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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 December 31, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-17157
NOVELLUS SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 77-0024666
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3970 NORTH FIRST STREET, SAN JOSE, CA 95134
(Address of principal executive offices) (Zip Code)
(408) 943-9700
(Registrant's telephone number
including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
------------------- ------------------------
None N/A
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
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
--- ---
As of March 7, 1997 the aggregate market value of voting stock held by
non-affiliates of the registrant was approximately $1,087,579,164.00 based on
the average of the high and low prices of the Common Stock as reported on the
Nasdaq National Market on such date. Shares of Common Stock held by officers,
directors and holders of more than 5% of the outstanding Common Stock have been
excluded from this calculation because such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
The number of shares of Common Stock outstanding on March 7, 1997 was
16,431,000.
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. / /
Documents Incorporated by Reference: Part II of this Report on Form 10-K
incorporates information by reference to Registrant's 1996 Annual Report to
Shareholders. Part III of this Report on Form 10-K incorporates information by
reference from the Registrant's Proxy Statement for its 1997 Annual Meeting of
Shareholders.
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PART I
ITEM 1. BUSINESS
Novellus is a leading supplier of high productivity chemical vapor
deposition (CVD) systems used in the fabrication of integrated circuits. CVD
systems are used to deposit all of the dielectric (insulating) layers and
certain of the conductive metal layers on the surface of a semiconductor wafer.
The overall growth in the semiconductor industry and the increasing number of
layers used in complex integrated circuits have lead to increased demand for
advanced CVD equipment. The Company's products are differentiated by their
simultaneous ability to provide superior film quality while providing the
highest productivity and lowest cost of ownership in the advanced CVD market.
The Company's strategy is to focus on major semiconductor manufacturers, and the
Company has sold one or more of its systems to each of the 20 largest
semiconductor manufacturers in the world.
INDUSTRY BACKGROUND
The semiconductor industry has experienced significant growth in recent
years due to the continued growth of the personal computer market, the expansion
of the telecommunications industry, the emergence of new applications such as
consumer electronics products, wireless communications devices and mobile
computers and the increased semiconductor content in these electronics systems.
Significant performance advantages and lower prices for integrated circuits have
contributed to the growth and expansion of the semiconductor industry. In
response to the growth in demand for integrated circuits, the semiconductor
industry is significantly increasing its manufacturing capacity through the
expansion of existing facilities and construction of new facilities.
The fabrication of integrated circuits requires a number of complex and
repetitive processing steps, including deposition, photolithography and etch.
Deposition is a process in which a film of either electrically insulating or
electrically conductive material is deposited on the surface of a wafer. The
two principal methods of thin film deposition are CVD, which can be used to
deposit both insulating and conductive films, and physical vapor deposition
(PVD), which is used primarily for sputtering conductive metals onto the wafer
surface. In the CVD process, wafers are typically placed in a reaction chamber
and a variety of pure and precisely metered gases are introduced while some form
of energy is added to activate a chemical reaction on the wafer surface. The
result of this reaction is the deposition of a film on the wafer. CVD has become
the predominant deposition solution for smaller line width geometry
semiconductor devices because CVD is more effective than PVD in uniformly
filling the narrower spaces and holes in depositing insulating material and
certain metals in advanced devices.
CVD processes are used to deposit all of the dielectric films and certain
conductive, metal films in an integrated circuit. The dielectric layers in an
integrated circuit include the initial interlayer, portions of the interconnect
layers and the final passivation layer. CVD is also used for deposition of
conductive metal layers, particularly those metals that are more difficult to
deposit in smaller line width geometry devices through conventional PVD or other
deposition technology. CVD technology is particularly effective for depositing
blanket tungsten as a "plug" layer that connects one conductive metal layer to
another in a multi-level integrated circuit. For such applications, tungsten is
replacing aluminum, which has certain physical properties that reduce its
efficacy for the smaller interconnect holes of devices with smaller line width
geometries.
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Advanced integrated circuit technology has created increased demand for
more sophisticated semiconductor processing equipment. Today's complex
semiconductor devices, such as 64 megabit DRAM memories and 64-bit
microprocessors, are being designed with line width geometries of .35 micron and
below, and the microprocessors have up to four layers of interconnect circuitry.
The next generation of semiconductor devices, including 256 megabit DRAM's and
64-bit microprocessors, are being designed with .25 micron line geometries, and
the microprocessors will incorporate four or more interconnect layers. Each
additional interconnect layer requires three separate layers of deposition,
which include the initial metal layer, a non-conductive dielectric layer and
then a "plug" metal film to fill patterned holes in the dielectric layer that
connects the metal layers on either side of the dielectric. The Company believes
that the greater complexity and number of interconnect layers in advanced
integrated circuits will enable the markets for dielectric and metal CVD systems
to experience significant growth.
Semiconductor manufacturers generally measure the cost performance of their
production equipment in terms of "cost per wafer," which is determined by
factoring in the fixed costs for acquisition and installation of such equipment,
its variable operating costs and its net throughput rate. A system with higher
throughput allows the semiconductor manufacturer to recover the purchase price
of the system over a greater number of wafers and thereby reduce the cost of
ownership of the system on a per wafer basis. Throughput is most accurately
measured on a net or overall basis, which takes into account the processing
speed of the system and any non-operational downtime for cleaning, maintenance
or other repairs. Yield and film quality are also significant factors to the
semiconductor manufacturer in selecting processing equipment. The increased
costs of larger and more complex semiconductor wafers have made high yields
extremely important to semiconductor manufacturers. To achieve higher yields and
better film quality, deposition systems must be capable of repeating the
original process on a consistent basis without a disqualifying level of defects.
This characteristic, known in the industry as "repeatability," is extremely
important in achieving commercially acceptable yields. Repeatability is more
easily achieved in those systems that can operate at desired throughput rates
without requiring the system to approach its critical tolerance limits.
The continuing evolution of semiconductor devices to smaller line width
geometries and more complex multi-level circuitry has significantly increased
the cost and performance requirements of the capital equipment used to
manufacture these devices. Many of the advanced eight inch fabrication lines
that are currently planned or in construction will cost up to $1 billion each,
representing a substantial increase over the costs of prior generation
fabrication facilities. Increased capital depreciation costs will continue to
become a much larger percentage of the aggregate production costs for
semiconductor manufacturers relative to labor, materials and other variable
manufacturing costs. As a result, there has been an increasing focus by the
semiconductor industry on obtaining increased productivity and higher returns
from its semiconductor manufacturing equipment, thereby reducing the effective
cost of ownership of such systems.
THE NOVELLUS SOLUTION
Novellus focuses on advanced CVD systems that provide superior film quality
and yield while attaining the high levels of productivity required to meet the
semiconductor industry's need for high volume, low cost wafer production. The
Company's multi-station continuous processing architecture enables its systems
to address each of the following critical parameters of CVD system performance:
- THROUGHPUT, COST PER WAFER. In contrast to CVD systems which process
only one wafer at a time in a chamber, the Company's multi-station continuous
processing systems can process five, six, or seven wafers at the same time in a
chamber, leading to higher throughput levels. The design
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simplicity and automatic cleaning capabilities of the Company's systems further
increase net throughput by reducing production downtime. The Company believes
that its systems attain the highest levels of productivity and lowest cost per
wafer in the advanced CVD equipment market.
- YIELD AND FILM QUALITY. With Novellus' unique sequential,
multi-station chamber design, each wafer receives a fraction of the desired film
thickness at each of five, six, or seven deposition stations in the process
chamber. The "averaging" effect created by this design tends to reduce
anomalies in film thickness and thereby improves film uniformity and quality.
The Company's systems can obtain in general within-wafer and wafer-to-wafer
uniformity levels of +/- 1% of film thickness as measured at one standard
deviation, which the Company believes are the highest in the industry.
- PROCESS REPEATABILITY. Because of the inherently higher throughput
potential of continuous processing, the Company's systems are able to deposit
materials at lower, more controlled rates than single wafer processing systems
which generally deposit at faster rates closer to the process performance limits
to achieve production-level throughputs. Lower deposition rates avoid straining
the system's process tolerance limits and thereby permit increased process
control and repeatability.
STRATEGY
The Company's objective is to increase its market share in the worldwide
CVD market and strengthen its position as a leading supplier of semiconductor
processing equipment. The key elements of the Company's strategy are as
follows:
- EMPHASIS ON HIGH PRODUCTIVITY SYSTEMS. Novellus focuses on
providing high productivity CVD systems to leading semiconductor companies.
The Company addresses the needs of semiconductor manufacturers through its
unique continuous processing architecture which enables its systems to attain
high levels of wafer throughput, yield and film quality. The architecture's
simple design also provides the Company's systems with greater up-time and
smaller footprints compared to competitive systems, resulting in additional
cost of ownership advantages. The Company believes that one of its new
products, SPEED, a high density plasma (HDP) dielectric deposition system, is
the most productive HDP system on the market today. The Company intends to
retain its focus on productivity by leveraging its continuous processing
architecture in product enhancements and new product offerings.
- LEADERSHIP IN CVD TECHNOLOGY. The Company's strategy is to provide
a family of deposition systems which utilize advanced CVD technologies to
address leading-edge wafer processing needs. The Company's Concept
One-Dielectric offers a dual frequency deposition technology to achieve
superior results for a wide variety of films on wafers as large as eight
inches and geometries as small as .35 micron. The Company's Concept One-W
with proprietary back-side exclusion technology is used by manufacturers to
connect multiple metal layers in advanced devices and the Company believes
that it is currently the only system that provides high volume manufacturing
worthy full coverage tungsten deposition. The Company's Concept Two system is
a modular CVD system designed to address the needs of wafer fabs that demand
greater levels of wafer processing integration, higher volume production and
increased factory automation. The Company is focusing its research and
development efforts on additional Concept Two modules, advanced "gap fill"
technology, primary conductor metals, low K dielectric materials, and
additional advanced technologies for the next generation of smaller geometry
fabrication lines, as well as equipment to process 300mm wafers. The
Company's first offering in the advanced "gap fill" technology market, SPEED,
was introduced in February 1996.
- FOCUS ON MAJOR SEMICONDUCTOR MANUFACTURERS. The Company has sold one
or more CVD systems to each of the 20 largest semiconductor manufacturers in the
world. The long term growth prospects for semiconductors have caused many of
these manufacturers to plan major capacity expansions over the next several
years. The Company's sales objective is to work closely with customers
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to secure purchase orders for multiple systems as such customers expand existing
facilities and build next generation wafer fabs. The Company seeks to build
customer loyalty and achieve a high level of repeat business by offering high
reliability products, comprehensive field support and a responsive parts
replacement and service program.
- EXPANSION OF ASIAN MARKET PRESENCE. An industry source estimates
that Asian manufacturers accounted for over half of the worldwide market for
processing semiconductor equipment in 1996, due to Japan's large
semiconductor industry and the recent rapid growth of manufacturers in Korea,
Taiwan and Singapore. While Novellus derives a significant percentage of its
net sales from the Asian marketplace, the Company believes that substantial
additional growth potential exists. Currently, the Company's local presence
in Asia includes sales and support offices through the Company's wholly owned
subsidiary in Japan and one in each of Korea, Taiwan, Mainland China,
Singapore and Thailand. The Company also sells its products through a
distributor in Japan and manufacturer's representatives in other Asia-Pacific
countries. Novellus feels it is an important part of its current business
strategy to aggressively build its infrastructure in Asia to serve this
rapidly growing region.
- LOW MANUFACTURING COST STRUCTURE. Novellus utilizes an outsourcing
strategy for the manufacture of major subassemblies and performs system design,
assembly and testing in-house. Novellus believes that outsourcing enables it to
minimize its fixed costs and capital expenditures while also providing the
flexibility to increase capacity as needed. This strategy also allows the
Company to focus on product differentiation through system design and quality
control. Through the use of third party manufacturing specialists, the Company
ensures that its subsystems incorporate advanced technologies in robotics, gas
panels and microcomputers. The Company works closely with its suppliers to
achieve mutual cost reduction through joint design efforts.
PRODUCTS
Since the introduction of its original Concept One-Dielectric system
in 1987, the Company has developed and now offers a family of processing systems
for the CVD dielectric and metal markets. The Concept One-Dielectric deposits a
variety of insulating or "dielectric" films on wafers including Oxide, Nitride
and TEOS. In 1990, the Company introduced a modified version of the Concept
One-Dielectric, the Concept One-W, which also uses a CVD process to deposit
blanket tungsten metal films on wafers primarily as the metal interconnect
between conductor layers in the integrated circuit layers. In November 1991,
the Company introduced the Concept Two, which is a modular, integrated
production system capable of depositing both dielectric and conductive metal
layers by combining one or more processing chambers around a common, automated
robotic wafer handler. In February 1996, the Company introduced SPEED on the
Concept Two platform. Targeted at advanced intermetal dielectric (IMD)
deposition, SPEED is the semiconductor industry's first high density plasma
deposition solution capable of high volume manufacturing.
CONCEPT ONE-DIELECTRIC
The Concept One-Dielectric is shipped in two versions, the Concept One-150,
which processes 100, 125, and 150 mm (approximately 4, 5, and 6 inches) wafers
and the Concept One-200, which processes 125, 150 and 200 mm (approximately 5, 6
and 8 inches) wafers and is designed for advanced eight inch fabrication lines.
The Concept One consists principally of two attached chambers and
associated hardware and electronics. The first chamber of the system, called
the "loadlock," isolates the process chamber from the outside environment.
Depending on the model of the Concept One-Dielectric, the loadlock accepts up to
75 wafers sized from 100 to 200 mm (approximately 4 to 8 inches) in diameter in
cassette carriers.
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The operator inserts the cassettes of wafers in batches into the loadlock, and
the pressure inside the loadlock is decreased to create a vacuum, which matches
the constant pressure level of the process chamber. A robotic arm, as the wafer
transport mechanism, in the center of the loadlock transfers wafers one at a
time from the cassettes to the process chamber and, upon completion of the
deposition process, returns the finished wafers to the cassettes. The loadlock
isolates the process chamber from the fabrication environment, permitting the
process chamber to remain at constant temperature and pressure while wafers are
transferred from the cleanroom to the loadlock and from the loadlock to the
process chamber. These stable process chamber conditions enhance film quality,
process repeatability, and throughput. The loadlock design also reduces
particulate contamination because the robotic arm is the only moving mechanism
in the loadlock and because the wafer cassettes are isolated from the cleanroom.
