean an appraisal of the Property or a portion
thereof in a form satisfactory to Lessee, Lessor, Agent and the Required
Participants, prepared by an independent MAI appraiser that (a) complies with
the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and all
other applicable Governmental Rules and (b) is approved by Lessor, Agent and the
Required Participants (at the time such appraiser is selected).
"Appurtenant Rights" shall mean all easements and rights-of-way, strips
and gores of land, streets, ways, alleys, passages, sewer rights, water, water
courses, water rights and powers, air rights and development rights, liberties,
tenements, hereditaments and appurtenances of any nature whatsoever, in any way
belonging, relating or pertaining to any Land or the Improvements thereto and
the reversions, remainders, and all the estates, rights, titles, interests,
property, possession, claim and demand whatsoever, both in law and in equity,
of, in and to such Land and Improvements and every part and parcel thereof, with
the appurtenances thereto.
"Assignee Participant" shall have the meaning given to that term in
Subparagraph 7.05(b) of the Participation Agreement.
"Assignment" shall have the meaning given to that term in Subparagraph
7.05(b) of the Participation Agreement.
"Assignment Agreement" shall have the meaning given to that term in
Subparagraph 7.05(b) of the Participation Agreement.
1.01-4
<PAGE>
"Assignment Effective Date" shall have, with respect to each Assignment
Agreement, the meaning set forth therein.
"Assignment of Construction Agreements" shall have the meaning given to
that term in Subparagraph 2.11(a) of the Participation Agreement.
"Assignment of Lease" shall have the meaning given to that term in
Subparagraph 2.11(b).
"Assignor Participant" shall have the meaning given to that term in
Subparagraph 7.05(b) of the Participation Agreement.
"Assumed Appraisal" shall have the meaning given to that term in
Subparagraph 3.02(h) of the Purchase Agreement.
"Base Rate" shall mean, on any day, the greater of (a) the Prime Rate
in effect on such date and (b) the Federal Funds Rate for such day plus one-half
percent (0.50%).
"Base Rent" shall have the meaning given to that term in Subparagraph
2.03(a) of the Lease Agreement.
"Budget" shall mean the budget for the acquisition of the Property and
the New Improvements set forth on Schedule 4.01(x).
"Business Day" shall mean any day on which (a) commercial banks are not
authorized or required to close in San Francisco, California, Chicago, Illinois
or New York, New York and (b) if such Business Day is related to a LIBOR Rental
Rate, dealings in Dollar deposits are carried out in the London interbank
market.
"Capital Adequacy Requirement" shall have the meaning given to that
term in Subparagraph 2.12(d) of the Participation Agreement.
"Capital Asset" shall mean, with respect to any Person, any tangible
fixed or capital asset owned or leased (in the case of a Capital Lease) by such
Person, or any expense incurred by such Person that is required by GAAP to be
reported as a non-current asset on such Person's balance sheet.
"Capital Expenditures" shall mean, with respect to Lessee and its
Subsidiaries for any period, the sum, determined on a consolidated basis in
accordance with GAAP, of all amounts expended and indebtedness incurred or
assumed by Lessee and its Subsidiaries during such period for the acquisition of
Capital Assets (including all amounts expended and indebtedness incurred or
assumed in connection with Capital Leases).
"Capital Leases" shall mean any and all lease obligations that, in
accordance with GAAP, are required to be capitalized on the books of a lessee.
"Cash Collateral" shall mean eurodollar deposits or United States
Treasury Securities and deposit accounts held or maintained by Agent and
Participants to the extent such securities and
1.01-5
<PAGE>
accounts are held and maintained in accordance with the Cash Collateral
Agreement and Lessor has a first priority perfected security interest therein
securing the Lessee Obligations.
"Cash Collateral Agreement" shall have the meaning given to that term
in Subparagraph 2.11(a) of the Participation Agreement.
"Cash Equivalents" shall mean, on any date:
(a) Any debt investments that mature within one year from such
date if such investments are permitted by the investment policy of
Lessee set forth in Schedule 5.02(e) to the Participation Agreement; or
(b) If the investment policy of Lessee is changed after the
date of the Participation Agreement, any debt investments that mature
within one year from such date if (i) such investments are permitted by
the most recent investment policy of Lessee and (ii) such investment
policy has been approved by Lessee's Board of Directors and by Lessor
and Required Participants.
"Casualty" shall mean any damage to, destruction of or decrease in the
value of all or any portion of any of the Property as a result of fire, flood,
earthquake or other natural cause; the actions or inactions of any Person or
Persons (whether willful or unintentional and whether or not constituting
negligence); or any other cause.
"Casualty and Condemnation Proceeds" shall mean all awards, damages,
compensation, reimbursement and other payments made or to be made to Lessee,
Lessor or Agent from any insurer, Governmental Authority or other Person (other
than Lessee or any Lessor Party) on account of any Casualty or Condemnation.
"Change of Control" shall mean (a) with respect to Lessee, the
occurrence of any of the following events: (i) any person or group of persons
(within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934,
as amended) shall (A) acquire beneficial ownership (within the meaning of Rule
13d-3 promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended) of twenty-five percent (25%) or more of the
outstanding Equity Securities of Lessee entitled to vote for members of the
board of directors, or (B) acquire all or substantially all of the assets of
Lessee and its Subsidiaries taken as a whole, or (ii) during any period of
twelve (12) consecutive calendar months, individuals who are directors of Lessee
on the first day of such period ("Initial Directors") and any directors of
Lessee who are specifically approved by two-thirds of the Initial Directors and
previously-approved Directors ("Approved Directors") shall cease to constitute a
majority of the Board of Directors of Lessee before the end of such period; and
(b) with respect to Lessee's Japanese Subsidiary, Lessee shall cease to own at
least fifty-one percent (51%) of the Equity Securities of such Subsidiary except
for nominal amounts of director stock necessary to do business in Japan.
"Change of Law" shall have the meaning given to that term in
Subparagraph 2.12(b) of the Participation Agreement.
"Closing Date" shall have the meaning given to that term in
Subparagraph 2.01(a) of the Participation Agreement.
1.01-6
<PAGE>
"Closing Date Appraisal" shall mean, with respect to any Tract of Land,
on or as of a recent date prior to its Acquisition Date, an Appraisal that
assesses at such time the Fair Market Value of such property on such date.
"Collateral" shall mean the Property Collateral, the Cash Collateral
and all other property in which any Lessor Party has a Lien to secure any of the
Lessee Obligations.
"Commencement Date" shall have the meaning given to that term in
Subparagraph 2.02(a) of the Lease Agreement.
"Commitment" shall mean, with respect to any Participant at any time,
such Participant's Proportionate Share of the Total Commitment at such time.
"Commitment Fees" shall have the meaning given to that term in
Subparagraph 2.04(b) of the Participation Agreement.
"Commitment Period" shall have the meaning given to that term in
Subparagraph 2.01(a) of the Participation Agreement.
"Commitment Termination Date" shall have the meaning given to that term
in Subparagraph 2.01(a) of the Participation Agreement.
"Completion" shall have the meaning given to that term in Subparagraph
3.05(c) of the Construction Agency Agreement. "Complete", "Completed" and
"Completion" shall have comparable meanings.
"Completion Date" shall mean the first date on which all of the
conditions set forth in Subparagraph 3.05(c) of the Construction Agency
Agreement are satisfied.
"Compliance Certificate" shall have the meaning given to that term in
Subparagraph 5.01(a) of the Participation Agreement.
"Condemnation" shall mean any condemnation, requisition, confiscation,
seizure or other taking or sale of the use, access, occupancy or other right in
or to all or any portion of any of the Property (whether wholly or partially,
temporarily or permanently), by or on account of any actual or threatened
eminent domain proceeding or other taking of action by any Governmental
Authority or other Person having the power of eminent domain, including an
action by any such Governmental Authority or Person to change the grade of, or
widen the streets adjacent to, such Property or alter the pedestrian or
vehicular traffic flow to such Property so as to result in change in access to
such Property, or by or on account of an eviction by paramount title or any
transfer made in lieu of any such proceeding or action. A "Condemnation" shall
be deemed to have occurred on the earliest of the dates that use, access,
occupancy or other right is taken.
"Conforming Bid" shall have the meaning given to that term in
Subparagraph 3.02(c) of the Purchase Agreement.
"Construction Agency Agreement" shall have the meaning given to that
term in Subparagraph 2.01(a) of the Participation Agreement.
1.01-7
<PAGE>
"Construction Agreements" shall have the meaning given to that term in
Paragraph 3.02 of the Construction Agency Agreement.
"Contingent Obligation" shall mean, with respect to any Person, (a) any
Guaranty Obligation of that Person; and (b) any direct or indirect obligation or
liability, contingent or otherwise, of that Person (i) in respect of any Surety
Instrument issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings or payments, (ii) as a partner or
joint venturer in any partnership or joint venture, (iii) to purchase any
materials, supplies or other property from, or to obtain the services of,
another Person if the relevant contract or other related document or obligation
requires that payment for such materials, supplies or other property, or for
such services, shall be made regardless of whether delivery of such materials,
supplies or other property is ever made or tendered, or such services are ever
performed or tendered, or (iv) in respect to any Rate Contract that is not
entered into in connection with a bona fide hedging operation that provides
offsetting benefits to such Person. The amount of any Contingent Obligation
shall (subject, in the case of Guaranty Obligations, to the last sentence of the
definition of "Guaranty Obligation") be deemed equal to the maximum reasonably
anticipated liability in respect thereof, and shall, with respect to item
(b)(iv) of this definition be marked to market on a current basis.
"Contractual Obligation" of any Person shall mean, any indenture, note,
lease, loan agreement, security, deed of trust, mortgage, security agreement,
guaranty, instrument; contract, agreement or other form of contractual
obligation or undertaking to which such Person is a party or by which such
Person or any of its property is bound.
"Credit Event" shall mean the making of each Advance, the selection of
a new Rental Period or the exercise of the Marketing Option under the Purchase
Agreement.
"Current Appraisal" shall have the meaning given to that term in
Subparagraph 3.02(h) of the Purchase Agreement.
"Default" shall mean any Event of Default under the Lease Agreement or
any event or circumstance not yet constituting an Event of Default under the
Lease Agreement which, with the giving of any notice or the lapse of any period
of time or both, would become an Event of Default under the Lease Agreement.
"Defaulting Participant" shall mean a Participant which has failed to
fund its portion of any Advance which it is required to fund under the
Participation Agreement and has continued in such failure for three (3) Business
Days after written notice from Agent.
"Deposit Accounts" shall have the meaning given to that term in
Subparagraph 2.01(a) of the Cash Collateral Agreement.
"Depositary Bank" shall have the meaning given to that term in
Paragraph 2.02 of the Cash Collateral Agreement.
"Designated Purchaser" shall have the meaning given to that term in
Subparagraph 3.02(e) of the Purchase Agreement.
1.01-8
<PAGE>
"Dollars" and "$" shall mean the lawful currency of the United States
of America and, in relation to any payment under the Operative Documents, same
day or immediately available funds.
"Eligible Assignee" shall mean (a) a commercial bank organized under
the laws of the United States, or any state thereof, and having a combined
capital and surplus of at least $100,000,000; (b) a commercial bank organized
under the laws of any other country which is a member of the Organization for
Economic Cooperation and Development (the "OECD"), or a political subdivision of
any such country, and having a combined capital and surplus of at least
$100,000,000, provided that such bank is acting through a branch or agency
located in the United States; or (c) a Person that is (i) a Subsidiary of a
Participant, (ii) a Subsidiary of a Person of which a Participant is a
Subsidiary, or (iii) a Person of which a Participant is a Subsidiary.
"Employee Benefit Plan" shall mean any employee benefit plan within the
meaning of section 3(3) of ERISA maintained or contributed to by Lessee or any
ERISA Affiliate, other than a Multiemployer Plan.
"Environmental Laws" shall mean the Clean Air Act, 42 U.S.C. Section
7401 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et
seq.; the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901
et seq.; the Comprehensive Environment Response, Compensation and Liability Act
of 1980 (including the Superfund Amendments and Reauthorization Act of 1986,
"CERCLA"), 42 U.S.C. Section 9601 et seq.; the Toxic Substances Control Act, 15
U.S.C. Section 2601 et seq.; the Occupational Safety and Health Act, 29 U.S.C.
Section 651; the Emergency Planning and Community Right-to-Know Act of 1986, 42
U.S.C. Section 11001 et seq.; the Mine Safety and Health Act of 1977, 30 U.S.C.
Section 801 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f et
seq.; and all other Governmental Rules relating to the protection of human
health and the environment, including all Governmental Rules pertaining to
reporting, licensing, permitting, transportation, storage, disposal,
investigation, and remediation of emissions, discharges, releases, or threatened
releases of Hazardous Materials into the air, surface water, groundwater, or
land, or relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of Hazardous Materials.
"Environmental Reports" shall have the meaning set forth in
Subparagraph 4.01(f) of the Participation Agreement.
"Equity Securities" of any Person shall mean (a) all common stock,
preferred stock, participations, shares, partnership interests or other equity
interests in and of such Person (regardless of how designated and whether or not
voting or non-voting) and (b) all warrants, options and other rights to acquire
any of the foregoing.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as the same may from time to time be amended or supplemented, including any
rules or regulations issued in connection therewith.
"ERISA Affiliate" shall mean any Person which is treated as a single
employer with Lessee under Section 414 of the IRC.
1.01-9
<PAGE>
"Event of Default" shall have the meaning given to that term in
Paragraph 5.01 of the Lease Agreement.
"Exhibit B Supplement" shall have the meaning given to that term in
Subparagraph 2.03(b) of the Participation Agreement.
"Existing Improvements" shall mean, with respect to the Land, all
Improvements existing on the Land on the Closing Date.
"Expiration Date" shall mean the earlier of (a) the Scheduled
Expiration Date under the Lease Agreement, as such date may be extended pursuant
to this Agreement, and (b) the Termination Date for the Lease Agreement, if the
Lease Agreement is terminated prior to its Scheduled Expiration Date in
accordance with its terms.
"Expiration Date Appraisal" shall mean, with respect to any Tract of
Land at any time, an Appraisal that assesses at such time the Fair Market Value
of such property on the Scheduled Expiration Date and as improved in accordance
with the Budget for the New Improvements, as such Appraisal may be revised as
contemplated by Subparagraph 5.01(h) of the Participation Agreement. Until the
first Appraisal complying with this definition is delivered, the term
"Expiration Date Appraisal" shall include the preliminary market valuation
delivered pursuant to Item F(2) of Schedule 3.01 to the Participation Agreement.
"Expiration Date Purchase Option" shall have the meaning given to that
term in Subparagraph 3.01(b) of the Purchase Agreement.
"Fair Market Value" shall mean, with respect to any of the Property or
any portion thereof, the maximum reasonable amount (not less than zero) that
would be paid in cash in an arm's-length transaction between an informed and
willing purchaser and an informed and willing seller, neither of whom is under
any compulsion to purchase or sell, for the ownership of the Property or such
portion.
"FASB 13" shall mean Financial Accounting Standards Board Statement No.
13.
"Federal Funds Rate" shall mean, for any day, the rate per annum set
forth in the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Board (including any
such successor publication, "H.15 (519)") for such day opposite the caption
"Federal Funds (Effective)". If on any relevant day, such rate is not yet
published in H.15 (519), the rate for such day shall be the rate set forth in
the daily statistical release designated as the Composite 3:30 p.m. Quotations
for U.S. Government Securities, or any successor publication, published by the
Federal Reserve Bank of New York (including any such successor publication, the
"Composite 3:30 p.m. Quotations") for such day under the caption "Federal Funds
Effective Rate". If on any relevant day, such rate is not yet published in
either H.15 (519) or the Composite 3:30 p.m. Quotations, the rate for such day
shall be the arithmetic means, as determined by Agent, of the rates quoted to
Agent for such day by three (3) Federal funds brokers of recognized standing
selected by Agent.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System.
1.01-10
<PAGE>
"Financial Statements" shall mean, with respect to any accounting
period for any Person, statements of income, shareholders' equity and cash flows
of such Person for such period, and a balance sheet of such Person as of the end
of such period, setting forth in each case in comparative form figures for the
corresponding period in the preceding fiscal year if such period is less than a
full fiscal year or, if such period is a full fiscal year, corresponding figures
from the preceding annual audit, all prepared in reasonable detail and in
accordance with GAAP.
"Fixed Charge Coverage Ratio" shall mean, with respect to Lessee for
any period, the ratio, determined on a consolidated basis in accordance with
GAAP, of:
(a) The Adjusted Net Income of Lessee and its Subsidiaries for such
period;
divided by
(b) The sum of (i) all Interest Expenses of Lessee and its Subsidiaries
accruing during such period, (ii) all rental expenses of Lessee and its
Subsidiaries accruing during such period, (iii) all current maturities of long
term Indebtedness (including, in the case of Capital Leases, amounts
attributable to current maturities of principal) paid or scheduled to be paid by
Lessee and its Subsidiaries during such period and (iv) 20% of all Indebtedness
and all synthetic leases and other off balance sheet obligations.
"Fixed Rate" shall mean, with respect to any Rental Period and Portion
for which Lessee accepts a Fixed Rate Offer pursuant to clause (iv)(D) of
Subparagraph 2.03(a) of the Lease Agreement, the weighted average per annum rate
set forth in such Fixed Rate Offer.
"Fixed Rate Acceptance" shall have the meaning given to that term in
Subparagraph 2.03(a) of the Lease Agreement.
"Fixed Rate Offer" shall have the meaning given to that term in
Subparagraph 2.03(a) of the Lease Agreement.
"Fixed Rate Quote" shall have the meaning given to that term in
Subparagraph 2.03(a) of the Lease Agreement.
"Fixed Rate Rejection" shall have the meaning given to that term in
Subparagraph 2.03(a) of the Lease Agreement.
"Fixed Rate Request" shall have the meaning given to that term in
Subparagraph 2.03(a) of the Lease Agreement.
"Fixed Rental Rate" shall mean, for any Rental Period and Portion, the
per annum rate equal to the Fixed Rate for such Rental Period, plus the
Applicable Margin, such rate to change from time to time during such period as
the Applicable Margin shall change.
"Force Majeure Events" shall mean any Acts of God, riots, civil
commotions, insurrections, wars, strikes, lockouts or other events beyond the
control of Lessee, except for (a) any such events that are known to or should be
known to Lessee on the Closing Date; (b) any such events that are caused by the
financial condition of Lessee or the failure of Lessee to make
1.01-11
<PAGE>
any payments under any Construction Agreements, any Operative Documents or any
related agreements or (c) any events that could be remedied through the payment
of money or the exercise of other commercially reasonable efforts.
"GAAP" shall mean generally accepted accounting principles and
practices as in effect in the United States of America from time to time,
consistently applied.
"Governmental Authority" shall mean any domestic or foreign national,
state or local government, any political subdivision thereof, any department,
agency, authority or bureau of any of the foregoing, or any other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including, without limitation, the
Federal Deposit Insurance Corporation, the Federal Reserve Board, the
Comptroller of the Currency, any central bank or any comparable authority.
"Governmental Charges" shall mean taxes, levies, assessments, fees,
imposts, duties, licenses, recording charges, claims or other charges imposed by
any Governmental Authority.
"Governmental Rule" shall mean any law, rule, regulation, ordinance,
order, code, interpretation, judgment, decree, directive, guidelines, policy or
similar form of decision of any Governmental Authority.
"Guaranty Obligation" shall mean, with respect to any Person, any
direct or indirect liability of that Person with respect to any indebtedness,
lease, dividend, letter of credit or other obligation (the "primary
obligations") of another Person (the "primary obligor"), including any
obligation of that Person, whether or not contingent, (a) to purchase,
repurchase or otherwise acquire such primary obligations or any property
constituting direct or indirect security therefor, or (b) to advance or provide
funds (i) for the payment or discharge of any such primary obligation, or (ii)
to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet item, level
of income or financial condition of the primary obligor, or (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (d) otherwise to assure or hold harmless
the holder of any such primary obligation against loss in respect thereof. The
amount of any Guaranty Obligation shall be deemed equal to the stated or
determinable amount of the primary obligation in respect of which such Guaranty
Obligation is made or, if not stated or if indeterminable, the maximum
reasonably anticipated liability in respect thereof.
"Hazardous Materials" shall mean all materials, substances and wastes
which are classified or regulated as "hazardous," "toxic" or similar
descriptions under any Environmental Law.
"Improvement/Expense Advance Request" shall have the meaning given to
that term in Subparagraph 2.03(b) of the Participation Agreement.
"Improvement/Expense Advances" shall have the meaning given to that
term in Subparagraph 2.01(a) of the Participation Agreement.
1.01-12
<PAGE>
"Improvements" shall mean all buildings, structures, facilities,
fixtures and other improvements of every kind and description now or hereafter
located on any of the Land, including (a) all parking areas, roads, driveways,
walks, fences, walls, drainage facilities and other site improvements; (b) all
water, sanitary and storm sewer, drainage, electricity, steam, gas, telephone
and other utility equipment and facilities, all plumbing, lighting, heating,
ventilating, air-conditioning, refrigerating, incinerating, compacting, fire
protection and sprinkler, surveillance and security, public address and
communications equipment and systems, partitions, elevators, escalators, motors,
machinery, pipes, fittings and other items of equipment of every kind and
description now or hereafter located on such Land or attached to the
Improvements thereto which by the nature of their location thereon or attachment
thereto are real property under applicable law; and (c) all Modifications to
such Land or its Improvements, except for any Modifications removed by Lessee
from the Property pursuant to Subparagraph 3.10 of the applicable Lease
Agreement.
"Indebtedness" of any Person shall mean, without duplication:
(a) All obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments and all other obligations of
such Person for borrowed money (including recourse obligations of such
Person in connection with receivables and other assets sold by such
Person);
(b) All obligations of such Person for the deferred purchase
price of property or services (including obligations under letters of
credit and other credit facilities which secure or finance such
purchase price and obligations under "synthetic" leases but excluding
trade payables incurred in the ordinary course of business on ordinary
terms which are not overdue);
(c) All obligations of such Person under conditional sale or
other title retention agreements with respect to property acquired by
such Person (to the extent of the value of such property if the rights
and remedies of the seller or lender under such agreement in the event
of default are limited solely to repossession or sale of such
property);
(d) All obligations of such Person as lessee under or with
respect to Capital Leases;
(e) All non-contingent payment or reimbursement obligations of
such Person, contingent or otherwise, under or with respect to Surety
Instruments;
(f) All net obligations of such Person, contingent or
otherwise, under or with respect to Rate Contracts;
(g) All Guaranty Obligations of such Person with respect to
the obligations of other Persons of the types described in clauses (a)
- (f) above; and
(h) All obligations of other Persons of the types described in
clauses (a) - (f) above to the extent secured by (or for which any
holder of such obligations has an existing right, contingent or
otherwise, to be secured by) any Lien in any property
1.01-13
<PAGE>
(including accounts and contract rights) of such Person, even though
such Person has not assumed or become liable for the payment of such
obligations
"Indemnified Taxes" shall mean all income taxes, stamp taxes, sales
taxes, use taxes, rental taxes, gross receipts taxes, property (tangible and
intangible) taxes, franchise taxes, excise taxes, value added taxes, turnover
taxes, withholding taxes and other taxes and Governmental Charges, together with
any and all assessments, penalties, fines, additions and interest thereon,
except:
(a) Net income taxes and franchise taxes in lieu of net income
taxes imposed on any Lessor Party by its jurisdiction of incorporation
or a jurisdiction in which it maintains an office (provided, however,
that this definition shall not be construed to prevent a payment from
being made on an after-tax basis);
(b) Any tax or other Governmental Charge that has not become a
Lien on any of the Property and that Lessee is contesting pursuant to
Paragraph 3.12 of the Lease Agreement (but only while Lessee is so
contesting such tax or Governmental Charge); or
(c) Any tax or other Governmental Charge that is imposed upon
an Indemnitee primarily as a result of the gross negligence or willful
misconduct of such Indemnitee itself (as opposed to gross negligence or
willful misconduct imputed to such Indemnitee), but not taxes or other
Governmental Charges imposed as a result of ordinary negligence of such
Indemnitee.
"Indemnitees" shall mean the Lessor Parties and their Affiliates and
their respective directors, officers, employees, agents, attorneys and advisors.
"Indemnity Amount" shall have the meaning given to that term in
Subparagraph 3.02(g) of the Purchase Agreement.
"Initial Acquisition Advance" shall have the meaning given to the term
in Subparagraph 2.03(a) of the Participation Agreement.
"Initial Bid" shall have the meaning given to that term in Subparagraph
3.02(b) of the Purchase Agreement.
"Initial Marketing Period" shall have the meaning given to that term in
Subparagraph 3.02(b) of the Purchase Agreement.
"Insurance Requirements" shall mean all terms, conditions and
requirements imposed by the policies of insurance which Lessee is required to
maintain by the Operative Documents.
"Interest Expenses" shall mean, with respect to Lessee and its
Subsidiaries for any period, the sum, determined on a consolidated basis in
accordance with GAAP, of (a) all interest accrued on the Indebtedness of Lessee
and its Subsidiaries during such period (including interest attributable to
Capital Leases, synthetic leases and other off-balance sheet financings) and (b)
all letter of credit fees payable by Lessee and its Subsidiaries accrued during
such period.
1.01-14
<PAGE>
"Investment" of any Person shall mean any loan or advance of funds by
such Person to any other Person (other than advances to employees of such Person
for moving and travel expenses, drawing accounts and similar expenditures in the
ordinary course of business), any purchase or other acquisition of any Equity
Securities or Indebtedness of any other Person, any capital contribution by such
Person to or any other investment by such Person in any other Person (including
any Guaranty Obligations of such Person and any indebtedness of such Person of
the type described in clause (h) of the definition of "Indebtedness" on behalf
of any other Person); provided, however, that Investments shall not include (a)
accounts receivable or other indebtedness owed by customers of such Person which
are current assets and arose from sales of inventory in the ordinary course of
such Person's business or (b) prepaid expenses of such Person incurred and
prepaid in the ordinary course of business.
"IRC" shall mean the Internal Revenue Code of 1986.
"Issues and Profits" shall mean all present and future rents,
royalties, issues, profits, receipts, revenues, income, earnings and other
benefits accruing from any of the Land, Improvements or Appurtenant Rights
(whether in the form of accounts, chattel paper, instruments, documents,
investment property, general intangibles or otherwise) including all rents and
other amounts payable pursuant to any Subleases.
"Land" shall mean all lots, pieces, tracts or parcels of land described
in Exhibit A to the Lease Agreement and leased by Lessee pursuant to the Lease
Agreement.
"Lease Agreement" shall have the meaning given to that term in
Subparagraph 2.01(a) of the Participation Agreement.
"Lease Extension Request" shall have the meaning given to that term in
Subparagraph 2.09(b) of the Participation Agreement.
"Lease Reduction Payments" shall mean each of the following to the
extent applied to reduce the Outstanding Lease Amount or any Portion thereof
pursuant to the Operative Documents:
(a) Casualty and Condemnation Proceeds;
(b) The purchase price paid for the Property (or any portion
thereof) by Lessee, an Assignee Purchaser or a Designated Purchaser
pursuant to the Purchase Agreement;
(c) The Residual Value Guaranty and Indemnity Amount paid by
Lessee pursuant to the Purchase Agreement;
(d) Any proceeds received by Lessee from any sale of the
Property after the Expiration Date if such Property is retained by
Lessor after such Expiration Date pursuant to the applicable Purchase
Agreement; and
1.01-15
<PAGE>
(e) Any proceeds received by any Lessor Party from the
exercise of any of its remedies under the Operative Documents after the
occurrence of an Event of Default under the Lease Agreement.
"Lessee" shall mean Fair Isaac and Company, Inc., acting in its
capacity as Lessee under the Operative Documents.
"Lessee Obligations" shall mean and include all liabilities and
obligations owed by Lessee to any Lessor Party under any of the Operative
Documents of every kind and description and however arising (whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising), including the obligation of Lessee to pay Rent, to pay the
Residual Value Guaranty Amount, Indemnity Amount and/or Outstanding Lease Amount
or any Portion thereof and to pay all interest, fees, charges, expenses,
attorneys' fees and accountants' fees chargeable to Lessee or payable by Lessee
under the Operative Documents.
"Lessee Security Documents" shall mean and include the Lease Agreement,
the Cash Collateral Agreement, the Assignment of Construction Agreements, and
all other instruments, agreements, certificates, opinions and documents
(including Uniform Commercial Code financing statements and fixture filings and
landlord waivers) delivered to any Lessor Party in connection with any
Collateral or to secure the Lessee Obligations.
"Lessor" shall mean Lease Plan North America, Inc. , acting in its
capacity as Lessor under the Operative Documents.
"Lessor Deed of Trust" shall have the meaning given to that term in
Subparagraph 2.11(b) of the Participation Agreement.
"Lessor Liens" shall mean any Liens or other interests in any of the
Property of any Person other than Lessee or a Lessor Party arising as a result
of (a) any transfer or assignment by Lessor to such Person of any of Lessor's
interests in such Property in violation of any of the Operative Documents or (b)
any claim against Lessor by any such Person unrelated to any of the Operative
Documents or the transactions contemplated thereby. (Lessor Liens shall include
Liens granted by Lessor to Agent or any Participant to secure the Lessor
Obligations.)
"Lessor Obligations" shall mean and include all liabilities and
obligations owed by Lessor to Agent or any Participant under any of the
Operative Documents of every kind and description and however arising (whether
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising), including the obligation of Lessor to share payments made
by Lessee to Lessor under the Operative Documents as provided in Paragraph 2.06
of the Participation Agreement.
"Lessor Parties" shall mean Lessor, the Participants and Agent.
"Lessor Security Agreement" shall have the meaning given to that term
in Subparagraph 2.11(b) of the Participation Agreement.
"Leverage Ratio" shall mean, with respect to Lessee and its
Subsidiaries at any time, the ratio, determined on a consolidated basis in
accordance with GAAP, of (a) total liabilities,
1.01-16
<PAGE>
including all Indebtedness of Lessee and its Subsidiaries at such time as
reflected on Lessee's balance sheet plus the total amount of all synthetic
leases and other off balance sheet obligations of Lessee and its Subsidiaries to
(b) the Tangible Net Worth of Lessee and its Subsidiaries at such time.
"LIBO Rate" shall mean, with respect to any Rental Period and Portion,
a rate per annum equal to the quotient (rounded upward if necessary to the
nearest 1/100 of one percent) of (a) the arithmetic mean (rounded up if
necessary to the nearest 1/16 of one percent) of the rates per annum appearing
on the Telerate Page 3750 (or any successor publication) on the second Business
Day prior to the first day of such Rental Period, at or about 11:00 A.M. (London
time) (for delivery on the first day of such Rental Period for a term comparable
to such Rental Period, (or for a term of one (1) month for any Rental Period
that is less than one (1) month but is at least seven (7 days), divided by (b)
one minus the Reserve Requirement in effect from time to time. If for any reason
rates are not available as provided in clause (a) of the preceding sentence, the
rate to be used in clause (a) shall be, the rate per annum at which Dollar
deposits are offered to ABN AMRO by prime banks in the London interbank market
on the second Business Day prior to the first day of such Rental Period at or
about 11:00 A.M. (London time) (for delivery on the first day of such Interest
Period) in an amount substantially equal to ABN AMRO's Proportionate Share of
the applicable Portion and for a term comparable to such Rental Period (or for a
term of one (1) month for any Rental Period that is less than one (1) month but
is at least seven (7) days. The LIBO Rate shall be adjusted automatically as of
the effective date of any change in the Reserve Requirement.
"LIBOR Rental Rate" shall mean, for any Rental Period and Portion, the
per annum rate equal to the LIBO Rate for such Rental Period and Portion, plus
the Applicable Margin, such rate to change from time to time during such period
as the Applicable Margin shall change.
"Lien" shall mean, with respect to any property, any security interest,
mortgage, pledge, lien, charge or other encumbrance in, of, or on such property
or the income therefrom, including the interest of a vendor or lessor under a
conditional sale agreement, Capital Lease, "synthetic" lease or other title
retention agreement, or any agreement to provide any of the foregoing, and the
filing of any financing statement or similar instrument under the Uniform
Commercial Code or comparable law of any jurisdiction.
"Line Item" shall mean each line item set forth in the Budget.
"Major Casualty" shall mean, with respect to the Property, any Casualty
affecting such Property where (a) the damage to such Property is treated by any
insurer of such Property as a total loss; (b) such Property cannot reasonably be
repaired and restored to the condition in which it existed immediately prior to
such Casualty; or (c) the reasonably anticipated cost to repair and restore such
Property to the condition in which it existed immediately prior to such Casualty
would exceed twenty-five percent (25%) of the Outstanding Lease Amount or any
Portion thereof.
"Major Condemnation" shall mean, with respect to the Property, any
Condemnation affecting such Property where (a) all or substantially all of such
Property is taken by such Condemnation; (b) such Property cannot reasonably be
repaired and restored to the condition in
1.01-17
<PAGE>
which it existed immediately prior to such Condemnation; or (c) the reasonably
anticipated cost to repair and restore such Property to the condition in which
it existed immediately prior to such Condemnation would exceed twenty-five
percent (25%) of the Outstanding Lease Amount or any Portion thereof.