The process chamber for the Concept One-Dielectric has six or eight
stations depending on the particular model. One station is used as a
load/unload site and the remaining five or seven stations are used for wafer
deposition. Each deposition station employs a dedicated shower head which
delivers gases and plasma energy to the wafer surface. In a six station process
chamber for example, each wafer moves through the system and stops at each of
the five deposition stations to receive one-fifth of its preprogrammed film
thickness. Some CVD products, called "single wafer" systems, process only one
wafer at a time in a process chamber, while multistation continuous process
systems, like the Concept One, can process numerous wafers at the same time.
The continuous processing capabilities of a multistation system generally enable
such systems to attain higher throughput while using a less critical, more
repeatable process than would be required for a single wafer system at
equivalent throughput levels. This multiple deposition design also results in
greater film uniformity and improved film quality because small variations in
deposition at any single station tend to be offset by deposition of the same
film at other stations.
After the entire batch of up to 75 wafers has been processed and returned
to the cassettes, an automatic cleaning cycle in the process chamber removes
residual deposition materials, which could otherwise cause particulate
contamination in a subsequent deposition process. During this cleaning cycle,
the loadlock automatically returns to atmospheric pressure, enabling the
operator to remove the cassettes of finished wafers without impacting system
throughout.
The Concept One-Dielectric uses electrical, radio frequency (RF) plasma
energy to enhance thermal energy, enabling the system to process wafers at a
relatively low temperature, thereby reducing the risk of heat damage to existing
metal layers during processing. The system also suppresses hillock formation by
limiting the time that the wafer is exposed to elevated temperatures prior to
deposition. The wafer is heated for 10 seconds or less in advance of deposition
in the Concept One-Dielectric, which the Company believes is one of the shortest
preheat times of any CVD system. Stress related defects are addressed through
the system by addition of a proprietary dual frequency, "stress control" option
which the Company offers. The system's vacuum loadlock reduces the level of
particulates, thereby improving film quality by isolating the process chamber of
the Concept One-Dielectric from temperature and pressure fluctuations. In
addition, the automatic cleaning capability and relatively simple mechanical
design of the system reduce particulate contaminants and thereby increase yields
and film quality.
In 1995, the Company introduced an extension to its Concept One-Dielectric
system, the Concept One Maxus. The Maxus extends the Company's leadership in
nitride passivation by enhancing the nitride deposition rate while retaining
superior nitride film performance. It also enhances the gap fill capability of
TEOS films by enabling fluorinated-TEOS (F-TEOS) processing for .35 micron gap
fill. F-TEOS enables the customer to lower the dielectric constant to 3.7, an
important capability in enhancing device performance.
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The Maxus is available on both the Concept One and Concept Two platform.
CONCEPT ONE-W
The Concept One-W was introduced in 1990 to address the tungsten CVD
market. The Concept One-W deposits blanket tungsten metal films, which are
increasingly used in advanced semiconductor devices to connect multiple metal
layers in the integrated circuit. Like the Concept One-Dielectric, the Concept
One-W uses a multistation, sequential deposition design that achieves high
throughput with desirable film properties for the entire range of film
thickness. The Concept One-W also uses an approach patented by the Company to
provide full-coverage frontside tungsten deposition while preventing deposition
of tungsten on the backside of the wafer. This capability helps prevent the
generation of damaging particles on the wafer and eliminates the need for
time-consuming etching on the backside of the wafer to remove the film.
During 1993, the Concept One-W successfully completed a 21 day, 24 hour per
day wafer manufacturing trial at SEMATECH, a U.S. semiconductor industry
consortium. The results of this extended manufacturing trial demonstrated that
the Concept One-W achieved or surpassed all program goals, which included system
availability, film uniformity, particulates and other film properties. SEMATECH
has also announced that the Concept One-W was one group of U.S. manufactured
semiconductor production tools capable of producing devices with 0.35 micron
geometries. The success of the Concept One-W in these SEMATECH trials was a
major milestone for the Company in attaining market acceptance for the Concept
One-W at major U.S. semiconductor manufacturers and in enabling the Company to
penetrate certain of these important accounts.
CONCEPT TWO
The Concept Two, which was introduced in November 1991, is a modular,
integrated production system that is capable of depositing both dielectric and
conductive metal layers by combining one or more processing chambers around a
common, automated robotic wafer handler. The Concept Two enables the
semiconductor manufacturer to increase production throughput and system
capability as needed without equipment replacement by adding additional process
modules through the Concept Two's modular configuration. The Concept Two was
initially available with a tungsten process chamber and a PVD process module for
deposition of certain metal layers. In late 1994, a dielectric process module
became available for Concept Two systems. The Concept Two has been designed to
be compatible with the modular equipment interface standard established by the
Modular Equipment Standards Committee (MESC), which is sponsored by SEMATECH.
The Concept Two in a typical configuration incorporates a central cassette
module and wafer handler that interfaces with the cleanroom and has multiple
interfaces for process or transport modules. The cassette module manages wafer
movement through its robotics between the various processing stations that can
be included in a particular Concept Two configuration. Different cassette
modules are available depending on the customer requirements. An optional
isolation chamber is also available that is connected to the cassette module to
connect high vacuum process chambers and other portions of the system.
In 1993, the Company introduced the Concept Two-ALTUS, which combines the
modular architecture of the Concept Two system with an advanced tungsten CVD
process chamber. The system features a dual loadlock cassette module with full
factory automation capability to meet the high throughput requirements of high
volume automated eight inch wafer fabs. This dual loadlock cassette
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handler permits continuous operation of the process chamber with one loadlock,
while a second loadlock is simultaneously being loaded or unloaded by the
operator in the cleanroom. Through its modular configuration, the Concept Two
enables the semiconductor manufacturer to combine multistation modules for
slower processes with single wafer modules for faster processes to balance the
throughput of the overall system. A dielectric version of the Concept Two
ALTUS, the Concept Two SEQUEL, was shipped in late 1994. This system brought
the same level of factory automation and throughput to the dielectric market as
the ALTUS did to the metals market. The Concept Two SEQUEL was initially shipped
in a single chamber version targeted at thin dielectric films used in volume
200mm IMD production applications.
In 1994, the Company introduced the Concept Two-Dual ALTUS tungsten
deposition system. The Dual ALTUS features the production proven performance of
Novellus' tungsten CVD chamber in a dual chamber configuration that delivers the
throughput power to dramatically lower the cost of tungsten deposition. The
Company feels that the Dual ALTUS is the best solution in the industry for very
high volume 200mm wafer fabs producing state-of-the-art 0.35um semiconductor
devices.
Subsequent to 1994, the Company has continued to expand its Concept Two
product offerings as follows:
CONCEPT TWO DUAL SEQUEL
This dual chamber version of the SEQUEL dielectric family is designed for
high throughput deposition of thick films, such as layers before CMP (chemical-
mechanical planarization), and dual layer passivation films. It utilizes two
process chambers to provide the throughput power of twelve stations, resulting
in dramatic improvements in productivity for these types of films.
CONCEPT TWO SEQUEL-S AND ALTUS-S
These enhanced versions of the SEQUEL and ALTUS systems offer improved
throughput performance for both thick and thin dielectric films, while occupying
45% less space than previous versions. They also provide a range of improved
maintainability features and design enhancements that reduce customer facilities
costs. They are available in both single and dual chamber versions.
In addition, in 1995 the Company began accepting orders for its Concept Two
Titanium Nitride (TiN) system. This system is used to form a high quality, low
cost barrier/adhesion layer prior to depositing tungsten (W). The Company began
shipments of this system in 1996.
CONCEPT TWO SPEED
Introduced in February 1996, SPEED is the Company's advanced dielectric gap
fill system, the semiconductor capital equipment industry's first high density
plasma deposition solution capable of high-volume manufacturing. SPEED is
targeted for advanced inter-metal dielectric (IMD) deposition for 0.35 micron
devices and below. The IMD market is the largest segment in dielectric CVD and
is also the fastest growing. SPEED is offered either as a stand alone gap fill
system or integrated with the Concept Two SEQUEL to provide a complete high-
throughput, low-cost gap fill and chemical mechanical polishing gap layer
solution for logic manufacturing. The system utilizes a patented hemispherical
source design and a proprietary electrostatic chuck to provide excellent fill,
superior reproducibility, low damage and high throughput. In 1996 the Company
received and shipped orders for multiple production
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SPEED systems and announced an enhanced version (SPEED-S) occupying 40% less
space, thus improving throughput densities for customers.
ANTI REFLECTION LAYER
In December 1996, the Company announced a new plasma enhanced
anti-reflection layer (ARL) product. The ARL product achieves tighter levels
of critical dimension control with i-line and Deep UV lithography in advanced
semiconductor devices while reducing cost per wafer. Running on a Concept Two
Sequel, the ARL offers very competitive throughput and low cost of ownership
for the industry. The Novellus ARL product is currently being used in
production in customer manufacturing facilities.
MARKETING, SALES AND SERVICE
Novellus markets its products worldwide to manufacturers of semiconductors,
including both captive fabrication lines, which produce semiconductors primarily
for internal consumption, and merchant semiconductor manufacturers, which
produce semiconductors primarily for sales to third party customers. In North
America, the Company sells products primarily through a direct sales force. It
has one manufacturer's representative. The Company's U.S. sales and support
offices are located in Boston, Orlando, Austin, Dallas, Phoenix, Hopewell
Junction, New York, Williston, Vermont and Beaverton, Oregon. In Europe, the
Company's products are predominantly sold through a wholly owned subsidiary,
Novellus Systems, Ltd, which has a sales and support facility outside London and
in Scotland. The Company also has sales and services support offices in The
Netherlands, France and Germany. In Asia, the Company sells its products
through a wholly owned subsidiary and through an independent distributor in
Japan, through wholly owned subsidiaries in Korea, Taiwan, Singapore, Mainland
China, and Thailand, and through manufacturers representatives in other Asia
Pacific countries. The Company's Japanese subsidiary maintains two offices
located near Tokyo (including Company headquarters), three offices in
Western Japan, and two offices in Kyushu.
The ability to provide prompt and effective field support is critical to
the Company's sales efforts, due to the substantial operational and financial
commitments made by customers that purchase a CVD system. The Company's strategy
of supporting its installed base through both its customer support and research
and development groups has served to encourage use of the Company's systems in
production applications and has accelerated penetration of certain key accounts.
The Company believes that its marketing efforts are enhanced by the technical
expertise of its research and development personnel who provide customer process
support and participate in a number of industry forums such as conferences and
publications.
The Company believes that its ability to service its customers is enhanced
by the design simplicity of its systems. The Company generally warrants its
products against defects in design, materials, and workmanship. In 1992, the
Company became the first semiconductor equipment manufacturer to extend its
warranty to 24 months from shipment and in 1993 also included the cost of all
consumable parts in the system and preventative maintenance parts. The Company
offers maintenance contracts as an additional service to its customers.
For the years ended December 31, 1996, 1995 and 1994, one customer, Seki
Technotron (a distributor in Japan), accounted for 12%, 11% and 13% of the
Company's net sales, respectively.
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Export sales for the year ended December 31, 1996 were approximately
$295.2 million, or 64% of net sales. For the years ended December 31, 1995,
and 1994, export sales (including sales made by the Company's Japanese
subsidiary) were approximately $209.4 million and $123.9 million,
respectively, or 56% and 55% of net sales, respectively. Export sales
increased due to strong international demand for semiconductor processing
equipment, particularly in Asia.
Historically, the Company has sold a significant proportion of its
systems in any particular period to a limited number of customers. Sales to
the Company's ten largest customers in 1996 and 1995 accounted for 59% and
58% of net sales, respectively. The Company expects that sales of its
products to relatively few customers will continue to account for a high
percentage of its net sales in the foreseeable future.
BACKLOG
As of December 31, 1996, the Company's backlog was $156,434,000, as
compared to a backlog of $151,456,000 at December 31, 1995. The Company
includes in its backlog only those customer orders for which it has accepted
purchase orders and assigned shipment dates within twelve months. All orders
are subject to cancellation or rescheduling by customers with limited or no
penalties. Because of orders received in the same quarter in which a system
is shipped, possible changes in system delivery schedules, cancellations of
orders and delays in systems shipments, the Company's backlog at any
particular date is not necessarily a reliable indicator of actual sales for
any succeeding period.
RESEARCH AND DEVELOPMENT
The semiconductor manufacturing industry is subject to rapid
technological change and new product introductions and enhancements. The
Company's ability to remain competitive in this market will depend in part
upon its ability to develop new and enhanced systems and to introduce these
systems at competitive prices and on a timely and cost-effective basis.
Accordingly, the Company devotes a significant portion of its personnel and
financial resources to research and development programs and seeks to
maintain close relationships with its customers to remain responsive to their
product needs.
The Company's current research and development efforts are directed at
development of new systems and processes and improving existing system
capabilities. The Company is focusing its research and development efforts on
additional Concept Two modules, advanced gap fill technology, primary
conductor metals, low K dielectric materials and additional advanced
technologies for the next generation of smaller geometry fabrication lines,
as well as equipment to process 300mm wafers.
Expenditures for research and development during 1996, 1995 and 1994 were
$53,902,000, $41,009,000, and $26,012,000, or approximately 12%, 11%, and 12% of
net sales, respectively. The Company expects in future years that research and
development expenditures will continue to represent a substantial percentage of
net sales.
The success of the Company in developing, introducing and selling new and
enhanced systems depends upon a variety of factors, including product selection,
timely and efficient completion of product design and development, timely and
efficient implementation of manufacturing and assembly processes, product
performance in the field and effective sales and marketing. There can be no
assurance that the Company will be successful in selecting, developing,
manufacturing and marketing new products or in enhancing its existing products.
As is typical in the semiconductor capital equipment market, the Company has
experienced delays from time to time in the introduction of, and certain
technical and
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manufacturing difficulties with, certain of its systems and enhancements and may
experience delays and technical and manufacturing difficulties in future
introductions or volume production of new systems or enhancements. The Company's
inability to complete the development or meet the technical specifications of
any of its new systems or enhancements or to manufacture and ship these systems
or enhancements in volume in a timely manner would materially adversely affect
the Company's business, financial condition and results of operations. In
addition, the Company may incur substantial unanticipated costs to ensure the
functionality and reliability of its future product introductions early in the
product's life cycle. If new products have reliability or quality problems,
reduced orders or higher manufacturing costs, delays in collecting accounts
receivable and additional service and warranty expense may result. Any of such
events could materially adversely affect the Company's business, financial
condition and results of operations.