"Majority Participants" shall mean (a) at any time the aggregate
Outstanding Lease Amount or any Portion thereof is greater than $0, Participants
whose aggregate Outstanding Participation Amounts equal or exceed fifty percent
(50%) of the aggregate Outstanding Lease Amount or any Portion thereof at such
time and (b) at any time the aggregate Outstanding Lease Amount or any Portion
thereof is $0, Participants whose Proportionate Shares equal or exceed fifty
percent (50%).
"Margin Stock" shall have the meaning given to that term in Regulation
U issued by the Federal Reserve Board, as amended from time to time, and any
successor regulation thereto.
"Marketing Option" shall have the meaning given to that term in
Subparagraph 3.01(a) of the Purchase Agreement.
"Marketing Option Event of Default" shall mean any Event of Default
other than a Non-Marketing Option Event of Default.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the business, assets, operations or financial or other condition of Lessee and
its Subsidiaries, taken as a whole; (b) the ability of Lessee to pay or perform
the Lessee Obligations when due in accordance with the terms of the Operative
Documents; (c) the rights and remedies of any Lessor Party under the Operative
Documents or any related document, instrument or agreement; or (d) the value of
the Property and the Collateral, any Lessor Party's security interests, Liens or
other rights in the Property and the Collateral or the perfection or priority of
such security interests, Liens or rights.
"Material Casualty" shall mean any Casualty to the Property that alone,
or in combination with any prior Casualties to the Property for which repairs to
restore the Property to its prior condition have not been completed, will
require repairs costing $1,000,000 or more to restore the Property to its prior
condition.
"Maturity" shall mean, with respect to any Rent, interest, fee or other
amount payable by Lessee under the Operative Documents, the date such Rent,
interest, fee or other amount becomes due, whether upon the stated maturity or
due date, upon acceleration or otherwise.
"Modifications" shall have the meaning given to that term in
Subparagraph 3.01(c) of the Lease Agreement.
"Multiemployer Plan" shall mean any multiemployer plan within the
meaning of section 3(37) of ERISA maintained or contributed to by Lessee or any
ERISA Affiliate.
"Net Proceeds" shall mean, with respect to any issuance of Equity
Securities by Lessee or any of its Subsidiaries, the aggregate consideration
received by Lessee or such Subsidiary from such issuance less the sum of the
actual amount of the reasonable fees and commissions payable to Persons other
than Lessee or any Affiliate of Lessee and the other reasonable costs and
1.01-18
<PAGE>
expenses (including reasonable legal expenses) directly related to such issuance
that are to be paid by Lessee or any of its Subsidiaries.
"New Improvements" shall mean, with respect to the Land, all new
Improvements to the Land contemplated by the Plans and Specifications.
"Non-Marketing Option Event of Default" shall mean:
(a) An Event of Default under Subparagraph 5.01(m) of the
Lease Agreement; or
(b) An Event of Default under Subparagraph 5.01(c) of the
Lease Agreement resulting from Lessee's failure to start and complete
the construction of the New Improvements in accordance with the
Construction Agency Agreement where such failure is caused solely by a
Force Majeure Event.
"Notice of Expiration Date Purchase Option Exercise" shall have the
meaning given to that term in Paragraph 3.01 of the Purchase Agreement.
"Notice of Marketing Option Exercise" shall have the meaning given to
that term in Paragraph 3.01 of the Purchase Agreement.
"Notice of Rental Period Selection" shall have the meaning given to
that term in Subparagraph 2.03(a) of the Lease Agreement.
"Notice of Term Purchase Option Exercise" shall have the meaning given
to that term in Subparagraph 2.01(a) of the Purchase Agreement.
"Operative Documents" shall mean and include the Participation
Agreement, the Lease Agreement, the Construction Agency Agreement, the Purchase
Agreement, the Lessee Security Documents, the Lessor Deed of Trust, the Lessor
Security Agreement, the Assignment of Lease, the Acquisition Agreements, the
PG&E Agreements and the Agent's Fee Letter; all other notices, requests,
certificates, documents, instruments and agreements delivered to any Lessor
Party pursuant to Paragraph 3.01 or 3.02 of the Participation Agreement; and all
notices, requests, certificates, documents, instruments and agreements delivered
to any Lessor Party in connection with any of the foregoing on or after the date
of the Participation Agreement. (Without limiting the generality of the
preceding definition, the term "Operative Documents" shall include all written
waivers, amendments and modifications to any of the notices, requests,
certificates, documents, instruments and agreements referred to therein.)
"Outside Completion Date" shall have the meaning given to that term in
Subparagraph 2.01(a) of the Participation Agreement.
"Outstanding Lease Amount or any Portion thereof" shall mean, on any
date, the remainder of (a) the sum of all Advances made by Lessor on or prior to
such date, minus (b) the sum of all Lease Reduction Payments applied by Lessor
on or prior to such date.
1.01-19
<PAGE>
"Outstanding Participation Amount" shall mean, with respect to any
Participant on any date, the remainder of (a) the sum of the portions of all
Advances funded by such Participant on or prior to such date, minus (b) the sum
of such Participant's share of all Lease Reduction Payments applied to the
Outstanding Lease Amount or any Portion thereof on or prior to such date.
"Outstanding Tranche A Participation Amount" shall mean, with respect
to any Tranche A Participant on any date, the remainder of (a) such
Participant's Tranche A Portion of all Advances made by Lessor on or prior to
such date, minus (b) such Participant's share of all Lease Reduction Payments
applied to the Tranche A Portion of the Advances on or prior to such date.
"Outstanding Tranche B Participation Amount" shall mean, with respect
to any Tranche B Participant on any date, the remainder of (a) such
Participant's Tranche B Portion of all Advances made by Lessor on or prior to
such date, minus (b) such Participant's share of all Lease Reduction Payments
applied to the Tranche B Portion of the Advances on or prior to such date.
"Outstanding Tranche C Participation Amount" shall mean, with respect
to any Tranche C Participant on any date, the remainder of (a) such
Participant's Tranche C Portion of all Advances made by Lessor on or prior to
such date, minus (b) such Participant's share of all Lease Reduction Payments
applied to the Tranche C Portion of the Advances on or prior to such date.
"Participants" shall mean the financial institutions from time to time
listed in Schedule I to the Participation Agreement (as amended from time to
time pursuant to Subparagraph 7.05(b) of the Participation Agreement or
otherwise), acting in their capacities as Participants under the Operative
Documents.
"Participation Agreement" shall mean the Participation Agreement, dated
as of May __, 1998 among Lessee and the Lessor Parties.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Permitted Improvement Costs" shall mean all reasonable costs and
expenses necessary for the construction of the New Improvements to the Land (not
including the costs of the Land, the Existing Improvements and the other
Property to be acquired for the Acquisition Price paid by Lessor for the Land
and the other initial Property on the Closing Date), including:
(a) All reasonable costs and expenses of building supplies and
materials necessary for the construction of the New Improvements;
(b) All reasonable costs and expenses of architects,
engineers, contractors and other Persons providing labor and services
necessary for the construction of the New Improvements;
(c) All reasonable costs and expenses of performance and other
bonds and other insurance necessary for the construction of the New
Improvements; and
(d) All Base Rent accruing during the Commitment Period.
1.01-20
<PAGE>
"Permitted Indebtedness" shall have the meaning given to that term in
Subparagraph 5.02(a) of the Participation Agreement.
"Permitted Liens" shall have the meaning given to that term in
Subparagraph 5.02(b) of the Participation Agreement.
"Permitted Property Liens" shall have the meaning given to that term in
Subparagraph 3.07(a) of the Lease Agreement.
"Permitted Transaction Expenses" shall mean the following costs and
expenses to the extent payable by Lessee in connection with and directly related
to the preparation, execution and delivery of the Operative Documents and the
transactions contemplated thereby:
(a) The reasonable fees and expenses of counsel for Lessee
incurred in connection with the preparation, negotiation, execution and
delivery of the Operative Documents;
(b) The reasonable fees and expenses of counsel for each of
Lessor and Agent incurred in connection with the preparation,
negotiation, execution and delivery of the Operative Documents;
(c) The reasonable fees and expenses incurred in recording,
registering or filing any of the Operative Documents;
(d) The title fees, premiums and escrow costs and other
expenses relating to title insurance and the closing of the
transactions contemplated by the Operative Documents;
(e) The reasonable fees and expenses of required environmental
audits and appraisals;
(f) The reasonable fees and expenses of consultants and
accountants for Lessee;
(g) The reasonable fees and expenses for surveys; and
(h) Other related reasonable fees and expenses.
"Person" shall mean and include an individual, a partnership, a
corporation (including a business trust), a joint stock company, an
unincorporated association, a limited liability company, a joint venture, a
trust or other entity or a Governmental Authority.
"Personal Property Collateral" shall have the meaning given to that
term in Subparagraph 2.07(b) of the Lease Agreement.
"PG&E" shall mean Pacific Gas and Electric Company, a California
corporation.
1.01-21
<PAGE>
"PG&E Agreements" shall mean each of (i) the Acquisition Agreement
relating to the Tract 1 Land, (ii) Grant Deed between PG&E, as grantor, and
Lessor, as grantee, conveying fee title to the Tract 1 Land, (iii) the Amended
and Restated Environmental Agreement between PG&E and Lessor, which also shall
be executed by Lessee, (iv) the License Agreement between PG&E and Lessor; and
(v) the Agreement Regarding Development Within Nonexclusive Easements between
PG&E and Lessor and any other agreements relating to such agreements or
delivered in connection with such agreements..
"Plans and Specifications" shall mean the final architectural,
engineering and construction plans, specifications and drawings for the New
Improvements to be constructed on the Land delivered to Lessor pursuant to
Subparagraph 5.01(h) of the Participation Agreement, including, if applicable,
all civil plans, landscaping plans, and plans for the exterior and interior of
structures, as such plans, specifications and drawings may thereafter be
revised, amended, supplemented or modified pursuant to Paragraph 3.01 of the
Construction Agency Agreement.
"Portion" shall mean a portion of the Outstanding Lease Amount. If, at
any time, Lessee has not elected to divide the Outstanding Lease Amount into two
or more portions, any reference to a Portion shall mean the total Outstanding
Lease Amount at such time.
"Pricing Grid" shall mean the Pricing Grid as set forth on Schedule II
to the Participation Agreement.
"Prime Rate" shall mean the per annum rate publicly announced by ABN
AMRO from time to time at its Chicago Office. The Prime Rate is determined by
ABN AMRO from time to time as a means of pricing credit extensions to some
customers and is neither directly tied to any external rate of interest or index
nor necessarily the lowest rate of interest charged by ABN AMRO at any given
time for any particular class of customers or credit extensions. Any change in
the Base Rate resulting from a change in the Prime Rate shall become effective
on the Business Day on which each change in the Prime Rate occurs.
"Property" shall have the meaning given to that term in Paragraph 2.01
of the Lease Agreement.
"Property Collateral" shall have the meaning given to that term in
Subparagraph 2.11(a) of the Participation Agreement.
"Proportionate Share" shall mean, with respect to each Participant, the
percentage set forth under the caption "Proportionate Share" opposite such
Participant's name on Part A of Schedule I, or, if changed, such percentage as
may be set forth for such Participant in the Register. The Proportionate Share
of each Participant shall equal the sum of such Participant's Tranche A
Proportionate Share, Tranche B Proportionate Share and Tranche C Proportionate
Share.
"Purchase Agreement" shall have the meaning given to that term in
Subparagraph 2.01(a) of the Participation Agreement.
"Purchase Documents" shall have the meaning given to that term in
Subparagraph 4.01(a) of the Purchase Agreement.
1.01-22
<PAGE>
"Purchaser" shall have the meaning given to that term in Subparagraph
4.01(a) of the Purchase Agreement.
"Quick Ratio" shall mean, with respect to Lessee at any time, the
ratio, determined on a consolidated basis in accordance with GAAP, of:
(a) The remainder of (i) the sum (without duplication) of all
cash, Cash Equivalents and net accounts receivable of Lessee and its
Subsidiaries at such time, minus (ii) the sum (without duplication) of
all such cash, Cash Equivalents and net accounts receivable that are
subject to a Lien or are otherwise restricted, provided that unless an
Event of Default has occurred and is continuing, Cash Equivalents held
pursuant to the Cash Collateral Agreement shall not be deemed to be
subject to a Lien or otherwise restricted;
to
(b) Current liabilities of Lessee and its Subsidiaries,
determined in accordance with GAAP, plus to the extent not included in
current liabilities, the principal amount of all Indebtedness
outstanding under revolving credit facilities and 20% of all synthetic
lease obligations and other off balance sheet obligations due within
one year.
"Rate Contracts" shall mean swap agreements (as that term is defined in
Section 101 of the Federal Bankruptcy Reform Act of 1978, as amended) and any
other agreements or arrangements designed to provide protection against
fluctuations in interest or currency exchange rates.
"Real Property Collateral" shall have the meaning given to that term in
Subparagraph 2.07(a) of the Lease Agreement.
"Register" shall have the meaning given to that term in Subparagraph
7.05(b) of the Participation Agreement.
"Related Agreements" shall mean all chattel paper, accounts,
instruments, documents, investment property and general intangibles relating to
any of the Land, Improvements or Appurtenant Rights or to the present or future
development, construction, operation or use of any of the Land, Improvements or
Appurtenant Rights, including (a) all plans, specifications, construction
agreements, maps, surveys, studies, books of account, records, files, insurance
policies, guarantees and warranties relating to such Land or Improvements or to
the present or future development, construction, operation or use of such Land,
Improvements or Appurtenant Rights (including the Construction Agreements and
the Plans and Specifications); (b) all architectural, engineering, construction
and management contracts, all supply and service contracts for water, sanitary
and storm sewer, drainage, electricity, steam, gas, telephone and other
utilities relating to such Land, Improvements or Appurtenant Rights or to the
present or future development, construction, operation or use of such Land,
Improvements or Appurtenant Rights; and (c) all computer software and
intellectual property, guaranties and warranties, letters of credit, and
documents relating to such Land, Improvements or Appurtenant Rights or to the
present or future development, construction, operation or use of such Land,
Improvements or Appurtenant Rights.
1.01-23
<PAGE>
"Related Goods" shall mean:
(a) All machinery, furniture, equipment, fixtures and other
goods and tangible personal property (including construction materials
and supplies) financed by any Advance, including all such property
described in Exhibit B to the Lease Agreement and in each Exhibit B
Supplement delivered by Lessee; and
(b) All machinery, equipment, fixtures and other goods and
tangible personal property (including construction materials and
supplies) now or hereafter intended for the construction,
reconstruction, repair, replacement, alteration, addition or
improvement of or to any of the Improvements or any other Related
Goods.
"Related Permits" shall mean all licenses, authorizations,
certificates, variances, consents, approvals and other permits, now or hereafter
pertaining to any of the Land, Improvements or Appurtenant Rights and all
tradenames or business names relating to any of the Land, Improvements or
Appurtenant Rights or the present or future development, construction, operation
or use of any of the Land, Improvements or Appurtenant Rights.
"Rent" shall mean collectively Base Rent and Supplemental Rent.
"Rental Period" shall have the meaning given to that term in
Subparagraph 2.03(a) of the Lease Agreement.
"Rental Rate" shall have the meaning given to that term in Subparagraph
2.03(a) of the Lease Agreement.
"Repair and Restoration Account" shall have the meaning given to that
term in Subparagraph 3.04(c) of the Lease Agreement.
"Reportable Event" shall have the meaning given to that term in ERISA
and applicable regulations thereunder.
"Required Participants" shall mean (a) at any time the aggregate
Outstanding Lease Amount or any Portion thereof is greater than $0, Participants
whose aggregate Outstanding Participation Amounts equal or exceed sixty-six and
two-thirds percent (66-2/3%) or more of the aggregate Outstanding Lease Amount
or any Portion thereof at such time and (b) at any time the aggregate
Outstanding Lease Amount or any Portion thereof is $0, Participants whose
Proportionate Shares equal or exceed sixty-six and two-thirds percent (66-2/3%).
"Requirement of Law" applicable to any Person shall mean (a) the
Articles or Certificate of Incorporation and By-laws, Partnership Agreement or
other organizational or governing documents of such Person, (b) any Governmental
Rule applicable to such Person, (c) any license, permit, approval or other
authorization granted by any Governmental Authority to or for the benefit of
such Person or (d) any judgment, decision or determination of any Governmental
Authority or arbitrator, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
1.01-24
<PAGE>
"Reserve Requirement" shall mean, with respect to any day in any Rental
Period, the aggregate of the reserve requirement rates (expressed as a decimal)
in effect on such day for eurocurrency funding (currently referred to as
"Eurocurrency liabilities" in Regulation D of the Federal Reserve Board)
maintained by a member bank of the Federal Reserve System. As used herein, the
term "reserve requirement" shall include, without limitation, any basic,
supplemental or emergency reserve requirements imposed on any Participant by any
Governmental Authority.
"Residual Value Guaranty Amount" shall have the meaning given to that
term in Subparagraph 3.02(g) of the Purchase Agreement.
"Scheduled Expiration Date" shall have the meaning given to that term
in Subparagraph 2.02(a) of the Lease Agreement.
"Scheduled Rent Payment Date" shall have the meaning given to that term
in Subparagraph 2.03(a) of the Lease Agreement.
"Secondary Marketing Period" shall have the meaning given to that term
in Subparagraph 3.02(b) of the Purchase Agreement.
"Seller" shall mean, respect to the Tract 1 Land, PG&E, and with
respect to the Tract 2 Land, the City of San Rafael, California.
"Solvent" shall mean, with respect to any Person on any date, that on
such date (a) the fair value of the property of such Person is greater than the
fair value of the liabilities (including, without limitation, contingent
liabilities) of such Person, (b) the present fair saleable value of the assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature and (d) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person's property would constitute an unreasonably small capital.
"Subleases" shall mean all leases and subleases of any of the Land,
Improvements and/or Appurtenant Rights by Lessee as lessor or sublessor, now or
hereafter in effect, whether or not of record, including all guaranties and
security therefor and the right to bring actions and proceedings thereunder or
for the enforcement thereof and to do anything which Lessee is or may become
entitled to do thereunder.
"Subordinated Indebtedness" shall mean Indebtedness which is unsecured
and subordinated to the Lessee Obligations on terms acceptable to Lessor and the
Required Participants.
"Subparticipants" shall have the meaning given to that term in
Subparagraph 7.05(c) of the Participation Agreement.
"Subsidiary" of any Person shall mean (a) any corporation of which more
than 50% of the issued and outstanding Equity Securities having ordinary voting
power to elect a majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of
1.01-25
<PAGE>
any other class or classes of such corporation shall or might have voting power
upon the occurrence of any contingency) is at the time directly or indirectly
owned or controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries, (b) any
partnership, joint venture, or other Person of which more than 50% of the equity
interest having the power to vote, direct or control the management of such
partnership, joint venture, business trust or other Person is at the time owned
and controlled by such Person, by such Person and one or more of the other
Subsidiaries or by one or more of such Person's other Subsidiaries or (c) any
other Person included in the Financial Statements of such Person on a
consolidated basis.
"Sub-Tract Parcel" shall have the meaning set forth ine Paragraph 2.02
of the Purchase Agreement.
"Supplemental Rent" shall have the meaning given to such term in
Subparagraph 2.03(b) of the Lease Agreement.
"Surety Instruments" shall mean all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties, shipside bonds,
surety bonds and similar instruments.
"Tangible Net Worth" shall mean, with respect to Lessee and its
Subsidiaries at any time, the remainder at such time, determined on a
consolidated basis in accordance with GAAP, of (a) the total assets of Lessee
and its Subsidiaries minus (b) the sum (without limitation and without
duplication of deductions) of (i) the total liabilities of Lessee and its
Subsidiaries, (ii) all reserves established by Lessee and its Subsidiaries for
anticipated losses and expenses (to the extent not deducted in calculating total
assets in clause (a) above), and (iii) all intangible assets of Lessee and its
Subsidiaries (to the extent included in calculating total assets in clause (a)
above), including, without limitation, goodwill (including any amounts, however
designated on the balance sheet, representing the cost of acquisition of
businesses and investments in excess of underlying tangible assets), trademarks,
trademark rights, trade name rights, copyrights, patents, patent rights,
licenses, unamortized debt discount, marketing expenses, organizational
expenses, non-compete agreements and deferred research and development.
"Term" shall mean the period beginning on the Commencement Date of the
Lease Agreement and ending on the Expiration Date of the Lease Agreement.
"Termination Date" shall mean (a) the date set forth in a Notice of
Term Purchase Option as the Scheduled Rent Payment Date on which the Lease
Agreement will be terminated by Lessee pursuant to Paragraph 4.01 of the Lease
Agreement and the Property will be purchased by Lessee pursuant to Section II of
the Purchase Agreement or (b) the date set forth in a written notice delivered
by Lessor to Lessee pursuant to Subparagraph 5.03(a) or 5.04(a) of the Lease
Agreement after the occurrence of an Event of Default thereunder as the date on
which the Lease Agreement will be terminated.
"Term Purchase Option" shall have the meaning given to that term in
Paragraph 2.01 of the Purchase Agreement.
"Thirty-Month Commitment" shall have the meaning given to that term in
Subparagraph 2.01(b) of the Participation Agreement.
1.01-26
<PAGE>
"Total Commitment" shall mean the amount set forth as such in
Subparagraph 2.01(b) of the Participation Agreement or, if such amount is
reduced pursuant to Subparagraph 2.08(a) of the Participation Agreement, the
amount to which so reduced.
"Tract" shall mean:
(a) With respect to any land, the lots, pieces, parcels and
tracts of land described in each Part of Exhibit A to the Lease
Agreement or Exhibit A to the Participation Agreement, as the case may
be; and
(b) With respect to any Property, a tract of land, together
with all Property related to such tract of land.
"Tract 1 Land" and "Tract 2 Land" shall mean the lots, pieces, parcels
and tracts of land described in Part 1 and Part 2, respectively, of Exhibit A to
the Participation Agreement.
"Tract 2 Acquisition Advance" shall have the meaning given to that term
in Subparagraph 2.03(a) of the Participation Agreement.
"Tract 2 Acquisition Date" shall have the meaning given to that term in
Subparagraph 2.01(a) of the Participation Agreement. "Tranche A Participant"
shall mean, at any time, any Participant having an Outstanding Tranche A
Participation Amount at such time.
"Tranche A Percentage" shall mean (a) with respect to each Participant
at any time prior to the Commitment Termination Date, the percentage set forth
under the caption "Tranche A Percentage" opposite such Participant's name in
Part A(1) of Schedule I and (b) with respect to each Participant at any time on
or after the Commitment Termination Date, the percentage set forth under the
caption "Tranche A Percentage" opposite such Participant's name in Part A(2) of
Schedule I; or in the case of either such percentage, if changed, such
percentage as may be set forth for such Participant in the Register.
"Tranche A Portion" shall mean, (a) with respect to any Advance without
reference to any Participant, the portion of such Advance equal to the Tranche A
Proportionate Share of such Advance and (b) with respect to any Advance with
reference to any Participant, the portion of such Advance equal to such
Participant's Tranche A Percentage of such Advance.
"Tranche A Proportionate Share" shall mean (a) at any time prior to the
Commitment Termination Date, eighty-nine and nine-tenths percent (89.9%) and (b)
at any time on or after the Commitment Termination Date, eighty-three and five
tenths percent (83.5%).
"Tranche B Participant" shall mean, at any time, any Participant having
an Outstanding Tranche B Participation Amount at such time.
"Tranche B Percentage" shall mean (a) with respect to each Participant
at any time prior to the Commitment Termination Date, the percentage set forth
under the caption "Tranche B Percentage" opposite such Participant's name in
Part A(1) of Schedule I and (b) with respect to
1.01-27
<PAGE>
each Participant at any time on or after the Commitment Termination Date, the
percentage set forth under the caption "Tranche B Percentage" opposite such
Participant's name in Part A(2) of Schedule I; or in the case of either such
percentage, if changed, such percentage as may be set forth for such Participant
in the Register.
"Tranche B Portion" shall mean, (a) with respect to any Advance without
reference to any Participant, the portion of such Advance equal to the Tranche B
Proportionate Share of such Advance and (b) with respect to any Advance with
reference to any Participant, the portion of such Advance equal to such
Participant's Tranche B Percentage of such Advance.
"Tranche B Proportionate Share" shall mean (a) at any time prior to the
Commitment Termination Date, seven and one-tenth percent (7.1% and (b) at any
time on or after the Commitment Termination Date, thirteen and five-tenths
percent (13.5%).
"Tranche C Participant" shall mean, at any time, any Participant having
an Outstanding Tranche C Participation Amount at such time.
"Tranche C Percentage" shall mean (a) with respect to each Participant
at any time prior to the Commitment Termination Date, the percentage set forth
under the caption "Tranche C Percentage" opposite such Participant's name in
Part A(1) of Schedule I and (b) with respect to each Participant at any time on
or after the Commitment Termination Date, the percentage set forth under the
caption "Tranche C Percentage" opposite such Participant's name in Part A(2) of
Schedule I; or in the case of either such percentage, if changed, such
percentage as may be set forth for such Participant in the Register.
"Tranche C Portion" shall mean, (a) with respect to any Advance without
reference to any Participant, the portion of such Advance equal to the Tranche C
Proportionate Share of such Advance and (b) with respect to any Advance with
reference to any Participant, the portion of such Advance equal to such
Participant's Tranche C Percentage of such Advance.
"Tranche C Proportionate Share" shall mean, at all times (whether
before, on or after the Commitment Termination Date), three percent (3.0%).
"Trustee" shall have the meaning given to that term in the introductory
paragraph of the Lease Agreement.
"Unused" shall mean (a) with respect to the 364-Day Commitment at any
time, the remainder of (i) the 364-Day Commitment at such time minus (ii) the
aggregate amount of all Advances made prior to such time and allocated to the
364-Day Commitment; (b) with respect to the Thirty-Month Commitment at any time,
the remainder of (i) the Thirty-Month Commitment at such time minus (ii) the
aggregate amount of all Advances made prior to such time and allocated to the
Thirty-Month Commitment; and (b) with respect to the Total Commitment at any
time, the remainder of (i) the Total Commitment at such time minus (b) the
aggregate amount of all Advances made prior to such time.
1.01-28
<PAGE>
SCHEDULE 1.02
RULES OF CONSTRUCTION
(a) GAAP. Unless otherwise indicated in any Operative Document, all
accounting terms used in the Operative Documents shall be construed, and all
accounting and financial computations thereunder shall be computed, in
accordance with GAAP. If GAAP changes after the date of the Participation
Agreement such that any covenants contained in the Operative Documents would
then be calculated in a different manner or with different components, Lessee
and the Lessor Parties agree to negotiate in good faith to amend the applicable
Operative Documents in such respects as are necessary to conform those covenants
as criteria for evaluating Lessee's financial condition to substantially the
same criteria as were effective prior to such change in GAAP; provided, however,
that, until Lessee and the Lessor Parities so amend the Operative Documents, all
such covenants shall be calculated in accordance with GAAP as in effect
immediately prior to such change.
(b) Headings. Headings in each of the Operative Documents are for
convenience of reference only and are not part of the substance thereof.
(c) Plural Terms. All terms defined in any Operative Document in the
singular form shall have comparable meanings when used in the plural form and
vice versa.
(d) Time. All references in each of the Operative Documents to a time
of day shall mean San Francisco, California time, unless otherwise indicated.
All references in each of the Operative Documents to a date (the "action date")
which is one month prior to or after another date (the "reference date") shall
mean the date in the immediately preceding or succeeding calendar month (as the
case may be) which numerically corresponds to the reference date; provided,
however, that (i) if such corresponding date in the immediately preceding or
succeeding calendar month (as the case may be) is not a Business Day, the action
date shall be the next succeeding Business Day after such corresponding date
(unless, in the case of a Rental Period, such next Business Day falls in another
calendar month, in which case the action date shall be the immediately preceding
Business Day) and (ii) if the reference date is the last Business Day of a
calendar month (or a day for which there is no numerically corresponding day in
the immediately preceding calendar month) the action date shall be the last
Business Day of the immediately preceding or succeeding calendar month (as the
case may be). All references in each of the Operative Documents to an earlier
date which is two or more months prior to a reference date or to a later date
which is two or more months after a reference date shall be determined in a
comparable manner.
(e) Construction. The Operative Documents are the result of
negotiations among, and have been reviewed by Lessee and each Lessor Party and
their respective counsel. Accordingly, the Operative Documents shall be deemed
to be the product of all parties hereto, and no ambiguity shall be construed in
favor of or against Lessee or any Lessor Party.
(f) Entire Agreement. The Operative Documents, taken together,
constitute and contain the entire agreement of Lessee and the Lessor Parties and
supersede any and all prior
1.02-1
<PAGE>
agreements, negotiations, correspondence, understandings and communications
among the parties, whether written or oral, respecting the subject matter
thereof.
(g) Calculation of Base Rent, Interest and Fees. All calculations of
Base Rent, interest and fees under the Operative Documents for any period (i)
shall include the first day of such period and exclude the last day of such
period and (ii) shall be calculated on the basis of a year of 360 days for
actual days elapsed, except that during any period that Base Rent or any
interest is to be calculated based upon the Base Rate, such Base Rent or
interest shall be calculated on the basis of a year of 365 or 366 days, as
appropriate, for actual days elapsed.
(h) References.
(i) References in any Operative Document to "Recitals,"
"Sections," "Paragraphs," "Subparagraphs," "Articles," "Exhibits" and
"Schedules" are to recitals, sections, paragraphs, subparagraphs,
articles, exhibits and schedules therein and thereto unless otherwise
indicated.
(ii) References in any Operative Document to any document,
instrument or agreement (A) shall include all exhibits, schedules and
other attachments thereto, (B) shall include all documents, instruments
or agreements issued or executed in replacement thereof, and (C) shall
mean such document, instrument or agreement, or replacement or
predecessor thereto, as amended, modified and supplemented from time to
time and in effect at any given time.
(iii) References in any Operative Document to any Governmental
Rule (A) shall include any successor Governmental Rule, (B) shall
include all rules and regulations promulgated under such Governmental
Rule (or any successor Governmental Rule), and (C) shall mean such
Governmental Rule (or successor Governmental Rule) and such rules and
regulations, as amended, modified, codified or reenacted from time to
time and in effect at any given time.
(iv) References in any Operative Document to any Person in a
particular capacity (A) shall include any permitted successors to and
assigns of such Person in that capacity and (B) shall exclude such
Person individually or in any other capacity.
(i) Other Interpretive Provisions. The words "hereof," "herein" and
"hereunder" and words of similar import when used in any Operative Document
shall refer to such Operative Document as a whole and not to any particular
provision of such Operative Document. The words "include" and "including" and
words of similar import when used in any Operative Document shall not be
construed to be limiting or exclusive. In the event of any inconsistency between
the terms of the Participation Agreement and the terms of any other Operative
Document, the terms of the Participation Agreement shall govern.
(j) Governing Law. Unless otherwise provided in any Operative Document,
each of the Operative Documents shall be governed by and construed in accordance
with the laws of the State of California without reference to conflicts of law
rules.
1.02-2
<PAGE>
SCHEDULE 3.01
CONDITIONS PRECEDENT TO INITIAL ACQUISITION ADVANCE
A. Principal Operative Documents.
(1) The Participation Agreement, duly executed by Lessee,
Lessor, each Participant and Agent;
(2) The Lease Agreement, duly executed by Lessee and Lessor
and appropriately notarized for recording;
(3) The Purchase Agreement, duly executed by Lessee and
Lessor;
(4) The Construction Agency Agreement, duly executed by Lessee
and Lessor;
(5) The Assignment of Construction Agreements, duly executed
by Lessee;
(6) The Cash Collateral Agreement, duly executed by Lessee;
(7) The Assignment of Lease, duly executed by Lessor and
appropriately notarized for recording;
(8) The Lessor Deed of Trust, duly executed by Lessor and
appropriately notarized for recording; and
(9) The Lessor Security Agreement, duly executed by Lessor.
B. Lessee Corporate Documents.
(1) The Certificate or Articles of Incorporation of Lessee,
certified as of a recent date prior to the Closing Date by the
Secretary of State (or comparable official) of its jurisdiction of
incorporation;
(2) A Certificate of Good Standing (or comparable certificate)
for Lessee, certified as of a recent date prior to the Closing Date by
the Secretary of State (or comparable official) of its jurisdiction of
incorporation;
(3) A certificate of the Secretary or an Assistant Secretary
of Lessee, dated the Closing Date, certifying (a) that attached thereto
is a true and correct copy of the Bylaws of Lessee as in effect on the
Closing Date; (b) that attached thereto are true and correct copies of
resolutions duly adopted by the Board of Directors of Lessee and
continuing in effect, which authorize the execution, delivery and
performance by Lessee of the Operative Documents executed or to be
executed by Lessee and the consummation of the
3.01-1
<PAGE>
transactions contemplated thereby; and (c) that there are no proceedings for the
dissolution or liquidation of Lessee;
(4) A certificate of the Secretary or an Assistant Secretary
of Lessee, dated the Closing Date, certifying the incumbency,
signatures and authority of the officers of Lessee authorized to
execute, deliver and perform the Operative Documents and all other
documents, instruments or agreements related thereto executed or to be
executed by Lessee; and
(5) A Certificates of Good Standing (or comparable
certificates) for Lessee, certified as of a recent date prior to the
Closing Date by the Secretary of State of California.