MANUFACTURING
The Company's manufacturing activities consist primarily of assembling and
testing components and subassemblies which are acquired from third party vendors
and then integrated into a finished system by the Company. The Company utilizes
an outsourcing strategy for the manufacture of major subassemblies and performs
system design, assembly and testing in-house. Novellus believes that outsourcing
enables it to minimize its fixed costs and capital expenditures while also
providing the flexibility to increase production capacity. This strategy also
allows the Company to focus on product differentiation through system design and
quality control. Through the use of manufacturing specialists, the Company
ensures that its subsystems incorporate advanced technologies in robotics, gas
panels and microcomputers. The Company works closely with its suppliers on
achieving mutual cost reduction through joint design efforts.
The Company manufactures its system units in clean-room environments which
are similar to the clean rooms used by semiconductor manufacturers for wafer
fabrication. This procedure is intended to reduce the amount of particulates
and other contaminants in the final assembled system, which in turn improves
yield and reduces the level of contaminants at the customer level. Following
assembly, the completed system is packaged in a plastic shrink wrap to maintain
cleanroom standards during shipment.
Certain of the components and subassemblies included in the Concept
One-Dielectric, Concept One-W and Concept Two are obtained from a limited group
of suppliers. Although the Company seeks to reduce its dependence on these
limited source suppliers, disruption or termination of certain of these sources
could occur and such disruptions could have at least a temporary adverse effect
on the Company's operations. Moreover, a prolonged inability to obtain certain
components could have a material adverse effect on the Company's business and
results of operations and could result in damage to customer relationships.
COMPETITION
Significant competitive factors in the semiconductor equipment market
include system performance and flexibility, cost, the size of each
manufacturer's installed customer base, capability for customer support and
breadth of product line. The Company believes that it competes favorably in the
CVD marketplace primarily on the basis of system performance and flexibility,
cost and customer support capability.
The semiconductor equipment industry is highly competitive. The Company
faces substantial competition in the markets in which it competes from both
established competitors and potential new
11
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entrants. In the CVD market, the Company's principal competitor is Applied
Materials, Inc., which is a major supplier of CVD systems and has established a
substantial base of CVD and other equipment in large semiconductor
manufacturers. Certain of the Company's competitors have greater financial,
marketing, technical or other resources, broader product lines, greater customer
service capabilities and larger and more established sales organizations and
customer bases than the Company. The Company may also face future competition
from new market entrants from Japan and other overseas and domestic sources. The
Company expects its competitors to continue to improve the design and
performance of their products. There can be no assurance that the Company's
competitors will not develop enhancements to or future generations of
competitive products that will offer superior price or performance features. In
addition, a substantial investment is required by customers to install and
integrate capital equipment into a semiconductor production line. As a result,
once a semiconductor manufacturer has selected a particular vendor's capital
equipment, the Company believes that the manufacturer will be generally reliant
upon that equipment for the specific production line application. Accordingly,
the Company may experience difficulty in selling a product line to a particular
customer for a significant period of time if that customer selects a
competitor's product. Increased competitive pressure could lead to lower prices
for the Company's products, thereby adversely affecting the Company's operating
results. There can be no assurance that the Company will be able to compete
successfully in the future.
PATENTS AND PROPRIETARY RIGHTS
The Company intends to continue to pursue primarily the legal protection
of its technology through patent and trade secret protection. The Company
currently holds eleven patents in the United States, some with pending
foreign counterparts, has sixteen patent applications allowed but not yet
issued or pending in the United States and intends to file additional patent
applications as appropriate. There can be no assurance that patents will
issue from any of these pending applications or that any claims allowed from
existing or pending patents will be sufficiently broad to protect the
Company's technology. While the Company intends to protect its intellectual
property rights vigorously, there can be no assurance that any patents held
by the Company will not be challenged, invalidated or circumvented, or that
the rights granted thereunder will provide competitive advantages to the
Company. The Company also relies on trade secrets and proprietary technology
that it seeks to protect, in part, through confidentiality agreements with
employees, consultants and other parties. There can be no assurance that
these agreements will not be breached, that the Company will have adequate
remedies for any breach, or that the Company's trade secrets will not
otherwise become known to or independently developed by others. See Item 3.
Legal Proceedings.
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OTHER CAUTIONARY STATEMENTS
Certain of the statements contained in this Annual Report on Form 10-K are
forward-looking statements that involve a number of risks and uncertainties, in
addition to those risks and uncertainties described above. These additional
risks and uncertainties could cause actual results to differ materially from
those described herein and include the following:
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- MARKET RISK. The Company's business depends predominantly on capital
expenditures of semiconductor manufacturers, which, in turn, depend on the
current and anticipated market demand for integrated circuits and products
utilizing integrated circuits. The semiconductor industry has historically been
very cyclical and has experienced periodic downturns, which have had a material
adverse effect on the semiconductor industry's demand for semiconductor
processing equipment, including equipment manufactured and marketed by the
Company. No assurance can be given that the Company's net sales and operating
results will not be adversely affected if downturns or slowdowns in the rate of
capital investment in the semiconductor industry occur in the future. In
addition, the semiconductor equipment industry is highly competitive, and
subject to rapid change and new products and enhancements.
- COMPETITION. The Company faces substantial competition in each of the
markets in which it sells its products. Certain of the Company's competitors
are larger, and have greater resources, financial and otherwise, than the
Company. There can be no assurance that the Company will be successful, or as
successful as its competitors, in selecting, developing, manufacturing, and
marketing its new products, or enhancing its existing products. Failure to
successfully develop new products could materially adversely affect the
Company's business, financial condition, and results of operations.
- PATENTS AND PROPRIETARY RIGHTS. There has also been substantial
litigation regarding patent and other intellectual property rights in
semiconductor related industries. The Company is currently involved in such
litigation (see Item 3. Legal Proceedings and Note 9 to the consolidated
financial statements), and, although it is not aware of any infringement by
its products of any patent or proprietary rights of others, it could become
involved in additional litigation in the future. Although the Company does
not believe the outcome of the current litigation will have a material impact
on the Company's financial condition or results of operations, no assurances
can be given that this litigation or future litigation will not have such an
impact.
- INTERNATIONAL OPERATIONS. Export sales accounted for approximately
64%, 56%, and 55% of net sales in 1996, 1995, and 1994, respectively. The
Company anticipates that export sales will account for a significant portion of
net sales in the foreseeable future. As a result, a significant portion of the
Company's sales will be subject to certain risks, including tariffs and other
barriers, difficulties in staffing and managing foreign subsidiary operations,
difficulties in managing distributors, potentially adverse tax consequences, and
the possibility of difficulty in accounts receivable collection. The Company is
also subject to the risks associated with the imposition of legislation and
regulations relating to the import or export of semiconductor products. The
Company cannot predict whether quotas, duties, taxes, or other charges or
restrictions will be implemented by the United States or any other country upon
the importation or exportation of the Company's products in the future. There
can be no assurance that any of these factors or the adoption of restrictive
policies will not have a material adverse effect on the Company's business,
financial condition or results of operations. In addition, sales of systems
shipped by the Company's Japanese subsidiary are denominated in Japanese Yen.
The Company sells the systems to its Japanese subsidiary in U.S. Dollars. It
then enters into forward foreign exchange contracts to hedge against the short-
term impact of foreign currency fluctuations of intercompany accounts payable
denominated in U.S. Dollars recorded by the Japanese subsidiary.
EMPLOYEES
At December 31, 1996, the Company had 1143 full time and temporary
employees.
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The success of the Company's future operations depends in large part on the
Company's ability to recruit and retain engineers and technicians, as well as
marketing, sales, service and other key personnel, who in each case are in great
demand. There can be no assurance that the Company will be successful in
retaining or recruiting key personnel.
None of the Company's employees is represented by a labor union and the
Company has never experienced a work stoppage, slowdown, or strike. The Company
considers its employee relations to be good.
ITEM 2. PROPERTIES
The Company's operations are conducted primarily in a business park and an
additional building located near each other in San Jose, California. The
business park contains five buildings with a combined square footage of 249,408
square feet, three of which are currently occupied by the Company and two of
which are occupied by other parties. The Company leases the business park under
a lease that expires in 2001 and subleases the two buildings that it does not
occupy. Of the three buildings occupied by the Company, one serves as corporate
headquarters and consists of 42,048 square feet, the second is used primarily
for manufacturing and contains 42,624 square feet. and the third consists of
59,904 square feet and is used primarily for office space and warehousing. The
additional building is used for research and development and customer
demonstrations. It consists of 58,000 square feet under a lease that expires in
2001. The Company also operates a research and development facility in
Wilsonville, Oregon containing 16,644 square feet under a lease that expires in
2001.
On October 24, 1996, the Company entered into a 10 year lease agreement for
approximately 4.4 acres of undeveloped land adjacent to the leased business
park. The Company anticipates a research and development facility will be built
on this land to support future business expansion.
The Company also operates facilities in Kawasaki and Sagimihara, Kanagawa
Prefecture, Japan. The former serves as corporate headquarters, sales offices,
service, technology and customer demonstration center and the latter as a
logistics, customer training, and production engineering facility for the
Company's Japanese subsidiary. The facility in Kawasaki is operated under a five
year lease expiring in 2001. The facility in Sagamihara is operated under a two
year lease with options to renew every two years up to a total of ten years.
If all the options to renew are exercised, the lease would end in 2001.
The Company leases various other smaller facilities worldwide which are
used as sales and customer service centers.
ITEM 3. LEGAL PROCEEDINGS
On January 30, 1995, Applied Materials, Inc. (Applied) filed a patent
infringement suit against the Company in the United States District Court for
the Northern District of California (the "TEOS Suit") alleging the Company's
TEOS products infringe Applied's U.S. Patent 5,362,526 issued in November
1994. On September 15, 1995, the Company filed a patent infringement suit
against Applied in the United States District Court for the Northern District
of California (the "Tungsten Suit") alleging that Applied's tungsten products
infringe the Company's U.S. Patent 5,238,499 issued in August 1993. In
addition, on September 15, 1995, Applied filed a patent infringement suit
against the Company in the United States District Court for the Northern
District of California alleging that one of the Company's tungsten processes
infringes Applied's patent 5,028,565 issued in July 1991. On October 10,
1995, the Company filed a counterclaim in the Tungsten Suit alleging that
Applied's TEOS products infringe a second patent of the Company, U.S. Patent
5,425,803 issued in June 1995. On October 26, 1995, the Company filed an
amended counterclaim in the Tungsten Suit alleging that Applied's tungsten
products infringe a third patent of the Company, U.S. Patent 5,374,594 issued
in December 1994. On August 7, 1996 the Company filed an amended complaint
and an amended counterclaim in the Tungsten suit alleging that Applied's
tungsten products infringe a fourth patent of the Company, U.S. Patent
5,230,741 issued in July 1993. In November 1996 the Court in the Tungsten
Suit upheld the Company's claim that one of Applied's products infringes the
Company's U.S. Patent 5,425,803 but has not yet ruled on Applied's invalidity
and unenforceability claims. In December 1996 in the TEOS suit, the same
court ruled in favor of Applied on certain summary judgment and related
motions which will limit the issues the Company will be able to litigate at
trial and make more difficult the Company's defense of Applied's claims at
trial. Applied's claims in the matters in litigation relate to the Company's
Concept One, Concept Two and Maxus products and seek an injunction against
use of Applied's patented technology in Company products as well as
unspecified damages. The Company's claims relate to Applied's P5000 CVD,
Century CVD and Optima DX2 products and seek an injunction against use of
the Company's patented technology in Applied products as well as unspecified
damages.
The trial in the TEOS Suit is now scheduled for March 24, 1997. The
Company has filed a notice with the Court of the Company's intention to ask
the United States Patent and Trademark Office for a reexamination of Applied's
patent 5,362,526 upon which Applied's TEOS Suit claims are based. The trial in
the Tungsten Suit is currently scheduled for August 1997, but is expected to
be continued until a later date. Management's expectations are that the
ultimate resolution of these matters will not have a material adverse effect
on the Company's financial position, cash flows, or results of operations and
no provision has been made for the ultimate outcome of these matters in the
Company's financial statements. However based on future developments,
management's estimate of the ultimate outcome could change in the near term.
In addition, in the normal course of business, the Company from time to
time receives inquiries with regard to possible other patent infringements. The
Company believes it is unlikely that the outcome of the patent infringement
inquiries will have a material adverse effect on the Company's financial
position or results of operations.
There has been substantial litigation regarding patent and other
intellectual property rights in semiconductor-related industries. Although the
Company is not aware of any infringement by its products of any patents or
proprietary rights of others except as claimed by Applied, further
commercialization of the Company's products could provoke claims of infringement
from third parties. In the future, litigation may be necessary to enforce
patents issued to the Company, to protect trade secrets or know-how owned by the
Company or to defend the Company against claimed infringement of the rights of
others and to determine the scope and validity of the proprietary rights of
others. Any such litigation could result in substantial cost and diversion of
effort by the Company, which by itself could have a material adverse effect on
the Company's financial condition and operating results. Further, adverse
determinations in such litigation could result in the Company's loss of
proprietary rights, subject the Company to significant liabilities to third
parties, require the Company to seek licenses from third parties or prevent the
Company from manufacturing or selling its products, any of which could have a
material adverse effect on the Company's financial condition and results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information required by this item is included under "Stock Information"
on page 16 of the Company's 1996 Annual Report to Shareholders and is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is included under "Selected
Consolidated Financial Data" on page 11 of the Company's 1996 Annual Report to
Shareholders and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information required by this item is included under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 12-15 of the Company's 1996 Annual Report to Shareholders and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is included on pages 17-30 of the
Company's 1996 Annual Report to Shareholders and is incorporated herein by
reference. Such information is listed under Item 14 of Part IV of this Report on
Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is included under "Proposal No. 1:
Election of Directors," "Other Information - Executive Officers" and "Compliance
with Section 16(a) of the Exchange Act" in the Company's Proxy Statement to be
filed in connection with its 1997 Annual Meeting of Shareholders and is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is included under "Other
Information - Executive Compensation" in the Company's Proxy Statement to be
filed in connection with its 1997 Annual Meeting of Shareholders and is
incorporated herein by reference.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item is included under "Other
Information - Security Ownership of Certain Beneficial Owners and Management" in
the Company's Proxy Statement to be filed in connection with its 1997 Annual
Meeting of Shareholders and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is included under "Other
Information - Certain Transactions" in the Company's Proxy Statement to be filed
in connection with its 1997 Annual Meeting of Shareholders and is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(a) 1. FINANCIAL STATEMENTS. The following financial statements and
schedules of the Registrant are contained on pages 17-31 of the Company's 1996
Annual Report to Shareholders and are incorporated herein by reference:
Report of Ernst & Young, LLP Independent Auditors.
Consolidated Balance Sheets at December 31, 1996 and 1995.
Consolidated Statements of Income for each of the three years in the
period ended December 31, 1996.
Consolidated Statements of Shareholders' Equity for each of the three
years in the period ended December 31, 1996.
Consolidated Statements of Cash Flows for each of the three years in
the period ended December 31, 1996.
Notes to Consolidated Financial Statements.
2. FINANCIAL STATEMENT SCHEDULES. The following financial statement
schedule for each of the three years in the period ended December 31, 1996 is
filed as part of this Report on Form 10-K and should be read in conjunction with
the financial statements:
Schedule II - Valuation and Qualifying Accounts.
Schedules not listed above have been omitted because they are
either inapplicable or the required information has been given in the financial
statements or the notes thereto.
(b) REPORTS ON FORM 8-K. None filed during quarter ended December 31,
1996.
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<PAGE>
(c) EXHIBITS
3.1 (5) Amended and Restated Articles of Incorporation of
Registrant...............................................
3.2 (1) Form of Bylaws of Registrant, as amended to date.........
4.1 (1) Registration Rights Agreement dated December 21,
1987 between Registrant, holders of Series A
Preferred Stock, Series B Preferred Stock, Series D
Preferred Stock, Warrants to purchase Series B and
Series C Preferred Stock and Robert F. Graham, and
amendment thereto........................................
10.1 (8) Credit Agreement dated June 23, 1992 between
Registrant and Bank of America National Trust and
Savings Association......................................
10.2 (9) First Amendment dated May 1, 1993 to Credit
Agreement dated June 23, 1992 between Registrant
and Bank of America National Trust and Savings
Association..............................................
10.3(10) Second Amendment dated April 30, 1994 to Credit
Agreement dated June 23, 1992 between Registrant
and Bank of America National Trust and Savings
Association..............................................
10.4(11) Third Amendment dated April 28, 1995 to Credit
Agreement dated June 23, 1992 between Registrant
and Bank of America National Trust and Savings
Association..............................................
10.5(9) Credit Agreement dated April 30, 1993 between
Registrant and Sanwa Bank of California, as amended
August 19, 1993..........................................
10.6(9) Guaranty dated November 29, 1993 between Registrant
and The Sanwa Bank Ltd...................................
10.7(10) Line of Credit Agreement dated June 13, 1994
between Registrant and Sanwa Bank of California..........
10.8(11) Amendment dated May 2, 1995 of Commercial Credit
Agreement dated June 13, 1994 between Registrant
and Sanwa Bank of California.............................
10.9 (5) Business Loan Agreement dated August 2, 1990
between Registrant and Silicon Valley Bank...............
10.10 (7) Change in Terms Agreement dated September 23, 1991
to Business Loan Agreement dated August 2, 1990
between Registrant and Silicon Valley Bank...............
10.11 (8) Change in Terms Agreement dated July 29, 1992 to
Business Loan Agreement dated August 2, 1990
between Registrant and Silicon Valley Bank...............
10.12(9) Change in Terms Agreement dated May 12, 1993 to
Business Loan Agreement dated August 2, 1990
between Registrant and Silicon Valley Bank...............
10.13(9) Modification dated May 12, 1993 to Business Loan
Agreement dated August 2, 1990 between Registrant
and Silicon Valley Bank, as amended September 23,
1991 and July 29, 1992...................................
10.14(10) Loan Modification Agreement dated July 15, 1995
between
18
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(c) EXHIBITS
Registrant and Silicon Valley Bank.......................
10.15(9) Commercial Guaranty dated May 12, 1993 between the
Registrant, Silicon Valley Bank and Individual
Employees of Novellus Systems, Inc.......................
10.16(7) Loan and Guaranty Agreement dated November 29, 1991
between Registrant and The Japan Development Bank........
10.17(11) Commercial Loan Agreement dated November 15, 1995
between Registrant and Sumitomo Bank of California.......
10.18 Commercial Loan Agreement dated April 3, 1996
between Registrant and Sumitomo Bank of California.......
10.19 Amendment Agreement Number 1 dated October 18, 1996
to Commercial Loan Agreement dated April 3, 1996
between Registrant and Sumitomo Bank of California.......
10.20(11) Guarantee dated August 31, 1995 between Registrant
and The Mitsubishi Bank, Limited.........................
10.21(5) Commercial Lease dated October 19, 1990 between
Registrant and Sobrato Development Companies #871,
concerning property located at 81 Vista Montana,
San Jose, California.....................................
10.22(1) Commercial Lease dated March 11, 1987 between
Registrant and California Second, Ltd., concerning
property located at 3950 North First Street, San
Jose, California.........................................
10.23(3) First Amendment dated February 8, 1989 to
Commercial Lease dated March 11, 1987 between
Registrant and California Second Ltd., concerning
property located at 3950 North First Street, San
Jose, California.........................................
10.24(11) Lease dated September 26, 1995 between Registrant
and W. F. Batton & Co., Inc. concerning property
located at 3590 North First Street, San Jose,
California...............................................
10.25(10) Standard Sublease dated April 28, 1994 between
Registrant and Granada Computer Services, Inc.,
concerning property located 3940 North First
Street, San Jose, California.............................
10.26(11) Sublease Agreement dated January 13, 1995 between
Registrant and LTX Corporation concerning property
located at 3970 North First Street, San Jose,
California...............................................
10.27(11) Assignment and Assumption of Lease dated November
22, 1995 among Registrant, Circadian, Incorporated
(Assignor) and California Second, Ltd. (Landlord)
concerning property located at 3942 North First
Street, San Jose, California.............................
10.28(11) Lease Agreement dated January 11, 1996 between
Registrant and South Bay/Fortran concerning
property located at 4415 Fortran Court, San Jose,
California...............................................
10.29 Purchase and Master Lease Agreement dated April 10,
1996 among Registrant and Sumitomo Bank Leasing and
Finance, Inc. (as Agent for Lessors) concerning
property located from 3930 through 3970 North First
Street, San Jose, California.............................
10.30 Purchase and Master Lease Agreement dated October
24, 1996 among Registrant and Sumitomo Bank Leasing
and Finance, Inc. (as Agent for Lessors) concerning
property located at the corner of
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(c) EXHIBITS
First Street and Headquarters Drive,
San Jose, California.....................................
10.31(1) Commercial Lease dated May 2, 1988 between
Registrant and Aetna Life Insurance Company,
concerning property located at 12820 Hillcrest
Road, Suite 122, Dallas, Texas...........................
10.32(6) Amendment dated March 27, 1990 to Commercial Lease
dated May 2, 1988 between Registrant and Aetna Life
Insurance Company, concerning property located at
12820 Hillcrest Road, Suite 122, Dallas, Texas...........
10.33(9) Amendment dated March 29, 1993 to Lease dated May
2, 1993 between Registrant and Aetna Life Insurance
Company, concerning property located at 12820
Hillcrest Road, Suite 122, Dallas, Texas.................
10.34(10) Standard Office Building Lease Agreement dated
August 15, 1994 between Registrant and Aetna Life
Insurance Company concerning property located at
12840 Hillcrest Road, Suite 104, Dallas, Texas...........
10.35(6) Lease Agreement dated May 1, 1990 between
Registrant and East Williston Road Associates,
concerning property located at One Blair Park,
Blair Park, Williston, Vermont...........................
10.36(7) Amendment dated May 23, 1991 to Lease Agreement
dated May 1, 1990 between Registrant and East
Williston Road Associates, concerning property
located at One Blair Park, Blair Park, Williston,
Vermont..................................................
10.37(9) Letter Extension dated October 25, 1993 to Lease
Agreement dated May 1, 1990 between Registrant and
East Williston Road Associates, concerning property
located at One Blair Park, Blair Park, Williston,
Vermont..................................................
10.38(11) Addendum dated August 10, 1995 to Lease Agreement
dated May 1, 1990 between Registrant and East
Williston Road Associates, concerning property
located at One Blair Park, Blair Park, Williston,
Vermont..................................................
10.39(7) Office Lease dated July 1, 1991 between Registrant
and Ray Prather, concerning property located at
4090 W. State Street, Boise, Idaho.......................
10.40(8) Office Lease dated January 29, 1992 between
Registrant and Alan Arkawy, concerning property
located at 1123 Route 52, Fishkill, New York.............
10.41(11) Lease dated August 14, 1995 between Registrant and
East Fishkill Corporate Park Investments concerning
property located at 25 Corporate Park Drive, Route
52, East Fishkill, New York..............................
10.42(7) Commercial Lease dated February 1, 1991 between
Registrant (Nippon Novellus Systems, K.K.) and
Tenko, K.K., concerning property located at 1-12-3
Kamitsuruma, Sagimihara City, Kanagawa Prefecture,
Japan....................................................
10.43 Commercial Lease dated May 1, 1996 between
Registrant (Nippon Novellus Systems, K.K.) and KSP
Community, Inc, concerning property located at C-10F
R&D KSP-Bldg., 3-2-1 Sakado, Takatsu-ku,
Kawasaki-shi, Kanagawa 213, Japan (English Summary
of original Exhibit In Japanese).........................
10.44 Commercial Lease dated February 1, 1995 between
Registrant
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(c) EXHIBITS
(Nippon Novellus Systems, K.K.) and Tenko Agency Co,
Ltd, concerning property located at 1-12-3
Kamitsuruma, Sagimihara City, Kanagawa
Prefecture, Japan (English Summary of original
Exhibit In Japanese).....................................
10.45 Commercial Lease dated July 15, 1995 between
Registrant (Nippon Novellus Systems, K.K.) and
Heiwa Kosan Co. Ltd., concerning property located
at 6-1-3 Nishinakajima, Yodogawa-ku, Osaka-shi,
Osaka 532, Japan (English Summary of original
Exhibit In Japanese).....................................
10.46 Commercial Lease dated November 21, 1994 between
Registrant (Nippon Novellus Systems, K.K.) and Usui
Kosan Ltd, concerning property located at 2-10-18-D
Ohi, Hakata-ku, Fukuoka-shi, Fukuoka 812, Japan
(English Summary of original Exhibit In Japanese)........
10.47 Commercial Lease dated May 11, 1995 between
Registrant (Nippon Novellus Systems, K.K.) and
Tadokora Jisho Co, Ltd, concerning property
located at 1-25-25 Onoue, Kumamoto-shi, Kumamoto
862, Japan. (English Summary of original Exhibit In
Japanese)................................................
10.48 Commercial Lease dated December 13, 1995 between
Registrant (Nippon Novellus Systems, K.K.) and
Meiko Takahashi, concerning property located at 5-8-41
Kasuga-cho, Fukuyama-shi, Hiroshima 721, Japan
(English Summary of original Exhibit In Japanese)........
10.49 Commercial Lease dated March 1, 1996 between
Registrant (Nippon Novellus Systems, K.K.) and
Tatsuo Ogawa, concerning property located at 9-12
Nishihamada, Yokkaichi-shi, Mie 510, Japan (English
Summary of original Exhibit In Japanese).................
10.50(8) Commercial Lease dated June 15, 1992 between
Registrant (Novellus Systems, Ltd.) and
Exploitatiemaatschappij Dillenberg B.V., concerning
property located at Dillenburgstraat 5-B Eindhoven,
The Netherlands..........................................
10.51(8) Commercial Lease dated March 26, 1992 between
Registrant (Novellus Systems, Ltd.) and W.B.
Properties Ltd., concerning property located at 1
to 5 Pyrford Road, West End Garage, West Byfleet,
Surrey, United Kingdom...................................
10.52(9) Lease dated August 17, 1993 between Registrant and
OTR, acting as the duly authorized nominee of the
Board of State Teachers Retirement System of Ohio,
concerning property located at 1701 Directors
Boulevard, Austin, Texas.................................
10.53(11) Lease Agreement dated May 26, 1995 between
Registrant and OTR, acting as the duly authorized
nominee of the Board of State Teachers Retirement
System of Ohio, concerning property located at 1701
Directors Boulevard, Austin, Texas.......................
10.54(9) Lease dated November 2, 1993 between Registrant and
Arnbil Associates, concerning property located at 5
Mount Royal Avenue, Marlborough, Massachusetts...........
10.55 Lease dated November 13, 1996 between R. K.
Associates-Marlboro, Inc., concerning property
located at 201 Boston Post
21
<PAGE>
(c) EXHIBITS
Road West, Marlborough, Massachusetts. ..................
10.56(9) Lease dated November 4, 1993 between Registrant and
Canterbury Associates, concerning property located
at 19 Walnut Hill Road, Poughkeepsie, New York...........
10.57(9) Lease dated November 17, 1992 between Registrant
and Aetna Casualty and Surety Company, concerning
property located at Two Gateway, Suite 420,
Phoenix, Arizona.........................................
10.58(9) First Amendment dated November 30, 1993 to Lease
dated November 17, 1992 between Registrant and
Aetna Casualty and Surety Company, concerning
property located at Two Gateway, Suite 420,
Phoenix, Arizona.........................................
10.59(9) Lease dated April 25, 1990 between Registrant and
Korea Women's Missionary Union...........................
10.60(11) Office Rental Contract dated November 28, 1994
between Registrant (Novellus Systems Korea Co.,
Ltd.) and Suh Won Building Management Company
concerning property located at 57 Garak-Dong
Songpa-Gu, Seoul, Korea..................................
10.61(11) Sublease executed February 2, 1995 between
Registrant (Novellus Systems, Ltd.) and Leyland DAF
Finance PLC with the consent of Central Regional
Council concerning property located at the Upper
Ground Floor (East Wing), The Forum, Callendar
Business Park, Falkirk, Scotland.........................
10.62 Lease Agreement dated August 22, 1996 between
Registrant (Novellus Systems SARL) concerning
property located at Building D, 1st Floor, Parc de
la Julienne, Coudray Montceaux, France (English
Summary of original Exhibit In Japanese).................
10.63(11) Commercial Lease Agreement dated February 1, 1996
between Registrant and Faison & Associates, Inc.
d/b/a Southland Management Company, not
individually, but solely as Management and Leasing
Broker for Plaza Central I concerning property
located at 6220 S. Orange Blossom Trail, Suite 186,
Orlando, Florida.........................................