C. Financial Statements, Financial Condition, Etc.
(1) A copy of the audited consolidated Financial Statements of Lessee
for the fiscal year ended September 30, 1997, audited by KPMG Peat
Marwick and a copy of the unqualified opinion delivered by such
accountants in connection with such Financial Statements;
(2) A copy of the 10-Q report filed by Lessee with the Securities and
Exchange Commission for the quarter ended December 31, 1997;
(3) A copy of the 10-K report filed by Lessee with the Securities and
Exchange Commission for the fiscal year ended September 30, 1997;
(4) A copy of the most recently completed annual report (Form 5500
Series) filed with the Internal Revenue Service with respect to each
Employee Benefit Plan of Lessee and its Subsidiaries, certified by the
Lessee;
(5) The consolidated plan and forecast of Lessee and its Subsidiaries
for the fiscal year to end September 30, 1998 including quarterly cash
flow projections and quarterly projections of Lessee's compliance with
each of the covenants set forth in Paragraph 5.03 of the Participation
Agreement; and
(6) Such other financial, business and other information regarding
Lessee, or any of its Subsidiaries as Agent or any Participant may
reasonably request, including information as to possible contingent
liabilities, tax matters, environmental matters and obligations for
employee benefits and compensation.
D. Collateral Documents.
(1) Evidence that the Lease Agreement, the Assignment of
Lease, and the Lessor Deed of Trust, delivered pursuant to items A(2),
A(7) and A(8) and the Memorandum of Purchase Agreement relating to the
Purchase Agreement delivered
3.01-2
<PAGE>
pursuant to item A(3) with respect to the Tract 1 Land have been properly
recorded in the Official Records of Marin County;
(2) An extended coverage owner's policy or binder of title
insurance (or a commitment therefor) for the Property insuring Lessor's
fee simple estate to the Tract 1 Land (subject to such exceptions as
Agent may approve), in such amounts and with such endorsements as Agent
may reasonably require, issued by a title insurer acceptable to Agent,
together with such policies of co-insurance or re-insurance (or
commitments therefor) as Agent may require;
(3) An extended coverage lender's policy of title insurance
(or a commitment therefor) for the Tract 1 Land insuring the validity
and priority of the Lease Agreement (subject to such exceptions as
Agent may approve), in such amounts and with such endorsements as Agent
may reasonably require, issued by a title insurer acceptable to Agent,
together with such policies of co-insurance or re-insurance (or
commitments therefor) as Agent may require;
(4) An extended coverage lender's policy of title insurance
(or a commitment therefor) for the Tract 1 Land insuring the validity
and priority of the Lessor Deed of Trust (subject to such exceptions as
Agent may approve), in such amounts and with such endorsements as Agent
may reasonably require, issued by a title insurer acceptable to Agent,
together with such policies of co-insurance or re-insurance (or
commitments therefor) as Agent may require;
(5) Copies of all leases for the Tract 1 Land and all other
documents, instruments and agreements recorded against or otherwise
affecting the Property, including all amendments, extensions and other
modifications thereof;
(6) Subordination, non-disturbance and attornment agreements
from the lessee under each of the leases for the Tract 1 Land;
(7) Such consents and estoppels, with appropriate mortgagee
protection language, as are requested by Agent, each duly executed by
the appropriate Person;
(8) Such Uniform Commercial Code financing statements and
fixture filings (appropriately completed and executed) for filing in
such jurisdictions as Agent may request to perfect the Liens granted to
Lessor and Agent in the Lessee Security Documents, the Lessor Security
Agreement and the other Operative Documents;
(9) Such Uniform Commercial Code termination statements
(appropriately completed and executed) for filing in such jurisdictions
as Agent may request to terminate any financing statement evidencing
Liens of other Persons in the Collateral which are prior to the Liens
granted to Lessor and Agent in the Lessee Security Documents, the
Lessor Security Agreement and the other Operative Documents, except for
any such prior Liens which are expressly permitted by the Operative
Documents to be prior;
3.01-3
<PAGE>
(10) Uniform Commercial Code search certificates from the
jurisdictions in which Uniform Commercial Code financing statements are
to be filed pursuant to item B(8) above reflecting no other financing
statements or filings which evidence Liens of other Persons in the
Collateral which are prior to the Liens granted to Lessor and Agent in
the Lessee Security Documents, the Lessor Security Agreement and the
other Operative Documents, except for any such prior Liens (a) which
are expressly permitted by the Operative Documents to be prior or (b)
for which Agent has received a termination statement pursuant to item
B(9) above;
(11) Such other documents, instruments and agreements as
Agents may reasonably request to establish and perfect the Liens
granted to any Lessor Party in the Lessee Security Documents, the
Lessor Deed of Trust, the Lessor Security Agreement and the other
Operative Documents;
(12) Such other evidence as Agent may request to establish
that the Liens granted to Agent or any Participant in the Lessee
Security Documents, the Lessor Deed of Trust, the Lessor Security
Agreement and the other Operative Documents are perfected and prior to
the Liens of other Persons in the Collateral, except for any such Liens
which are expressly permitted by the Operative Documents to be prior;
and
E. Opinions.
(1) A favorable written opinion of Pillsbury, Madison & Sutro
LLP, counsel to Lessee, dated the Closing Date, addressed to Lessor and
Agent, for the benefit of Lessor, Agent and the Participants, and
covering such legal matters as Agent may reasonably request and
otherwise in form and substance satisfactory to Agent.
F. Other Items.
(1) A duly completed and timely delivered Acquisition Request,
duly executed by Lessee;
(2) A preliminary market valuation for the Property,
satisfactory to Lessor, dated as of a recent date prior to the Closing
Date;
(3) Bills of sale for all Related Goods to be acquired with
the Initial Acquisition Advances to be made on the Closing Date, each
reflecting Lessor as the purchaser of such Related Goods;
(4) An as-built survey of the Property (i) prepared by a
registered surveyor reasonably satisfactory to Agent, (ii) certified as
correct and as (A) having been made in accordance with the most recent
standards for "Minimum Standard Detail Requirements for ALTA/ACSM Land
Title Surveys," jointly established and adopted by ALTA and ACSM, and
(B) meeting the accuracy requirements of a Class A survey (as defined
therein) and including items 1-5, 7-13 and 15 of Table 3 thereof, and
(iii) disclosing, among other things, (A) the location of the perimeter
of the Property by courses and distances, (B) all easements and
rights-of-way, whether above or underground, (C) the
3.01-4
<PAGE>
lines of the street abutting the Property and the width thereof, (D)
encroachments, if any, and the extent thereof in feet and inches upon
the Property, and (E) all boundary and lot lines, and all other matters
that would be disclosed by inspection of the Property and the public
records;
(5) If requested by Lessor, Agent or any Participant, a list
of and copies of all Construction Agreements;
(6) Each of the Environmental Reports;
(7) Certificates of insurance evidencing the insurance Lessee
is required to maintain pursuant to Paragraph 3.03 of the Lease
Agreements;
(8) A certificate of an Authorized Officer of Lessee,
addressed to Lessor and Agent and dated the Closing Date, certifying
that:
(a) The representations and warranties set forth in
Paragraph 4.01 of the Participation Agreement and in the other
Operative Documents are true and correct in all material
respects as of such date (except for such representations and
warranties made as of a specified date, which shall be true as
of such date);
(b) No Default has occurred and is continuing as of
such date;
(c) All of the Operative Documents are in full force
and effect on such date.
(9) The Acquisition Agreement for the Tract 1 Land and an
assignment of such Acquisition Agreement to Lessor.
(10) All fees and expenses payable to the Lessor Parties on or
prior to the Closing Date (including all Agent's Fees);
(11) All fees and expenses of Lessor's and Agent's counsels
through the Closing Date;
(12) Each of the PG&E Agreements, which shall have been duly
executed and delivered and be binding on PG&E and an appropriate
officer's certificates of PG&E as to the due authorization and
execution of such Agreements; and
(13) The agreements between Lessee and Village Builders, L.P.
relating to leasing the Property and making leasehold improvements to
the Property shall have been terminated and Phase II of the Purchase
Agreement between Lessee and Village Builders LP shall have been
terminated as no longer in effect.
Such other evidence as Agent may reasonably request to
establish the accuracy and completeness of the representations and
warranties and the compliance with the terms and conditions contained
in the Operative Documents.
3.01-5
<PAGE>
SCHEDULE 3.02
CONDITIONS PRECEDENT TO TRACT 2 ACQUISITION ADVANCE
A. Principal Operative Documents.
(1) An amendment to the Lease Agreement adding the Tract 2
Land to the Property covered thereby, duly executed by Lessee and
Lessor and appropriately notarized;
(2) An amendment to the Purchase Agreement adding the Tract 2
Land to the Property covered thereby, duly executed by Lessee and
Lessor;
(3) An amendment to the Construction Agency Agreement adding
the Tract 2 Land to the Property covered thereby, duly executed by
Lessee and Lessor;
(4) An amendment to the Assignment of Lease adding the Tract 2
Land to the Property covered thereby, duly executed by Lessee and
Lessor and appropriately notarized; and
(5) An amendment to the Lessor Deed of Trust adding the Tract
2 Land to the Property covered thereby, duly executed by Lessee and
Lessor and, appropriately notarized.
B. Collateral Documents.
(1) An amendment to the Memorandum of Purchase Agreement
adding the Tract 2 Land to the Property covered thereby, duly executed
by Lessee and Lessor and appropriately notarized for recording, and
evidence that such amendment has been properly recorded in the Official
Records of the County of Marin, California;
(2) Evidence that the Lease Agreement, the Assignment of Lease
and the Lessor Deed of Trust, or amendments thereto, have been properly
recorded in the Official Records of the County of Marin, California;
(3) An extended coverage owner's policy or binder of title
insurance (or a commitment therefor) for the Tract 2 Land insuring
Lessor's fee simple title to such Property (subject to such exceptions
as Agent may approve), in such amounts and with such endorsements as
Agent may reasonably require, issued by a title insurer acceptable to
Agent, together with such policies of co-insurance or re-insurance (or
commitments therefor) as Agent may require;
(4) An extended coverage lender's policy of title insurance
(or a commitment therefor) for the Tract 2 Land insuring the validity
and priority of the Lease Agreement
3.02-1
<PAGE>
(subject to such exceptions as Agent may approve), in such amounts and
with such endorsements as Agent may reasonably require, issued by a
title insurer acceptable to Agent, together with such policies of
co-insurance or re-insurance (or commitments therefor) as Agent may
require;
(5) An extended coverage lender's policy of title insurance
(or a commitment therefor) for the Tract 2 Land insuring the validity
and priority of the Lessor Deed of Trust (subject to such exceptions as
Agent may approve), in such amounts and with such endorsements as Agent
may reasonably require, issued by a title insurer acceptable to Agent,
together with such policies of co-insurance or re-insurance (or
commitments therefor) as Agent may require;
(6) Copies of all leases for the Tract 2 Land and all other
documents, instruments and agreements recorded against or otherwise
affecting such Property, including all amendments, extensions and other
modifications thereof;
(7) Subordination, non-disturbance and attornment agreements
from the lessee under each of the leases for the Tract 2 Land;
(8) Such consents and estoppels, with appropriate mortgagee
protection language, as are requested by Agent, each duly executed by
the appropriate Person;
(9) Such Uniform Commercial Code financing statements and
fixture filings (appropriately completed and executed) for filing in
such jurisdictions as Agent may request to perfect the Liens granted to
Lessor and Agent in the Lessee Security Documents, the Lessor Security
Agreement and the other Operative Documents;
(10) Such Uniform Commercial Code termination statements
(appropriately completed and executed) for filing in such jurisdictions
as Agent may request to terminate any financing statement evidencing
Liens of other Persons in the Collateral which are prior to the Liens
granted to Lessor and Agent in the Lessee Security Documents, the
Lessor Security Agreement and the other Operative Documents, except for
any such prior Liens which are expressly permitted by the Operative
Documents to be prior;
(11) Uniform Commercial Code search certificates from the
jurisdictions in which Uniform Commercial Code financing statements are
to be filed pursuant to item B.(9) above reflecting no other financing
statements or filings which evidence Liens of other Persons in the
Collateral which are prior to the Liens granted to Lessor and Agent in
the Lessee Security Documents, the Lessor Security Agreement and the
other Operative Documents, except for any such prior Liens (a) which
are expressly permitted by the Operative Documents to be prior or (b)
for which Agent has received a termination statement pursuant to item
B.(10) above;
(12) Such other documents, instruments and agreements as
Agents may reasonably request to establish and perfect the Liens
granted to any Lessor Party in the Lessee Security Documents, the
Lessor Deed of Trust, the Lessor Security Agreement and the other
Operative Documents; and
3.02-2
<PAGE>
(13) Such other evidence as Agent may request to establish
that the Liens granted to Agent or any Participant in the Lessee
Security Documents, the Lessor Deed of Trust, the Lessor Security
Agreement and the other Operative Documents are perfected and prior to
the Liens of other Persons in the Collateral, except for any such Liens
which are expressly permitted by the Operative Documents to be prior.
C. Opinions.
(1) A favorable written opinion of Pillsbury, Madison & Sutro
LLP, counsel to Lessee, dated the Tract 2 Acquisition Date, addressed
to Lessor and Agent, for the benefit of Lessor, Agent and the
Participants, and covering such legal matters as Agent may reasonably
request and otherwise in form and substance satisfactory to Agent.
D. Other Items.
(1) A duly completed and timely delivered Acquisition Request
for the Tract 2 Advance, duly executed by Lessee;
(2) A letter updating the Expiration Date Appraisal or other
evidence satisfactory to Lessor as to appraised value of the Tract 2
Land as of the Tract 2 Acquisition Date;
(3) Bills of sale for all Related Goods to be acquired for the
Acquisition Advance to be made on the Tract 2 Acquisition Date, each
reflecting Lessor as the purchaser of such Related Goods;
(4) An as-built survey of the Property (i) prepared by a
registered surveyor reasonably satisfactory to Agent, (ii) certified as
correct and as (A) having been made in accordance with the most recent
standards for "Minimum Standard Detail Requirements for ALTA/ACSM Land
Title Surveys," jointly established and adopted by ALTA and ACSM, and
(B) meeting the accuracy requirements of a Class A survey (as defined
therein) and including items 1-5, 7-13 and 15 of Table 3 thereof, and
(iii) disclosing, among other things, (A) the location of the perimeter
of the Property by courses and distances, (B) all easements and
rights-of-way, whether above or underground, (C) the lines of the
street abutting the Property and the width thereof, (D) encroachments,
if any, and the extent thereof in feet and inches upon the Property,
and (E) all boundary and lot lines, and all other matters that would be
disclosed by inspection of the Property and the public records;
(5) If requested by Lessor, Agent or any Participant, a list
of and copies of all Construction Agreements;
(6) Each of the Environmental Reports to the extent not
previously delivered;
3.02-3
<PAGE>
(7) Certificates of insurance evidencing the insurance Lessee
is required to maintain pursuant to Paragraph 3.03 of the Lease
Agreement;
(8) The Acquisition Agreement for the Tract 2 Land and an
assignment of such Acquisition Agreement by Lessee to Lessor;
(9) All fees and expenses payable to the Lessor Parties on or
prior to the Acquisition Date for the Tract 2 Land (including all
Agent's Fees);
(10) All fees and expenses of Lessor's and Agent's counsels
through the Acquisition Date for the Tract 2 Land; and
(11) Such other evidence as Agent, Lessor or any Participant
may reasonably request to establish the accuracy and completeness of
the representations and warranties and the compliance with the terms
and conditions contained in the Operative Documents.
3.02-4
<PAGE>
<TABLE>
SCHEDULE 4.01(q)
SUBSIDIARIES
<CAPTION>
Shares
Jurisdiction of Class of Owned by Percentage Owned
Subsidiary Corporation Equity Lessee by Lessee
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
4.01(q)-1
<PAGE>
Schedule 4.01(f)
Environmental Reports
California Regional Water Quality Control Board, San Francisco Bay Region, Order
No. 85-80, Waste Discharge Requirements for: Pacific Gas and Electric Company,
Redwood Regional Office, San Rafael, Marin County, Adopted June 19, 1985
California Department of Health Services, Toxic Substances Control Division,
Consent Order, Docket No. HAS 89-/90-002 - Covenant of Deed Restriction,
Covenant and Agreement to Restrict Use of Property, Pacific Gas and Electric
Company, San Rafael, California, July 14, 1989
Phase I Environmental Site Assessment for the Former PG&E San Rafael Service
Center Site, City of San Rafael Corporation Yard, and Shell Station, San Rafael,
California, August 14, 1996, Levine-Fricke (Prepared for Fair, Isaac & Company)
Final Risk Appraisal, San Rafael Retail Project, San Rafael, California, June
21, 1989, Harding Lawson Associates
1995 Annual Groundwater Monitoring Report for the Pacific Gas and Electric
Company's Former San Rafael Manufactured Gas Plant Site, June, 1996, Tetra Tech,
Inc.
Review of 1989 Risk Appraisal, Second and Lindaro Streets, San Rafael,
California, July 3, 1996, Harding Lawson Associates
Soil and Groundwater Investigation, Second and Lindaro Streets, San Rafael,
California, October 28, 1996, Harding Lawson Associates
Evaluation of Existing Groundwater Extraction System and Revised Proposed
Extraction and Monitoring System Modifications, Village Properties/Fair, Isaac
Development, Second and Lindaro Property, San Rafael, California, May 7, 1997,
Harding Lawson Associates
1996 Annual Groundwater Monitoring Report for the Pacific Gas and Electric
Company's Former San Rafael Manufactured Gas Plan Site, June, 1997, Tetra Tech,
Inc.
Risk Assessment of Groundwater and Soil, PG&E Parcel, San Rafael, California,
July 8, 1997, Harding Lawson Associates
Revised Risk Assessment of Groundwater and Soil, PG&E Parcel, San Rafael,
California, July 18, 1997, Harding Lawson Associates
Health and Safety Plan, Fair, Isaac Office Park, 250 Lindaro Avenue, San Rafael,
California, June 11, 1997, Harding Lawson Associates
(Revised) Soil Management Work Plan, Fair, Isaac Office Park, Second and Lindaro
Streets, San Rafael, California, June 12, 1997, Revision 1, September 30, 1997,
Revision 2, February 1998, Harding Lawson Associates
4.01(f)-1
<PAGE>
(Revised) Health and Safety Plan, Fair, Isaac Office Park, 250 Lindaro Avenue,
San Rafael, California, Revised September 30, 1997, Harding Lawson Associates
Draft Environmental Impact Report for the Fair, Isaac Office Park Project,
Volume I - EIR Text & Appendices, August 18, 1997, Robert Bein, William Frost &
Associates
San Rafael Downtown Retail Center, Draft Environmental Impact Report, EIP
Associates, December, 1987
Limited Phase I and Phase II Environmental Site Assessment Report, Shell Station
and San Rafael Corporation Yard, 755 Second Street, 790 Lincoln Avenue, San
Rafael, California, September 25, 1995, McCulley, Frick & Gilman, Inc. (Prepared
for The City of San Rafael Redevelopment Agency)
1997 Annual Ground Water Monitoring Report, for PG&E's former San Rafael Plant
Site, April 1998, Tetra Tech, Inc.
4.01(f)-2
<PAGE>
SCHEDULE 4.01(u) -PART 1
TRACT 1 PROPERTY
(i) The Tract 1 Land consists of approximately 10.47 acres located in
the City of San Rafael, Marin County, California, more particularly described in
Part 1 to Exhibit A.
(ii) Upon the completion of the New Improvements on the Tract 1 Land,
the Improvements on the Land will consist of two office buildings containing
approximately 150,000 rentable square feet (including parking, landscaping,
recreational and related facilities, amenities and improvements).
(iii) Access to the Tract 1 Land for pedestrians and motor vehicles
from publicly dedicated streets and public highways is available.
(iv) No portion of the Tract 1 Land is located in an area identified as
a special flood hazard area by the Federal Emergency Management Agency or other
applicable Governmental Authority, or if any portion of the Property is located
in such an area, flood insurance has been obtained for the Property or such
portion thereof in accordance with Paragraph 3.03 of the Lease Agreement and the
National Flood Insurance Act of 1968.
4.01(u)-1
<PAGE>
SCHEDULE 4.01(u) - PART 2
TRACT 2 PROPERTY
(i) The Tract 2 Land consists of approximately 2.25 acres located in
the City of San Rafael, Marin County, California, more particularly described in
Part 2 to Exhibit A.
(ii) No New Improvements will be built on the Tract 2 Land prior to the
Scheduled Expiration Date.
(iii) Access to the Tract 2 Land for pedestrians and motor vehicles
from publicly dedicated streets and public highways is available.
(iv) No portion of the Tract 2 Land is located in an area identified as
a special flood hazard area by the Federal Emergency Management Agency or other
applicable Governmental Authority, or if any portion of the Property is located
in such an area, flood insurance has been obtained for the Property or such
portion thereof in accordance with Paragraph 3.03 of the Lease Agreement and the
National Flood Insurance Act of 1968.
4.01(u)-2
<PAGE>
SCHEDULE 4.01(x)
BUDGET
4.01(x)
<PAGE>
SCHEDULE 5.02(a)
EXISTING INDEBTEDNESS
None.
5.02(a)-1
<PAGE>
SCHEDULE 5.02(b)
EXISTING LIENS
None.
5.02(b)-1
<PAGE>
SCHEDULE 5.02(e)
INVESTMENT POLICY
5.02(E)-1
<PAGE>
EXHIBIT A
LAND
Part 1
Property to be acquired from PG&E.
A-1
<PAGE>
EXHIBIT A
LAND
Part 2
Property to be acquired from City of San Rafael.
A-2
<PAGE>
EXHIBIT B
LEASE AGREEMENT
B-1
<PAGE>
EXHIBIT C
PURCHASE AGREEMENT
C-1
<PAGE>
EXHIBIT D
CONSTRUCTION AGENCY AGREEMENT
D-1
<PAGE>
EXHIBIT E
ACQUISITION REQUEST
[Date]
Lease Plan North America, Inc.
c/o ABN AMRO Bank N.V.
as Agent
Capital Markets-Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to that certain Participation Agreement, dated as
of May 15, 1998, (the "Participation Agreement"), among Fair, Isaac and Company,
Inc. ("Lessee"), Lease Plan North America, Inc. ("Lessor"), the financial
institutions listed in Schedule I to the Participation Agreement (the
"Participants") and ABN AMRO Bank N.V., as agent for the Participants (in such
capacity, "Agent"). Unless otherwise indicated, all terms defined in the
Participation Agreement have the same respective meanings when used herein.
2. Pursuant to Subparagraph 2.03(a) of the Participation Agreement,
Lessee hereby irrevocably requests Lessor to acquire [the Tract1/Tract2 Land]
and to make the Acquisition Advance as follows:
(a) The Acquisition Advances shall be made on ___________, 1998; and
(b) The Acquisition Advance shall be in the amount of $____________
which shall be used to pay (i) $___________ on account of the purchase
price to be paid for the [Tract 1/ Tract 2 Land] pursuant to the
applicable Acquisition Agreement, and (ii) $___________ on account of
Permitted Transaction Expenses.
3. Lessee desires that the Rental Rate on such Advance be calculated as
follows: (select one)
(a) At the LIBOR Rental Rate with a Rental Period of __
months, or
(b) At the Alternate Base Rate.
4. [For Advances requested prior to delivery of the Plans and
Specifications pursuant to Subparagraph 5.01(h) of the Participation
Agreement.] [Set forth on Schedule 1 hereto is an allocation of such
Advance to each applicable Line Item of the Budget and a reconciliation
of Advances made prior to the date hereof to the applicable Line Items
of the Budget.]
5. Lessee hereby certifies to the Lessor Parties that, on the date of
this Acquisition Request and after giving effect to the use of the requested
Acquisition Advance[s] as described above:
E-1
<PAGE>
(a) The representations and warranties of Lessee set forth in
Paragraph 4.01 of the Participation Agreement and in the other
Operative Documents are true and correct in all material respects as if
made on such date (except for representations and warranties expressly
made as of a specified date, which shall be true as of such date);
(b) No Default has occurred and is continuing;
(c) All of the Operative Documents are in full force and
effect;
(d) No action, suit or other proceeding affecting the title
to, or the use, operation or value of, the applicable Property
(including any proceeding for Condemnation or under any Environmental
Law) is pending or, to the best of Lessee's knowledge, threatened; and
(e) No Casualty affecting the applicable Property has
occurred.
6. Please disburse the proceeds of the Acquisition Advance to
__________________________________________________________.
IN WITNESS WHEREOF, Lessee has executed this Acquisition Request on the
date set forth above.
FAIR, ISAAC AND COMPANY, INC.
By: _____________________________
Name: _______________________
Title: ______________________
E-2
<PAGE>
SCHEDULE 1
TO
ACQUISITION REQUEST
E-3
<PAGE>
EXHIBIT F
IMPROVEMENT/EXPENSE ADVANCE REQUEST
[Date]
Lease Plan North America, Inc.
c/o ABN AMRO Bank N.V.
as Agent
Capital Markets-Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to that certain Participation Agreement, dated as
of May 15, 1998 (the "Participation Agreement"), among Fair, Isaac and Company,
Inc. ("Lessee"), Lease Plan North America, Inc. ("Lessor"), the financial
institutions listed in Schedule I to the Participation Agreement (the
"Participants") and ABN AMRO Bank N.V., as agent for the Participants (in such
capacity, "Agent"). Unless otherwise indicated, all terms defined in the
Participation Agreement have the same respective meanings when used herein.
2. Pursuant to Subparagraph 2.03(b) of the Participation Agreement,
Lessee hereby irrevocably requests Lessor to make an Improvement/Expense Advance
as follows:
(a) Such Improvement/Expense Advance shall be in the aggregate
amount of $________; and
(b) The date of such Improvement/Expense Advance shall be
____________, ____ (the "Advance Date").
3. Lessee desires that the Rental Rate on such Advance be calculated as
follows: (select one)
(a) At the LIBOR Rental Rate with a Rental Period of __
months, or
(b) At the Alternate Base Rate.
4. [For Advances requested prior to delivery of the Plans and
Specifications pursuant to Subparagraph 5.01(h) of the Participation Agreement.]
[Set forth on Schedule 1 hereto is an allocation of such Advance to each
applicable Line Item of the Budget and a reconciliation of Advances made prior
to the date hereof to the applicable Line Items of the Budget.]
F-1
<PAGE>
5. [Lessee will use $________ of the proceeds of the requested
Improvement/Expense Advance to pay the costs for the Related Goods described in
the Supplement to Exhibit B to the Lease Agreement which is attached hereto.
Bills of sale for all such Related Goods, each showing Lessor as the purchaser,
also are attached hereto.][Whenever the requested Improvement/Expense Advance is
to be used to pay for Related Goods, include the preceding two sentences,
complete and attach an Exhibit B Supplement describing the Related Goods and
attach the applicable bills of sale.] Lessee will use the [remaining] proceeds
of such Improvement/Expense Advance to pay the costs and expenses set forth in
Schedule 1 hereto. All such costs and expenses are Permitted Improvement Costs
and/or Permitted Transaction Expenses which are now due and payable. No prior
Advance has been requested to pay any such costs and expenses.
6. Lessee hereby certifies to the Lessor Parties that, on the date of
this Improvement/Expense Advance Request and after giving effect to the
requested Improvement/Expense Advance:
(a) The representations and warranties of Lessee set forth in
Paragraph 4.01 of the Participation Agreement and in the other
Operative Documents are true and correct in all material respects as if
made on such date (except for representations and warranties expressly
made as of a specified date, which shall be true as of such date);
(b) No Default has occurred and is continuing; and
(c) All of the Operative Documents are in full force and
effect.
7. Please disburse the proceeds of the Improvement/Expense Advance to
___________________________________________________.
IN WITNESS WHEREOF, Lessee has executed this Improvement/Expense
Advance Request on the date set forth above.
FAIR, ISAAC AND COMPANY, INC.
By: _____________________________
Name: _______________________
Title: ______________________
F-2
<PAGE>
SCHEDULE 1
TO
IMPROVEMENT/EXPENSE ADVANCE REQUEST
F-3
<PAGE>
EXHIBIT G(1)
364-DAY COMMITMENT EXTENSION REQUEST
[Date]
Lease Plan North America, Inc.
c/o ABN AMRO Bank N.V.
as Agent
Capital Markets-Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to that certain Participation Agreement, dated as
of May 15, 1998 (the "Participation Agreement"), among Fair, Isaac and Company,
Inc. ("Lessee"), Lease Plan North America, Inc. ("Lessor"), the financial
institutions listed in Schedule I to the Participation Agreement (the
"Participants") and ABN AMRO Bank N.V., as agent for the Participants (in such
capacity, "Agent"). Unless otherwise indicated, all terms defined in the
Participation Agreement have the same respective meanings when used herein.
2. Pursuant to Subparagraph 2.09(a) of the Participation Agreement,
Lessee hereby irrevocably requests Lessor to extend (and the Participants to
consent to such extension) the Unused 364-Day Commitment ($___________) for an
additional six (6) months by extending the current 364-Day Commitment
Termination Date from [__________] to [__________].
3. Lessee hereby certifies to the Lessor Parties that, on the date of
this 364-Day Commitment Extension Request and after giving effect to the
extension requested hereby:
(a) The representations and warranties of Lessee set forth in
Paragraph 4.01 of the Participation Agreement and in the other
Operative Documents are true and correct in all material respects as if
made on such date (except for representations and warranties expressly
made as of a specified date, which shall be true as of such date);
(b) No Default has occurred and is continuing; and
(c) All of the Operative Documents are in full force and
effect.
G(1)-1
<PAGE>
IN WITNESS WHEREOF, Lessee has executed this 364-Day Commitment
Extension Request on the date set forth above.
FAIR, ISAAC AND COMPANY, INC.
By: _____________________________
Name: _______________________
Title: ______________________
CONSENT
The undersigned hereby consents to the extension of the 364-Day
Commitment Termination Date requested above.
_________________________________
By: _____________________________
Name: _______________________
Title: ______________________
Date: ________________________
G(1)-2
<PAGE>
EXHIBIT G(2)
LEASE EXTENSION REQUEST
[Date]
Lease Plan North America, Inc.
c/o ABN AMRO Bank N.V.
as Agent
Capital Markets-Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to that certain Participation Agreement, dated as
of May 15, 1998 (the "Participation Agreement"), among Fair, Isaac and Company,
Inc. ("Lessee"), Lease Plan North America, Inc. ("Lessor"), the financial
institutions listed in Schedule I to the Participation Agreement (the
"Participants") and ABN AMRO Bank N.V., as agent for the Participants (in such
capacity, "Agent"). Unless otherwise indicated, all terms defined in the
Participation Agreement have the same respective meanings when used herein.
2. Pursuant to Subparagraph 2.09(b) of the Participation Agreement,
Lessee hereby irrevocably requests Lessor to extend (and the Participants to
consent to such extension) the Term of the Lease Agreement for an additional
__________ by extending the current Scheduled Expiration Date from [__________]
to [__________].
3. Lessee hereby certifies to the Lessor Parties that, on the date of
this Lease Extension Request and after giving effect to the extension requested
hereby:
(a) The representations and warranties of Lessee set forth in
Paragraph 4.01 of the Participation Agreement and in the other
Operative Documents are true and correct in all material respects as if
made on such date (except for representations and warranties expressly
made as of a specified date, which shall be true as of such date);
(b) No Default has occurred and is continuing; and
(c) All of the Operative Documents are in full force and
effect.
G(2)-1
<PAGE>
IN WITNESS WHEREOF, Lessee has executed this Lease Extension Request on
the date set forth above.
FAIR, ISAAC AND COMPANY, INC.
By: __________________________________
Name: ____________________________
Title: ___________________________
CONSENT
The undersigned hereby consents to the extension of the Scheduled
Expiration Date requested above upon the terms set forth in the attachment
hereto.
______________________________________
By: __________________________________
Name: ____________________________
Title: ___________________________
Date: ________________________________
G(2)-2
<PAGE>
EXHIBIT H
ASSIGNMENT OF CONSTRUCTION AGREEMENTS
H-1
<PAGE>
EXHIBIT I
CASH COLLATERAL AGREEMENT
I-1
<PAGE>
EXHIBIT J
ASSIGNMENT OF LEASE
J-1
<PAGE>
EXHIBIT K
LESSOR DEED OF TRUST
K-1
<PAGE>
EXHIBIT L
LESSOR SECURITY AGREEMENT
L-1
<PAGE>
EXHIBIT M
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT, dated as of the date set forth at the top of
Attachment 1 hereto, by and among:
(1) The party designated under item A of Attachment I hereto
as the Assignor Participant ("Assignor Participant"); and
(2) Each party designated under item B of Attachment I hereto
as an Assignee Participant (individually, an "Assignee Participant").
RECITALS
A. Assignor Participant is one of the "Participants" in a Participation
Agreement dated as of May 15, 1998, among Fair, Isaac and Company, Inc.
("Lessee"), Lease Plan North America, Inc. ("Lessor"), Assignor Participant and
the other institutions parties thereto as "Participants" (collectively, the
"Participants") and ABN AMRO Bank N.V., as agent for the Participants (in such
capacity, "Agent"). (Such Participation Agreement, as amended, supplemented or
otherwise modified in accordance with its terms from time to time to be referred
to herein as the "Participation Agreement").
B. Assignor Participant wishes to sell, and each Assignee Participant
wishes to purchase, all or a portion of Assignor Participant's rights under the
Participation Agreement pursuant to Subparagraph 7.05(b) of the Participation
Agreement.
AGREEMENT
Now, therefore, the parties hereto hereby agree as follows:
1. Definitions. Except as otherwise defined in this Assignment
Agreement, all capitalized terms used herein and defined in the Participation
Agreement have the respective meanings given to those terms in the Participation
Agreement.