10.64(11) Office Lease dated March 20, 1995 between
Registrant and Hartford Underwriters Insurance
Company concerning property located at 15350 North
West Greenbrier Parkway, Suite B-340, Beaverton,
Oregon...................................................
10.65 Office Lease dated May 3, 1995 between Registrant
and Security Capital Industrial trust concerning
property located at 26277 SW 95th Avenue, Suites
402-403, Wilsonville, Oregon.............................
10.66(11) Lease dated February 15, 1995 between Registrant
(Novellus Systems Taiwan) and Mr. Woo-Shung Lin and
Mr. Wing-Yee Lee concerning property located at 5F-1,
No. 295, Sec. 2, Kwang Fu Road, Hsinchu, Taiwan
R.O.C. (English translation of original exhibit in
the Chinese language)....................................
10.67 Tenancy Agreement dated March 14, 1996 between
Registrant (Novellus Singapore PTE Ltd) and UOL
Property Investments PTE Ltd concerning property
located at 101 Thompson Road, #21-01/02 United
Square, Singapore........................................
10.68(2) Equipment Lease dated March 28, 1989 between Registrant and
22
<PAGE>
(c) EXHIBITS
Matsco Leasing Company...................................
10.69(7) Distribution Agreement dated April 1, 1991 between
Registrant and Seki Technotron Corporation...............
10.70(9) First Amendment dated January 1, 1993 to
Distribution Agreement dated April 1, 1991 between
the Registrant and Seki Technotron Corporation...........
10.71(11) Distribution Agreement dated January 1, 1996
between Registrant and Seki Technotron Corporation.......
*10.72(7) Registrant's Amended and Restated 1984 Stock Option
Plan, together with forms of agreements thereunder.......
*10.73(9) Registrant's 1992 Stock Option Plan, together with
forms of agreements thereunder...........................
*10.74(8) Registrant's 1992 Employee Stock Purchase Plan...........
*10.75(1) Form of Agent Indemnification Agreement and
amendment thereto........................................
*10.76(4) Employment Agreement dated June 1, 1989 between
Registrant and Evert van de Ven..........................
*10.77(8) Employment Agreement dated as of June 15, 1992
between the Registrant and Peter Hanley..................
*10.78(9) Offer Letter Agreement dated November 1, 1993
between Registrant and Richard S. Hill...................
*10.79(8) Promissory Note secured by Deed of Trust between
Registrant and Daniel Queyssac secured by property
located at 6051 Reston Road, Care Creek, Arizona.........
13.1 Registrant's 1996 Annual Report to Shareholders
(only portions of this document specifically
incorporated herein by reference are included in
this exhibit)............................................
22.1 Subsidiaries of Registrant...............................
23.1 Consent of Ernst & Young, LLP, Independent
Auditors.................................................
25.1 Powers of Attorney (see page 25).........................
-------------
(1) Incorporated by reference to the exhibit filed with Registrant's
Registration Statement on Form S-1, File No. 33-23011, which was declared
effective August 11, 1988.
(2) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on March 31,
1989.
(3) Incorporated by reference to the exhibit filed with Registrant's
Registration Statement on Form S-1, File No. 33-28108, which was declared
effective May 2, 1989.
(4) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on March 30,
1990.
(5) Incorporated by reference to the exhibit filed with Registrant's
Registration Statement on Form S-1, File No. 33-37607, which was declared
effective November 19, 1990.
23
<PAGE>
(6) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on March 29,
1991.
(7) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on March 30,
1992.
(8) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on February 26,
1993.
(9) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on February 18,
1994.
(10) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on March 16,
1995.
(11) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on March 20,
1996.
* Management contracts or compensatory plans or arrangements.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, in San Jose,
California on the 19th day of March, 1997.
NOVELLUS SYSTEMS, INC.
By: /s/Robert H. Smith
-------------------------------
Robert H. Smith
EXECUTIVE VICE PRESIDENT, FINANCE AND
ADMINISTRATION,
CHIEF FINANCIAL OFFICER AND SECRETARY
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Richard S. Hill and Robert H. Smith, and
each of them, his attorneys-in-fact, each with the 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 each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
SIGNATURE CAPACITY DATE
--------- -------- ----
/s/Richard S. Hill President and Chief Executive March 19, 1997
----------------------- Officer (Principal Executive
Richard S. Hill Officer)
/s/Robert H. Smith Executive Vice President, Finance March 19, 1997
----------------------- and Administration, Chief
Robert H. Smith Financial Officer and Secretary
(Principal Financial and
Accounting Officer)
/s/Richard S. Hill Chairman of the Board of March 19, 1997
----------------------- Directors
Richard S. Hill
/s/D. James Guzy Director March 19, 1997
-----------------------
D. James Guzy
/s/Tom Long Director March 19, 1997
-----------------------
Tom Long
/s/Glen Possley Director March 19, 1997
-----------------------
Glen Possley
25
<PAGE>
/s/Robert H. Smith Director March 19, 1997
-----------------------
Robert H. Smith
/s/Joseph Van Poppelen Director March 19, 1997
-----------------------
Joseph Van Poppelen
26
<PAGE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
Description Balance at Charged Deductions(1) Balance at
- --------------------------------- Beginning to Costs ------------- End of
of Period and Period
---------- Expenses -----------
--------
<S> <C> <C> <C> <C>
Year Ended December 31, 1994 $ 799 $ 1,097 $ 135 $ 1,761
Allowance for Doubtful Accounts
Year Ended December 31, 1995 1,761 495 60 2,196
Allowance for Doubtful Accounts
Year Ended December 31, 1996 2,196 581 0 2,777
Allowance for Doubtful Accounts
</TABLE>
- ---------------
(1) Charges for uncollectable accounts
27
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER DOCUMENT SEQUENTIALLY
- -------------- -------- NUMBERED PAGE
-------------
3.1 (5) Amended and Restated Articles of Incorporation of
Registrant. . . . . . . . . . . . . . . . . . . .
3.2 (1) Form of Bylaws of Registrant, as amended to
date. . . . . . . . . . . . . . . . . . . . . . .
4.1 (1) Registration Rights Agreement dated December 21,
1987 between Registrant, holders of Series A
Preferred Stock, Series B Preferred Stock,
Series D Preferred Stock, Warrants to purchase
Series B and Series C Preferred Stock and
Robert F. Graham, and amendment thereto.. . . . .
10.1 (8) Credit Agreement dated June 23, 1992 between
Registrant and Bank of America National Trust
and Savings Association.. . . . . . . . . . . . .
10.2 (9) First Amendment dated May 1, 1993 to Credit
Agreement dated June 23, 1992 between Registrant
and Bank of America National Trust and Savings
Association.. . . . . . . . . . . . . . . . . . .
10.3(10) Second Amendment dated April 30, 1994 to Credit
Agreement dated June 23, 1992 between Registrant
and Bank of America National Trust and Savings
Association.. . . . . . . . . . . . . . . . . . .
10.4(11) Third Amendment dated April 28, 1995 to Credit
Agreement dated June 23, 1992 between Registrant
and Bank of America National Trust and Savings
Association . . . . . . . . . . . . . . . . . . .
10.5(9) Credit Agreement dated April 30, 1993 between
Registrant and Sanwa Bank of California, as
amended August 19, 1993.. . . . . . . . . . . . .
10.6(9) Guaranty dated November 29, 1993 between
Registrant and The Sanwa Bank Ltd. . . . . . . .
10.7(10) Line of Credit Agreement dated June 13, 1994
between Registrant and Sanwa Bank of
California. . . . . . . . . . . . . . . . . . . .
10.8 Second Amendment dated April 5, 1996 to Line of
Credit Agreement dated June 13, 1994 between
Registrant and Sanwa Bank of California.. . . . .
10.9 Third Amendment dated October 24, 1996 to Line of
Credit Agreement dated June 13, 1994 between
Registrant and Sanwa Bank of California.. . . . .
10.10(11) Amendment dated May 2, 1995 of Commercial Credit
Agreement dated June 13, 1994 between Registrant
and Sanwa Bank of California. . . . . . . . . . .
10.11(5) Business Loan Agreement dated August 2, 1990
between Registrant and Silicon Valley Bank. . . .
10.12(7) Change in Terms Agreement dated September 23,
1991 to Business Loan Agreement dated August 2,
1990 between Registrant and Silicon Valley
Bank. . . . . . . . . . . . . . . . . . . . . . .
10.13(8) Change in Terms Agreement dated July 29, 1992 to
Business Loan Agreement dated August 2, 1990
between Registrant and Silicon Valley Bank. . . .
10.14(9) Change in Terms Agreement dated May 12, 1993 to
Business Loan Agreement dated August 2, 1990
between Registrant and Silicon
<PAGE>
EXHIBIT NUMBER DOCUMENT SEQUENTIALLY
- -------------- -------- NUMBERED PAGE
-------------
Valley Bank.. . . . . . . . . . . . . . . . . . .
10.15(9) Modification dated May 12, 1993 to Business Loan
Agreement dated August 2, 1990 between Registrant
and Silicon Valley Bank, as amended September 23,
1991 and July 29, 1992. . . . . . . . . . . . . .
10.15(10) Loan Modification Agreement dated July 15, 1995
between Registrant and Silicon Valley Bank. . . .
10.17(9) Commercial Guaranty dated May 12, 1993 between
the Registrant, Silicon Valley Bank and
Individual Employees of Novellus Systems, Inc.. .
10.18(7) Loan and Guaranty Agreement dated November 29,
1991 between Registrant and The Japan Development
Bank. . . . . . . . . . . . . . . . . . . . . . .
10.19(11) Commercial Loan Agreement dated November 15, 1995
between Registrant and Sumitomo Bank of
California. . . . . . . . . . . . . . . . . . . .
10.20 Commercial Loan Agreement dated April 3, 1996
between Registrant and Sumitomo Bank of
California. . . . . . . . . . . . . . . . . . . .
10.21 Amendment Agreement Number 1 dated October 18,
1996 to Commercial Loan Agreement dated April 3,
1996 between Registrant and Sumitomo Bank of
California. . . . . . . . . . . . . . . . . . . .
10.22(11) Guarantee dated August 31, 1995 between Registrant
and The Mitsubishi Bank, Limited. . . . . . . . .
10.23 Guarantee dated June 7, 1996 between Registrant
and The Sumitomo Bank, Limited. . . . . . . . . .
10.24 Guarantee dated July 24, 1996 between Registrant
and The Sanwa Bank, Limited . . . . . . . . . . .
10.25 Guarantee dated July 24, 1996 between Registrant
and The Bank Tokyo-Mitsubishi, Limited. . . . . .
10.26(5) Commercial Lease dated October 19, 1990 between
Registrant and Sobrato Development Companies
#871, concerning property located at 81 Vista
Montana, San Jose, California.. . . . . . . . . .
10.27(1) Commercial Lease dated March 11, 1987 between
Registrant and California Second, Ltd., concerning
property located at 3950 North First Street,
San Jose, California. . . . . . . . . . . . . . .
10.28(3) First Amendment dated February 8, 1989 to
Commercial Lease dated March 11, 1987 between
Registrant and California Second Ltd., concerning
property located at 3950 North First Street,
San Jose, California. . . . . . . . . . . . . . .
10.29(11) Lease dated September 26, 1995 between Registrant
and W. F. Batton & Co., Inc. concerning property
located at 3590 North First Street, San Jose,
California. . . . . . . . . . . . . . . . . . . .
10.30(10) Standard Sublease dated April 28, 1994 between
Registrant and Granada Computer Services, Inc.,
concerning property located 3940 North First
Street, San Jose, California. . . . . . . . . . .
10.31(11) Sublease Agreement dated January 13, 1995
between Registrant and LTX Corporation concerning
property located at 3970 North First Street,
San Jose, California. . . . . . . . . . . . . . .
10.32(11) Assignment and Assumption of Lease dated
November 22, 1995 among Registrant, Circadian,
Incorporated (Assignor) and
<PAGE>
EXHIBIT NUMBER DOCUMENT SEQUENTIALLY
- -------------- -------- NUMBERED PAGE
-------------
California Second, Ltd. (Landlord) concerning
property located at 3942 North First Street,
San Jose, California. . . . . . . . . . . . . . .
10.33(11) Lease Agreement dated January 11, 1996 between
Registrant and South Bay/Fortran concerning
property located at 4415 Fortran Court,
San Jose, California. . . . . . . . . . . . . . .
10.34 Purchase and Master Lease Agreement dated
April 10, 1996 among Registrant and Sumitomo
Bank Leasing and Finance, Inc. (as Agent for
Lessors) concerning property located from 3930
through 3970 North First Street, San Jose,
California. . . . . . . . . . . . . . . . . . . .
10.35 Purchase and Master Lease Agreement dated
October 24, 1996 among Registrant and Sumitomo
Bank Leasing and Finance, Inc. (as Agent for
Lessors) concerning property located at the
corner of First Street and Headquarters Drive,
San Jose, California. . . . . . . . . . . . . . .
10.36(1) Commercial Lease dated May 2, 1988 between
Registrant and Aetna Life Insurance Company,
concerning property located at 12820 Hillcrest
Road, Suite 122, Dallas, Texas. . . . . . . . . .
10.37(6) Amendment dated March 27, 1990 to Commercial
Lease dated May 2, 1988 between Registrant and
Aetna Life Insurance Company, concerning
property located at 12820 Hillcrest Road,
Suite 122, Dallas, Texas. . . . . . . . . . . . .
10.38(9) Amendment dated March 29, 1993 to Lease dated
May 2, 1993 between Registrant and Aetna Life
Insurance Company, concerning property located
at 12820 Hillcrest Road, Suite 122,
Dallas, Texas.. . . . . . . . . . . . . . . . . .
10.39(10) Standard Office Building Lease Agreement dated
August 15, 1994 between Registrant and Aetna Life
Insurance Company concerning property located at
12840 Hillcrest Road, Suite 104, Dallas, Texas. .
10.40(6) Lease Agreement dated May 1, 1990 between
Registrant and East Williston Road Associates,
concerning property located at One Blair Park,
Blair Park, Williston, Vermont. . . . . . . . . .
10.41(7) Amendment dated May 23, 1991 to Lease Agreement
dated May 1, 1990 between Registrant and East
Williston Road Associates, concerning property
located at One Blair Park, Blair Park,
Williston, Vermont. . . . . . . . . . . . . . . .
10.42(9) Letter Extension dated October 25, 1993 to Lease
Agreement dated May 1, 1990 between Registrant
and East Williston Road Associates, concerning
property located at One Blair Park, Blair Park,
Williston, Vermont. . . . . . . . . . . . . . . .
10.43(11) Addendum dated August 10, 1995 to Lease Agreement
dated May 1, 1990 between Registrant and East
Williston Road Associates, concerning property
located at One Blair Park, Blair Park,
Williston, Vermont. . . . . . . . . . . . . . . .
10.44(7) Office Lease dated July 1, 1991 between
Registrant and Ray Prather, concerning property
located at 4090 W. State Street, Boise, Idaho.. .
10.45(8) Office Lease dated January 29, 1992 between
Registrant and Alan Arkawy, concerning property
located at 1123 Route 52, Fishkill, New York. . .
<PAGE>
EXHIBIT NUMBER DOCUMENT SEQUENTIALLY
- -------------- -------- NUMBERED PAGE
-------------
10.46(11) Lease dated August 14, 1995 between Registrant
and East Fishkill Corporate Park Investments
concerning property located at 25 Corporate Park
Drive, Route 52, East Fishkill, New York. . . . .
10.47(7) Commercial Lease dated February 1, 1991 between
Registrant (Nippon Novellus Systems, K.K.) and
Tenko, K.K., concerning property located at
1-12-3 Kamitsuruma, Sagimihara City, Kanagawa
Prefecture, Japan.. . . . . . . . . . . . . . . .
10.48 Commercial Lease dated March 22, 1996 between
Registrant (Nippon Novellus Systems, K.K.) and
KSP Community, K.K. an agent for KSP K.K.,
concerning property located at C-10F R&D KSP-
Bldg., 3-2-1 Sakado, Takatsu-ku, Kawasaki-shi,
Kanagawa 213, Japan (English Summary of original
Exhibit In Japanese). . . . . . . . . . . . . . .
10.49 Commercial Lease dated March 1, 1996 between
Registrant (Nippon Novellus Systems, K.K.) and
Tatsunaga Kogawa, concerning property located
at 9-12 Nishihamada, Yokkaichi-shi, Mie 510,
Japan (English Summary of original Exhibit
In Japanese). . . . . . . . . . . . . . . . . . .
10.50(8) Commercial Lease dated June 15, 1992 between
Registrant (Novellus Systems, Ltd.) and
Exploitatiemaatschappij Dillenberg B.V.,
concerning property located at
Dillenburgstraat 5-B Eindhoven, The
Netherlands.. . . . . . . . . . . . . . . . . . .
10.51(8) Commercial Lease dated March 26, 1992 between
Registrant (Novellus Systems, Ltd.) and W.B.
Properties Ltd., concerning property located at
1 to 5 Pyrford Road, West End Garage, West
Byfleet, Surrey, United Kingdom.. . . . . . . . .
10.52(9) Lease dated August 17, 1993 between Registrant
and OTR, acting as the duly authorized nominee of
the Board of State Teachers Retirement System of
Ohio, concerning property located at 1701
Directors Boulevard, Austin, Texas. . . . . . . .
10.53(11) Lease Agreement dated May 26, 1995 between
Registrant and OTR, acting as the duly authorized
nominee of the Board of State Teachers Retirement
System of Ohio, concerning property located at
1701 Directors Boulevard, Austin, Texas.. . . . .
10.54(9) Lease dated November 2, 1993 between Registrant
and Arnbil Associates, concerning property
located at 5 Mount Royal Avenue, Marlborough,
Massachusetts.. . . . . . . . . . . . . . . . . .
10.55 Lease dated November 13, 1996 between R. K.
Associates-Marlboro, Inc., concerning property
located at 201 Boston Post Road West,
Marlborough, Massachusetts. . . . . . . . . . . .
10.56(9) Lease dated November 4, 1993 between Registrant
and Canterbury Associates, concerning property
located at 19 Walnut Hill Road, Poughkeepsie,
New York. . . . . . . . . . . . . . . . . . . . .
10.57(9) Lease dated November 17, 1992 between Registrant
and Aetna Casualty and Surety Company,
concerning property located at Two Gateway,
Suite 420, Phoenix, Arizona.. . . . . . . . . . .
10.58(9) First Amendment dated November 30, 1993 to Lease
dated
<PAGE>
EXHIBIT NUMBER DOCUMENT SEQUENTIALLY
- -------------- -------- NUMBERED PAGE
-------------
November 17, 1992 between Registrant and
Aetna Casualty and Surety Company, concerning
property located at Two Gateway, Suite 420,
Phoenix, Arizona. . . . . . . . . . . . . . . . .
10.59(9) Lease dated April 25, 1990 between Registrant
and Korea Women's Missionary Union. . . . . . . .
10.60(11) Office Rental Contract dated November 28, 1994
between Registrant (Novellus Systems Korea Co.,
Ltd.) and Suh Won Building Management Company
concerning property located at 57 Garak-Dong
Songpa-Gu, Seoul, Korea.. . . . . . . . . . . . .
10.61(11) Sublease executed February 2, 1995 between
Registrant (Novellus Systems, Ltd.) and Leyland
DAF Finance PLC with the consent of Central
Regional Council concerning property located at
the Upper Ground Floor (East Wing), The Forum,
Callendar Business Park, Falkirk, Scotland. . . .
10.62 Lease Agreement dated August 22, 1996 between
Registrant (Novellus Systems SaRL) concerning
property located at Building D, 1st Floor,
Parc de la Julienne, Coudray Montceaux, France
(English Summary of original Exhibit In
Japanese).. . . . . . . . . . . . . . . . . . . .
10.63(11) Commercial Lease Agreement dated February 1, 1996
between Registrant and Faison & Associates, Inc.
d/b/a Southland Management Company, not
individually, but solely as Management and
Leasing Broker for Plaza Central I concerning
property located at 6220 S. Orange Blossom Trail,
Suite 186, Orlando, Florida.. . . . . . . . . . .
10.64(11) Office Lease dated March 20, 1995 between
Registrant and Hartford Underwriters Insurance
Company concerning property located at 15350 North
West Greenbrier Parkway, Suite B-340, Beaverton,
Oregon. . . . . . . . . . . . . . . . . . . . . .
10.65 Office Lease dated May 3, 1995 between Registrant
and Security Capital Industrial trust concerning
property located at 26277 SW 95th Avenue, Suites
402-403, Wilsonville, Oregon. . . . . . . . . . .
10.66(11) Lease dated February 15, 1995 between Registrant
(Novellus Systems Taiwan) and Mr. Woo-Shung Lin
and Mr. Wing-Yee Lee concerning property located
at 5F-1, No. 295, Sec. 2, Kwang Fu Road, Hsinchu,
Taiwan R.O.C. (English translation of original
exhibit in the Chinese language). . . . . . . . .
10.67 Tenancy Agreement dated March 14, 1996 between
Registrant (Novellus Singapore PTE Ltd) and UOL
Property Investments PTE Ltd concerning property
located at 101 Thompson Road, #21-01/02 United
Square, Singapore.. . . . . . . . . . . . . . . .
10.68(2) Equipment Lease dated March 28, 1989 between
Registrant and Matsco Leasing Company.. . . . . .
10.69(7) Distribution Agreement dated April 1, 1991 between
Registrant and Seki Technotron Corporation. . . .
10.70(9) First Amendment dated January 1, 1993 to
Distribution Agreement dated April 1, 1991 between
the Registrant and Seki Technotron Corporation. .
<PAGE>
EXHIBIT NUMBER DOCUMENT SEQUENTIALLY
- -------------- -------- NUMBERED PAGE
-------------
10.71(11) Distribution Agreement dated January 1, 1996
between Registrant and Seki Technotron
Corporation.. . . . . . . . . . . . . . . . . . .
*10.72(7) Registrant's Amended and Restated 1984 Stock
Option Plan, together with forms of agreements
thereunder. . . . . . . . . . . . . . . . . . . .
*10.73(9) Registrant's 1992 Stock Option Plan, together
with forms of agreements thereunder.. . . . . . .
*10.74(8) Registrant's 1992 Employee Stock Purchase Plan. .
*10.75(1) Form of Agent Indemnification Agreement and
amendment thereto.. . . . . . . . . . . . . . . .
*10.76(4) Employment Agreement dated June 1, 1989 between
Registrant and Evert van de Ven.. . . . . . . . .
*10.77(8) Employment Agreement dated as of June 15, 1992
between the Registrant and Peter Hanley.. . . . .
*10.78(9) Offer Letter Agreement dated November 1, 1993
between Registrant and Richard S. Hill. . . . . .
*10.79(8) Promissory Note secured by Deed of Trust between
Registrant and Daniel Queyssac secured by
property located at 6051 Reston Road,
Care Creek, Arizona.. . . . . . . . . . . . . . .
13.1 Registrant's 1996 Annual Report to Shareholders
(only portions of this document specifically
incorporated herein by reference are included
in this exhibit). . . . . . . . . . . . . . . . .
22.1 Subsidiaries of Registrant. . . . . . . . . . . .
23.1 Consent of Ernst & Young, LLP, Independent
Auditors. . . . . . . . . . . . . . . . . . . . .
25.1 Powers of Attorney (see page 25). . . . . . . . .
- ---------------
(1) Incorporated by reference to the exhibit filed with Registrant's
Registration Statement on Form S-1, File No. 33-23011, which was declared
effective August 11, 1988.
(2) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on March 31,
1989.
(3) Incorporated by reference to the exhibit filed with Registrant's
Registration Statement on Form S-1, File No. 33-28108, which was declared
effective May 2, 1989.
(4) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on March 30,
1990.
(5) Incorporated by reference to the exhibit filed with Registrant's
Registration Statement on Form S-1, File No. 33-37607, which was declared
effective November 19, 1990.
(6) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on March 29,
1991.
<PAGE>
(7) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on March 30,
1992.
(8) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on February 26,
1993.
(9) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on February 18,
1994.
(10) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on March 16,
1995.
(11) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on March 20,
1996.
* Management contracts or compensatory plans or arrangements.
<PAGE>
SECOND AMENDMENT TO LINE OF CREDIT AGREEMENT
This SECOND AMENDMENT TO LINE OF CREDIT AGREEMENT ("SECOND AMENDMENT"),
dated as of April 5, 1996, is entered into by and between Novellus Systems, Inc.
("BORROWER") and Sanwa Bank California ("BANK").
RECITALS
A. The Bank and the Borrower are parties to a Line of Credit Agreement
dated as of June 13, 1994, as amended by the Amendment to Credit Agreement dated
as of May 2, 1995, (as so amended, the "Credit Agreement"), pursuant to which
the Bank has extended certain credit facilities to the Borrower and certain of
its subsidiaries.
B. The Borrower has requested that the Bank agree to certain amendments
to the Credit Agreement.
C. The Bank is willing to amend the Credit Agreement, subject to the
terms and conditions of this Second Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledge, Bank and Borrower mutually agree to amend said
Credit Agreement as follows:
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings, if any, assigned to them in the Credit
Agreement.
2. AMENDMENTS TO CREDIT AGREEMENT.
(a) Section 4.05 of the Credit Agreement is hereby amended to
add the following at the end of the subsection;
"The Bank acknowledges that the Borrower will enter into a
Purchase and Master Lease Agreement, dated as of April 10, 1996, by and among
Novellus Systems, Inc., the lessors referred to therein and Sumitomo Bank
Leasing and Finance, Inc. as agent for the lessors, as the same may be amended
from time to time and that from time to time Borrower may grant a security
interest with respect to its assets in connection with Borrower's obligations
under the Lease, and the Bank further acknowledges and agrees that the entering
into the Lease and the granting from time to time of such security interests
shall not be deemed to constitute a material adverse change in the financial
condition or operations of Borrower.
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(b) Section 5.12 of the Credit Agreement shall be amended
by replacing the semicolon at the end of subsection with a semicolon and adding
the following:
"provided, however, security interests granted from time to
time in connection with the obligations of Borrower pursuant to the Lease shall
not violate the terms of this subsection or this Agreement."
3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents
and warrants to the Bank as follows:
(a) No Event of Default, or event which with the giving of
notice, the lapse of time, or both, would be an Event of Default, has occurred
and is continuing.
(b) The execution, delivery and performance by the Borrower
of this Second Amendment have been duly authorized by all necessary corporate
and other action and do not and will not require any registration with, consent
or approval of, notice to or action by, any person (including any governmental
authority) in order to be effective and enforceable. The Credit Agreement as
amended by this Second Amendment constitutes the legal, valid and binding
obligations of the Borrower, enforceable against it in accordance with its
respective terms, without defense, counterclaim or offset.
(c) All representations and warranties of the Borrower
contained in the Credit Agreement are true and correct.
(d) The Borrower is entering this Second Amendment on the
basis of its own investigation and for its own reasons, without reliance upon
the Bank or any other person.
4. EFFECTIVE DATE. This Second Amendment will become effective as
of April 5, 1996 (the "Effective Date"), provided that the Bank has received
from the Borrower a duly executed original of this Second Amendment.
5. RESERVATION OF RIGHTS. The Borrower acknowledges and agrees that
the execution and delivery by the Bank of this Second Amendment shall not be
deemed to create a course of dealing or otherwise obligate the Bank to forbear
or execute similar amendments under the same or similar circumstances in the
future.
6. MISCELLANEOUS.
(a) Except as herein expressly amended, all terms, covenants
and provisions of the Credit Agreement are and shall remain in full force and
effect and all references therein to the Credit Agreement shall henceforth refer
to the Credit Agreement as amended by this Second Amendment. This Second
Amendment shall be deemed incorporated into, and a part of, the Credit
Agreement.
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(b) This Second Amendment shall be binding upon and insure
to the benefit of the parties hereto and thereto and their respective successors
and assigns. No third party beneficiaries are intended in connection with this
Second Amendment.
(c) This Second Amendment shall be governed by and
construed in accordance with the law of the State of California (without regard
to principles of conflicts of laws).
(d) This Second Amendment may be executed in any number
of counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
(e) This Second Amendment, together with the Credit
Agreement, contains the entire and exclusive agreement of the parties hereto
with reference to the matters discussed herein and therein. This Second
Amendment supersedes all prior drafts and communications with respect thereto.
This Second Amendment may not be amended except in writing executed by the
Borrower and the Bank.
(f) If any term or provision of this Second Amendment shall
be deemed prohibited by or invalid under any applicable law, such provision
shall be invalidated without affecting the remaining provisions of this Second
Amendment or the Credit Agreement, respectively.