2. Sale and Assignment. Subject to the terms and conditions of this
Assignment Agreement, Assignor Participant hereby agrees to sell, assign and
delegate to each Assignee Participant and each Assignee Participant hereby
agrees to purchase, accept and assume the rights, obligations and duties of a
Participant under the Participation Agreement and the other Operative Documents
equal to the Tranche A Percentage, Tranche B Percentage, Tranche C Percentage
and Proportionate Share set forth under the captions "Tranche Percentages and
Proportionate Shares Assigned" opposite such Assignee Participant's name on Part
A of
M-1
<PAGE>
Attachment I hereto. Such sale, assignment and delegation shall become effective
on the date designated in Part C of Attachment I hereto (the "Assignment
Effective Date"), which date shall be, unless Agent shall otherwise consent, at
least five (5) Business Days after the date following the date counterparts of
this Assignment Agreement are delivered to Agent in accordance with Paragraph 3
hereof.
3. Assignment Effective Notice. Upon (a) receipt by Agent of five (5)
counterparts of this Assignment Agreement (to each of which is attached a fully
completed Attachment 1), each of which has been executed by Assignor Participant
and each Assignee Participant (and, to the extent required by clause (i) of
Subparagraph 7.05(b) of the Participation Agreement, by Lessor, Lessee and
Agent) and (b) payment to Agent of the registration and processing fee specified
in clause (iii) of Subparagraph 7.05(b) of the Participation Agreement, Agent
will transmit to Lessor, Lessee, Assignor Participant and each Assignee
Participant an Assignment Effective Notice substantially in the form of
Attachment 2 hereto, fully completed (an "Assignment Effective Notice").
4. Assignment Effective Date. At or before 12:00 noon (local time of
Assignor Participant) on the Assignment Effective Date, each Assignee
Participant shall pay to Assignor Participant, in immediately available or same
day funds, an amount equal to the purchase price, as agreed between Assignor
Participant and such Assignee Participant (the "Assignment Purchase Price"), for
the respective Tranche A Percentage, Tranche B Percentage, Tranche C Percentage
and Proportionate Share purchased by such Assignee Participant hereunder.
Effective upon receipt by Assignor Participant of the Assignment Purchase Price
payable by each Assignee Participant, the sale, assignment and delegation to
such Assignee Participant of such Proportionate Share as described in Paragraph
2 hereof shall become effective.
5. Payments After the Assignment Effective Date. Assignor Participant
and each Assignee Participant hereby agree that Agent shall, and hereby
authorize and direct Agent to, allocate amounts payable under the Participation
Agreement and the other Operative Documents as follows:
(a) All payments applied to reduce the Outstanding Lease
Amount or any Portion thereof after the Assignment Effective Date with
respect to each Tranche A Percentage, Tranche B Percentage, Tranche C
Percentage and Proportionate Share assigned to an Assignee Participant
pursuant to this Assignment Agreement shall be payable to such Assignee
Participant.
(b) All Base Rent, interest, fees and other amounts accrued
after the Assignment Effective Date with respect to each Tranche A
Percentage, Tranche B Percentage, Tranche C Percentage and
Proportionate Share assigned to an Assignee Participant pursuant to
this Assignment Agreement shall be payable to such Assignee
Participant.
Assignor Participant and each Assignee Participant shall make any separate
arrangements between themselves which they deem appropriate with respect to
payments between them of amounts paid under the Operative Documents on account
of the Tranche A Percentage, Tranche B Percentage, Tranche C Percentage and
Proportionate Share assigned to such Assignee
M-2
<PAGE>
Participant, and neither Agent nor Lessee shall have any responsibility to
effect or carry out such separate arrangements.
6. Delivery of Copies of Operative Documents. Concurrently with the
execution and delivery hereof, Assignor Participant will provide to each
Assignee Participant (if it is not already a party to the Participation
Agreement) conformed copies of all documents delivered to Assignor Participant
on or prior to the Closing Date in satisfaction of the conditions precedent set
forth in the Participation Agreement.
7. Further Assurances. Each of the parties to this Assignment Agreement
agrees that at any time and from time to time upon the written request of any
other party, it will execute and deliver such further documents and do such
further acts and things as such other party may reasonably request in order to
effect the purposes of this Assignment Agreement.
8. Further Representations, Warranties and Covenants. Assignor
Participant and each Assignee Participant further represent and warrant to and
covenant with each other, Lessor, Agent and the other Participants as follows:
(a) Other than the representation and warranty that it is the
legal and beneficial owner of the interest being assigned hereby free
and clear of any adverse claim, Assignor Participant makes no
representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in
connection with the Participation Agreement or the other Operative
Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Participation Agreement or the
other Operative Documents furnished or the Collateral or any security
interest therein.
(b) Assignor Participant makes no representation or warranty
and assumes no responsibility with respect to the financial condition
of Lessee or any of its obligations under the Participation Agreement
or any other Operative Documents.
(c) Each Assignee Participant confirms that it has received a
copy of the Participation Agreement and such other documents and
information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment Agreement.
(d) Each Assignee Participant will, independently and without
reliance upon Lessor, Agent, Assignor Participant or any other
Participant and based upon such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under the Participation Agreement and
the other Operative Documents.
(e) Each Assignee Participant appoints and authorizes Agent to
take such action as Agent on its behalf and to exercise such powers
under the Participation Agreement and the other Operative Documents as
Agent is authorized to exercise by the terms thereof, together with
such powers as are reasonably incidental thereto, all in accordance
with Section VI of the Participation Agreement.
M-3
<PAGE>
(f) Each Assignee Participant (i) affirms that each of the
representations and warranties set forth in Paragraph 4.03 of the
Participation Agreement is true and correct with respect to such
Participant and (ii) agrees that it will perform in accordance with
their terms all of the obligations which by the terms of the
Participation Agreement and the other Operative Documents are required
to be performed by it as a Participant.
(g) Each Assignee Participant represents and warrants that, as
of the date hereof, it would not have any basis for demanding any
payment under Subparagraph 2.12(c) or Subparagraph 2.12(d) of the
Participation Agreement or, to its knowledge, under Subparagraph
2.13(a) of the Participation Agreement.
(h) Part B of Attachment 1 hereto sets forth administrative
information with respect to each Assignee Participant.
9. Effect of this Assignment Agreement. On and after the Assignment
Effective Date, (a) each Assignee Participant shall be a Participant with a
Tranche A Percentage, Tranche B Percentage, Tranche C Percentage and
Proportionate Share as set forth under the caption "Tranche Percentages and
Proportionate Share After Assignment" opposite such Assignee Participant's name
in Part A of Attachment 1 hereto and shall have the rights, duties and
obligations of such a Participant under the Participation Agreement and the
other Operative Documents and (b) Assignor Participant shall be a Participant
with a Tranche A Percentage, Tranche B Percentage, Tranche C Percentage and
Proportionate Share as set forth under the caption "Tranche Percentages and
Proportionate Share After Assignment" opposite Assignor Participant's name in
Part A of Attachment 1 hereto and shall have the rights, duties and obligations
of such a Participant under the Participation Agreement and the other Operative
Documents, or, if the Proportionate Share of Assignor Participant has been
reduced to zero, Assignor Participant shall cease to be a Participant and shall
have no further obligation to fund any portion of any Advance.
10. Miscellaneous. This Assignment Agreement shall be governed by, and
construed in accordance with, the laws of the State of California. Paragraph
headings in this Assignment Agreement are for convenience of reference only and
are not part of the substance hereof.
M-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed by their respective duly authorized officers as of the
date set forth in Attachment 1 hereto.
__________________________________, as
Assignor Participant
By: __________________________________
Name: ____________________________
Title: ___________________________
__________________________________, as
Assignee Participant
By: __________________________________
Name: ____________________________
Title: ___________________________
__________________________________, as
Assignee Participant
By: __________________________________
Name: ____________________________
Title: ___________________________
__________________________________, as
Assignee Participant
By: __________________________________
Name: ____________________________
Title: ___________________________
M-5
<PAGE>
CONSENTED TO AND ACKNOWLEDGED BY:
______________________________________
as Lessee
By: __________________________________
Name: ____________________________
Title: ___________________________
______________________________________,
as Agent
By: __________________________________
Name: ____________________________
Title: ___________________________
______________________________________,
As Lessor
By: __________________________________
Name: ____________________________
Title: ___________________________
ACCEPTED FOR RECORDATION IN REGISTER:
______________________________________,
As Agent
By: __________________________________
Name: ____________________________
Title: ___________________________
M-6
<PAGE>
<TABLE>
ATTACHMENT 1
TO ASSIGNMENT AGREEMENT
PART A(1) TRANCHE PERECENTAGES PRIOR TO COMMITMENT TERMINATION DATE
<CAPTION>
Tranche Percentages and
Proportionate Shares Assigned
----------------- ---------------- ----------------- -----------------
Tranche A Tranche B Tranche C Proportionate
Percentage Percentage Percentage Share
---------- ---------- ---------- -----
<S> <C> <C> <C> <C>
Assignor Participant:
- --------- --. -------% --. -------% --. -------% --. -------%
- --------- --. -------% --. -------% --. -------% --. -------%
- --------- --. -------% --. -------% --. -------% --. -------%
Assignee Participants:
- --------- --. -------% --. -------% --. -------% --. -------%
- --------- --. -------% --. -------% --. -------% --. -------%
- --------- --. -------% --. -------% --. -------% --. -------%
- --------- --. -------% --. -------% --. -------% --. -------%
Tranche Percentages and
Proportionate Shares After Assignment
------------------- ---------------- -------------------- -------------------
Tranche A Tranche B Tranche C Proportionate
Percentage Percentage Percentage Share
---------- ---------- ---------- -----
Assignor Participant:
- --------- --. -------% --. -------% --. --------% --. --------%
- --------- --. -------% --. -------% --. --------% --. --------%
- --------- --. -------% --. -------% --. --------% --. --------%
Assignee Participants:
- --------- --. -------% --. -------% --. --------% --. --------%
- --------- --. -------% --. -------% --. --------% --. --------%
- --------- --. -------% --. -------% --. --------% --. --------%
- --------- --. -------% --. -------% --. --------% --. --------%
</TABLE>
M(1)-1
<PAGE>
<TABLE>
ATTACHMENT 1
TO ASSIGNMENT AGREEMENT
PART A(1) TRANCHE PERECENTAGES PRIOR TO COMMITMENT TERMINATION DATE
<CAPTION>
Tranche Percentages and
Proportionate Shares Assigned
----------------- ---------------- ----------------- -----------------
Tranche A Tranche B Tranche C Proportionate
Percentage Percentage Percentage Share
---------- ---------- ---------- -----
<S> <C> <C> <C> <C>
Assignor Participant:
- --------- --. -------% --. -------% --. -------% --. -------%
- --------- --. -------% --. -------% --. -------% --. -------%
- --------- --. -------% --. -------% --. -------% --. -------%
Assignee Participants:
- --------- --. -------% --. -------% --. -------% --. -------%
- --------- --. -------% --. -------% --. -------% --. -------%
- --------- --. -------% --. -------% --. -------% --. -------%
- --------- --. -------% --. -------% --. -------% --. -------%
Tranche Percentages and
Proportionate Shares After Assignment
------------------- ---------------- -------------------- -------------------
Tranche A Tranche B Tranche C Proportionate
Percentage Percentage Percentage Share
---------- ---------- ---------- -----
Assignor Participant:
- --------- --. -------% --. -------% --. --------% --. --------%
- --------- --. -------% --. -------% --. --------% --. --------%
- --------- --. -------% --. -------% --. --------% --. --------%
Assignee Participants:
- --------- --. -------% --. -------% --. --------% --. --------%
- --------- --. -------% --. -------% --. --------% --. --------%
- --------- --. -------% --. -------% --. --------% --. --------%
- --------- --. -------% --. -------% --. --------% --. --------%
</TABLE>
M(1)-2
<PAGE>
PART B
[Assignee Participant]
Applicable Participating Office:
_________________________
Address for notices:
Telephone No:
Telecopier No:
Wiring Instructions:
[Assignee Participant]
Applicable Participating Office:
_________________________
Address for notices:
Telephone No:
Telecopier No:
Wiring Instructions:
M(1)-3
<PAGE>
PART C
ASSIGNMENT EFFECTIVE DATE ________, ____
M(1)-4
<PAGE>
ATTACHMENT 2
TO ASSIGNMENT AGREEMENT
FORM OF
ASSIGNMENT EFFECTIVE NOTICE
Reference is made to the Participation Agreement, dated as of May 15,
1998, among Fair, Isaac and Company, Inc., Inc. ("Lessee"), Lease Plan North
America, Inc. ("Lessor"), the financial institutions parties thereto as
"Participants" (the "Participants") and ABN AMRO Bank N.V., as agent for the
Participants (in such capacity, "Agent"). Agent hereby acknowledges receipt of
five executed counterparts of a completed Assignment Agreement, a copy of which
is attached hereto. [Note: Attach copy of Assignment Agreement.] Terms defined
in such Assignment Agreement are used herein as therein defined.
1. Pursuant to such Assignment Agreement, you are advised that the
Assignment Effective Date will be __________.
2. Pursuant to such Assignment Agreement, each Assignee Participant is
required to pay its Purchase Price to Assignor Participant at or before 12:00
Noon on the Assignment Effective Date in immediately available funds.
Very truly yours,
ABN AMRO Bank N.V.,
as Agent
By: _____________________________
Name: _______________________
Title: ______________________
M(2)-1
<PAGE>
N-1
Recording requested by and
when recorded return to:
Christine Fitzpatrick, Esq.
Orrick, Herrington & Sutcliffe
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California 94111
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LEASE AGREEMENT,
CONSTRUCTION DEED OF TRUST WITH ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
Between
FAIR, ISAAC AND COMPANY, INC.
And
LEASE PLAN NORTH AMERICA, INC.
May 15, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS LEASE IS NOT INTENDED TO CONSTITUTE
A TRUE LEASE FOR INCOME TAX PURPOSES
(SEE PARAGRAPH 2.06)
- --------------------------------------------------------------------------------
Maturity Date: May 15, 2003
Maximum Principal Amount to be Advanced: $55,000,000
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. INTERPRETATION...........................................2
1.01. Definitions..................................................2
1.02. Rules of Construction........................................2
SECTION 2. BASIC PROVISIONS.........................................2
2.01. Lease of the Property........................................2
2.02. Term.........................................................2
2.03. Rent.........................................................3
2.04. Use..........................................................7
2.05. "As Is" Lease................................................7
2.06. Nature of Transaction........................................8
2.07. Security, Etc. ..............................................8
SECTION 3. OTHER LESSEE AND LESSOR RIGHTS AND OBLIGATIONS..........10
3.01. Maintenance, Repair, Etc. ..................................10
3.02. Risk of Loss................................................11
3.03. Insurance...................................................12
3.04. Casualty and Condemnation...................................14
3.05. Taxes.......................................................18
3.06. Environmental Matters.......................................18
3.07. Liens, Easements, Etc. .....................................19
3.08. Subletting..................................................20
3.09. Utility Charges.............................................21
3.10. Removal of Property.........................................21
3.11. Compliance with Governmental Rules and
Insurance Requirements...................................21
3.12. Permitted Contests..........................................21
3.13. Lessor Obligations; Right to Perform Lessee Obligations.....22
3.14. Inspection Rights...........................................22
SECTION 4. EXPIRATION DATE.........................................22
4.01. Termination by Lessee Prior to Scheduled Expiration Date....22
4.02. Surrender of Property.......................................22
4.03. Holding Over................................................23
SECTION 5. DEFAULT.................................................23
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TABLE OF CONTENTS
(continued)
Page
5.01. Events of Default...........................................23
5.02. General Remedies............................................25
5.03. Lease Remedies..............................................26
5.04. Loan Remedies...............................................27
5.05. Remedies Cumulative.........................................30
5.06. No Cure or Waiver...........................................30
5.07. Exercise of Rights and Remedies.............................30
SECTION 6. MISCELLANEOUS...........................................30
6.01. Notices.....................................................30
6.02. Waivers; Amendments.........................................30
6.03. Successors and Assigns......................................30
6.04. No Third Party Rights.......................................30
6.05. Partial Invalidity..........................................31
6.06. Governing Law...............................................31
6.07. Counterparts................................................31
6.08. Nature of Lessee's Obligations..............................31
EXHIBITS
A Land (2.01(a))
B Related Goods (2.01(d))
C Notice of Rental Period Selection
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LEASE AGREEMENT,
CONSTRUCTION DEED OF TRUST WITH ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
THIS LEASE AGREEMENT, CONSTRUCTION DEED OF TRUST WITH ASSIGNMENT OF
RENTS, SECURITY AGREEMENT AND FIXTURE FILING (this "Agreement" herein), dated as
of May 15, 1998 is entered into by and among:
(1) FAIR, ISAAC AND COMPANY, INC., a Delaware corporation
("Lessee");
(2) LEASE PLAN NORTH AMERICA, INC., an Illinois corporation
("Lessor").
RECITALS
A. Lessee has requested Lessor and the financial institutions which are
"Participants" under the Participation Agreement referred to in Recital B below
(such financial institutions to be referred to collectively as the
"Participants") to provide to Lessee a lease facility pursuant to which:
(1) Lessor would (a) purchase certain property designated by
Lessee, (b) lease such property to Lessee, (c) appoint Lessee as
Lessor's agent to make such improvements (which improvements will be
owned by Lessor), (d) make advances to finance such improvements and to
pay certain related expenses and (e) grant to Lessee the right to
purchase such property; and
(2) The Participants would participate in such lease facility
by (a) funding the purchase price and other advances to be made by
Lessor and (b) acquiring participation interests in the rental and
certain other payments to be made by Lessee.
B. Pursuant to a Participation Agreement dated as of May 15, 1998 (the
"Participation Agreement") among Lessee, Lessor, the Participants and ABN AMRO
Bank N.V., as agent for the Participants (in such capacity, "Agent"), Lessor and
the Participants have agreed to provide such lease facility upon the terms and
subject to the conditions set forth therein, including without limitation the
execution and delivery of this Agreement setting forth the terms of the lease by
Lessor to Lessee of the property.
EXHIBIT 10.39
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
SECTION 1. INTERPRETATION.
1.01. Definitions. Unless otherwise indicated in this Agreement or any
other Operative Document, each term set forth in Schedule 1.01 to the
Participation Agreement, when used in this Agreement or any other Operative
Document, shall have the respective meaning given to that term in such Schedule
1.01 or in the provision of this Agreement or other document, instrument or
agreement referenced in such Schedule 1.01.
1.02. Rules of Construction. Unless otherwise indicated in this
Agreement or any other Operative Document, the rules of construction set forth
in Schedule 1.02 to the Participation Agreement shall apply to this Agreement
and the other Operative Documents.
SECTION 2. BASIC PROVISIONS.
2.01. Lease of the Property. Subject to the acquisition thereof by
Lessor pursuant to the Participation Agreement and applicable Acquisition
Agreement either on the Closing Date or during the term hereof , Lessor agrees
to lease to Lessee and Lessee agrees to lease from Lessor the following property
(the "Property") to the extent of Lessor's estate, right, title and interest
therein, thereto or thereunder:
(a) All lots, pieces, tracts and parcels of land described in
Exhibit A (the "Land");
(b) All Improvements located on the Land;
(c) All Appurtenant Rights belonging, relating or pertaining
to any of the Land or Improvements;
(d) All Related Goods (including those described in Exhibit B
and in each Exhibit B Supplement), Related Permits and Related
Agreements related to any of the foregoing Land, Improvements or
Appurtenant Rights; and
(e) All accessions and accretions to and replacements and
substitutions for the foregoing.
2.02. Term.
(a) Original Term. The original term of this Agreement shall
commence on the Closing Date (the "Commencement Date") and shall end on
May 15, 2003 (such date
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as it may be extended pursuant to Subparagraph 2.02(b) to be referred
to as the "Scheduled Expiration Date").
(b) Extensions. Lessee may request Lessor to extend the
Scheduled Expiration Date in effect for either (i) three (3) additional
periods of one (1) year each, or (ii) one (1) additional period of
three (3) years, as each is provided in Subparagraph 2.09(b) of the
Participation Agreement, provided that after giving effect to any such
extension, the remaining scheduled term shall not exceed five (5)
years. If Lessor and each Participant consents to any such request in
accordance with such provision, the current Scheduled Expiration Date
shall be deemed extended by one (1) year or three (3) years, as
applicable. Lessee acknowledges that neither Lessor nor any Participant
has any obligation or commitment (either express or implied) to extend,
or consent to the extension of, the Scheduled Expiration Date at any
time.
2.03. Rent.
(a) Base Rent.
(i) Lessee shall pay as base rent hereunder ("Base
Rent") for each Rental Period for each Portion of the
Outstanding Lease Amount an amount equal to the product of (A)
the Rental Rate for such Rental Period and Portion, times (B)
the amount of such Portion on the first day of such Rental
Period (which shall include any Advance under made on the
first day of such Rental Period), times (C) a fraction, the
numerator of which is the number of days in such Rental Period
and the denominator of which is 360. If the Rental Rate shall
change during any Rental Period, the Rental Rate for such
Rental Period shall be the weighted average of the Rental
Rates in effect from time to time during such Rental Period.
(ii) Prior to the first Business Day in the first
calendar month immediately following the month in which the
Commencement Date occurs, the Outstanding Lease Amount shall
consist of a single Portion in the full amount of the
Outstanding Lease Amount. Thereafter, Lessee may elect to
divide the Outstanding Lease Amount into two or more Portions
by delivering a Notice of Rental Period Selection as provided
in clause (iii) below; provided, however, that (A) each
Portion shall be in the amount of $10,000,000 or an integral
multiple of $100,000 in excess thereof; (B) the total number
of Portions outstanding at any time shall not exceed four (4);
and (C) the Outstanding Lease Amount shall consist of a single
Portion in the amount of the Outstanding Lease Amount if the
Outstanding Lease Amount is less than $10,000,000.
(iii) The Term shall consist of the following rental
periods (individually, a "Rental Period") for each Portion:
(A) The period which begins on the
Commencement Date and ends on the first Business Day
in the first calendar month immediately following the
month in which the Commencement Date occurs; and
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(B) Each successive period thereafter which
begins on the last day of the immediately preceding
Rental Period for the applicable Portion and ends at
the end of the time period selected by Lessee as
provided below in this clause (B) through and
including the Scheduled Expiration Date.
(1) Unless Lessee has selected a
longer Rental Period for a Portion to have a
Fixed Rate pursuant to clause (iv)(D) of
this Subparagraph 2.03(a), Lessee shall,
subject to clause (3) below, select a Rental
Period for each Portion of one (1), two (2),
three (3) or six (6) months; provided,
however, that (y) no such Rental Period
shall be longer than one (1) month if a
Default has occurred and is continuing on
the date three (3) Business Days prior to
the first day of such Rental Period and (z)
each such Rental Period for which Lessee
fails to make a selection in accordance with
this clause (iii)(B)(1) shall be one (1)
month. Lessee shall select each such Rental
Period by delivering to Lessor, at least
three (3) Business Days prior to the first
day of such Rental Period, an irrevocable
written notice in the form of Exhibit C,
appropriately completed (a "Notice of Rental
Period Selection"). Each Notice of Rental
Period Selection shall be delivered by
first-class mail or facsimile as required by
Subparagraph 2.02(a) and Paragraph 7.01 of
the Participation Agreement; provided,
however, that Lessee shall promptly deliver
the original of any Notice of Rental Period
Selection initially delivered by facsimile.
(2) If Lessee has elected to
exercise the Fixed Rate option for any
Rental Period for a Portion pursuant to
clause (iv)(D) of this Subparagraph 2.03(a),
Lessee shall, subject to clause (3) below,
select a Rental Period of twelve (12) months
or longer for such Rental Period, which
Rental Period shall begin on the last day of
the then current Rental Period for such
Portion. Lessee shall select each such
Rental Period by delivering to Agent a Fixed
Rate Request pursuant to clause (iv)(D)
below.
(3) Lessee's selection of the time
period for each Rental Period which begins
on or after the Commencement Date is subject
to the following:
(y) Each Rental Period
shall begin and end on the first
Business Day of a calendar month,
except that the last Rental Period
may begin on the first Business Day
in which the Scheduled Expiration
Date is to occur and end on the
Scheduled Expiration Date; and
(z) No Rental Period shall
end after the Scheduled Expiration
Date.
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(iv) The rental rate for each Rental Period for a
Portion ("Rental Rate") shall be the LIBOR Rental Rate for
such Rental Period and Portion, except as follows:
(A) If the Commencement Date is not the
first Business Day of a month, the Rental Rate for
the first Rental Period (which begins on or after the
Commencement Date, but prior to the first Business
Day of the succeeding month) shall be (y) the LIBOR
Rental Rate for the period beginning on or after the
Commencement Date but prior to the first Business Day
of the succeeding month and ending on the first
Business Day of such succeeding month provided that
such period is greater than seven (7) days or (z) the
Alternate Rental Rate if such period is seven (7)
days or less. The Rental Rate for the last Rental
Period (which begins on the first Business Day of
month in which the Scheduled Expiration Date is to
occur) shall be (y) the LIBOR Rental Rate for the
period beginning on the first Business Day of such
month and ending on the Scheduled Expiration Date,
provided that such period is greater than seven (7)
days, or (z) the Alternate Rental Rate if such period
is seven (7) days or less.
(B) The Rental Rate for any Rental Period
(or portion thereof) during which the LIBOR Rental
Rate is unavailable pursuant to Subparagraph 2.12(a)
or Subparagraph 2.12(b) of the Participation
Agreement shall be the Alternate Rental Rate.
(C) If Lessee so selects by notifying Lessor
in writing prior to the time Lessee is required to
select a new Rental Period pursuant to clause
(iii)(B)(1) above, the rental rate for any Rental
Period shall be the Alternate Rental Rate.
(D) If Lessee so selects, the rental rate
for a Rental Period for any Portion (of one year or
more) shall be a Fixed Rental Rate, with the Fixed
Rate for such Rental Period determined as follows:
(1) Lessee shall request Lessor to
provide a Fixed Rate by delivering to Agent
a written request (a "Fixed Rate Request")
in the form of Exhibit C, which specifies
the Portion and Rental Period for which such
Fixed Rate is requested, which Rental Period
shall comply with clause (iii)(B) of this
Subparagraph 2.03(a). Lessee shall deliver
each Fixed Rate Request to Agent, no later
than 12:00 noon (Eastern Standard Time or
Eastern Daylight Time, as applicable) at
least four (4) Business Days prior to the
first day of such Rental Period. Agent shall
promptly furnish to Lessor and each
Participant copies of each Fixed Rate
Request.
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(2) Not later than 11:00 a.m.
(Eastern Standard Time or Eastern Daylight
Time, as applicable) three (3) Business Days
prior to the first day of the Rental Period
specified in each Fixed Rate Request, each
Participant shall advise Agent
telephonically and shall immediately
thereafter confirm such telephonic notice by
delivering to Agent by facsimile a written
irrevocable quote (a "Fixed Rate Quote")
specifying the per annum fixed rate at which
such Participant is willing to fund its
Proportionate Share of the applicable
Portion during such Rental Period.
(3) After receipt of the various
Fixed Rate Quotes, Agent shall promptly
calculate the weighted average (rounded
upward if necessary to the nearest 1/100 of
one percent) of the Fixed Rate Quotes
provided by each Participant and shall
deliver to Lessee no later than 11:20 a.m.
(Eastern Standard Time or Eastern Daylight
Time, as applicable) three (3) Business
Days prior to the first day of the Rental
Period specified in each Fixed Rate
Request, with copies to Lessor and each
Participant, a written irrevocable offer (a
"Fixed Rate Offer") specifying such
average. If any Participant fails to
provide a Fixed Rate Quote, Agent shall
calculate the weighted average of the Fixed
Rate Quotes actually received and the Fixed
Rate Quote submitted by such Participant
shall be deemed to be the weighted average
of the Fixed Rate Quotes actually received
from all Participants.
(4) Not later than 11:30 a.m.
(Eastern Standard Time or Eastern Daylight
Time, as applicable) three (3) Business Days
prior to the first day of the Rental Period
specified in each Fixed Rate Request, Lessee
shall deliver to Agent a written irrevocable
notice either accepting the Fixed Rate Offer
(a "Fixed Rate Acceptance") or rejecting the
Fixed Rate Offer (a "Fixed Rate Rejection").
If Lessee fails to deliver either a Fixed
Rate Acceptance or Fixed Rate Rejection as
required hereunder, the Fixed Rate Offer
shall be deemed rejected.
(y) If Lessee accepts a
Fixed Rate Offer, the rental rate
for the Rental Period and Portion
specified in the applicable Fixed
Rate Request shall be a Fixed Rental
Rate and the Fixed Rate for such
Rental Period and Portion shall be
the average rate set forth in such
Fixed Rate Offer; provided that each
Participant shall be entitled to
receive a Fixed Rate equal to the
Fixed Rate Quote submitted or deemed
submitted by such Participant.
(z) If Lessee rejects a
Fixed Rate Offer or if the Fixed
Rate Request is not delivered by the
Agent within the applicable time
periods, the rental rate for the
applicable
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Portion shall continue at the LIBOR
Rental Rate (except as otherwise
provided in clause (iv)(A), (iv)(B)
or (iv)(C) of this Subparagraph
2.03(a)), with the next succeeding
Rental Period for such Portion to
be determined as provided in clause
(iii)(B)(1) of this Subparagraph
2.03(a). Each Fixed Rate Request,
Fixed Rate Quote, Fixed Rate
Acceptance and Fixed Rate Rejection
shall be delivered by facsimile as
required by Paragraph 7.01 of the
Participation Agreement[; provided,
however, that
(v) Lessee shall pay Base Rent in arrears (A) for
each Portion, on the last day of each Rental Period therefor
and, in the case of any Rental Period which exceeds three (3)
months, each day occurring every three (3) months after the
first day of such Rental Period (individually, a "Scheduled
Rent Payment Date") and (B) for all Portions, on the
Expiration Date.
(b) Supplemental Rent. Lessee shall pay as supplemental rent
hereunder ("Supplemental Rent") all amounts (other than Base Rent, the
purchase price payable by Lessee for any purchase of the Property by
Lessee pursuant to the Purchase Agreement and the Residual Value
Guaranty Amount and Indemnity Amount payable under the Purchase
Agreement) payable by Lessee under this Agreement and the other
Operative Documents. Lessee shall pay all Supplemental Rent amounts on
the dates specified in this Agreement and the other Operative Documents
for the payment of such amounts or, if no date is specified for the
payment of any such amount, 10 days after demand of Lessor or any other
Person to whom such amount is payable.
2.04. Use. Lessee may use the Property for (i) general office uses,
(ii) uses reasonably ancillary to ordinary general office uses, such as
cafeterias for employees, and (iii) the sale of goods and services by Lessee or
any corporate successor to Lessee that do not involve customer purchases in
person.
2.05. "As Is" Lease. Lessee has conducted, or will conduct from time to
time with regard to property that may be added hereto after the date hereof, all
due diligence which it deems appropriate regarding the Property and agrees that
no Lessor Party has any obligation to conduct any such due diligence. Lessee is
leasing the Property "as is, with all faults" without any representation,
warranty, indemnity or undertaking by any Lessor Party regarding any aspect of
the Property, including (a) the condition of the Property (including any
Improvements to the Property made prior to the Commencement Date or during the
Term); (b) title to the Property (including possession of the Property by any
Person or the existence of any Lien or any other right, title or interest in or
to any of the Property in favor of any Person); (c) the value, habitability,
usability, design, operation or fitness for use of the Property; (d) the
availability or adequacy of utilities and other services to the Property; (e)
any latent, hidden or patent defect in the Property; (f) the zoning or status of
the Property or any other restrictions on the use of the Property; (g) the
economics of the Property; (h) any Casualty or Condemnation; or (i) the
compliance of the Property with any applicable Governmental Rule or Insurance
Requirement; provided, however, that Lessor shall be obligated to remove Lessor
Liens to the extent required in Subparagraph 5.04(b) of the Participation
Agreement. Without limiting the generality of the
7
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foregoing, Lessee specifically waives any covenant of quiet enjoyment except as
otherwise provided in Subparagraph 5.04(b) of the Participation Agreement.
2.06. Nature of Transaction. As more fully provided in Paragraph 2.10
of the Participation Agreement, Lessee and Lessor, the Participants and Agent
(collectively, the "Lessor Parties") intend that the transaction evidenced by
this Agreement and the other Operative Documents constitute an operating lease
in accordance with FASB 13 for accounting purposes and a loan secured by the
Property for federal, state and local income tax purposes and bankruptcy law
purposes.
2.07. Security, Etc. In order to secure the Lessee Obligations and
otherwise to assure the Lessor Parties the benefits hereof in the event that the
transaction evidenced by this Agreement and the other Operative Documents is,
pursuant to the intent of Lessee and the Lessor Parties, treated as a loan for
certain purposes, Lessee hereby makes the following grants and agrees as
follows:
(a) Real Property Security. As security for the Lessee
Obligations, Lessee hereby irrevocably and unconditionally grants,
conveys, transfers and assigns to Lessor, as beneficiary (in trust for
the benefit of the Lessor Parties), with power of sale and right of
entry and possession, all estate, right, title and interest of Lessee
in the following property, whether now owned or hereafter acquired,
(collectively, the "Real Property Collateral"):
(i) The Land;
(ii) All Improvements located on the Land;
(iii) All Appurtenant Rights belonging, relating or
pertaining to any of the foregoing Land or Improvements;
(iv) All Subleases of and all Issues and Profits
accruing from any of the foregoing Land, Improvements or
Appurtenant Rights to the extent that such Subleases and
Issues and Profits constitute real property;
(v) All Related Goods, Related Permits and Related
Agreements related to any of the foregoing Land, Improvements
or Appurtenant Rights to the extent that such Related Goods,
Related Agreements and Related Permits constitute real
property;
(vi) All other Property to the extent that such
property constitutes real property; and
(vii) All proceeds of the foregoing, including
Casualty and Condemnation Proceeds.
(b) Personal Property Security. As security for the Lessee
Obligations, Lessee hereby irrevocably and unconditionally assigns and
grants to Lessor, for the benefit of the Lessor Parties, a security
interest in all estate, right, title and interest of Lessee in the
8
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following property, whether now owned or hereafter acquired,
(collectively, the "Personal Property Collateral"):
(i) All Subleases of and all Issues and Profits
accruing from any of the Land, Improvements or Appurtenant
Rights to the extent that such Subleases and Issues and
Profits constitute personal property;
(ii) All Related Goods, Related Permits and Related
Agreements related to any of the Land, Improvements or
Appurtenant Rights to the extent that such Related Goods,
Related Agreements and Related Permits constitute personal
property;
(iii) All Cash Collateral and all other deposit
accounts, instruments, investment property and monies held by
any Lessor Party in connection with this Agreement or any
other Operative Document (including any Repair and Restoration
Account);
(iv) All other Property to the extent such Property
constitutes personal property; and
(v) All proceeds of the foregoing, including Casualty
and Condemnation Proceeds.
For purpose of the provisions of this Agreement related to the creation
and enforcement of this Agreement as a security agreement and a fixture
filing with respect to the Related Goods, Lessee is the "debtor" and
Lessor is the "secured party," acting for the benefit of the Lessor
Parties. This Agreement constitutes a fixture filing for purposes of
the California Commercial Code with respect to the Related Goods which
are or are to become fixtures on the Land or Improvements. The mailing
addresses of Lessee and of Lessor from which information concerning
security interests hereunder may be obtained are as set forth on the
signature page of this Agreement. A carbon, photographic or other
reproduction of this Agreement or of any financing statement related to
this Agreement shall be sufficient as a financing statement for any of
the purposes referenced herein.
(c) Absolute Assignment of Subleases, Issues, and Profits.
Lessee hereby irrevocably assigns to Lessor, for the benefit of the
Lessor Parties, all of Lessee's estate, right, title and interest in,
to and under the Subleases and the Issues and Profits, whether now
owned or hereafter acquired. This is a present and absolute assignment
for security purposes, and Lessor's right to the Subleases and Issues
and Profits is not contingent upon, and may be exercised without
possession of, the Property.
(i) If no Event of Default has occurred and is
continuing, Lessee shall have a revocable license to collect
and retain the Issues and Profits as they become due. Upon the
occurrence and during the continuance of an Event of Default,
such license shall automatically terminate, and Lessor may
collect and apply the Issues and Profits pursuant to
Subparagraph 5.02(d) without further notice to Lessee or any
other party and without taking possession of the Property.
9
<PAGE>
All Issues and Profits thereafter collected by Lessee shall be
held by Lessee as trustee in a constructive trust for the
benefit of Lessor. Lessee hereby irrevocably authorizes and
directs the sublessees under the Subleases, without any need
on their part to inquire as to whether an Event of Default has
actually occurred or is then existing, to rely upon and comply
with any notice or demand by Lessor for the payment to Lessor
of any rental or other sums which may become due under the
Subleases or for the performance of any of the sublessees'
undertakings under the Subleases. Collection of any Issues and
Profits by Lessor shall not cure or waive any default or
notice of default hereunder or invalidate any acts done
pursuant to such notice.
(ii) The foregoing irrevocable assignment shall not
cause any Lessor Party to be (A) a mortgagee in possession;
(B) responsible or liable for (1) the control, care,
management or repair of the Property or for performing any of
Lessee's obligations or duties under the Subleases, (2) any
waste committed on the Property by the sublessees under any of
the Subleases or by any other Persons, (3) any dangerous or
defective condition of the Property, or (4) any negligence in
the management, upkeep, repair or control of the Property
resulting in loss or injury or death to any sublessee,
licensee, employee, invitee or other Person; or (C)
responsible for or impose upon any Lessor Party any duty to
produce rents or profits. No Lessor Party, in the absence of
gross negligence or willful disregard on its part, shall be
liable to Lessee as a consequence of (y) the exercise or
failure to exercise any of the rights, remedies or powers
granted to Lessor hereunder or (z) the failure or refusal of
Lessor to perform or discharge any obligation, duty or
liability of Lessee arising under the Subleases.
SECTION 3. OTHER LESSEE AND LESSOR RIGHTS AND OBLIGATIONS.
3.01. Maintenance, Repair, Etc.
(a) General. Lessee shall not permit any waste of the
Property, except for ordinary wear and tear, and shall, at its sole
cost and expense, maintain the Property in good working order,
mechanical condition and repair and make all necessary repairs thereto,
of every kind and nature whatsoever, whether interior or exterior,
ordinary or extraordinary, structural or nonstructural or foreseen or
unforeseen, in each case as required by all applicable Governmental
Rules and Insurance Requirements and on a basis consistent with the
operation and maintenance of commercial properties comparable in type
and location to the Property and in compliance with prudent industry
practice.
(b) New Improvements. Lessee shall make or cause to be made
all of the New Improvements authorized and required by the Construction
Agency Agreement in accordance with the Construction Agency Agreement.
(c) Other Modifications. Lessee, at its sole cost and expense,
may from time to time make alterations, renovations, improvements and
additions to the Property and
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substitutions and replacements therefor (collectively, "Modifications")
in addition to the New Improvements; provided that:
(i) No Modification impairs the value, utility or
useful life of the Property or any part thereof from that
which existed immediately prior to such Modification;
(ii) All Modifications are made expeditiously and, in
no case unless Lessee currently is exercising either the Term
Purchase Option or the Expiration Date Purchase Option, shall
Modifications in an aggregate amount of $100,000 remain
uncompleted later than six (6) months prior to the Scheduled
Expiration Date;
(iii) All Modifications are made in a good and
workmanlike manner and in compliance with all applicable
Governmental Rules and Insurance Requirements;
(iv) Subject to Paragraph 3.12 relating to permitted
contests, Lessee pays all costs and expenses and discharges
(or cause to be insured or bonded over) any Liens arising in
connection with any Modification not later than the earlier of
(A) sixty (60) days after the same shall be filed (or
otherwise becomes effective) and (B)unless Lessee currently is
exercising either the Term Purchase Option or the Expiration
Date Purchase Option, six (6) months prior to the Scheduled
Expiration Date;
(v) At least one (1) month prior to the commencement
of (A) any Modifications which are anticipated to cost
$500,000 or more in the aggregate, or (B) any Modifications
which cause the total of all Modifications undertaken during
the previous twelve-month period to exceed an aggregate cost
of $1,000,000, Lessee shall deliver to Lessor, with sufficient
copies for Agent and each Participant, a brief written
description of such Modifications; and
(vi) All Modifications otherwise comply with this
Agreement and the other Operative Documents.
(d) Abandonment. Lessee shall not abandon the Property or any
material portion thereof for any period in excess of sixty (60)
consecutive days during the term hereof, except as a part of any New
Improvements or Modifications as permitted herein or in the other
Operative Documents.
3.02. Risk of Loss. Lessee assumes all risks of loss arising from any
Casualty or Condemnation which arises or occurs prior to the Expiration Date or
while Lessee is in possession of the Property and all liability for all personal
injuries and deaths and damages to property suffered by any Person or property
on or in connection with the Property which arises or occurs prior to the
Expiration Date or while Lessee is in possession of the Property, except in each
case to the extent any such loss or liability is primarily caused by the gross
negligence or willful misconduct of a Lessor Party. Lessee hereby waives the
provisions of California Civil
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Code Sections 1932(1), 1932(2) and 1933(4), and any and all other applicable
existing or future Governmental Rules permitting the termination of this
Agreement as a result of any Casualty or Condemnation, and Lessor shall in no
event be answerable or accountable for any risk of loss of or decrease in the
enjoyment and beneficial use of the Property as a result of any such event.
3.03. Insurance.
(a) Coverage. Lessee, at its sole cost and expense, shall
carry and maintain the following insurance coverage:
(i) At all times during the Term, commercial
liability insurance covering claims for injuries or death
sustained by persons or damage to property while on the
Property, and workers' compensation insurance;
(ii) At all times after commencement of construction
of any structure, (A) unless covered by builders' risk
insurance pursuant to clause (iii) of Subparagraph 3.03(a),
property insurance covering loss or damage by earthquake in an
amount not less than the then current probable maximum loss
(as determined by a seismic expert reasonably approved by
Lessor and Agent and subject to a reasonable deductible of not
more than 15% of the total value at risk and (B) property
insurance covering loss or damage by fire, flood and other
risks (other than earthquake) in an amount not less than the
Asset Termination Value;
(iii) At all times after commencement of construction
of any structure, builders' risk insurance in the full amount
of the Asset Termination Value, as such may change from time
to time, covering fire, flood, earthquake and other normal
insured risks; and
(iv) At all times during the Term as appropriate,
such other insurance of the types customarily carried by a
reasonably prudent Person owning or operating properties
similar to the Property in the same geographic area as the
Property.
Except as otherwise specifically required above, such insurance shall
be in amounts, in a form and with deductibles reasonably approved by
Lessor.
(b) Carriers. Any primary insurance carried and maintained by
Lessee pursuant to this Paragraph 3.03 shall be underwritten by an
insurance company which (A) has, at the time such insurance is placed
and at the time of each renewal thereof, a general policyholder rating
of "A" and a financial rating of at least 10 from A.M. Best and Company
or any successor thereto (or if there is none, an organization having a
similar national reputation) or (B) is otherwise approved by Lessor and
Required Participants.
(c) Terms. Each insurance policy maintained by Lessee pursuant
to this Paragraph 3.03 shall provide as follows, whether through
endorsements or otherwise:
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(i) Lessor and Agent shall be named as additional
insureds, in the case of each policy of liability insurance
and property insurance, and additional loss payees, in the
case of each policy of property insurance.
(ii) In respect of the interests of Lessor in the
policy, the insurance shall not be invalidated by any action
or by inaction of Lessee or by any Person having temporary
possession of the Property while under contract with Lessee to
perform maintenance, repair, alteration or similar work on the
Property, and shall insure the interests of Lessor regardless
of any breach or violation of any warranty, declaration or
condition contained in the insurance policy by Lessee, Lessor
or any other additional insured (other than by such additional
insured, as to such additional insured); provided, however,
that the foregoing shall not be deemed to (A) cause such
insurance policies to cover matters otherwise excluded from
coverage by the terms of such policies or (B) require any
insurance to remain in force notwithstanding non-payment of
premiums except as provided in clause (iii) below.
(iii) If the insurance policy is cancelled for any
reason whatsoever, or substantial change is made in the
coverage that affects the interests of Lessor, or if the
insurance coverage is allowed to lapse for non-payment of
premium, such cancellation, change or lapse shall not be
effective as to Lessor for thirty (30) days after receipt by
Lessor of written notice from the insurers of such
cancellation, change or lapse.
(iv) No Lessor Party shall have any obligation or
liability for premiums, commissions, assessments, or calls in
connection with the insurance.
(v) The insurer shall waive any rights of set-off or
counterclaim or any other deduction, whether by attachment or
otherwise, that it may have against any Lessor Party.
(vi) The insurance shall be primary without right of
contribution from any other insurance that may be carried by
any Lessor Party with respect to its interest in the Property.
(vii) The insurer shall waive any right of
subrogation against any Lessor Party.
(viii) All provisions of the insurance, except the
limits of liability, shall operate in the same manner as if
there were a separate policy covering each insured party.
(ix) The insurance shall not be invalidated should
Lessee or any Lessor Party waive, in writing, prior to a loss,
any or all rights of recovery against any Person for losses
covered by such policy, nor shall the insurance in favor of
any Lessor Party or Lessee, as the case may be, or their
respective rights under and interests in said policies be
invalidated or reduced by any act or omission or
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negligence of any Lessee Party or Lessor, as the case may be,
or any other Person having any interest in the Property.
(x) All insurance proceeds with a value of less than
Five Million Dollars ($5,000,000) in respect of any loss or
occurrence with respect to the Property shall be paid to and
adjusted solely by Lessee and all other insurance proceeds
shall be paid to Lessor and adjusted jointly by Lessor and
Lessee, except that, from and after the date on which the
insurer receives written notice from Lessor that an Event of
Default has occurred and is continuing (and unless and until
such insurer receives written notice from Lessor that all
Events of Default have been cured), all losses shall be
adjusted solely by, and all insurance proceeds shall be paid
solely to, Lessor.
(xi) Each policy shall contain a standard form
mortgagee endorsement in favor of Lessor.
(d) Evidence of Insurance. Lessee, at its sole cost and
expense, shall furnish to Lessor from time to time (i) upon each
renewal of insurance and upon any material change in terms thereof,
certificates evidencing such renewal or change and Lessee's compliance
with the insurance requirements set forth in the Paragraph 3.03, and
(ii) upon the request of Lessor, such other certificates or other
documents as Lessor may reasonably request to evidence Lessee's
compliance with the insurance requirements set forth in this Paragraph
3.03.
(e) Release of Lessor Parties. Lessee hereby waives, releases
and discharges each Lessor Party and its directors, officers,
employees, agents and advisors from all claims whatsoever arising out
of any loss, claim, expense or damage to or destruction covered or
coverable by insurance required under this Paragraph 3.03,
notwithstanding that such loss, claim, expense or damage may have been
caused by any such Person, and, as among Lessee and such Persons,
Lessee agrees to look to the insurance coverage only in the event of
such loss.
3.04. Casualty and Condemnation.
(a) Notice. Lessee shall give Lessor prompt written notice of
the occurrence of any Material Casualty affecting, or the institution
of any proceedings for the Condemnation of, the Property or any portion
thereof.
(b) Repair or Purchase Option. After the occurrence of any
Material Casualty or Condemnation affecting the Property or any portion
thereof, Lessee shall either (i) repair and restore the Property as
required by Subparagraph 3.04(c) or (ii) exercise the Term Purchase
Option and purchase the Property pursuant to the Purchase Agreement;
provided, however, that Lessee may not elect to repair and restore the
Property if such casualty or condemnation is a Major Casualty or Major
Condemnation or if an Event of Default has occurred and is continuing,
unless Lessor and the Required Participants shall consent in writing.
Not later than forty-five (45) days after the occurrence of any
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Material Casualty or Condemnation, Lessee shall deliver to Lessor a
written notice indicating whether it elects to repair and restore or
purchase the Property.
(c) Repair and Restoration. If Lessee elects to repair and
restore the Property following any Material Casualty or Condemnation,
Lessee shall diligently proceed to obtain all necessary permits and to
repair and restore the Property to the condition in which it existed
immediately prior to such Material Casualty or Condemnation and shall
use reasonable efforts to complete all such repairs and restoration as
soon as reasonably practicable, but not later than the earlier of (y)
twelve (12) months following the occurrence of the Material Casualty or
Condemnation and (z) six (6) months prior to the Scheduled Expiration
Date unless Lessee currently is exercising either the Term Purchase
Option or the Expiration Date Purchase Option. Lessee shall use its own
funds to make such repairs and restoration, except to the extent any
Casualty and Condemnation Proceeds are available and are released to
Lessee for such purpose pursuant to Subparagraph 3.04(f). Lessee's
exercise of the repair and restoration option shall, if Lessor or
Required Participants direct, be subject to satisfaction of the
following conditions:
(i) Within two (2) months after the occurrence of the
Material Casualty or Condemnation, Lessee shall deposit in a
deposit account acceptable to and controlled by Lessor (a
"Repair and Restoration Account") of funds (including any
Casualty and Condemnation Proceeds which are available and are
released to Lessee pursuant to Subparagraph 3.04(f)) in the
amount which Lessor determines is needed to complete and fully
pay all costs of the repair or restoration (including taxes,
financing charges, insurance and rent during the repair
period).
(ii) As soon as reasonably possible after the
occurrence of the Material Casualty or Condemnation, Lessee
shall establish an arrangement for lien releases and
disbursement of funds acceptable to Lessor and in a manner and
upon such terms and conditions as would be required by a
prudent interim construction lender.
(iii) As soon as reasonably possible after the
occurrence of the Material Casualty or Condemnation, Lessee
shall deliver to Lessor the following, each in form and
substance acceptable to Lessor;
(A) Evidence that the Property can, in
Lessor's reasonable judgment, with diligent
restoration or repair, be returned to a condition at
least equal to the condition thereof that existed
prior to the Casualty or partial Condemnation causing
the loss or damage within the earlier to occur of (A)
twelve (12) months after the occurrence of the
Casualty or Condemnation and (B) unless Lessee
currently is exercising either the Term Purchase
Option or the Expiration Date Purchase Option, six
(6) months prior to the Scheduled Expiration Date;
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(B) Evidence that all necessary governmental
approvals can be timely obtained to allow the
rebuilding and reoccupancy of the Property;
(C) Copies of all plans and specifications
for the work;
(D) Copies of all contracts for the work,
signed by a contractor reasonably acceptable to
Lessor;
(E) A cost breakdown for the work;
(F) A payment and performance bond for the
work or other security satisfactory to Lessor;
(G) Evidence that, upon completion of the
work, the size, capacity and total value of the
Property will be at least as great as it was before
the Casualty or Condemnation occurred; and
(H) Evidence of satisfaction of any
additional conditions that Lessor or Required
Participants may reasonably establish to protect
their rights under this Agreement and the other
Operative Documents.
All plans and specifications for the work must be reasonably
acceptable to Lessor, except that Lessor's approval shall not
be required if the restoration work is based on the same plans
and specifications as were originally used to construct the
Property. To the extent that the funds in a Repair and
Restoration Account include both Casualty and Condemnation
Proceeds and other funds deposited by Lessee, the other funds
deposited by Lessee shall be used first. Lessee acknowledges
that the specific conditions described above are reasonable.
(d) Prosecution of Claims for Casualty and Condemnation
Proceeds. Lessee shall proceed promptly and diligently to prosecute in
good faith the settlement or compromise of any and all claims for
Casualty and Condemnation Proceeds; provided, however, that any
settlement or compromise of any such claim shall, except as otherwise
provided in clause (x) of Subparagraph 3.03(c), be subject to the
written consent of Lessor and Required Participants, which consents
shall not be unreasonably withheld. Lessor may participate in any
proceedings relating to such claims, and, after the occurrence and
during the continuance of any Event of Default, Lessor is hereby
authorized, in its own name or in Lessee's name, to adjust any loss
covered by insurance or any Casualty or Condemnation claim or cause of
action, and to settle or compromise any claim or cause of action in
connection therewith, and Lessee shall from time to time deliver to
Lessor any and all further assignments and other instruments required
to permit such participation.
(e) Assignment of Casualty and Condemnation Proceeds. Lessee
hereby absolutely and irrevocably assigns to Lessor all Casualty and
Condemnation Proceeds and all claims relating thereto. Except as
otherwise provided in clause (x) of Subparagraph 3.03(c), Lessee agrees
that all Casualty and Condemnation Proceeds are to be paid to Lessor
and Lessee hereby authorizes and directs any insurer, Governmental
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Authority or other Person responsible for paying any Casualty and
Condemnation Proceeds to make payment thereof directly to Lessor alone,
and not to Lessor and Lessee jointly. If Lessee receives any Casualty
and Condemnation Proceeds payable to Lessor hereunder, Lessee shall
promptly pay over such Casualty and Condemnation Proceeds to Lessor.
Lessee hereby covenants that until such Casualty and Condemnation
Proceeds are so paid over to Lessor, Lessee shall hold such Casualty
and Condemnation Proceeds in trust for the benefit of Lessor and shall
not commingle such Casualty and Condemnation Proceeds with any other
funds or assets of Lessee or any other Person. Except as otherwise
provided in clause (x) of Subparagraph 3.03(c), Lessor may commence,
appear in, defend or prosecute any assigned right, claim or action, and
may adjust, compromise, settle and collect all rights, claims and
actions assigned to Lessor, but shall not be responsible for any
failure to collect any such right, claim or action, regardless of the
cause of the failure.
(f) Use of Casualty and Condemnation Proceeds.
(i) If (A) no Event of Default has occurred and is
continuing, (B) Lessee exercises the repair and restoration
option pursuant to Subparagraphs 3.04(b) and 3.04(c) and (C)
Lessee complies with any conditions imposed pursuant to
Subparagraph 3.04(c); then Lessor shall release any Casualty
and Condemnation Proceeds to Lessee for repair or restoration
of the Property, but may condition such release and use of the
Casualty and Condemnation Proceeds upon deposit of the
Casualty and Condemnation Proceeds in a Repair and Restoration
Account. Lessee shall have the option, upon the completion of
such restoration of the Property, to apply any surplus
Casualty and Condemnation Proceeds remaining after the
completion of such restoration to the payment of Rent and/or
the reduction of the Outstanding Lease Amount, notwithstanding
that such amounts are not then due and payable or that such
amounts are otherwise adequately secured.
(ii) If (A) an Event of Default has occurred and is
continuing, (B) Lessee fails to or is unable to comply with
any conditions imposed pursuant to Subparagraph 3.04(c) or (C)
Lessee elects to exercise the Term Purchase Option and
purchase the Property pursuant to the Purchase Agreement;
then, at the absolute discretion of Lessor and the Required
Participants, regardless of any impairment of security or lack
of impairment of security, but subject to applicable
Governmental Rules governing use of Casualty and Condemnation
Proceeds, if any, Lessor may (1) apply all or any of the
Casualty and Condemnation Proceeds it receives to the expenses
of Lessor Parties in obtaining such proceeds; (2) apply the
balance to the payment of Rent and/or the reduction of the
Outstanding Lease Amount, notwithstanding that such amounts
are not then due and payable or that such amounts are
otherwise adequately secured and/or (3) release all or any
part of such proceeds to Lessee upon any conditions Lessor and
the Required Participants may elect.
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(iii) Lessor shall apply any Casualty and
Condemnation Proceeds which are to be used to reduce the
Outstanding Lease Amount only on the last day of a Rental
Period unless a Default has occurred and is continuing.
(iv) Application of all or any portion of the
Casualty and Condemnation Proceeds, or the release thereof to
Lessee, shall not cure or waive any Default or notice of
default or invalidate any acts done pursuant to such notice.
3.05. Taxes. Subject to Paragraph 3.12 relating to permitted contests,
Lessee shall promptly pay when due all Indemnified Taxes imposed on or payable
by Lessee or any Lessor Party in connection with the Property, this Agreement or
any of the other Operative Documents, or any of the transactions contemplated
hereby or thereby. As promptly as possible after any Indemnified Taxes are
payable by Lessee, Lessee shall send to Lessor for the account of the applicable
Lessor Party a copy of an original official receipt received by Lessee showing
payment thereof. If Lessee fails to pay any such Indemnified Taxes when due to
the appropriate taxing authority or fails to remit to Lessor the required
receipts or other required documentary evidence, Lessee shall indemnify the
Lessor Parties for any incremental taxes, interest or penalties that may become
payable by the Lessor Parties as a result of any such failure. The obligations
of Lessee under this Paragraph 3.05 shall survive the payment and performance of
the Lessee Obligations and the termination of this Agreement.
3.06. Environmental Matters.
(a) Lessee's Covenants. Lessee shall not cause or permit
Hazardous Materials to be used, generated, manufactured, stored,
treated, disposed of, transported or present on or released or
discharged from the Property in violation of Environmental Laws that is
reasonably likely to have a Material Adverse Effect. Lessee may use
Hazardous Materials in connection with the operation of its business
(or the business of permitted subtenants) so long as such use is
consistent with the preceding sentence. Other than as previously
disclosed to Lessor under the Participation Agreement, Lessee shall
immediately notify Lessor in writing of (i) any knowledge by Lessee
that the Property does not comply with any Environmental Laws; (ii) any
claims against Lessee or the Property relating to Hazardous Materials
or pursuant to Environmental Laws; and (iii) the discovery of any
occurrence or condition on any real property adjoining or in the
vicinity of the Property that could cause the Property or any part
thereof to be designated as a "hazardous waste property" or as a
"border zone property" under the provisions of California Health and
Safety Code Sections 25220 et seq. or any regulation adopted in
accordance therewith. In response to the release or discharge of any
Hazardous Materials on, under or about the Property, Lessee shall
immediately take, at Lessee's sole expense, all remedial action
required by any Environmental Laws or any judgment, consent decree,
settlement or compromise in respect to any claim based thereon.
(b) Inspection By Lessor. Upon reasonable prior notice to
Lessee, Lessor, its employees and agents, may from time to time
(whether before or after the commencement of a nonjudicial or judicial
foreclosure proceeding), enter and inspect the Property for the purpose
of determining the existence, location, nature and magnitude of
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any past or present release or threatened release of any Hazardous
Materials into, onto, beneath or from the Property, provided that any
such Person so entering and inspecting the Property shall do so in
compliance with the PG&E Agreements and without materially disrupting
the operations of Lessee.
(c) Indemnity. Without in any way limiting any other indemnity
contained in this Agreement or any other Operative Document, Lessee
agrees to defend, indemnify and hold harmless the Lessor Parties and
the other Indemnitees from and against any claim, loss, damage, cost,
expense or liability directly or indirectly arising out of (i) the use,
generation, manufacture, storage, treatment, release, threatened
release, discharge, disposal, transportation or presence of any
Hazardous Materials which are found in, on, under or about the Property
or (ii) the breach of any covenant, representation or warranty of
Lessee relating to Hazardous Materials or Environmental Laws contained
in this Agreement or any Operative Document, excluding any breach of
the PG&E Agreements by Lessor while Lessor is in physical possession of
the Property after an Event of Default. This indemnity shall include
(A) the costs, whether foreseeable or unforeseeable, of any
investigation, repair, cleanup or detoxification of the Property which
is required by any Governmental Authority or is otherwise necessary to
render the Property in compliance with all Environmental Laws; (B) all
other direct or indirect consequential damages (including any third
party claims, claims by any Governmental Authority, or any fines or
penalties against the Indemnitees; and (C) all court costs and
attorneys' fees (including expert witness fees and the cost of any
consultants) paid or incurred by the Indemnitees. Lessee shall pay
immediately upon Lessor's demand any amounts owing under this
indemnity. Lessee shall use legal counsel reasonably acceptable to
Lessor in any action or proceeding arising under this indemnity. The
obligations of Lessee under this Subparagraph 3.06(c) shall survive the
payment and performance of the Lessee Obligations and the termination
of this Agreement.
(d) PG&E Agreements. Lessee shall take all necessary action to
comply to the fullest extent possible with all of the terms and
conditions of the PG&E Agreements. Lessor agrees that it will not take
any affirmative action which would constitute a breach the PG&E
Agreements, provided that for purposes of this covenant, any action by
Lessee under the PG&E Agreements shall not be deemed to be the action
of Lessor.
(e) Legal Effect of Section. Lessee and Lessor agree that (i)
this Paragraph 3.06 and clause (i) of Subparagraph 4.01(u) of the
Participation Agreement are intended as Lessor's written request for
information (and Lessee's response) concerning the environmental
condition of the real property security as required by California Code
of Civil Procedure Section 726.5 and (ii) each representation and
warranty and covenant herein and therein (together with any indemnity
applicable to a breach of any such representation and warranty) with
respect to the environmental condition of the Property is intended by
Lessor and Lessee to be an "environmental provision" for purposes of
California Code of Civil Procedure Section 736.
3.07. Liens, Easements, Etc.
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(a) Lessee's Covenants. Subject to Paragraph 3.12 relating to
permitted contests, Lessee shall not create, incur, assume or permit to
exist any Lien or easement on or with respect to any of the Property of
any character, whether now owned or hereafter acquired, except for the
following ("Permitted Property Liens"):
(i) Liens in favor of a Lessor Party securing the
Lessee Obligations and other Lessor Liens;
(ii) Liens and easements in existence on the
Commencement Date to the extent reflected in the title
insurance policies delivered to Agent pursuant to Paragraph
3.01 of and Schedule 3.01 to the Participation Agreement and
approved by Lessor;
(iii) Liens for taxes or other Governmental Charges
not at the time delinquent or thereafter payable without
penalty; and
(iv) Liens of carriers, warehousemen, mechanics,
materialmen and vendors and other similar Liens imposed by law
incurred in the ordinary course of business for sums not
overdue.
Subject to Paragraph 3.12 relating to permitted contests, Lessee shall
promptly (A) pay all Indebtedness of Lessee and other obligations prior
to the time the non-payment thereof would give rise to a Lien on the
Property and (B) discharge, at its sole cost and expense, any Lien on
the Property which is not a Permitted Property Lien.
(b) No Consents. Nothing contained in this Agreement shall be
construed as constituting the consent or request of any Lessor Party,
express or implied, to or for the performance by any contractor,
mechanic, laborer, materialman, supplier or vendor of any labor or
services or for the furnishing of any materials for any construction,
alteration, addition, repair or demolition of or to the Property or any
part thereof. NOTICE IS HEREBY GIVEN THAT NO LESSOR PARTY IS OR SHALL
BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE
FURNISHED TO LESSEE, OR TO ANYONE HOLDING THE PROPERTY OR ANY PART
THEREOF THROUGH OR UNDER LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS
FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE
INTEREST OF ANY LESSOR PARTY IN AND TO THE PROPERTY.
3.08. Subletting. Lessee may, in the ordinary course of business,
sublease the Property or any portion thereof to any Person, provided, that (a)
Lessee remains directly and primarily liable for performing its obligations
under this Agreement and all other Lessee Obligations; (b) each sublease is
subject to and subordinated to this Agreement; (c) each sublease has a term
which expires on or prior to the Scheduled Expiration Date (or, if longer,
includes a provision that the sublease terminates on the Expiration Date if such
Expiration Date occurs prior to the Scheduled Expiration Date unless Lessee
purchases the Property on the Expiration Date pursuant to the Purchase
Agreement); (d) each sublease prohibits the sublessee from engaging in any
activities on the Property other than those permitted by Paragraph 2.04,
provided that Lessee
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may sublease the Tract 2 Property to a Person which occupies the Tract 2
Property as of the date hereof and such Person may engage in activities on such
Property in which it is engaged on the date hereof; and (e) no sublease has a
Material Adverse Effect. Any sublease which does not satisfy each of the
requirements of the immediately preceding sentence shall be null and void as to
the Lessor Parties and their successor and assigns. Except for such permitted
subleases, Lessee shall not assign any of its rights or interests under this
Agreement to any other Person.
3.09. Utility Charges. Lessee shall pay all charges for electricity,
power, gas, oil, water, telephone, sanitary sewer service and all other
utilities and services to, on or in connection with the Property during the
Term.
3.10. Removal of Property. Lessee shall not remove any Improvements
from the Land or any other Property from the Land or Improvements, except that,
during the Term, Lessee may remove any Modification or any trade fixture,
machinery, equipment, inventory or other personal property if such Modification
or property (a) was not financed by an Advance, (b) is not required by any
applicable Governmental Rule or Insurance Requirement and (c) is readily
removable without impairing the value, utility or remaining useful life of the
Property.
3.11. Compliance with Governmental Rules and Insurance Requirements.
Lessee, at its sole cost and expense, shall, unless its failure is not
reasonably likely to have a Material Adverse Effect, (a) comply, and cause its
agents, sublessees, assignees, employees, invitees, licensees, contractors and
tenants, and the Property to comply, with all Governmental Rules (including,
without limitation, Waste Discharge Requirements order No. 85-80 (Ca. Regional
Water Quality Control Board, San Francisco Region) and Consent Order Docket No.
HAS 89/90-002 (Ca. Department of Toxic Substances Control), including all the
attached and ancillary documents thereto) and Insurance Requirements relating to
the Property (including the construction, use, operation, maintenance, repair
and restoration thereof, whether or not compliance therewith shall require
structural or extraordinary changes in the Improvements or interfere with the
use and enjoyment of the Property), and (b) procure, maintain and comply with
all licenses, permits, orders, approvals, consents and other authorizations
required for the construction, use, maintenance and operation of the Property
and for the use, operation, maintenance, repair and restoration of the
Improvements.
3.12. Permitted Contests. Lessee, at its sole cost and expense, may
contest any alleged Lien or easement on any of the Property or any alleged
Governmental Charge, Indebtedness or other obligation which is payable by Lessee
hereunder to Persons other than the Lessor Parties or which, if unpaid, would
give rise to a Lien on any of the Property, provided that (a) each such contest
is diligently pursued in good faith by appropriate proceedings; (b) the
commencement and continuation of such proceedings suspends the enforcement of
such Lien or easement or the collection of such Governmental Charge,
Indebtedness or obligation; (c) Lessee has established adequate reserves for the
discharge of such Lien or easement or the payment of such Governmental Charge,
Indebtedness or obligation in accordance with GAAP and, if the failure to
discharge such Lien or easement or the failure to pay such Governmental Charge,
Indebtedness or obligation might result in any civil liability for any Lessor
Party, Lessee has provided to such Lessor Party a bond or other security
satisfactory to such Lessor Party; (d) the failure to discharge such Lien or
easement or the failure to pay such Governmental Charge, Indebtedness
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or obligation could not result in any criminal liability for any Lessor Party;
(e) the failure to discharge such Lien or easement or the failure to pay such
Governmental Charge, Indebtedness or obligation is not otherwise reasonably
likely to have a Material Adverse Effect; and (f) unless Lessee currently is
exercising either the Term Purchase Option or the Expiration Date Purchase
Option, any such contest is completed and such Lien or easement is discharged
(either pursuant to such proceedings or otherwise) or such Governmental Charge,
Indebtedness or obligation is declared invalid, paid or otherwise satisfied not
later than six (6) months prior to the Scheduled Expiration Date.