(g) Borrower covenants to pay to or reimburse the Bank,
upon demand, for all costs and expenses (including allocated costs of in-house
counsel) incurred in connection with the development, preparation, negotiation,
execution and delivery of this Second Amendment.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Second Amendment as of the date first above written.
SANWA BANK CALIFORNIA NOVELLUS SYSTEMS, INC.
By: /s/ illegible By: /s/ William J. Wall
------------------------------------- ------------------------------
Title: VP & Manager Title: Chief Financial Officer
Title:
/s/ John P. Root
Treasurer
3
<PAGE>
THIRD AMENDMENT TO LINE OF CREDIT AGREEMENT
This THIRD AMENDMENT TO LINE OF CREDIT AGREEMENT ("THIRD AMENDMENT"), dated
as of October 24, 1996 ("Effective Date"), is entered into by and between
Novellus Systems, Inc. ("Borrower") and Sanwa Bank California ("BANK").
RECITALS
A. The Bank and the Borrower are parties to a Line of Credit Agreement
dated as of June 13, 1994, as amended by the Amendment to Credit Agreement dated
as of May 2, 1995, as amended by a Second Amendment to Line of Credit Agreement
dated as of April 5, 1996, (as so amended, the "Credit Agreement"), pursuant to
which the Bank has extended certain credit facilities to the Borrower and
certain of its subsidiaries.
B. The Borrower has requested that the Bank agree to certain amendments
to the Credit Agreement.
C. The Bank is willing to amend the Credit Agreement, subject to the
terms and conditions of this Third Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledge, Bank and Borrower mutually agree to amend said
Credit Agreement as follows:
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings, if any, assigned to them in the Credit
Agreement.
2. AMENDMENTS TO CREDIT AGREEMENT.
(a) Section 4.05 of the Credit Agreement is hereby amended to
add the following at the end of the subsection:
"The Bank acknowledges that the Borrower will enter into a
Purchase and Master Lease Agreement, dated as of October 24, 1996, by and among
Novellus Systems, Inc., the lessors referred to therein and Sumitomo Bank
Leasing and Finance, Inc. as agent for the lessors, as the same may be amended
from time to time (the "Second Lease") and that from time to time Borrower may
grant a security interest with respect to its assets in connection with
Borrower's obligations under the Second Lease; and the Bank further acknowledges
and agrees that the entering into the Second Lease and the granting from time to
time of such security interests shall not be deemed to constitute a material
adverse change in the financial condition or operations of Borrower.
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(b) Section 5.12 of the Credit Agreement shall be amended by
replacing the semicolon at the end of subsection with a semicolon and adding the
following:
"provided, however, security interests granted from time to
time in connection with the obligations of Borrower pursuant to the Second Lease
shall not violate the terms of this subsection or this Agreement."
3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants to the Bank as follows:
(a) No Event of Default, or event which with the giving of
notice, the lapse of time, or both, would be an Event of Default, has occurred
and is continuing.
(b) The execution, delivery and performance by the Borrower of
this Third Amendment have been duly authorized by all necessary corporate and
other action and do not and will not require any registration with, consent or
approval of, notice to or action by, any person (including any governmental
authority) in order to be effective and enforceable. The Credit Agreement as
amended by this Third Amendment constitutes the legal, valid and binding
obligations of the Borrower, enforceable against it in accordance with its
respective terms, without defense, counterclaim or offset.
(c) All representations and warranties of the Borrower contained
in the Credit Agreement are true and correct.
(d) The Borrower is entering this Third Amendment on the basis
of its own investigation and for its own reasons, without reliance upon the Bank
or any other person.
4. EFFECTIVE DATE. This Third Amendment will become effective as of the
Effective Date, provided that the Bank has received from the Borrower a duly
executed original of this Third Amendment.
5. RESERVATION OF RIGHTS. The Borrower acknowledges and agrees that the
execution and delivery by the Bank of this Third Amendment shall not be deemed
to create a course of dealing or otherwise obligate the Bank to forbear or
execute similar amendments under the same or similar circumstances in the
future.
6. MISCELLANEOUS.
(a) Except as herein expressly amended, all terms, covenants and
provisions of the Credit Agreement are and shall remain in full force and effect
and all references therein to the Credit Agreement shall henceforth refer to the
Credit Agreement as amended by this Third Amendment. This Third Amendment shall
be deemed incorporated into, and a part of, the Credit Agreement.
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<PAGE>
(b) This Third Amendment shall be binding upon and insure to the
benefit of the parties hereto and thereto and their respective successors and
assigns. No third party beneficiaries are intended in connection with this
Third Amendment.
(c) This Third Amendment shall be governed by and construed in
accordance with the law of the State of California (without regard to principles
of conflicts of laws).
(d) This Third Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
(e) This Third Amendment, together with the Credit Agreement,
contains the entire and exclusive agreement of the parties hereto with reference
to the matters discussed herein and therein. This Third Amendment supersedes
all prior drafts and communications with respect thereto. This Third Amendment
may not be amended except in writing executed by the Borrower and the Bank.
(f) If any term or provision of this Third Amendment shall be
deemed prohibited by or invalid under any applicable law, such provision shall
be invalidated without affecting the remaining provisions of this Third
Amendment or the Credit Agreement, respectively.
(g) Borrower covenants to pay to or reimburse the Bank, upon
demand, for all costs and expenses (including allocated costs of in-house
counsel) incurred in connection with the development, preparation, negotiation,
execution and delivery of this Third Amendment.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Third Amendment as of the date first above written.
SANWA BANK CALIFORNIA NOVELLUS SYSTEMS, INC.
By: /s/ illegible By: /s/ John P. Root
-------------------------------- -----------------------------------
Title: AVP Title: Treasurer
----------------------------- --------------------------------
3
<PAGE>
COMMERCIAL LOAN AGREEMENT
<PAGE>
COMMERCIAL LOAN AGREEMENT
This Commercial Loan Agreement dated as of April 3, 1996 ("Agreement") is
between Sumitomo Bank of California ("Bank") and Novellus Systems,
Inc.("Borrower").
1. LINE OF CREDIT, AMOUNT AND TERMS
Bank agrees to make available to Borrower a line of credit on the following
terms, covenants and conditions:
1.1 LINE OF CREDIT AMOUNT.
Unsecured Line of Credit. During the Availability Period, Bank will
provide an Unsecured Line of Credit to Borrower. The maximum amount of this
Line of Credit (the "Commitment") is One Million Dollars ($1,000,000).
Borrower's obligation to repay this Unsecured Line of Credit is evidenced by a
promissory note substantially in the form of Exhibit A attached hereto (the
"Unsecured Line Note"),
(a) MAXIMUM LOAN BALANCE. Borrower agrees not to permit the
outstanding principal balance of the Unsecured Line of Credit plus the
outstanding amounts of any letters of credit, including amounts drawn on letters
of credit and not yet reimbursed, and any amounts outstanding under obligations
to Bank of third parties which are guaranteed by Borrower (such sum is the "Loan
Balance") to exceed the Commitment.
1.2 AVAILABILITY PERIOD.
The period under which Borrower may draw on the Unsecured Line of Credit
("Availability Period") is between the date of this Agreement and June 30, 1998
(the "Maturity Date") unless Borrower is in default, in which event Bank need
not make any advances.
1.3 INTEREST RATE.
(a) Unless Borrower elects an Offshore Rate based Interest Rate as
described below, the interest rate is Bank's Prime Rate in effect from time to
time.
(b) The "Prime Rate" equals the rate of interest set from time to
time by Bank at its head office in San Francisco, California as its Prime Rate.
The Prime Rate is determined by
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Bank as a means of pricing credit extensions to some customers and is neither
tied to any external rate of interest or index nor is it necessarily the lowest
rate of interest charged by Bank at any given time for any particular class of
customers or credit extensions. Any changes in the interest rate resulting from
a change in the Prime Rate shall take effect without notice on the date
specified at the time the Prime Rate is set.
(c) OFFSHORE RATE/RATE PLUS DISCLOSED SPREAD. Borrower may elect to
have all or portions of the principal balance of the Unsecured Line of Credit
bear interest at the Offshore Rate plus One and Three Fourths percent (1.75%).
Designation of an Offshore Rate portion is subject to the following
requirements:
(i) The interest period during which the Offshore Rate will be in
effect will be no shorter than 30 days and no longer than 180 days as
selected by Borrower with consent of Bank. The last day of the interest
period will be determined by Bank using the practices of the offshore
dollar inter-bank market.
(ii) Each Offshore Rate portion will be for an amount not less than
One Million dollars ($1,000,000).
(iii) The "Offshore Rate" means the interest rate determined by the
following formula, rounded upward to the nearest 1/100 of one percent. All
amounts in the calculation will be determined by Bank as of the first day
of interest period.
Offshore Rate = EURODOLLAR RATE
(1.00 - Reserve Percentage)
Where,
(A) "Eurodollar Rate" means the interest rate (rounded upward to
the nearest 1/16th of one percent) at which Bank's Grand Cayman Branch
would offer U.S. dollar deposits for the applicable interest period to
other major banks in the offshore dollar inter-bank market.
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<PAGE>
(B) "Reserve Percentage" means the total of the maximum reserve
percentages for determining the reserves to be maintained by member
banks of the Federal Reserve System for Eurocurrency Liabilities, as
defined in the Federal Reserve Board Regulation D, rounded upward to
the nearest 1/100 of one percent. The percentage will be expressed as
a decimal, and will include, but not be limited to, marginal,
emergency, supplemental, special, and other reserve percentages.
(iv) Borrower may not elect an Offshore Rate with respect to any
portion of the principal balance of the Unsecured Line of Credit which is
scheduled to be repaid before the last day of the applicable interest
period.
(v) No portion of the principal balance of the line of credit
already bearing interest at the offshore Rate may be converted to a
different rate during its interest period.
(vi) Each prepayment of an Offshore Rate option, whether
voluntary, by reason of acceleration or otherwise, will be accompanied by
the amount of accrued interest on the amount prepaid, and a prepayment fee
equal to the amount (if any) by which
(A) the additional interest which would have been payable on the
amount prepaid had it not been paid until the last day of the interest
period, exceeds
(B) the interest which would have been recoverable by Bank by
placing the amount prepaid on the deposit in the offshore dollar
market for a period starting on the date on which it was prepaid and
ending on the last day of the interest period for such portion.
(vii) Bank will have no obligation to accept an election of an
Offshore Rate portion if any of the following described events has occurred
and is continuing:
(x) Dollar deposits in the principal amount, and for periods
equal to the interest
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<PAGE>
period, of an Offshore Rate portion are not available in the
offshore Dollar interbank market; or
(y) the Offshore Rate does not accurately reflect the cost of an
Offshore Rate portion.
1.4 REPAYMENT TERMS/UNSECURED LINE OF CREDIT.
(a) Borrower will pay interest in arrears commencing on December 1,
1995, and then on each first day of each month thereafter until payment in full
of all amounts outstanding under the Unsecured Line of Credit.
(b) Borrower will repay in full, all principal, interest and other
charges outstanding under the Unsecured Line of Credit no later than the
Maturity Date.
(c) Subject to provisions contained elsewhere herein, Borrower may
prepay the Unsecured Line of Credit in full or in part at any time. The
prepayment will be applied first to interest and charges and then to the most
remote installment of principal due under this Agreement.
1.5 LETTER OF CREDIT LINE. This Line of Credit may be used for financing:
(i) commercial letters of credit with a maximum maturity of 360
days but not to extend beyond the Maturity Date. Each commercial letter of
credit will require drafts payable at sight or up to 180 days after sight.
(ii) standby letters of credit with a maximum maturity of 24
months but not to extend beyond the Maturity Date.
(a) The amount of outstanding letters of credit, including amounts
drawn on letters of credit and not yet reimbursed, may not exceed at any one
time the Commitment,
(b) Any sum drawn under a letter of credit may, at the option of
Bank, be added to the principal amount outstanding under this Agreement. The
amount will bear interest and be due as described elsewhere in this Agreement.
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<PAGE>
(c) In the event any letters of credit are outstanding on the
Maturity Date, or in the event an Event of Default shall have occurred, Borrower
shall immediately prepay such letters of credit and deposit with Bank, as cash
collateral for the obligations of Borrower under such letters of credit (and
Borrower hereby grants to Bank a security interest in such cash collateral), an
amount equal to the face amount of all outstanding letters of credit, to be
applied to repay draws under letters of credit as and when made.
(d) The issuance of any letter of credit or any amendment to a letter
of credit is subject to Bank's written approval and must be in form and content
satisfactory to Bank and in favor of a beneficiary acceptable to Bank.
(e) Borrower will sign Bank's form Application and Security Agreement
for Commercial Letter of Credit or Application and Agreement for Standby Letter
of Credit.
(f) Borrower agrees that Bank may automatically charge its checking
account for applicable fees, discounts, and other charges relating to any
letters of credit.
(g) Borrower will pay Bank a non-refundable fee equal to 1.0% per
annum of the outstanding undrawn amount of each standby letter of credit,
payable in advance, calculated on the basis of the face amount outstanding on
the day the fee is calculated. Standby letters of credit issued for the purpose
of allowing Borrower to borrow local currencies from Sumitomo Bank Limited will
carry an issuance fee equal to .5% per annum.
(h) Borrower will pay any issuance and/or other fees that Bank
notifies Borrower will be charged for issuing and processing letters of credit
for Borrower.
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<PAGE>
2. FEES AND EXPENSES
2.1 FEES.
(a) LOAN FEE. Borrower agrees to pay a Two Thousand Five Hundred
Dollar ($2,500) loan fee on June 30, 1996 and again on June 30, 1997.
2.2 EXPENSES.
(a) Borrower agrees to immediately repay Bank for expenses that
include, without limitation, filing, recording and search fees, appraisal
fees, title report fees, and documentation fees.
(b) Borrower agrees to reimburse Bank for any expenses it incurs
in the negotiation and preparation of this Agreement and any agreement or
instrument required by this Agreement. Expenses include, but are not
limited to, reasonable attorneys', fees, including any allocated costs of
Bank's in-house counsel.
3. DISBURSEMENTS, PAYMENTS AND COSTS
3.1 REQUEST FOR CREDIT. Each request for an extension of credit will be
made in writing in a manner acceptable to Bank, or by another means acceptable
to Bank.
3.2 DISBURSEMENTS AND PAYMENTS. Each disbursement by Bank and each
payment by Borrower will be:
(a) made at Bank's branch (or other location) selected by Bank
from time to time.
(b) made for the account of Bank's branch selected by Bank from
time to time.
(c) made in immediately available funds, or such other type of
funds selected by Bank.