3.13. Lessor Obligations; Right to Perform Lessee Obligations. No
Lessor Party shall have any obligation to (a) maintain, repair or make any
improvements to the Property, (b) maintain any insurance on the Property, (c)
perform any other obligation of Lessee under this Agreement or any other Lessee
Obligation, (d) make any expenditure on account of the Property (except to make
Advances as required by the Participation Agreement) or (e) take any other
action in connection with the Property, this Agreement or any other Operative
Document, except as expressly provided herein or in another Operative Document;
provided however, that Lessor may, in its sole discretion and without any
obligation to do so, perform any Lessee Obligation not performed by Lessee when
required. Lessor may enter the Property or exercise any other right of Lessee
under this Agreement or any other Operative Document to the extent Lessor
determines in good faith that such entry or exercise is reasonably necessary for
Lessor to perform any such Lessee Obligation not performed by Lessee when
required. Lessee shall reimburse Lessor and the other Lessor Parties, within
five (5) Business Days after demand, for all fees, costs and expenses incurred
by them in performing any such obligation or curing any Default.
3.14. Inspection Rights. During the Term, Lessee shall permit any
Person designated by Lessor, upon reasonable notice and during normal business
hours, to visit and inspect any of the Property.
SECTION 4. EXPIRATION DATE.
4.01. Termination by Lessee Prior to Scheduled Expiration Date. Subject
to the terms and conditions of the Purchase Agreement, Lessee may, at any time
prior to the Scheduled Expiration Date, terminate this Agreement and purchase
the Property pursuant to Section 2 of the Purchase Agreement. Lessee shall
notify Lessor of Lessee's election so to terminate this Agreement and purchase
the Property by delivering to Agent a Notice of Term Purchase Option Exercise
pursuant to and in accordance with the provisions of Paragraph 2.02 of the
Purchase Agreement.
4.02. Surrender of Property. Unless Lessee purchases the Property on
the Expiration Date pursuant to the Purchase Agreement, Lessee shall vacate and
surrender the Property to Lessor on the Expiration Date in its then-current
condition, subject to compliance by Lessee on or prior to such date of its
obligations under this Agreement and the other Operative Documents (including
the completion of the New Improvements and all Modifications, the completion of
all permitted contests and the removal of all Liens which are not Permitted
Property Liens of the types described in clauses (i), (ii) (iii) or (vi) of
Subparagraph 3.07(a)).
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4.03. Holding Over. If Lessee does not purchase the Property on the
Expiration Date pursuant to the Purchase Agreement but continues in possession
of any portion of the Property after the Expiration Date, Lessee shall pay rent
for each day it so continues in possession, payable upon demand of Lessor, at a
per annum rate equal to the Alternate Rental Rate plus two percent (2.0%) and
shall pay and perform all of its other Lessee Obligations under this Agreement
and the other Operative Documents in the same manner as though the Term had not
ended; provided, however, that this Paragraph 4.03 shall not be interpreted to
permit such holding over or to limit any right or remedy of Lessor for such
holding over.
SECTION 5. DEFAULT.
5.01. Events of Default. The occurrence or existence of any one or more
of the following shall constitute an "Event of Default" hereunder:
(a) Non-Payment. Lessee shall (i) fail to pay on the
Expiration Date any amount payable by Lessee under this Agreement or
any other Operative Document on such date, (ii) fail to pay within five
(5) Business Days after any Scheduled Rent Payment Date any Base Rent
payable on such Scheduled Rent Payment Date (other than the Base Rent
payable on the Expiration Date) or (iii) fail to pay within ten (10)
Business Days after the same becomes due, any Supplemental Rent or
other amount required under the terms of this Agreement or any other
Operative Document (other than any such amount payable on the
Expiration Date or Base Rent); or
(b) Specific Defaults. Lessee or any of its Subsidiaries shall
fail to observe or perform any covenant, obligation, condition or
agreement set forth in Subparagraph 3.01(d), Paragraph 3.03 or
Subparagraph 3.07(a) hereof, in Subparagraph 2.01(c), Paragraph 5.02 or
Paragraph 5.03 of the Participation Agreement or in Paragraph 3.01 of
the Construction Agency Agreement; or
(c) Other Defaults. Lessee or any of its Subsidiaries shall
fail to observe or perform any other covenant, obligation, condition or
agreement contained in this Agreement or any other Operative Document
and such failure shall continue for a period of thirty (30) days after
written notice thereof from Lessor; provided, however, that in the
event that such failure cannot reasonably be cured within such thirty
(30) day period, such failure shall not constitute an Event of Default
hereunder so long as Lessee shall have commenced to cure such failure
within such thirty (30) day period and shall thereafter diligently
pursue such cure to completion, provided further that such failure
shall in all events be cured by the earlier of (i) the Expiration Date
and (ii) one hundred and eighty days (180) days after Lessor's notice
thereof; or
(d) Representations and Warranties. Any representation,
warranty, certificate, information or other statement (financial or
otherwise) made or furnished by or on behalf of Lessee or any of its
Subsidiaries to any Lessor Party in or in connection with this
Agreement or any other Operative Document, or as an inducement to any
Lessor Party to enter into this Agreement or any other Operative
Document, shall be false, incorrect, incomplete or misleading in any
material respect when made or furnished and Lessee
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shall not have cured the facts or circumstances causing such
representation, warranty, certificate or other statement to be false,
incorrect, incomplete or misleading within thirty (30) days of notice
thereof from Lessor; or
(e) Cross-Default. Lessee or any of its Subsidiaries (i)
shall fail to make any payment when due on account of any Indebtedness
or Contingent Obligation of such Person (excluding the Lessee
Obligations but including all other Indebtedness and Contingent
Obligations of Lessee or any of its Subsidiaries to any Lessor Party)
and such failure shall continue beyond any period of grace provided
with respect thereto, if the amount of such payment exceeds $5,000,000
or the effect of such failure is to cause, or permit the holder or
holders thereof to cause, Indebtedness and/or Contingent Obligations in
an aggregate amount exceeding $5,000,000 to become due or (ii) shall
default in the observance or performance of any other agreement, term
or condition contained in any agreement or instrument evidencing such
Indebtedness or Contingent Obligation, if the effect of such default is
to cause, or permit the holder or holders thereof to cause,
Indebtedness and/or Contingent Obligations in an aggregate amount
exceeding $5,000,000 to become due; or
(f) Insolvency, Voluntary Proceedings. Lessee or any of its
Subsidiaries shall (i) apply for or consent to the appointment of a
receiver, trustee, liquidator or custodian of itself or of all or a
substantial part of its property, (ii) be unable, or admit in writing
its inability, to pay its debts generally as they mature, (iii) make a
general assignment for the benefit of its or any of its creditors, (iv)
be dissolved or liquidated in full or in part, (v) become insolvent (as
such term may be defined or interpreted under any applicable statute),
(vi) commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter
in effect or consent to any such relief or to the appointment of or
taking possession of its property by any official in an involuntary
case or other proceeding commenced against it, or (vi) take any action
for the purpose of effecting any of the foregoing; or
(g) Involuntary Proceedings. Proceedings for the appointment
of a receiver, trustee, liquidator or custodian of Lessee or any of its
Subsidiaries or of all or a substantial part of the property thereof,
or an involuntary case or other proceedings seeking liquidation,
reorganization or other relief with respect to Lessee or any of its
Subsidiaries or the debts thereof under any bankruptcy, insolvency or
other similar law now or hereafter in effect shall be commenced and an
order for relief entered or such proceeding shall not be dismissed or
discharged within sixty (60) days of commencement; or
(h) Judgments. (i) A final judgment or order for the payment
of money in excess of $5,000,000 (exclusive of amounts covered by
insurance issued by an insurer not an Affiliate of Lessee and otherwise
satisfying the requirements set forth in Subparagraph 5.01(d)) shall be
rendered against Lessee or any of its Subsidiaries and the same shall
remain undischarged for a period of sixty (60) days during which
execution shall not be effectively stayed or (ii) any judgment, writ,
assessment, warrant of attachment, tax lien or execution or similar
process shall be issued or levied against a
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substantial part of the property of Lessee or any of its Subsidiaries
and such judgment, writ, or similar process shall not be released,
stayed, vacated or otherwise dismissed within sixty (60) days after
issue or levy; or
(i) Operative Documents. Any Operative Document or any
material term thereof shall cease to be, or be asserted by Lessee or
any of its Subsidiaries not to be, a legal, valid and binding
obligation of Lessee or any of its Subsidiaries enforceable in
accordance with its terms; or
(j) ERISA. Any Reportable Event which constitutes grounds for
the termination of any Employee Benefit Plan by the PBGC or for the
appointment of a trustee by the PBGC to administer any Employee Benefit
Plan shall occur, or any Employee Benefit Plan shall be terminated
within the meaning of Title IV of ERISA or a trustee shall be appointed
by the PBGC to administer any Employee Benefit Plan; or
(k) Change of Control. Any Change of Control shall occur; or
(l) Major Casualty or Condemnation. Any Major Casualty or
Major Condemnation affecting the Property shall occur; or
(m) Material Adverse Effect. Any event(s) or condition(s)
which has a Material Adverse Effect shall occur or exist.
5.02. General Remedies. In all cases, upon the occurrence or existence
of any Event of Default and at any time thereafter unless such Event of Default
is waived, Lessor may, with the consent of the Required Participants, or shall,
upon instructions from the Required Participants, exercise any one or more of
the following rights and remedies (except that the remedy set forth in the first
sentence of Subparagraph 5.02(a) shall be automatic):
(a) Termination of Commitments. If such Event of Default is an
Event of Default of the type described in Subparagraph 5.01(f) or
Subparagraph 5.01(g) affecting Lessee, immediately and without notice
the obligation of Lessor to make Advances and the obligations of the
Participants to fund Advances shall automatically terminate. If such
Event of Default is any other Event of Default, Lessor may by written
notice to Lessee, terminate the obligation of Lessor to make Advances
and the obligations of the Participants to fund Advances.
(b) Appointment of a Receiver. Lessor may apply to any court
of competent jurisdiction for, and obtain appointment of, a receiver
for the Property.
(c) Specific Performance. Lessor may bring an action in any
court of competent jurisdiction to obtain specific enforcement of any
of the covenants or agreements of Lessee in this Agreement or any of
the other Operative Documents.
(d) Collection of Issues and Profits. Lessor may collect
Issues and Profits as provided in Subparagraph 2.07(c) and apply the
proceeds to pay Lessee Obligations.
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(e) Protection of Property. Lessor may enter, take possession
of, manage and operate all or any part of the Property or take any
other actions which it reasonably determines are necessary to protect
the Property and the rights and remedies of the Lessor Parties under
this Agreement and the other Operative Documents, including (i) taking
and possessing all of Lessee's books and records relating to the
Property; (ii) entering into, enforcing, modifying, or canceling
subleases on such terms and conditions as Lessor may consider proper;
(iii) obtaining and evicting tenants; (iv) fixing or modifying sublease
rents; (v) collecting and receiving any payment of money owing to
Lessee; (vi) completing any unfinished Improvements; and/or (vii)
contracting for and making repairs and alterations.
(f) Termination of Agency. Lessor may terminate all or any
portion of the authority of Lessee, as agent, under the Construction
Agency Agreement.
(g) Other Rights and Remedies. In addition to the specific
rights and remedies set forth above in this Paragraph 5.02 and in
Paragraph 5.03 and Paragraph 5.04, Lessor may exercise any other right,
power or remedy permitted to it by any applicable Governmental Rule,
either by suit in equity or by action at law, or both.
5.03. Lease Remedies. If the transaction evidenced by this Agreement
and the other Operative Documents is treated as a lease, upon the occurrence or
existence of any Event of Default and at any time thereafter unless such Event
of Default is waived, Lessor may, with the consent of the Required Participants,
or shall, upon instructions from the Required Participants, exercise any one or
more of the following rights and remedies in addition to those rights and
remedies set forth in Paragraph 5.02:
(a) Termination of Lease. Lessor may, by written notice to
Lessee, terminate this Agreement on a Termination Date which is prior
to the Scheduled Expiration Date, subject to Subparagraph 3.02(1) of
the Purchase Agreement. Such Termination Date shall be the last day of
a Rental Period unless Required Participants shall otherwise direct. On
such Termination Date (which shall then be the Expiration Date), Lessee
shall pay all unpaid Base Rent accrued through such date, all
Supplemental Rent due and payable on or prior to such date and all
other amounts payable by Lessee on the Expiration Date pursuant to this
Agreement and the other Operative Documents. Lessee also shall pay to
Lessor, in addition to all accrued Base Rent, the worth at the time of
such payment of the amount by which the unpaid Base Rent through the
Scheduled Expiration Date exceeds the amount of such rental loss for
the same period that Lessee proves could reasonably be avoided.
(b) Continuation of Lease. Lessor may exercise the rights and
remedies provided by California Civil Code Section 1951.4, including
the right to continue this Agreement in effect after Lessee's breach
and abandonment and recover Rent as it becomes due. Acts of maintenance
or preservation, efforts to relet the Property, the appointment of a
receiver upon Lessor's initiative to protect its interest under this
Agreement or withholding consent to or terminating a sublease shall not
of themselves constitute a termination of Lessee's right to possession.
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(c) Removal and Storage of Property. Lessor may enter the
Property and remove therefrom all Persons and property, store such
property in a public warehouse or elsewhere at the cost of and for the
account of Lessee and sell such property and apply the proceeds
therefrom pursuant to applicable California law.
5.04. Loan Remedies. If the transaction evidenced by this Agreement and
the other Operative Documents is treated as a loan, upon the occurrence or
existence of any Event of Default and at any time thereafter unless such Event
of Default is waived, Lessor may, with the consent of the Required Participants,
or shall, upon instructions from the Required Participants, exercise any one or
more of the following rights and remedies in addition to those rights and
remedies set forth in Paragraph 5.02:
(a) Acceleration of Lessee Obligations. Lessor may, by written
notice to Lessee, terminate this Agreement on a Termination Date which
is prior to the Scheduled Expiration Date, subject to Subparagraph
3.02(1) of the Purchase Agreement, and declare all unpaid Lessee
Obligations due and payable on such Termination Date. Such Termination
Date shall be the last day of a Rental Period unless Required
Participants shall otherwise direct. On such Termination Date (which
shall then be the Expiration Date), Lessee shall pay all unpaid Base
Rent accrued through such date, all Supplemental Rent due and payable
on or prior to such date and all other amounts payable by Lessee on the
Expiration Date pursuant to this Agreement and the other Operative
Documents.
(b) Uniform Commercial Code Remedies. Lessor may exercise any
or all of the remedies granted to a secured party under the California
Uniform Commercial Code.
(c) Judicial Foreclosure. Lessor may bring an action in any
court of competent jurisdiction to foreclose the security interest in
the Property granted to Lessor by this Agreement or any of the other
Operative Documents.
(d) Power of Sale. Lessor may cause some or all of the
Property, including any Personal Property Collateral, to be sold or
otherwise disposed of in any combination and in any manner permitted by
applicable Governmental Rules.
(i) Sales of Personal Property. Lessor may dispose of
any Personal Property Collateral separately from the sale of
Real Property Collateral, in any manner permitted by Division
9 of the California Uniform Commercial Code, including any
public or private sale, or in any manner permitted by any
other applicable Governmental Rule. Any proceeds of any such
disposition shall not cure any Event of Default or reinstate
any Lessee Obligation for purposes of Section 2912c of the
California Civil Code. In connection with any such sale or
other disposition, Lessee agrees that the following procedures
constitute a commercially reasonable sale:
(A) Lessor shall mail written notice of the
sale to Lessee not later than thirty (30) days prior
to such sale.
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(B) Once per week during the three (3) weeks
immediately preceding such sale, Lessor will publish
notice of the sale in a local daily newspaper of
general circulation.
(C) Upon receipt of any written request,
Lessor will make the Property available to any bona
fide prospective purchaser for inspection during
reasonable business hours.
(D) Notwithstanding, Lessor shall be under
no obligation to consummate a sale if, in its
judgment, none of the offers received by it equals
the fair value of the Property offered for sale.
(E) If Lessor so requests, Lessee shall
assemble all of the Personal Property Collateral and
make it available to Lessor at the site of the Land.
Regardless of any provision of this Agreement or any
other Operative Document, Lessor shall not be
considered to have accepted any property other than
cash or immediately available funds in satisfaction
of any Lessee Obligation, unless Lessor has given
express written notice of its election of that remedy
in accordance with California Uniform Commercial Code
Section 9505.
The foregoing procedures do not constitute the only procedures
that may be commercially reasonable.
(ii) Lessor's Sales of Real Property or Mixed
Collateral. Lessor may choose to dispose of some or all of the
Property which consists solely of Real Property Collateral in
any manner then permitted by applicable Governmental Rules. In
its discretion, Lessor may also or alternatively choose to
dispose of some or all of the Property, in any combination
consisting of both Real Property Collateral and Personal
Property Collateral, together in one sale to be held in
accordance with the law and procedures applicable to real
property, as permitted by Section 9501(4) of the California
Uniform Commercial Code (ORS Section 79.5010(4)). Lessee
agrees that such a sale of Personal Property Collateral
together with Real Property Collateral constitutes a
commercially reasonable sale of the Personal Property
Collateral. (For purposes of this power of sale, either a sale
of Real Property Collateral alone, or a sale of both Real
Property Collateral and Personal Property Collateral together
in accordance with California Uniform Commercial Code Section
9501(4), will sometimes be referred to as a "Lessor's Sale.")
(A) Before any Lessor's Sale, Lessor shall
give such notice of default and election to sell as
may then be required by applicable Governmental
Rules.
(B) When all time periods then legally
mandated have expired, and after such notice of sale
as may then be legally required has been
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given, Lessor shall sell the property being sold at a
public auction to be held at the time and place
specified in the notice of sale.
(C) Neither Lessor nor Agent shall have any
obligation to make demand on Lessee before any
Lessor's Sale.
(D) From time to time in accordance with
then applicable law, Lessor may postpone any Lessor's
Sale by public announcement at the time and place
noticed for that sale.
(E) At any Lessor's Sale, Lessor shall sell
to the highest bidder at public auction for cash in
lawful money of the United States.
(F) Lessor shall execute and deliver to the
purchaser(s) a deed or deeds conveying the Property
being sold without any covenant or warranty
whatsoever, express or implied. The recitals in any
such deed of any matters or facts, including any
facts bearing upon the regularity or validity of any
Lessor's Sale, shall be conclusive proof of their
truthfulness. Any such deed shall be conclusive
against all Persons as to the facts recited in it.
(e) Foreclosure Sales.
(i) Single or Multiple. If the Property consists of
more than one lot, parcel or item of property, Lessor may:
(A) Designate the order in which the lots,
parcels and/or items shall be sold or disposed of or
offered for sale or disposition; and
(B) Elect to dispose of the lots, parcels
and/or items through a single consolidated sale or
disposition to be held or made under the power of
sale granted in Subparagraph 5.04(d), or in
connection with judicial proceedings, or by virtue of
a judgment and decree of foreclosure and sale; or
through two or more such sales or dispositions; or in
any other manner Lessor may deem to be in its best
interests (any such sale or disposition, a
"Foreclosure Sale;" any two or more, "Foreclosure
Sales").
If Lessor chooses to have more than one Foreclosure Sale,
Lessor at its option may cause the Foreclosure Sales to be
held simultaneously or successively, on the same day, or on
such different days and at such different times and in such
order as it may deem to be in its best interests. No
Foreclosure Sale shall terminate or affect the security
interests granted to Lessor in the Property by this Agreement
on any part of the Property which has not been sold, until all
of the Lessee Obligations have been paid in full.
(ii) Credit Bids. At any Foreclosure Sale, any
Person, including any Lessor Party, may bid for and acquire
the Property or any part of it to the extent permitted by then
applicable Governmental Rules. Instead of paying cash for that
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property, Lessor may settle for the purchase price by
crediting the sales price of the Property against the Lessee
Obligations in any order and proportions as Lessor in its sole
discretion may choose.
5.05. Remedies Cumulative. The rights and remedies of Lessor under this
Agreement and the other Operative Documents are cumulative and may be exercised
singularly, successively, or together.
5.06. No Cure or Waiver. Neither the performance by Lessor of any of
Lessee's obligations pursuant to Paragraph 3.13 nor the exercise by Lessor of
any of its other rights and remedies under this Agreement or any other Operative
Document (including the collection of Issues and Profits and the application
thereof to the Lessee Obligations) shall constitute a cure or waiver of any
Default or nullify the effect of any notice of default or sale, unless and until
all Lessee Obligations are paid in full.
5.07. Exercise of Rights and Remedies. The rights and remedies provided
to Lessor under this Agreement may be exercised by Lessor itself, by Agent
pursuant to Subparagraph 2.02(c) of the Participation Agreement, by a
court-appointed receiver or by any other Person appointed by any of the
foregoing to act on its behalf. All of the benefits afforded to Lessor under
this Agreement and the other Operative Documents shall accrue to the benefit of
Agent to the extent provided in Subparagraph 2.02(c) of the Participation
Agreement.
SECTION 6. MISCELLANEOUS.
6.01. Notices. Except as otherwise specified herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Lessee or Lessor under this Agreement shall be given as provided in Subparagraph
2.02(c) and Paragraph 7.01 of the Participation Agreement.
6.02. Waivers; Amendments. Any term, covenant, agreement or condition
of this Agreement may be amended or waived only as provided in the Participation
Agreement. No failure or delay by any Lessor Party in exercising any right
hereunder shall operate as a waiver thereof or of any other right nor shall any
single or partial exercise of any such right preclude any other further exercise
thereof or of any other right. Unless otherwise specified in any such waiver or
consent, a waiver or consent given hereunder shall be effective only in the
specific instance and for the specific purpose for which given.
6.03. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Lessor Parties and Lessee and their permitted
successors and assigns; provided, however, that the Lessor Parties and Lessee
shall not sell, assign or delegate their respective rights and obligations
hereunder except as provided in the Participation Agreement.
6.04. No Third Party Rights. Nothing expressed in or to be implied from
this Agreement is intended to give, or shall be construed to give, any Person,
other than the Lessor Parties and Lessee and their permitted successors and
assigns, any benefit or legal or equitable
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right, remedy or claim under or by virtue of this Agreement or under or by
virtue of any provision herein. 6.05. Partial Invalidity. If at any time any
provision of this Agreement is or becomes illegal, invalid or unenforceable in
any respect under the law or any jurisdiction, neither the legality, validity or
enforceability of the remaining provisions of this Agreement nor the legality,
validity or enforceability of such provision under the law of any other
jurisdiction shall in any way be affected or impaired thereby.
6.06. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California without reference to
conflicts of law rules.
6.07. Counterparts. This Agreement may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.
6.08. Nature of Lessee's Obligations.
(a) Independent Obligation. The obligation of Lessee to pay
the amounts payable by Lessee under this Agreement and the other
Operative Documents and to perform the other Lessee Obligation are
absolute, unconditional and irrevocable obligations which are separate
and independent of the obligations of the Lessor Parties under this
Agreement and the other Operative Documents and all other events and
circumstances, including the events and circumstances set forth in
Subparagraph 6.08(c).
(b) No Termination or Abatement. This Agreement and the other
Operative Documents and Lessee's obligation to pay Rent and to pay and
perform all other Lessee Obligations shall continue in full force and
effect without abatement notwithstanding the occurrence or existence of
any event or circumstance, including any event or circumstance set
forth in Subparagraph 6.08(c).
(c) Full Payment and Performance. Lessee shall make all
payments under this Agreement and the other Operative Documents in the
full amounts and at the times required by the terms of this Agreement
and the other Operative Documents without setoff, deduction or
reduction of any kind and shall perform all other Lessee Obligations as
and when required, without regard to any event or circumstances
whatsoever, including (i) the condition of the Property (including any
Improvements to the Property made prior to the Commencement Date or
during the Term); (ii) title to the Property (including possession of
the Property by any Person or the existence of any Lien or any other
right, title or interest in or to any of the Property in favor of any
Person); (iii) the value, habitability, usability, design, operation or
fitness for use of the Property; (iv) the availability or adequacy of
utilities and other services to the Property; (v) any latent, hidden or
patent defect in the Property; (vi) the zoning or status of the
Property or any other restrictions on the use of the Property; (g) the
economics of the Property; (vii) any Casualty or Condemnation; (viii)
the compliance of the Property with any applicable Governmental Rule or
Insurance Requirement; (ix) any failure by any Lessor Party to perform
any of its obligations under this Agreement or any other Operative
Document; or
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(x) the exercise by any Lessor Party of any of its remedies under this
Agreement or any other Operative Document; provided, however, that this
Paragraph 6.08 shall not abrogate any right which Lessee may have to
recover damages from any Lessor Party for any material breach by such
Lessor Party of its obligations under this Agreement or any other
Operative Document to the extent permitted hereunder or thereunder.
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IN WITNESS WHEREOF, Lessee and Lessor have caused this Agreement to be
executed as of the day and year first above written.
LESSEE: FAIR, ISAAC AND COMPANY, INC.,
a Delaware corporation
By: __________________________________
Name: Michael C. Gordon
Title: Vice President - Facilities
Administration
Fair, Isaac and Company, Inc.
120 North Redwood Drive
San Rafael, CA 94903-1996
Attn: Peter L. McCorkell,
General Counsel
Tel. No: 415-472-2211
Fax. No: 415-444-5029
LESSOR: LEASE PLAN NORTH AMERICA, INC.,
an Illinois corporation
By: __________________________________
Name: Jamie Dillon
Title: Attorney-in-fact
Lease Plan North America, Inc.
c/o ABN AMRO Bank N.V.
135 South LaSalle Street, Suite 711
Chicago, IL 60603
Attn: David M. Shipley
Tel. No: (312) 904-2183
Fax. No: (312) 904-6217
33
<PAGE>
STATE OF CALIFORNIA )
) ss
COUNTY OF _________________________)
On _____________, 1998, before me, ___________________ a Notary Public
in and for the State of California, personally appeared , personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s) or the
entity on behalf of which the person(s) acted, executed the instrument.
Witness my hand and official seal.
[SEAL]
______________________________________________
<PAGE>
STATE OF CALIFORNIA )
) ss
COUNTY OF _________________________)
On _____________, 1998, before me, ___________________ a Notary Public
in and for the State of California, personally appeared , personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s) or the
entity on behalf of which the person(s) acted, executed the instrument.
Witness my hand and official seal.
[SEAL]
______________________________________________
<PAGE>
EXHIBIT A
LAND
PART 1 - PROPERTY PURCHASED FROM PG&E
A-1
<PAGE>
PART 2 - PROPERTY PURCHSED FROM CITY OF SAN RAFAEL
A-1
<PAGE>
EXHIBIT B
RELATED GOODS
B-1
<PAGE>
EXHIBIT B(1)
SUPPLEMENT TO EXHIBIT B TO LEASE AGREEMENT
[Date]
Lease Plan North America, Inc.
c/o ABN AMRO Bank N.V.
as Agent
Capital Markets-Syndication Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to that certain Lease Agreement, Construction Deed
of Trust with Assignment of Rents, Security Agreement and Fixture Filing, dated
as of ____________, 1998 (the "Lease Agreement"), between Fair, Isaac and
Company, Inc. ("Lessee") and Lease Plan North America, Inc. ("Lessor").
2. Lessee hereby agrees that the description of "Related Goods" set
forth in Exhibit B to the Lease Agreement shall be supplemented by adding
thereto the Related Goods described in Attachment 1 hereto. Lessee hereby
accepts all such Related Goods and agrees that such Related Goods constitute
part of the Property subject to the Lease Agreement.
IN WITNESS WHEREOF, Lessee has executed this Supplement to Exhibit B on
the date set forth above.
LESSEE: FAIR, ISAAC AND COMPANY, INC.,
a Delaware corporation
By: _______________________________
Name: _________________________
Title: ________________________
B(1)-1
<PAGE>
ATTACHMENT 1
TO
SUPPLEMENT TO EXHIBIT B
C-1
<PAGE>
EXHIBIT C
NOTICE OF RENTAL PERIOD SELECTION
[Date]
Lease Plan North America, Inc.
c/o ABN AMRO Bank N.V.
as Agent
Capital Markets-Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to that certain Participation Agreement, dated as
of May 15, 1998 (the "Participation Agreement"), among Fair, Isaac and Company,
Inc. ("Lessee"), Lease Plan North America, Inc. ("Lessor"), the financial
institutions listed in Schedule I to the Participation Agreement (the
"Participants") and ABN AMRO Bank N.V., as agent for the Participants (in such
capacity, "Agent"). Unless otherwise indicated, all terms defined in the
Participation Agreement have the same respective meanings when used herein.
2. [Insert one of the following as appropriate]
[Pursuant to Subparagraph 2.03(a) of the Lease Agreement,
Lessee hereby irrevocably selects a new Rental Period for a Portion of the
Outstanding Lease Amount as follows:
(a) The Portion for which a new Rental Period is to be
selected is the Portion in the amount of $__________ with a current
Rental Period which began on ________, ____ and ends on __________,
____; and
(b) The next Rental Period for such Portion shall be
__________ month[s].]
[Pursuant to Subparagraph 2.03(a) of the Lease Agreement,
Lessee hereby irrevocably elects to divide a Portion of the Outstanding Lease
Amount into further Portions as follows:
(a) The Portion which is to be divided is the Portion in the
amount of $__________ with a current Rental Period which began on
________, ____ and ends on __________, ____; and
(b) On the last day of the current Rental Period for such
Portion, such Portion is to be divided into the following Portions with
the following initial Rental Periods:
C-1
<PAGE>
Portion Rental Period
------- -------------
$___________ _______ month[s]
$___________ _______ month[s]
$___________ _______ month[s]
$___________ _______ month[s]]
[Pursuant to Subparagraph 2.03(a) of the Lease Agreement,
Lessee hereby irrevocably elects to combine into a single Portion certain
Portions of the Outstanding Lease Amount as follows:
(a) The Portions which are to be combined are the Portions in
the amounts of $__________, $_________ and $_______, each with a
current Rental Period which ends on __________, ____; and
(b) The initial Rental Period for such newly created Portion
shall be __________ month[s].]
[Pursuant to Subparagraph 2.03(a) of the Lease Agreement,
Lessee hereby elects the Fixed Rate option for a Rental Period of ___________
months with respect to a Portion equal to $________. Lessee hereby requests that
Lessor to provide a Fixed Rate.]
3. Lessee hereby certifies to the Lessor Parties that, on the date of
this Notice of Rental Period Selection and after giving effect to the selections
described above:
(a) The representations and warranties of Lessee set forth in
Paragraph 4.01 of the Participation Agreement and in the other
Operative Documents are true and correct in all material respects as if
made on such date (except for representations and warranties expressly
made as of a specified date, which shall be true as of such date);
(b) No Default has occurred and is continuing; and
(c) All of the Operative Documents are in full force and
effect.
IN WITNESS WHEREOF, Lessee has executed this Notice of Rental Period
Selection on the date set forth above.
FAIR, ISAAC AND COMPANY, INC.
By: _______________________________
Name: _________________________
Title: ________________________
C-2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PURCHASE AGREEMENT
Between
FAIR, ISAAC AND COMPANY, INC.
And
LEASE PLAN NORTH AMERICA, INC.
May 15, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. INTERPRETATION......................................................1
1.01. Definitions.........................................................1
1.02. Rules of Construction...............................................2
SECTION 2. OPTIONAL PURCHASE BY LESSEE DURING THE TERM.........................2
2.01. Term Purchase Option................................................2
2.02. Partial Purchase Option.............................................3
SECTION 3. OBLIGATIONS OF LESSEE ON THE EXPIRATION DATE........................4
3.01. Alternative.........................................................4
3.02. Marketing Option....................................................4
3.03. Expiration Date Purchase Option.....................................9
SECTION 4. TERMS OF ALL PURCHASES.............................................10
4.01. Representations and Warranties of Parties..........................10
4.02. "As Is" Purchase...................................................12
4.03. Release............................................................12
4.04. Permits, Approvals, Etc. ..........................................13
4.05. Costs..............................................................13
4.06. Lessee's Expiration Date and Partial Purchase Date
Payment Obligations..............................................13
4.07. Lessor Liens.......................................................14
4.08. Transfer Documents.................................................14
4.09. Casualty and Condemnation Proceeds.................................14
4.10. Payments...........................................................15
4.11. Environmental Reports..............................................15
4.12. Further Assurances.................................................15
SECTION 5. MISCELLANEOUS......................................................15
5.01. Notices............................................................15
5.02. Waivers, Amendments................................................15
5.03. Successors and Assigns.............................................15
5.04. No Third Party Rights..............................................16
5.05. Partial Invalidity.................................................16
5.06. Governing Law......................................................16
5.07. Counterparts.......................................................16
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
5.08. Nature of Lessee's Obligations.....................................16
-ii-
<PAGE>
TABLE OF CONTENTS
EXHIBITS
A(1) Notice of Term Purchase Option Exercise (2.02)
A(2) Notice of Partial Purchase Option Exercise (2.02)
B Notice of Marketing Option Exercise (3.01)
C Notice of Expiration Date Purchase Option Exercise (3.02)
D Deed (Lessor) (4.08(a))
E Bill of Sale (Lessor) (4.08(a))
7-i-
<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement" herein), dated as of May 15,
1998, is entered into by and between:
(1) FAIR, ISAAC AND COMPANY, INC., a Delaware corporation
("Lessee"); and
(2) LEASE PLAN NORTH AMERICA, INC., an Illinois corporation
("Lessor").
RECITALS
A. Lessee has requested Lessor and the financial institutions which are
"Participants" under the Participation Agreement referred to in Recital B below
(such financial institutions to be referred to collectively as the
"Participants") to provide to Lessee a lease facility pursuant to which:
(1) Lessor would (a) purchase certain property designated by
Lessee, (b) lease such property to Lessee, (c) appoint Lessee as
Lessor's agent to make certain improvements to such property, (d) make
advances to finance such improvements and to pay certain related
expenses, and (e) grant to Lessee the right to purchase such property;
and
(2) The Participants would participate in such lease facility
by (a) funding the purchase price and other advances to be made by
Lessor, and (b) acquiring participation interests in the rental and
certain other payments to be made by Lessee.
B. Pursuant to a Participation Agreement dated as of May 15, 1998 (the
"Participation Agreement") among Lessee, Lessor, the Participants and ABN AMRO
Bank N.V., as agent for the Participants (in such capacity, "Agent"), Lessor and
the Participants have agreed to provide such lease facility upon the terms and
subject to the conditions set forth therein, including without limitation the
execution and delivery of this Agreement setting forth the terms for the
purchase of the Property by Lessee from Lessor.
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
SECTION 1. INTERPRETATION.
1.01. Definitions. Unless otherwise indicated in this Agreement or any
other Operative Document, each term set forth in Schedule 1.01 to the
Participation Agreement, when used in
EXHIBIT 10.40
<PAGE>
this Agreement or any other Operative Document, shall have the respective
meaning given to that term in such Schedule 1.01 or in the provision of this
Agreement or other document, instrument or agreement referenced in such Schedule
1.01.
1.02. Rules of Construction. Unless otherwise indicated in this
Agreement or any other Operative Document, the rules of construction set forth
in Schedule 1.02 to the Participation Agreement shall apply to this Agreement
and the other Operative Documents.
SECTION 2. OPTIONAL PURCHASE BY LESSEE DURING THE TERM.
2.01. Term Purchase Option. Subject to the terms and conditions of this
Agreement and the other Operative Documents (including those set forth below in
this Paragraph 2.01), Lessee may, at its option on any Business Day prior to the
Scheduled Expiration Date of the Lease Agreement, terminate the Lease Agreement
and purchase all of the Property (the "Term Purchase Option").
(a) Notice of Term Purchase Option Exercise. Lessee shall
notify Lessor of Lessee's exercise of the Term Purchase Option by
delivering to Lessor an irrevocable written notice in the form of
Exhibit A(1), appropriately completed (the "Notice of Term Purchase
Option Exercise"), which states that Lessee is exercising its right to
terminate the Lease Agreement prior to the Scheduled Expiration Date
thereof pursuant to Paragraph 4.01 of the Lease Agreement and purchase
all of the Property pursuant to this Paragraph 2.01 and specifies the
Business Day on which such termination and purchase are to occur (which
date, after the delivery of such notice, shall be the Expiration Date).
Lessee shall give the Notice of Term Purchase Option Exercise to Lessor
at least ten (10) Business Days prior to the Business Day on which such
termination and purchase are to occur. The Notice of Term Purchase
Option Exercise shall be delivered as required by Subparagraph 2.02(c)
and Paragraph 7.01 of the Participation Agreement; provided, however,
that Lessee shall promptly deliver the original of any Notice of Term
Purchase Option Exercise initially delivered by facsimile.
(b) Term Purchase Option Purchase Price. Lessee shall pay to
Lessor on the Expiration Date, as the purchase price for the Property,
an amount equal to the Outstanding Lease Amount on such date.
(c) Effect of Certain Events. Lessee may exercise the Term
Purchase Option as provided in this Paragraph 2.01, notwithstanding (i)
the prior election by Lessee to exercise the Partial Purchase Option
pursuant to Paragraph 2.02, the Marketing Option pursuant to Paragraph
3.01 and Paragraph 3.02 or the Expiration Date Purchase Option pursuant
to Paragraph 3.01 and Paragraph 3.03, provided that Lessor completes
the purchase of the Property pursuant to the Term Purchase Option and
this Agreement prior to the Scheduled Expiration Date and Lessor has
not previously entered into an agreement with a Designated Purchaser or
an Assignee Purchaser to sell the Property or (ii) the occurrence of
any Event of Default or the exercise by the Lessor Parties of any of
their rights or remedies under the Operative Documents following the
occurrence of such Event of Default, provided that such exercise by
Lessee of the Term Purchase Option
2
<PAGE>
after the occurrence of any Event of Default shall not require the
Lessor Parties to cease exercising such rights and remedies unless and
until Lessee completes the purchase of the Property pursuant to the
Term Purchase Option and this Agreement.
2.02. Partial Purchase Option. Subject to the terms and conditions of
this Agreement and the other Operative Documents (including those set forth
below in this Paragraph 2.02), Lessee may from time to time, at its option on
any Business Day prior to the Scheduled Expiration Date of the Lease Agreement,
without terminating the Lease Agreement, purchase one or more legal parcels of
property included in any Tract (a "Sub-Tract Parcel") of the Property (the
"Partial Purchase Option").
(a) Notice of Partial Purchase Option Exercise. Lessee shall
notify Lessor of Lessee's exercise of the Partial Purchase Option by
delivering to Lessor an irrevocable written notice in the form of
Exhibit A(2), appropriately completed (the "Notice of Partial Purchase
Option Exercise"), which states that Lessee is exercising its right to
purchase one or more Sub-Tract Parcels of the Property (but less than
all of the Property) prior to the Scheduled Expiration Date pursuant to
this Paragraph 2.02 and specifies (i) the Sub-Tract(s) so to be
purchased and (ii) the Business Day on which such purchase is to occur
(a "Partial Purchase Date"). Lessee shall give each Notice of Partial
Purchase Option Exercise to Lessor at least ten (10) Business Days
prior to the Partial Purchase Date on which a purchase is to occur.
Each Notice of Partial Purchase Option Exercise shall be delivered as
required by Subparagraph 2.02(c) and Paragraph 7.01 of the
Participation Agreement; provided, however, that Lessee shall promptly
deliver the original of any Notice of Partial Purchase Option Exercise
initially delivered by facsimile.
(b) Partial Purchase Option Purchase Price. Lessee shall pay
to Lessor on each Partial Purchase Date, as the purchase price for each
Sub-Tract of Property to be purchased on such date, an amount equal to
the purchase price of such Sub-Tract, as set forth on Schedule 1 to
Exhibit A(2) (the "Sub-Tract Purchase Price")
(c) Conditions to Exercise of Partial Purchase Option. The
purchase by Lessee on any Partial Purchase Date of any Sub-Tract of
Property pursuant to this Paragraph 2.02 is subject to receipt by
Lessor, on or prior to such Partial Purchase Date, of new Expiration
Date Appraisals for all Sub-Tracts and Tracts of Property that are to
remain subject to the Lease Agreement after such Partial Purchase Date,
which appraisals (i) each shall be dated a recent date prior to such
Partial Purchase Date and (ii) together shall assess the aggregate Fair
Market Value of all such remaining Sub-Tracts and Tracts of Property at
not less than the Outstanding Lease Amount that will remain after
application of all amounts to be applied thereto on such Partial
Purchase Date.
(d) Limitations to Exercise of Partial Purchase Option as to
the Tract 2 Land. Such other limitations with respect to the exercise
of the Partial Purchase Option on the Sub-Tracts within the Tract 2
Land as Lessor may reasonably request prior to the Tract 2 Acquisition
Date.
(e) Upon delivery of any revised Expiration Date Appraisal
pursuant to Subparagraph 5.01(h) of the Participation Agreement,
Schedule 1 to Exhibit A-2 shall be
3
<PAGE>
revised in accordance with such revised Expiration Date Appraisal.
SECTION 3. OBLIGATIONS OF LESSEE ON THE EXPIRATION DATE.
3.01. Alternative. Unless Lessee has exercised the Term Purchase
Option, on the Expiration Date of the Lease Agreement, Lessee shall either:
(a) Marketing Option. Cause another Person to complete the
purchase of the Property pursuant to Paragraph 3.02 (the "Marketing
Option"); or
(b) Expiration Date Purchase Option. Purchase the Property
itself pursuant to Paragraph 3.03 (the "Expiration Date Purchase
Option").
Lessee shall elect either the Marketing Option or the Expiration Date Purchase
Option by delivering to Lessor, not less than six (6) months prior to the
Scheduled Expiration Date for the Lease Agreement, either (i) a written notice
in the form of Exhibit B, appropriately completed (the "Notice of Marketing
Option Exercise"), or (ii) a written notice in the form of Exhibit C,
appropriately completed (the "Notice of Expiration Date Purchase Option
Exercise"); provided, however, that (A) Lessee shall be deemed to have elected
the Expiration Date Purchase Option if it fails to deliver either notice as
required by this sentence; (B) Lessee's election of the Expiration Date Purchase
Option (whether expressly by a notice so delivered or implicitly by the failure
to deliver any notice) shall be irrevocable; and (C) Lessee may not elect the
Marketing Option if (1) the Expiration Date has been accelerated to an earlier
Termination Date following a Marketing Option Event of Default under the Lease
Agreement or (2) the conditions set forth in Paragraph 3.03 of the Participation
Agreement are not satisfied on the date Lessee delivers its election notice or
on the Expiration Date of the Lease Agreement (unless, in each case, the only
event or condition causing such conditions not to be so satisfied is the
occurrence of a Non-Marketing Option Event of Default under the Lease
Agreement). The Notice of Marketing Option Exercise or the Notice of Expiration
Date Purchase Option Exercise shall be delivered as required by Subparagraph
2.02(c) and Paragraph 7.01 of the Participation Agreement; provided, however,
that Lessee shall promptly deliver to Lessor the original of any such notice
initially delivered by facsimile.
3.02. Marketing Option.
(a) General. If Lessee elects to exercise the Marketing Option
by delivering to Lessor a Notice of Marketing Option Exercise pursuant
to Paragraph 3.01, Lessee shall (i) locate a purchaser which satisfies
the requirements set forth in this Paragraph 3.02, (ii) arrange for
such purchaser to purchase the Property on the Expiration Date for a
purchase price which is not less than the lesser of (A) the sum of the
total Tranche B Proportionate Share and total Tranche C Proportionate
share of the Outstanding Lease Amount and (B) the Fair Market Value of
the Property, and (iii) otherwise comply, or cause compliance with, the
requirements of this Paragraph 3.02 and the other applicable provisions
of this Agreement.
(b) Lessee's Marketing Obligations.
4
<PAGE>
(i) Initial Marketing Period. During the period
beginning on the date Lessee delivers the Notice of Marketing
Option Exercise and ending on the date which is four (4)
months prior to the Expiration Date of the Lease Agreement
(the "Initial Marketing Period"), Lessee shall use reasonable
efforts to solicit Conforming Bids from potential purchasers
of the Property. On or prior to the last day of the Initial
Marketing Period, Lessee shall deliver to Lessor any
Conforming Bid selected by Lessee (the "Initial Bid"). If the
purchase price specified in the Initial Bid is equal to or
greater than the sum of the total Tranche B Proportionate
Share and the total Tranche C Proportionate Share of the
Outstanding Lease Amount, Lessor shall accept such bid and
Lessee shall have no further obligations to solicit additional
bids.
(ii) Secondary Marketing Period. If Lessee does not
submit an Initial Bid or if the purchase price specified in
the Initial Bid is less than the sum of the total Tranche B
Proportionate Share and the total Tranche C Proportionate
Share of the Outstanding Lease Amount, Lessor may reject such
bid and Lessee shall, during the period which begins on the
day following the Initial Marketing Period and ends on the
date two (2) months prior to the Expiration Date of the Lease
Agreement (the "Secondary Marketing Period"):
(A) Use its best efforts to solicit
additional Conforming Bids, including the engagement
of experienced and knowledgeable brokers;
(B) Furnish to each Lessor Party copies of
all bids and otherwise provide each Lessor Party with
such information relating to the marketing of the
Property as such Person may reasonably request in
writing;
(C) Agree to provide to all potential
purchasers all customary seller's indemnities
(including environmental indemnities),
representations and warranties regarding the Property
(including the title to, except for Lessor Liens, and
condition of the Property);
(D) Furnish to each Lessor Party copies of
environmental reports, architect's certificates,
licenses, permits and other evidence reasonably
requested by such Person to establish that no Default
has occurred and is continuing under the Lease
Agreement;
(E) Permit any Lessor Party or potential
purchaser to inspect the Property and the maintenance
records for the Property upon reasonable prior
written notice and during normal business hours and
provide to each such Person all information regarding
the Property reasonably requested by such Person in
writing;
(F) Take all other commercially reasonable
steps to secure the best price for the Property; and
5
<PAGE>
(G) Submit to Lessor on or prior to the last
day of the Secondary Marketing Period any Conforming
Bid selected by Lessee with a purchase price which is
equal to or greater than the sum of the total Tranche
B Proportionate Share and the total Tranche C
Proportionate Share of the Outstanding Lease Amount
or, if no such Conforming Bid was received by Lessee,
the highest Conforming Bid received by Lessee during
the Secondary Marketing Period.
During the Secondary Marketing Period, any Lessor Party shall
have the right to submit one or more bids or solicit bids from
other Persons.
(c) Conforming Bids. Each bid must meet each of the following
requirements (each such bid to be referred to herein as a "Conforming
Bid"):
(i) The bid may be submitted by any Person other than
(A) a Person which is an Affiliate of Lessee or (B) a Person
which has an agreement (whether express or implied) with
Lessee or any of its Affiliates to sell, lease or otherwise
make available to Lessee or any of its Affiliates any portion
of the Property;
(ii) The bidder must agree in writing to purchase the
Property on the Expiration Date of the Lease Agreement for a
purchase price to be paid in cash which is not less than the
lesser of (A) the sum of the total Tranche B Proportionate
Share and the Tranche C Proportionate Share of the Outstanding
Lease Amount on such date and (B) the Fair Market Value of the
Property on such date;
(iii) The bidder must agree to purchase the Property
"as is" without any representations, warranties or
indemnities, except for (A) any representations, warranties or
indemnities provided by Lessor and Lessee pursuant to
Subparagraph 4.01(b) and (B) any representations, warranties
or indemnities provided by Lessee pursuant to clause (ii)(C)
of Subparagraph 3.02(b); and
(iv) The bidder must agree to be bound by the other
terms and conditions of this Agreement applicable to bidders.
(d) Lessor's Obligation to Accept Bids. If, at any time on or
prior to the last day of the Secondary Marketing Period, Lessee submits
to Lessor a Conforming Bid under this Paragraph 3.02 with a purchase
price which is equal to or greater than the sum of the total Tranche B
Proportionate Share and the Tranche C Proportionate Share of the
Outstanding Lease Amount, Lessor shall accept such bid. If Lessee
submits to Lessor a Conforming Bid under this Paragraph 3.02 with a
purchase price which is less than the sum of the total Tranche B
Proportionate Share and the Tranche C Porportionate Share of the
Outstanding Lease Amount, Lessor shall not accept such bid unless
approved by Lessor and Required Participants. If Lessee fails to submit
a bid to Lessor on or prior to the last day of the Secondary Marketing
Period which Lessor is so required to accept, Lessor shall retain the
Property after the Expiration Date of the Lease Agreement; provided,
however, that Lessee's payment obligations on such Expiration Date
shall be
6
<PAGE>
limited to the amounts payable pursuant to clause (iii) of Subparagraph
4.06(a) if (i) Lessor retains the Property after Lessee submits a
Conforming Bid on or prior to the last day of the Secondary Marketing
Period in accordance with clause (ii) of Subparagraph 3.02(b) and (ii)
the Marketing Option has not terminated prior to such Expiration Date
pursuant to Subparagraph 3.02(f). Lessor shall notify Lessee of
Lessor's election to retain the Property by delivering to Lessee, at
least ten (10) days prior to the Expiration Date of the Lease
Agreement, a written notice of such election.
(e) Purchase Price. If Lessor accepts any bid by any Person,
such Person (the "Designated Purchaser") shall pay to Lessor on the
Expiration Date of the Lease Agreement, as the purchase price for the
Property, the amount set forth in such bid as the purchase price.
(f) Termination of the Marketing Option. Lessee's right to
exercise the Marketing Option shall immediately terminate and Lessee
shall purchase the Property on the Expiration Date of the Lease
Agreement pursuant to Paragraph 3.03 if (i) Lessee fails to comply with
any of its obligations under this Paragraph 3.02; (ii) a Marketing
Option Event of Default under the Lease Agreement occurs after Lessee
delivers the Notice of Marketing Option Exercise; (iii) the conditions
precedent set forth in Paragraph 3.03 of the Participation Agreement
are not satisfied on the Expiration Date of the Lease Agreement (unless
the only event or condition causing such conditions not to be so
satisfied is the occurrence of a Non-Marketing Option Event of Default
under the Lease Agreement); or (iv) the Designated Purchaser fails to
consummate the purchase of the Property on the Expiration Date of the
Lease Agreement in accordance with its accepted bid and this Agreement,
without regard to the reason for such failure (except as otherwise
provided in the following proviso); provided, however, that, if the
Designated Purchaser fails to consummate the purchase of the Property
on the Expiration Date solely due to Lessor's failure to remove Lessor
Liens or deliver the required deed and bill of sale or other documents
required to be delivered by Lessor hereunder, Lessee's right to
exercise the Marketing Option shall not terminate, Lessee shall not be
required to purchase the Property on the Expiration Date and Lessee's
payment obligations on the Expiration Date shall be limited to the
amounts set forth in clause (ii) of Subparagraph 4.06(a) (determined as
if the purchase by the Designated Purchaser had been consummated).
(g) Residual Value Guaranty Amount and Indemnity Amount.
Unless Lessee's right to exercise the Marketing Option has terminated
and Lessee is required to purchase the Property on the Expiration Date
of the Lease Agreement pursuant to Paragraph 3.03, Lessee shall pay to
Lessor on such Expiration Date the following:
(i) An amount (the "Residual Value Guaranty Amount")
equal to the total Tranche A Proportionate Share of the
Outstanding Lease Amount on such date; and
(ii) An amount (the "Indemnity Amount") equal to the
decrease, if any, between the Commencement Date and the
Expiration Date of the Lease Agreement in the Fair Market
Value of the Property caused by (A) any representation or
warranty of Lessee or any of its Affiliates regarding the
Property
7
<PAGE>
set forth in any of the Operative Documents proving to be
false or inaccurate when made, (B) the existence of, or the
failure of Lessee to pay any Governmental Charge, Indebtedness
or other obligation which might give rise to, any Liens in the
Property (other than Permitted Property Liens), (C) the
failure of Lessee to complete any New Improvements or any
Modifications or (D) any other failure of Lessee to comply
with any of its obligations regarding the Property set forth
in any of the Operative Documents;
Provided, however, that (A) Lessee shall not be obligated to pay any
Residual Value Guaranty Amount or Indemnity Amount if the purchase
price paid to Lessor equals or exceeds the Outstanding Lease Amount on
such date and (B) the sum of any Residual Value Guaranty Amount and
Indemnity Amount payable to Lessor on the Expiration Date of the Lease
Agreement shall not exceed the deficiency, if any, between such
Outstanding Lease Amount and such purchase price.
(h) Determination of Fair Market Value and Indemnity Amount.
If the purchase price specified in the Initial Bid is less than the sum
of the total Tranche B Proportionate Share and the total Tranche C
Proportionate Share of the Outstanding Lease Amount, Lessor may, on or
prior to the last day of the Secondary Marketing Period (if Lessee has
not previously delivered to Lessor a Conforming Bid with a purchase
price equal to or greater than the sum of the total Tranche B
Proportionate Share and the total Tranche C Proportionate Share of the
Outstanding Lease Amount), deliver to Lessee a written notice of
Lessor's determination of the current Fair Market Value of the Property
and the Indemnity Amount. To determine such amounts, Lessor shall
obtain Appraisals of the Property which set forth:
(i) A current Appraisal of the Fair Market Value of
the Property in its then existing condition (the "Current
Appraisal"); and
(ii) An Appraisal of the Fair Market Value of the
Property which assumes that (A) all representations and
warranties regarding the Property made by Lessee or any of its
Affiliates in any of the Operative Documents were true and
correct when made; (B) Lessee has maintained the Property in
compliance with all applicable Governmental Rules, Insurance
Requirements and the Operative Documents; (C) Lessee has
completed all Modifications and any other New Improvements in
a good and workmanlike manner and otherwise as required by the
Operative Documents; (D) Lessee has repaired the Property as
required by the Operative Documents following any Casualty;
(E) Lessee has restored the Property as required by the
Operative Documents following any Condemnation; (F) Lessee has
paid all Governmental Charges, Indebtedness and other
obligations which, if unpaid, might give rise to a Lien (other
than a Lessor Lien) on the Property; (G) Lessee has removed
all Liens on the Property except for Permitted Property Liens
and Lessor Liens; and (H) Lessee has performed all of its
other obligations as required by the Operative Documents (the
"Assumed Appraisal").
In the absence of manifest error, (A) the Current Appraisal shall
constitute the current Fair Market Value of the Property and (B) the
difference between the Current Appraisal
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and the Assumed Appraisal shall constitute the Indemnity Amount if the
Current Appraisal is less than the Assumed Appraisal.
(i) Lessee not an Agent. Lessee shall not be an agent for any
of the Lessor Parties in arranging for a purchaser of the Property. No
Lessor Party shall be bound by any acts of Lessee.
(j) Excess Proceeds. If, on the Expiration Date of the Lease
Agreement, after the application by Lessor of all amounts received by
Lessor on such date to the Outstanding Lease Amount, all unpaid Rent
accrued through or due and payable on or prior to such date and all
other amounts, if any, due and payable by Lessee under the Operative
Documents on or prior to such date, any excess amount remains, Lessor
promptly shall pay such excess amount to Lessee.
(k) Creditworthiness of Designated Purchaser. Lessee assumes
all responsibility for determining the creditworthiness of any
potential purchaser on any bid submitted by Lessee to Lessor hereunder.
If, after any purchase by a Designated Purchaser hereunder, the
purchase price paid by such Designated Purchaser is recovered from any
Lessor Party, Lessee shall reimburse such Lessor Party for such
recovery unless such recovery is due solely to a material
misrepresentation or covenant breach by such Lessor Party.
(l) Exercise of Marketing Option After Non-Marketing Option
Event of Default. If Lessor notifies Lessee pursuant to Subparagraph
5.03(a) or Subparagraph 5.04(a) of the Lease Agreement that Lessor is
terminating the Lease Agreement on a Termination Date which is prior to
the Scheduled Expiration Date of the Lease Agreement and the only basis
for such early termination is the occurrence of a Non-Marketing Option
Event of Default, Lessee may, subject to Paragraph 3.01, elect to
exercise the Marketing Option if, not later than five (5) Business Days
after it receives from Lessor such notice of early termination, it (i)
delivers to Lessor a Notice of Marketing Option Exercise, (ii) delivers
to Agent or Participants Cash Collateral as required by clause (ii) of
Subparagraph 2.11(a) of the Participation Agreement, (iii) delivers to
Lessor an opinion of its counsel as required by clause (ii) of
Subparagraph 2.11(a) of the Participation Agreement, and (iv) takes
such other actions as may be necessary to grant to Agent first priority
perfected security interests in such Cash Collateral in accordance with
the Cash Collateral Agreement. Upon the delivery by Lessee to Lessor of
a Notice of Marketing Option Exercise and satisfaction of the Cash
Collateral requirements set forth in the preceding sentence of this
Subparagraph 3.02(l), the Expiration Date of the Lease Agreement shall,
if the conditions to the exercise of the Marketing Option set forth in
Paragraph 3.01 are satisfied, be extended to the first Business Day
that is six (6) months after the date of receipt by Lessor of such
Notice of Marketing Option Exercise. Any exercise by Lessee of the
Marketing Option pursuant to this Subparagraph 3.02(l) shall be subject
to the terms and conditions otherwise set forth in this Agreement.
3.03. Expiration Date Purchase Option.
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(a) General. If (i) Lessee elects to exercise the Expiration
Date Purchase Option by delivering to Lessor a Notice of Expiration
Date Purchase Option Exercise pursuant to Paragraph 3.01; (ii) Lessee
elects to exercise the Marketing Option by delivering to Lessor a
Notice of Marketing Option Exercise pursuant to Paragraph 3.01 but the
Marketing Option terminates pursuant to Subparagraph 3.02(f); or (iii)
Lessee fails to deliver to Lessor either notice as required by
Paragraph 3.01; Lessee shall purchase the Property on the Expiration
Date of the Lease Agreement and otherwise comply, or cause compliance
with, the requirements of this Paragraph 3.03 and the other applicable
provisions of this Agreement.
(b) Purchase Price. If Lessee is purchasing the Property
pursuant to the Expiration Date Purchase Option, Lessee shall pay to
Lessor on the Expiration Date of the Lease Agreement, as the purchase
price for the Property, an amount equal to the Outstanding Lease Amount
on such date.
SECTION 4. TERMS OF ALL PURCHASES.
4.01. Representations and Warranties of Parties.
(a) Representations and Warranties of Purchaser. The purchaser
of the Property, whether Lessee, an Assignee Purchaser or a Designated
Purchaser ("Purchaser") shall represent and warrant to Lessor on the
Expiration Date of the Lease Agreement (or, in the case of a purchase
of a portion of the Property pursuant to the Partial Purchase Option,
on the applicable Partial Purchase Date) as follows:
(i) Such Person is a legal entity duly organized,
validly existing and in good standing under the laws of its
jurisdiction of organization or an individual with legal
capacity to purchase the Property (or, in the case of a
purchase of a portion of the Property pursuant to the Partial
Purchase Option, on the applicable Partial Purchase Date).
(ii) The execution, delivery and performance by such
Person of each document, instrument and agreement executed, or
to be executed, by such Person in connection with its purchase
of the Property (or, in the case of a purchase of a portion of
the Property pursuant to the Partial Purchase Option, on the
applicable Partial Purchase Date) (the "Purchase Documents")
and the consummation of the transactions contemplated thereby
(A) are within the power of such Person and (B) have been duly
authorized by all necessary actions on the part of such
Person.
(iii) Each Purchase Document executed, or to be
executed, by such Person has been, or will be, duly executed
and delivered by such Person and constitutes, or will
constitute, a legal, valid and binding obligation of such
Person, enforceable against such Person in accordance with its
terms, except as limited by bankruptcy, insolvency or other
laws of general application relating to or affecting the
enforcement of creditors' rights generally and general
principles of equity.
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(iv) Such Person has not (A) made a general
assignment for the benefit of creditors, (B) filed any
voluntary petition in bankruptcy or suffered the filing of any
involuntary petition by such Person's creditors, (C) suffered
the appointment of a receiver to take possession of all, or
substantially all, of such Person 's assets, (D) suffered the
attachment or other judicial seizure of all, or substantially
all, of such Person's assets, (E) admitted in writing its
inability to pay its debts as they come due, or (F) made an
offer of settlement, extension or composition to its creditors
generally.
(v) Such Person is not a "party in interest" within
the meaning of Section 3(14) of the ERISA, with respect to any
investor in or beneficiary of Lessor.
(b) Representations and Warranties of Lessor and Lessee. Each
of Lessor and Lessee shall represent and warrant to Purchaser (and
Lessee also shall represent and warrant to Lessor if Lessor is to
retain the Property) on the Expiration Date of the Lease Agreement as
follows:
(i) Such Person is a corporation duly organized,
validly existing and in good standing under the laws of its
jurisdiction of organization.
(ii) The execution, delivery and performance by such
Person of each Purchase Document executed, or to be executed,
by such Person and the consummation of the transactions
contemplated thereby (A) are within the power of such Person
and (B) have been duly authorized by all necessary actions on
the part of such Person.
(iii) Each Purchase Document executed, or to be
executed, by such Person has been, or will be, duly executed
and delivered by such Person and constitutes, or will
constitute, a legal, valid and binding obligation of such
Person, enforceable against such Person in accordance with its
terms, except as limited by bankruptcy, insolvency or other
laws of general application relating to or affecting the
enforcement of creditors' rights generally and general
principles of equity.
(iv) Such Person has not (A) made a general
assignment for the benefit of creditors, (B) filed any
voluntary petition in bankruptcy or suffered the filing of any
involuntary petition by such Person's creditors, (C) suffered
the appointment of a receiver to take possession of all, or
substantially all, of such Person's assets, (D) suffered the
attachment or other judicial seizure of all, or substantially
all, of such Person's assets, (E) admitted in writing its
inability to pay its debts as they come due, or (F) made an
offer of settlement, extension or composition to its creditors
generally.
In addition to the foregoing, (A) Lessee shall represent and warrant to
the Designated Purchaser (or Lessor if Lessor is to retain the
Property) on the Expiration Date of the Lease Agreement that no Liens
are attached to the Property, except for Permitted Property Liens, and
(B) Lessor shall represent and warrant to Purchaser on the Expiration
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Date of the Lease Agreement (or, in the case of a purchase of a portion
of the Property pursuant to the Partial Purchase Option, on the
applicable Partial Purchase Date) that no Lessor Liens are attached to
the Property (or, in the case of a purchase of a portion of the
Property pursuant to the Partial Purchase Option, on the portion to be
purchased). Except for the foregoing representations and warranties to
be made by Lessor on the Expiration Date of the Lease Agreement (or, in
the case of a purchase of a portion of the Property pursuant to the
Partial Purchase Option, on the applicable Partial Purchase Date), no
Lessor Party shall make any representation or warranty regarding the
Property or the sale of the Property. Lessee shall make such additional
representations and warranties as it may be required to make pursuant
to clause (ii) of Subparagraph 3.02(b).
(c) Survival of Representations and Warranties. The
representations and warranties of Purchaser, Lessor and Lessee shall
survive for a period of twelve (12) months after the Expiration Date of
the Lease Agreement (or, in the case of a purchase of a portion of the
Property pursuant to the Partial Purchase Option, on the applicable
Partial Purchase Date). Any claim which any such party may have at any
time against any other such party for a breach of any such
representation or warranty, whether known or unknown, which is not
asserted by written notice within such twelve (12) month period shall
not be valid or effective, and the party shall have no liability with
respect thereto.
4.02. "As Is" Purchase. All purchases of the Property hereunder shall
be "as is, with all faults" and without any representations, warranties or
indemnities except for any representations, warranties or indemnities provided
by Lessee pursuant to clause (ii)(C) of Subparagraph 3.02(b) or by Lessor or
Lessee pursuant to Subparagraph 4.01(b). Purchaser shall specifically
acknowledge and agree that Lessor is selling and Purchaser is purchasing the
Property on an "as is, with all faults" basis and that Purchaser is not relying
on any representations or warranties of any kind whatsoever, express or implied,
from any Lessor Party, its agents, or brokers as to any matters concerning the
Property (except for any representations and warranties provided by Lessor
pursuant to Subparagraph 4.01(b)), including (a) the condition of the Property
(including any Improvements to the Property made prior to the Commencement Date
or during the Term of the Lease Agreement); (b) title to the Property (including
possession of the Property by any Person or the existence of any Lien or any
other right, title or interest in or to any of the Property in favor of any
Person); (c) the value, habitability, useability, design, operation or fitness
for use of the Property; (d) the availability or adequacy of utilities and other
services to the Property; (e) any latent, hidden or patent defect in the
Property; (f) the zoning or status of the Property or any other restrictions on
the use of the Property; (g) the economics of the Property; (h) any Casualty or
Condemnation; or (i) the compliance of the Property with any applicable
Governmental Rule or Insurance Requirement.
4.03. Release. Without limiting the foregoing, Purchaser shall, on
behalf of itself and its successors and assigns, waive its right to recover
from, and forever release and discharge, Lessor and the other Indemnitees from
any and all demands, claims, legal or administrative proceedings, losses,
liabilities, damages, penalties, fines, liens, judgments, costs or expenses
whatsoever (including attorneys' fees and costs), whether direct or indirect,
known or unknown, foreseen or unforeseen, that may arise on account of or in any
way be connected with the physical condition of the Property or any Governmental
Rule applicable thereto, including any Environment Law. Purchaser shall
expressly waive the benefits of Section 1542 of the
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California Civil Code, which provides that, "a general release does not extend
to claims which the creditor does not know or expect to exist in his favor at
the time of executing the release, which if known to him must have materially
affected the settlement with the debtor."
4.04. Permits, Approvals, Etc. Lessee shall obtain all permits,
licenses and approvals from and make all filings with Governmental Authorities
and other Persons, comply and cause compliance with all applicable Governmental
Rules and take all other actions required for the marketing, purchase and sale
of the Property.
4.05. Costs. Lessee shall pay directly, without deduction from the
purchase price or any other amount payable to Lessor hereunder, all costs and
expenses of Lessee and Lessor associated with the marketing and sale of the
Property, including brokers' fees and commissions; title insurance premiums;
survey charges; utility, tax and other prorations; fees and expenses of
environmental consultants and attorneys; appraisal costs; escrow fees; recording
fees; documentary, transfer and other taxes; and all other fees, costs and
expenses which might otherwise be deducted from the purchase price or any other
amount payable to Lessor hereunder.
4.06. Lessee's Expiration Date and Partial Purchase Date Payment
Obligations.
(a) Expiration Date. On the Expiration Date of the Lease
Agreement, Lessee shall pay to Lessor the following:
(i) Purchase by Lessee. If the Property is to be
purchased by Lessee or an Assignee Purchaser on such date, (i)
the purchase price payable by Lessee, (ii) all unpaid Rent
accrued through or due and payable on or prior to such date
and (iii) all other amounts, if any, due and payable by Lessee
under the Operative Documents on or prior to such date;
(ii) Purchase by a Designated Purchaser. If the
Property is to be purchased by a Designated Purchaser on such
date, (i) the Residual Value Guaranty Amount (subject to the
provisos set forth at the end of Subparagraph 3.02(g)), (ii)
the Indemnity Amount (subject to the provisos set forth at the
end of Subparagraph 3.02(g)), (iii) all unpaid Rent accrued
through or due and payable on or prior to such date and (iv)
all other amounts, if any, due and payable by Lessee under the
Operative Documents on or prior to such date; or
(iii) Retention by Lessor. If the Property is to be
retained by Lessor on such date pursuant to Subparagraph
3.02(d), (i) the Residual Value Guaranty Amount, (ii) the
Indemnity Amount, (iii) all unpaid Rent accrued through or due
and payable on or prior to such date and (iv) all other
amounts, if any, due and payable by Lessee under the Operative
Documents on or prior to such date.
(b) Partial Purchase Date. On any Partial Purchase Date,
Lessee shall pay to Lessor (i) the purchase price for the Sub-Tract(s)
of Property to be purchased on such date, (ii) all unpaid Rent
attributable to such Sub-Tract(s) of Property accrued through or due
and payable on or prior to such date and (iii) all other amounts
attributable to such Sub-Tracts of Property , if any, due and payable
by Lessee under the Operative Documents on or prior to such date.
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4.07. Lessor Liens. Lessor shall remove all Lessor Liens from the
Property on or before the Expiration Date of the Lease Agreement.
4.08. Transfer Documents.
(a) Expiration Date.
(i) Lessor. Subject to receipt by Lessor on the
Expiration Date of the Lease Agreement of the full amount of
the following, without any setoff, deduction or reduction of
any kind:
(A) In the case of a transfer to Lessee or
an Assignee Purchaser, all amounts payable by Lessee
pursuant to clause (i) of Subparagraph 4.06(a); or
(B) In the case of a transfer to a
Designated Purchaser, (A) the purchase price payable
by the Designated Purchaser and (B) all amounts
payable by Lessee pursuant to clause (ii) of
Subparagraph 4.06(a);
Lessor shall transfer its interest in the Property to
Purchaser on the Expiration Date of the Lease Agreement
(unless Lessor is to retain the Property) by executing and
delivering to Purchaser a Deed in substantially the form of
Exhibit D and a Bill of Sale in substantially the form of
Exhibit E.
(ii) Lessee. On the Expiration Date of the Lease
Agreement, unless Lessee is to purchase the Property, Lessee
shall transfer its interest in the Property to the Designated
Purchaser or the Assignee Purchaser (or Lessor if Lessor is to
retain the Property) by executing and delivering to such
Person a Deed in substantially the form of Exhibit F, a Bill
of Sale in substantially the form of Exhibit G and such other
documents, instruments and agreements as such Person may
reasonably request.
(b) Partial Purchase Date. Subject to receipt by Lessor on any
Partial Purchase Date of all amounts payable by Lessee pursuant to
Subparagraph 4.06(b), without any setoff, deduction or reduction of any
kind, Lessor shall transfer its interest in the Tracts of Property to
be purchased on such date to Lessee by executing and delivering to
Lessee a Deed in substantially the form of Exhibit D, a Bill of Sale in
substantially the form of Exhibit E and such other documents,
instruments and agreements as Lessee may reasonably request
4.09. Casualty and Condemnation Proceeds. If, on the Expiration Date of
the Lease Agreement, any Casualty and Condemnation Proceeds are held by Lessor
in a Repair and Restoration Account or otherwise, Lessor shall (a) if Lessee is
to purchase the Property on the Expiration Date of the Lease Agreement and
Lessee shall so direct, apply such proceeds to the purchase price to be paid by
Lessee or (b) in all other cases, release such proceeds to Lessee; provided,
however, that Lessor shall not have any obligation so to apply or release such
proceeds unless Lessee and/or any Designated Purchaser has complied with all of
the terms and conditions of this Agreement.
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4.10. Payments. Purchaser, Lessor and Lessee shall make all payments in
lawful money of the United States and in same day or immediately available funds
not later than 12:00 noon on the date due.
4.11. Environmental Reports. Lessee shall obtain and deliver to Lessor,
not later than one (1) month prior to the Expiration Date of the Lease Agreement
(or, in the case of a purchase of a portion of the Property pursuant to the
Partial Purchase Option, prior to the applicable Partial Purchase Date), copies
of all reports or documents (not previously delivered to Lessor) that update the
Environmental Reports with respect to the Property (or, in the case of a
purchase of a portion of the Property pursuant to the Partial Purchase Option,
with respect to the applicable portion thereof) prepared by environmental
consultants acceptable to Lessor and a database report prepared by such
environmental consultants with respect to the properties adjoining the Property
(or the applicable portion thereof).
4.12. Further Assurances. Lessee shall, and shall cause any Designated
Purchaser to, execute and deliver such documents, instruments and agreements and
take such other actions as Lessor may reasonably request to effect the purposes
of this Agreement and comply with the terms hereof. Similarly, Lessor shall
execute and deliver such documents, instruments and agreements and take such
other actions as Lessee or a Designated Purchaser may reasonably request to
effect the purposes of this Agreement and comply with the terms hereof.
SECTION 5. MISCELLANEOUS.
5.01. Notices. Except as otherwise specified herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Lessee or Lessor under this Agreement shall be given as provided in Subparagraph
2.02(c) and Paragraph 7.01 of the Participation Agreement.
5.02. Waivers, Amendments. Any term, covenant, agreement or condition
of this Agreement may be amended or waived only as provided in the Participation
Agreement. No failure or delay by any Lessor Party in exercising any right
hereunder shall operate as a waiver thereof or of any other right nor shall any
single or partial exercise of any such right preclude any other further exercise
thereof or of any other right. Unless otherwise specified in any such waiver or
consent, a waiver or consent given hereunder shall be effective only in the
specific instance and for the specific purpose for which given.
5.03. Successors and Assigns.
(a) General. This Agreement shall be binding upon and inure to
the benefit of the Lessor Parties and Lessee and their permitted
successors and assigns; provided, however, that the Lessor Parties and
Lessee shall not sell, assign or delegate their respective rights and
obligations hereunder except as provided in the Participation Agreement
and in Subparagraph 5.03(b).
(b) Assignment by Lessee of Purchase Rights. Lessee may assign
to a third party (an "Assignee Purchaser") its right to purchase the
Property pursuant to the Term Purchase Option, the Partial Purchase
Option or the Expiration Date Purchase Option;
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provided, however, that (i) such an assignment shall not relieve Lessee
of its obligations to consummate or cause the consummation of any such
purchase in accordance with the terms of this Agreement and (ii) Lessee
assumes all responsibility for determining the creditworthiness of any
such Assignee Purchaser. If, after any purchase by an Assignee
Purchaser hereunder, the purchase price paid by such Assignee Purchaser
is recovered from any Lessor Party, Lessee shall reimburse such Lessor
Party for such recovery unless such recovery is due solely to a
material misrepresentation or covenant breach by such Lessor Party.
5.04. No Third Party Rights. Nothing expressed in or to be implied from
this Agreement is intended to give, or shall be construed to give, any Person,
other than the Lessor Parties and Lessee and their permitted successors and
assigns, any benefit or legal or equitable right, remedy or claim under or by
virtue of this Agreement or under or by virtue of any provision herein.
5.05. Partial Invalidity. If at any time any provision of this
Agreement is or becomes illegal, invalid or unenforceable in any respect under
the law or any jurisdiction, neither the legality, validity or enforceability of
the remaining provisions of this Agreement nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.
5.06. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California without reference to
conflicts of law rules.
5.07. Counterparts. This Agreement may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.
5.08. Nature of Lessee's Obligations.
(a) Independent Obligation. The obligation of Lessee to pay
the amounts payable by Lessee under this Agreement and the other
Operative Documents and to perform the other Lessee Obligation are
absolute, unconditional and irrevocable obligations which are separate
and independent of the obligations of the Lessor Parties under this
Agreement and the other Operative Documents and all other events and
circumstances, including the events and circumstances set forth in
Subparagraph 5.08(c).
(b) No Termination or Abatement. This Agreement and the other
Operative Documents and Lessee's obligation to pay all amounts
hereunder and to pay and perform all other Lessee Obligations shall
continue in full force and effect without abatement notwithstanding the
occurrence or existence of any event or circumstance, including any
event or circumstance set forth in Subparagraph 5.08(c).
(c) Full Payment and Performance. Lessee shall make all
payments under this Agreement and the other Operative Documents in the
full amounts and at the times required by the terms of this Agreement
and the other Operative Documents without setoff, deduction or
reduction of any kind and shall perform all other Lessee Obligations as
and when required, without regard to any event or circumstances
whatsoever,
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including (i) the condition of the Property (including any Improvements
to the Property made prior to the Commencement Date or during the Term
of the Lease Agreement); (ii) title to the Property (including
possession of the Property by any Person or the existence of any Lien
or any other right, title or interest in or to any of the Property in
favor of any Person); (iii) the value, habitability, useability,
design, operation or fitness for use of the Property; (iv) the
availability or adequacy of utilities and other services to the
Property; (v) any latent, hidden or patent defect in the Property; (vi)
the zoning or status of the Property or any other restrictions on the
use of the Property; (g) the economics of the Property; (vii) any
Casualty or Condemnation; (viii) the compliance of the Property with
any applicable Governmental Rule or Insurance Requirement; (ix) any
failure by any Lessor Party to perform any of its obligations under
this Agreement or any other Operative Document; or (x) the exercise by
any Lessor Party of any of its remedies under this Agreement or any
other Operative Document; provided, however, that this Paragraph 5.08
shall not abrogate any right which Lessee may have to recover damages
from any Lessor Party for any material breach by such Lessor Party of
its obligations under this Agreement or any other Operative Document to
the extent permitted hereunder or thereunder.
[The signature page follows.]
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IN WITNESS WHEREOF, Lessee and Lessor have caused this Agreement to be
executed as of the day and year first above written.
LESSEE: FAIR, ISAAC AND COMPANY, INC.,
a Delaware corporation
By:_________________________________
Name: Michael C. Gordon
Title: Vice President--Facilities
Administration
LESSOR: LEASE PLAN NORTH AMERICA, INC.,
an Illinois corporation
By:__________________________________
Name: Jamie Dillon
Title: Attorney-in-Fact
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EXHIBIT A(1)
NOTICE OF TERM PURCHASE OPTION EXERCISE
[Date]
Lease Plan North America, Inc.
c/o ABN AMRO Bank N.V.
as Agent
Capital Markets-Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to the following:
(a) The Participation Agreement, dated as of May 15, 1998 (the
"Participation Agreement"), among Fair, Isaac and Company, Inc.
("Lessee"), Lease Plan North America, Inc. ("Lessor"), the financial
institutions listed in Schedule I to the Participation Agreement (the
"Participants") and ABN AMRO Bank N.V., as agent for the Participants
(in such capacity, "Agent");
(b) The Lease Agreement, dated as of ____________, 1998 (the
"Lease Agreement"), between Lessee and Lessor; and
(c) The Purchase Agreement, dated as of ____________, 1998
(the "Lease Agreement"), between Lessee and Lessor.
Unless otherwise indicated, all terms defined in the Participation Agreement
have the same respective meanings when used herein.
2. Pursuant to Subparagraph 4.01(a) of the Lease Agreement and
Paragraph 2.01 of the Purchase Agreement, Lessee hereby irrevocably notifies
Lessor that Lessee is exercising its right to terminate the Lease Agreement
prior to the Scheduled Expiration Date of the Lease Agreement and purchase the
Property on [_________, ____] (which date is a Scheduled Rent Payment Date and
which date, after the delivery of this notice, shall be the Expiration Date of
the Lease Agreement).
IN WITNESS WHEREOF, Lessee has executed this Notice of Term Purchase
Option Exercise on the date set forth above.
FAIR, ISAAC AND COMPANY, INC.,
a Delaware corporation
By:_____________________________
Name:________________________
Title:_______________________
A-1
<PAGE>
EXHIBIT A(2)
NOTICE OF PARTIAL PURCHASE OPTION EXERCISE
[Date]
Lease Plan North America, Inc.
c/o ABN AMRO Bank N.V.
as Agent
Capital Markets-Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to the following:
(a) The Participation Agreement, dated as of May 15, 1998 (the
"Participation Agreement"), among Fair, Isaac and Company, Inc.
("Lessee"), Lease Plan North America, Inc. ("Lessor"), the financial
institutions listed in Schedule I to the Participation Agreement (the
"Participants") and ABN AMRO Bank N.V., as agent for the Participants
(in such capacity, "Agent"); and
(b) The Purchase Agreement, dated as of May __, 1998 (the
"Purchase Agreement"), between Lessee and Lessor.
Unless otherwise indicated, all terms defined in the Participation Agreement
have the same respective meanings when used herein.
2. Pursuant to Paragraph 2.02 of the Purchase Agreement, Lessee hereby
irrevocably notifies Lessor that Lessee is exercising its right to purchase a
portion of the Property as follows:
(a) The Sub-Tract[s] of Property to be purchased is [are]
________________; and
(b) The date on which such purchase is to occur is [_________,
____] (which date is a Business Day).
3. Lessee hereby certifies to Lessor, Agent and the Participants that,
on the date of this notice:
(a) The representations and warranties of Lessee set forth in
Paragraph 4.01 of the Participation Agreement and in the other
Operative Documents are true and correct in all material respects as if
made on such date (except for representations and warranties expressly
made as of a specified date, which shall be true as of such date);
(b) No Default has occurred and is continuing; and
(c) All of the Operative Documents are in full force and
effect.
A(2)-1
<PAGE>
IN WITNESS WHEREOF, Lessee has executed this Notice of Partial Purchase
Option Exercise on the date set forth above.
FAIR, ISAAC AND COMPANY, INC.
By:_____________________________
Name:________________________
Title:_______________________
A(2)-2
<PAGE>
SCHEDULE 1
TO
EXHIBIT A(2)
SUB-TRACT PURCHASE PRICE
- -------------------------------------- -----------------------------------------
Description of Parcel Purchase Price
- -------------------------------------- -----------------------------------------
- -------------------------------------- -----------------------------------------
- -------------------------------------- -----------------------------------------
- -------------------------------------- -----------------------------------------
- -------------------------------------- -----------------------------------------
- -------------------------------------- -----------------------------------------
A(2)-3
<PAGE>
EXHIBIT B
NOTICE OF MARKETING OPTION EXERCISE
[Date]
Lease Plan North America, Inc.
c/o ABN AMRO Bank N.V.
as Agent
Capital Markets-Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to the following:
(a) The Participation Agreement, dated as of May 15, 1998 (the
"Participation Agreement"), among Fair, Isaac and Company, Inc.
("Lessee"), Lease Plan North America, Inc. ("Lessor"), the financial
institutions listed in Schedule I to the Participation Agreement (the
"Participants") and ABN AMRO Bank N.V., as agent for the Participants
(in such capacity, "Agent"); and
(b) The Purchase Agreement, dated as of ____________, 1998
(the "Purchase Agreement"), between Lessee and Lessor.
Unless otherwise indicated, all terms defined in the Participation Agreement
have the same respective meanings when used herein.
2. Pursuant to Paragraph 3.01 of the Purchase Agreement, Lessee hereby
notifies Lessor that Lessee is electing to exercise the Marketing Option on the
Scheduled Expiration Date of the Lease Agreement of [_____, ____].
3. Lessee hereby certifies to Lessor, Agent and the Participants that,
on the date of this notice:
(a) The representations and warranties of Lessee set forth in
Paragraph 4.01 of the Participation Agreement and in the other
Operative Documents are true and correct in all material respects as if
made on such date (except for representations and warranties expressly
made as of a specified date, which shall be true as of such date);
(b) No Default (other than a Non-Marketing Option Event of
Default under the Lease Agreement) has occurred and is continuing; and
(c) All of the Operative Documents are in full force and
effect.
B-1
<PAGE>
IN WITNESS WHEREOF, Lessee has executed this Notice of Marketing Option
Exercise on the date set forth above.
FAIR, ISAAC AND COMPANY, INC.,
a Delaware corporation
By:_____________________________
Name:________________________
Title:_______________________
B-2
<PAGE>
EXHIBIT C
NOTICE OF EXPIRATION DATE PURCHASE OPTION EXERCISE
[Date]
Lease Plan North America, Inc.
ABN AMRO Bank N.V.
as Agent
Capital Markets-Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
1. Reference is made to the following:
(a) The Participation Agreement, dated as of May 15, 1998 (the
"Participation Agreement"), among Fair, Isaac and Company, Inc.
("Lessee"), Lease Plan North America, Inc. ("Lessor"), the financial
institutions listed in Schedule I to the Participation Agreement (the
"Participants") and ABN AMRO Bank N.V., as agent for the Participants
(in such capacity, "Agent"); and
(b) The Purchase Agreement, dated as of ____________, 1998
(the "Purchase Agreement"), between Lessee and Lessor.
Unless otherwise indicated, all terms defined in the Participation Agreement
have the same respective meanings when used herein.
2. Pursuant to Paragraph 3.01 of the Purchase Agreement, Lessee hereby
notifies Lessor that Lessee is electing to exercise the Expiration Date Purchase
Option on the Scheduled Expiration Date of the Lease Agreement of [_____, ____].
IN WITNESS WHEREOF, Lessee has executed this Notice of Expiration Date
Purchase Option Exercise on the date set forth above.
FAIR, ISAAC AND COMPANY, INC.,
a Delaware corporation
By:_____________________________
Name:________________________
Title:_______________________
C-1
<PAGE>
EXHIBIT D
RECORDING REQUESTED BY
WHEN RECORDED RETURN TO
AND MAIL TAX STATEMENTS TO:
[Purchaser]
__________________
__________________
__________________
Documentary Transfer Tax is not of public record and is shown on a separate
sheet attached to this deed.
________________________________________________________________________________
QUITCLAIM DEED
FOR VALUABLE CONSIDERATION, the receipt of which is hereby
acknowledged, LEASE PLAN NORTH AMERICA, INC. , a [_________] ("Grantor"), hereby
releases, remises and forever quitclaims to [PURCHASER], a _____________
("Grantee"), the real property located in the City of [_______], County of
[_________], State of California, described on Exhibit A attached hereto and
made a part hereof (the "Property"). Grantor is selling and Grantee is
purchasing the Property on an "as is, with all faults" basis and that Grantee is
not relying on any representations or warranties of any kind whatsoever, express
or implied, from Grantor, its agents, or brokers as to any matters concerning
the Property including (a) the condition of the Property (including any
improvements to the Property); (b) title to the Property (including possession
of the Property by any individual or entity or the existence of any lien or any
other right, title or interest in or to any of the Property in favor of any
person); (c) the value, habitability, useability, design, operation or fitness
for use of the Property; (d) the availability or adequacy of utilities and other
services to the Property; (e) any latent, hidden or patent defect in the
Property; (f) the zoning or status of the Property or any other restrictions on
the use of the Property; (g) the economics of the Property; (h) any damage to,
destruction or, or decrease in the value of all or any portion of the Property
or any condemnation or other taking or sale of all or any portion of the
Property, by or on account of any actual or threatened eminent domain proceeding
or other taking of action by any governmental authority or other person have the
power of eminent domain; or (i) the compliance of the Property with any
applicable law, rule, regulation, ordinance, order, code, judgment or similar
form of decision of any governmental authority or any terms, conditions or
requirements imposed by any policies of insurance relating to the Property.
[See Next Page]
D-1
<PAGE>
Executed as of _____, 19__.
LEASE PLAN NORTH AMERICA, INC.,
an Illinois corporation
By: ______________________________
Its: ______________________________
D-2
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
Assessor's Parcel No.: _______________
D(A)-1
<PAGE>
State of _____________
County of _____________________
On ___________________ before me, _________________________________________,
Date Name, Title of Officer
personally appeared ___________________________________________________________,
Name(s) of signer(s)
(personally known to me -OR- (proved to me on the basis of satisfactory
evidence to be the person(s) whose name(s)
is/are subscribed to the within instrument
and acknowledged to me that he/she/they
executed the same in his/her/their
authorized capacity(ies), and that by
his/her/their signature(s) on the instrument
the person(s) or the entity upon behalf of
which the person(s) acted, executed the
instrument.
WITNESS my hand and official seal.
____________________________________________
<PAGE>
_____________________, 19__
Marin County Recorder
Re: Request That Statement of Documentary
Transfer Tax Not be Recorded
Dear Sir:
Request is hereby made in accordance with Section 11932 of the Revenue
and Taxation Code that this statement of tax due not be recorded with the
attached deed but be affixed to the deed after recordation and before return as
directed on the deed.
The attached deed names LEASE PLAN NORTH AMERICA, INC., an Illinois
corporation, as grantor, and [PURCHASER], a _________________, as grantee.
The property being transferred and described in the attached deed is
located in the City of San Rafael and County of Marin, State of California.
The amount of Documentary Transfer Tax due on the attached deed is
$__________, computed on full value of the property conveyed.
LEASE PLAN NORTH AMERICA, INC.,
an Illinois corporation
By: ______________________________
Its: ______________________________
<PAGE>
EXHIBIT E
BILL OF SALE
FOR GOOD AND VALUABLE CONSIDERATION, the receipt of which is hereby
acknowledged, LEASE PLAN NORTH AMERICA, INC., an Illinois corporation ("Seller")
does hereby sell, transfer and convey to [PURCHASER], a
_________________________ ("Purchaser"), the personal property owned by Seller
in connection with that certain real property commonly known as _______________,
_________, California, including, without limitation, the personal property
itemized on Schedule 1 attached hereto and incorporated herein by this reference
(the "Property").
Seller is selling and Purchaser is purchasing the Property on an "as
is, with all faults" basis and Purchaser is not relying on any representations
or warranties of any kind whatsoever, express or implied, from Seller, its
agents, or brokers as to any matters concerning the Property including (a) the
condition of the Property; (b) title to the Property (including possession of
the Property by any individual or entity or the existence of any lien or any
other right, title or interest in or to any of the Property in favor of any
person); (c) the value, habitability, useability, design, operation or fitness
for use of the Property; or (d) any latent, hidden or patent defect in the
Property.
Dated: ________________, 19__ SELLER:
LEASE PLAN NORTH AMERICA, INC.,
an Illinois corporation
By: ______________________________
Its: ______________________________
PURCHASER:
[PURCHASER]
a _____________________________
By: ______________________________
Its: ______________________________
E-1
<PAGE>
Schedule 1
Property
EXHIBIT G
BILL OF SALE
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Fair, Isaac and Company, Inc., a Delaware
corporation ("Seller"), does hereby sell, transfer, and convey unto [PURCHASER]
("Buyer"), the personal property owned by Seller in connection with that certain
real property commonly known as _______________, ________, California, which
Seller warrants to be free and clear of all liens and encumbrances, including,
without limitation, the personal property itemized on Schedule 1 attached hereto
and incorporated herein by this reference.
Seller does hereby covenant with Buyer that Seller is the lawful owner
of such personal property, and that the undersigned has good right to sell the
same as aforesaid and will warrant and defend the title thereto unto Buyer, its
successors and assigns, against the claims and demands of all persons
whomsoever.
DATED this ____ day of __________, 19__.
Seller: Fair, Isaac and Company, Inc.,
a Delaware corporation
By: ______________________________
Its: ______________________________
Schedule 1
Property
E(1)-1
THIRD AMENDMENT TO LEASE
THIS THIRD AMENDMENT TO LEASE is made and entered into effective as of the 2nd
day of December, 1998, between CSM CORPORATION, a Minnesota corporation,
("Landlord") and DYNAMARK, INC., a Minnesota corporation, ("Tenant").
RECITALS
First: CSM Investors, Inc. ("CSMI"), as landlord, and DynaMark, Inc., as
tenant, entered into a lease dated April 28, 1995, covering
certain premises located at 4255 Lexington Avenue North, Arden
Hills, Minnesota (the "Lease").
Second: CSMI's interest, as landlord, in the Lease was assigned to CSM
Corporation, pursuant to an Assignment and Assumption Agreement
dated September 12, 1995, whereupon CSM Corporation became the
landlord under the Lease.
Third: The parties have executed a First Amendment to Lease, dated March
11, 1997, clarifying their respective rights and obligations
concerning the "Excess Land" described in the First Amendment.
Fourth: The parties have executed a Second Amendment to Lease, dated
November 25, 1997, extending the Initial Term of the Lease and
establishing the rents payable thereunder during such period.
Fifth: The parties wish to execute this Third Amendment to Lease to
further extend the term of the Lease and to establish the rents
payable thereunder during such period:
AGREEMENT
In consideration of the above stated premises and the mutual covenants
hereinafter contained, the parties hereby agree that the Lease is modified,
amended and/or supplemented as follows:
1. Premises. The Premises and certain improvements thereupon shall be and
are hereby modified as shown on the site plan attached hereto as
REVISED EXHIBIT A. REVISED EXHIBIT A replaces and his hereby
substituted for Exhibit A attached to the First Amendment to Lease.
Tenant acknowledges that the Premises are a part of a development which
will include four buildings and associated appurtenant improvements,
all as shown on REVISED EXHIBIT A. Tenant acknowledges and agrees that
the Premises will be subject to and benefitted by various non-exclusive
easements for ingress, egress and access over the private drives
serving the Project, and certain exclusive easements for utilities and
other purposes, provided that the same shall not interfere with the use
and enjoyment of the Premises, as contemplated herein.
2. Lease Term. Landlord and Tenant are parties to a lease agreement dated
December 2, 1998 (the "New Lease"), covering certain premises and a new
building to be constructed thereon located adjacent to the Premises,
all as shown on REVISED EXHIBIT A. The parties agree that the term of
the Lease shall be adjusted such that the term of the Lease shall be
coterminous with the term of the New Lease. More particularly, upon the
commencement date of the New Lease, the term of the Lease shall be
extended and shall run for a period of one hundred fifty-six (156)
months commencing on the commencement date of the New Lease. If the
commencement date of the New Lease is other than the first day of a
calendar month, then the term of the Lease shall continue in full force
and effect for a period of one hundred fifty-six (156) months from and
after the first day of the month next succeeding the commencement date
of the New Lease. When the commencement date of the New Lease has been
established, the parties shall execute an
1 Exhibit 10.41
<PAGE>
addendum to this Third Amendment to Lease, confirming the term and
expiration date of the Lease.
3. Subsection 1.6(A) of the Lease and Section 2 of the Second Amendment to
Lease are hereby deleted in their entirety and replaced with the
following:
"Base Rent. The Base Rental for the Premises during the remaining term
of this Lease shall be as follows:
Monthly Per
Period Base Rent Square Foot
------ --------- -----------
11/1/98 - 8/31/00 $23,375.00 $8.50
09/1/00 - 12/31/06 $24,750.00 $9.00
01/1/07 - New Lease expiration date $26,125.00 $9.50
Option Term:
------------
60 months following the
New Lease expiration date market market
Landlord and Tenant agree that the as built area of the Premises is
33,000 square feet."
4. Remodeling Allowance. Landlord agrees to provide Tenant with a one time
allowance for remodeling the Premises. Landlord's maximum contribution
towards the costs of remodeling will be based upon the time that such
remodeling occurs, in accordance with the following schedule:
Period of Maximum Allowance
Remodeling Expenditure Amount Per Square Foot
---------------------- ----------------------
1/1/01 - 12/31/02 $3.00
1/1/03 - 12/31/04 $3.75
1/1/05 - 12/31/06 $4.50
1/1/07 - 12/31/08 $5.25
The allowance shall apply towards Tenant's actual remodeling costs and
shall be payable to Tenant upon completion of remodeling and receipt by
Landlord of evidence of payment under normal and customary construction
lending procedures. Landlord shall not be required to provide any
allowance on costs submitted for reimbursement after December 31, 2010.
4. Guaranty. Landlord has required, as a condition to its execution of
this third Amendment to Lease, that Fair, Isaac and Company,
Incorporated unconditionally guarantee the full performance of Tenant's
obligations under the Lease, as amended. Tenant agrees to deliver such
guaranty, in the form of EXHIBIT C attached hereto and incorporated
herein by reference, within ten (10) days following the full execution
of this Third Amendment to Lease by Landlord and Tenant. In the event
Tenant fails to deliver such guaranty, Landlord may, at its option,
terminate this Third Amendment to Lease upon five (5) days written
notice to Tenant.
5. Section 14.12 of the Lease is deleted in its entirety and is replaced
with the following:
"Option to Extend. Subject to the terms and conditions hereinafter set
forth, Tenant shall have the option to extend the term of this Lease
for one (1) additional sixty (60) month term ("Option Term") upon and
pursuant to the same conditions contained herein. This option may be
exercised by written notice of exercise from Tenant to Landlord given
not less than one (1) year prior to the expiration of the Lease Term.
Tenant may exercise this option only if: (i) no condition of default
exists with respect to Tenant's performance of its obligations under
the Lease; and (ii) Tenant simultaneously exercises all of its options
to extend under the New Lease and under the Existing Lease covering the
premises located at 4295 Lexington Avenue North in Arden Hills,
Minnesota (as defined in Section 14.12 of the New Lease). Base Rent for
the Option Term shall be at the fair
2
<PAGE>
market rate for comparable space in the north suburban geographic area.
The fair market rent shall be agreed upon by Tenant and Landlord within
sixty (60) days of Tenant's notice to Landlord of its irrevocable
intent to exercise its option to extend set forth herein. The fair
market rental rate shall be determined in accordance with the
definition set forth in Section 7 of the Existing Lease dated May 1,
1995 and amended December 30, 1996 for the premises located at 4295
Lexington Avenue North in Arden Hills, Minnesota. In the event that
Landlord and Tenant fail to agree to the fair market rental rate in the
time period set forth herein, then the fair market rent shall be
established in accordance with the arbitration procedures set forth in
section 8 of the Existing Lease for the premises located at 4295
Lexington Avenue North in Arden Hills, Minnesota. If Tenant fails to
exercise this option as aforesaid, this option shall be null and void
and of no further force and effect."
6. Miscellaneous. Except as expressly stated herein, the Lease shall
remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to Lease
to be executed the day and year first above written.
LANDLORD: TENANT:
CSM CORPORATION DYNAMARK, INC.
BY: _______________________________ BY: _______________________________
ITS: _______________________________ ITS: _______________________________
3
Subsidiaries of
Fair, Isaac and Company, Incorporated
Name of Company and Jurisdiction of
Name under which it Incorporation or
Does Business Organization
- ----------------------- -------------------
Fair, Isaac International
Corporation(1) California
DynaMark, Inc.(1) Minnesota
Credit & Risk Management Associates, Inc. (1) Delaware
Data Research Technologies(1) Minnesota
Prevision, Inc.(1) Oregon
Risk Management Technologies(1) California
Lindaro Office Park, Inc. (1) California
Fair, Isaac International
Germany Corporation(2) California
Fair, Isaac International
Canada Corporation(2) California
Fair, Isaac International
UK Corporation(2) California
Fair, Isaac International
Japan Corporation(2) California
Fair, Isaac International Ltd(2) England
Fair, Isaac International
France Corporation(2) California
Fair, Isaac International
Mexico Corporation(2) California
Fair, Isaac Brazil, LLC(2) Delaware
Radar International, Inc.(3) Virgin Islands
Fair, Isaac Do Brasil Ltda.(4) Brazil
(1) 100% owned by Fair, Isaac and Company, Incorporated.
1 Exhibit 21.1
<PAGE>
(2) 100% owned by Fair, Isaac International Corporation.
(3) 100% owned by Risk Management Technologies
(4) 99% owned by Fair, Isaac International Corporation and 1% owned by
Fair, Isaac Brazil, LLC
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS IN THE COMPANY'S 1998 ANNUAL REPORT ON FORM 10-K AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<CASH> 12,242
<SECURITIES> 18,283
<RECEIVABLES> 40,191
<ALLOWANCES> 1,163
<INVENTORY> 0
<CURRENT-ASSETS> 102,613
<PP&E> 75,769
<DEPRECIATION> 38,876
<TOTAL-ASSETS> 189,614
<CURRENT-LIABILITIES> 47,761
<BONDS> 789
0
0
<COMMON> 140
<OTHER-SE> 133,311
<TOTAL-LIABILITY-AND-EQUITY> 189,614
<SALES> 0
<TOTAL-REVENUES> 245,545
<CGS> 0
<TOTAL-COSTS> 84,980
<OTHER-EXPENSES> 37,470
<LOSS-PROVISION> 677
<INTEREST-EXPENSE> 803
<INCOME-PRETAX> 42,105
<INCOME-TAX> 17,778
<INCOME-CONTINUING> 24,327
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,327
<EPS-PRIMARY> 1.77
<EPS-DILUTED> 1.68
</TABLE>