(d) evidenced by records kept by Bank. In addition, Bank may,
at its discretion, require Borrower to sign one or more promissory notes.
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<PAGE>
3.3 TELEPHONE AUTHORIZATION.
(a) Bank may honor telephone instructions for advances or
repayments or for the designation of optional interest rates given by any
officer of Borrower or a person or persons so authorized by any officer of
Borrower.
(b) Advances will be deposited in, and repayments will be
withdrawn from, Borrower's account number 019-001809-70, or such other
accounts with Bank as designated in writing by Borrower.
(c) Borrower indemnifies and holds harmless Bank (including its
officers, employees, and agents) from all liability, loss, and costs in
connection with any act resulting from telephone instructions it reasonably
believes are made by an officer of Borrower or a person authorized by an
officer of Borrower. This indemnity and agreement to hold harmless will
survive this Agreement's termination.
3.4 DIRECT DEBIT
(a) Borrower agrees that interest, principal payments and any
fees will be deducted automatically on the due date from Borrower's checking
account number 019-001809-70.
(b) Bank will debit Borrower's account on the dates the payments
become due. If a due date does not fall on a banking day, Bank will debit the
account on the first Banking Day following the due date.
(c) Borrower will maintain sufficient funds in the account on
the dates Bank enters debits authorized by this Agreement. If there are
insufficient funds in the account on the date Bank enters any debit authorized
by this Agreement Borrower shall immediately pay such shortfall to Bank.
3.5 BANKING DAYS. Unless otherwise provided in this Agreement, a
"Banking Day" is a day other than a Saturday or a Sunday, on which Bank is open
for business in California. For amounts bearing interest at an Offshore Rate
(if any), a Banking Day is a day other than a Saturday or a Sunday on which Bank
is open for business in California and dealing in offshore dollars.
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All payments and disbursements which would be due on a day which is not a
Banking Day will be due on the next Banking Day. All payments received on a day
which is not a Banking Day will be applied to the applicable Line of Credit on
the next Banking Day.
3.6 TAXES. Borrower will not deduct any taxes from any payments made to
Bank. If any government authority imposes any taxes or charges on any payments
to Borrower, Borrower will pay the taxes or charges. Upon request by Bank,
Borrower will confirm that it has paid the taxes by giving Bank official tax
receipts (or notarized copies) within 30 days after the due date.
3.7 ADDITIONAL COSTS. Borrower will pay Bank, on demand, for Bank's costs
or losses arising from any statute or regulation, or any request or requirement
of a regulatory agency which is applicable to Bank. The costs and losses will be
allocated to the loans in a manner determined by Bank, using any reasonable
method. The costs include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to Bank's assets and
commitments for credit.
3.8 INTEREST CALCULATION. Except as otherwise stated in this Agreement,
all interest and fees, if any, will be computed on the basis of a 360-day year
and the actual number of days elapsed. This results in more interest or a
higher fee than if a 365-day year is used.
3.9 INTEREST ON LATE PAYMENTS. At Bank's sole option in each instance,
any amount not paid when due under this Agreement (including interest) shall
bear interest from the due date at Bank's Prime Rate plus Two percent (2.0%).
This may result in compounding of interest.
3.10 DEFAULT RATE. If any amount under this Agreement is not paid in full
when due at maturity or when due because of the exercise of an option by Bank,
Borrower agrees to pay interest on the outstanding principal and interest at the
rate of interest otherwise provided under this Agreement plus Two percent
(2.0%).
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<PAGE>
3.11 OVERDRAFTS. At Bank's sole option in each instance, Bank may make
advances under this Agreement to prevent or cover an overdraft on any account of
Borrower with Bank. Each such advance will accrue interest from the date of the
advance or the date on which the account is overdrawn, whichever occurs first,
at the interest rate described in this Agreement.
4. CONDITIONS
4.1 INITIAL ADVANCE. Bank must have received the following items, in form
and content acceptable to Bank, before it is required to extend any credit to
Borrower under this Agreement:
(a) AUTHORIZATIONS. Evidence that the execution, delivery and
performance by Borrower of this Agreement and any instrument or agreement
required under this Agreement have been duly authorized.
(b) NOTES. The fully executed Unsecured Note.
(c) GOOD STANDING. Certificates of good standing for Borrower from
its state of incorporation and from any other state in which Borrower is
required to qualify to conduct its business.
4.2 CONDITIONS TO EACH ADVANCE. Before each extension of credit,
including the first:
(a) The Representations and Warranties hereunder must be true
and correct.
5. REPRESENTATIONS AND WARRANTIES
When Borrower signs this Agreement, and until Bank is repaid in full,
Borrower makes the following representations and warranties. Each request for
an extension of credit constitutes a renewed representation.
5.1 ORGANIZATION OF BORROWER. Borrower is a corporation duly formed and
existing under the laws of the state where organized.
5.2 AUTHORIZATION. This Agreement, and any instrument or agreement
required hereunder, are within Borrower's powers,
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<PAGE>
have been duly authorized, and do not conflict with any of its organizational
papers.
5.3 ENFORCEABLE AGREEMENT. This Agreement and any related loan documents,
are legal, valid and binding agreements of Borrower, enforceable against
Borrower in accordance with their terms, and any instrument or agreement
required hereunder or thereunder, when executed and delivered, will be similarly
legal, valid, binding and enforceable.
5.4 GOOD STANDING. In each state in which Borrower does business, it is
properly licensed, in good standing, and, where required, in compliance with
fictitious name statutes.
5.5 NO CONFLICTS. This Agreement does not conflict with any law,
agreement, or obligation by which Borrower is bound.
5.6 FINANCIAL INFORMATION. All financial and other information that has
been or will be supplied to Bank, including Borrower's financial statement dated
as of December 31, 1995, is:
(a) sufficiently complete to give Bank accurate knowledge of
Borrower's financial condition.
(b) in form and content required by Bank.
(c) in compliance with all government regulations that apply.
Since the dates of the financial statements specified above, there has
been no material adverse change in the assets or the financial condition of
Borrower. The Bank acknowledges that the Borrower will enter into a Purchase
and Master Lease Agreement, dated as of April , 1996, by and among Novellus
Systems, Inc., the Lessors referred to therein and Sumitomo Bank Leasing and
Finance, Inc., as Agent for the Lessors, as the same may be amended from time to
time (the "Lease") and that from time to time the Borrower may grant a security
interest with respect to its assets in connection with the Borrower's
obligations under the Lease as provided for in Section 6.7(c) of this Agreement;
and the Bank further acknowledges and agrees that entering into the Lease and
the granting from time to time of such security interest shall not be deemed to
constitute a material adverse change in the assets or financial condition of
Borrower.
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5.7 LAWSUITS. There is no lawsuit, tax claim or other dispute pending or
threatened against Borrower except as has been disclosed in writing to Bank
prior to the date hereof.
5.8 PERMITS, FRANCHISES. Borrower possesses all permits, memberships,
franchises, contracts and licenses required and all trademark rights, trade name
rights, patent rights and fictitious name rights necessary to enable it to
conduct the business in which it is now engaged without conflict with the rights
of others.
5.9 OTHER OBLIGATIONS. Borrower is not in default on any obligation for
borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation.
5.10 INCOME TAX RETURNS. Borrower has filed all required tax returns and
has no knowledge of any pending assessments or adjustments of its income tax for
any year.
5.11 NO EVENT OF DEFAULT. No event has occurred which is, or with notice
or lapse of time or both would be, an Event of Default under this Agreement,
5.12 ERISA PLANS.
(a) Borrower has fulfilled its obligations, if any, under the
minimum funding standards of ERISA and the Code with respect to each Plan
and is in compliance in all material respects with the presently applicable
provisions of ERISA and the Code, and has not incurred any liability with
respect to any Plan under Title IV of ERISA.
(b) No reportable event has occurred under Section 4043(b) of
ERISA for which the PBGC requires 30 day notice.
(c) No action by Borrower to terminate or withdraw from any Plan
has been taken and no notice of intent to terminate a Plan has been filed
under Section 4041 of ERISA.
(d) No proceeding has been commenced with respect to a Plan
under Section 4042 of ERISA, and no event has occurred or condition exists
which might
11
<PAGE>
constitute grounds for the commencement of such a proceeding.
(e) The following terms have the meanings indicated for purposes
of this Agreement:
(i) "Code" means the Internal
Revenue Code of 1986, as amended from time to time.
(ii) "ERISA" means the
Employee Retirement Income Art of 1974, as amended from time to time.
(iii) "PBGC" means the Pension
Benefit Guaranty Corporation established pursuant to Subtitle A of
Title IV of ERISA.
(iv) "Plan" means any employee
pension benefit plan maintained or contributed to by Borrower and
insured by the Pension Benefit Guaranty Corporation under Title IV of
ERISA.
6. COVENANTS
Borrower agrees, so long as credit is available under this Agreement
and until Bank is repaid in full:
6.1 USE OF PROCEEDS. To use the proceeds of the Unsecured Line of Credit
only for corporate purposes, including the guaranty of employee loans at the
Bank.
6.2 FINANCIAL INFORMATION. To provide the following financial information
and statements and such additional information as requested by Bank from time to
time:
(a) Within 90 days of Borrower's fiscal year end, Borrower's
annual financial statements. These financial statements must be audited by
a Certified Public Accountant ("CPA") acceptable to Bank. The statements
shall be prepared on a consolidated basis.
(b) Within 45 days of the period's end, Borrower's quarterly
financial statements. These financial statements may be Borrower prepared.
The statements shall be prepared on a consolidated basis.
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<PAGE>
(c) Copies of Borrower's Form 10-K Annual Report, Form 10-Q
Quarterly Report and Form 8-K Current Report within 15 days after the date
of filing with the Securities and Exchange Commission.
6.3 QUICK RATIO. To maintain on a consolidated basis as of the last day
of each fiscal quarter, a ratio of quick assets to current liabilities of at
least 1.5:1.0.
"Quick assets" means cash, short-term cash investments, net trade
receivables and marketable securities not classified as long-term investments,
6.4 TANGIBLE NET WORTH. To maintain on a consolidated basis, as of the
last day of each fiscal quarter, Tangible Net Worth equal to at least
$220,000,000.
"Tangible Net Worth" means the gross book value of Borrower's assets
(excluding goodwill, patents, trademarks, trade names, organization expense,
treasury stock, unamortized debt discount and expense, deferred research and
development costs, deferred marketing expenses, and other like intangibles and
monies due from affiliates, officers, directors or shareholders of Borrower)
plus debt subordinated to Bank in a manner acceptable to Bank less total
liabilities, including, without limitation, accrued and deferred income taxes,
and any reserves against assets.
6.5 TOTAL LIABILITIES TO TANGIBLE NET WORTH. To maintain on a
consolidated basis, as of the last of each fiscal quarter, a ratio of Total
Liabilities not subordinated to Tangible Net Worth not exceeding .5:1.0.
"Total Liabilities not subordinated" means the sum of current
liabilities plus long term liabilities, excluding debt subordinated to
Borrower's obligations to Bank in a manner acceptable to Bank.
6.6 OTHER DEBTS. Not to have outstanding or incur any direct or
contingent debts or lease obligations (other than those to Bank), or become
liable for the debts of others without Bank's written consent. This does not
prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade
credit.
13
<PAGE>
(b) Endorsing negotiable instruments received in the usual
course of business.
(c) obtaining surety bonds in the usual course of business.
(d) Unsecured debts and lines of credit in existence on the date
of this Agreement disclosed in writing to Bank prior to the date of this
Agreement in Borrower's financial statement dated March 31,1995.
(e) Additional unsecured lines of credit with other banks and
financial institutions not exceeding, in the aggregate, $20,000,000.
(f) Debts or obligations in an aggregate principal amount of up
to $33,000,000 incurred in connection with the Lease, relating to certain
real property and improvements thereon located at 3930-3970 North First
Street in San Jose, California.
6.7 OTHER LIENS. Not to create, assume, or allow any security interest or
lien (including judicial liens) on property Borrower now or later owns, except:
(a) Liens or security interests in favor of Bank.
(b) Liens for taxes not yet due.
(c) Security interests on property valued at not more than $37
million (not including the value of the real property and improvements
covered by the Lease) granted from time to time in connection with the
obligations of Borrower pursuant to the Lease.
6.8 NOTICES TO BANK. To promptly notify Bank in writing of:
(a) any lawsuit over One Million dollars ($1,000,000) against
Borrower;
(b) any substantial dispute between Borrower and any government
authority;
14
<PAGE>
(c) any failure to comply with this Agreement;
(d) any material adverse change in Borrower's financial
condition or operations;
(e) any change in Borrower's name, address, or legal structure;
and
(f) the occurrence of any Event of Default.
6.9 BOOKS AND RECORDS. To maintain adequate books and records.
6.10 COMPLIANCE WITH LAWS. To comply with the laws, regulations, and
orders of any government body with authority over Borrower's business (including
any fictitious name statute and all statutes regarding the processing,
manufacture, storage, transportation, sale or use of hazardous or toxic
materials).
6.11 PRESERVATION OF RIGHTS. To maintain and preserve all rights,
privileges, and franchises Borrower now has necessary to carry on Borrower's
business.
6.12 COOPERATION. To take any action requested by Bank to carry out the
intent of this Agreement.
6.13 Insurance.
(a) General Business Insurance. To maintain insurance as is
usual for the business it is in.
6.14 ADDITIONAL NEGATIVE COVENANTS. Not to, without Bank's prior written
consent:
(a) engage in any business activities substantially different
from Borrower's present business.
(b) liquidate or dissolve Borrower's business.
(c) enter into any consolidation, merger, pool, joint venture,
syndicate, or other combination.
15
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(d) lease, or dispose of all or a substantial part of Borrower's
business or Borrower's assets except in the ordinary course of Borrower's
business.
6.15 ERISA PLANS. To give prompt written notice to Bank of:
(a) The occurrence of any reportable event under Section 4043(b)
of ERISA for which the PBGC requires 30 day notice.
(b) Any action by Borrower to terminate or withdraw from a Plan
or the filing of any notice of intent to terminate under Section 4041 of
ERISA.
(c) Any notice of noncompliance made with respect to a Plan
under Section 4041(b) of ERISA.
(d) The commencement of any proceeding with respect to a Plan
under Section 4042 of ERISA.
7. DEFAULT
7.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following
events shall constitute an "Event of Default":
(a) FAILURE TO PAY. Borrower fails to make a payment under this
Agreement when due.
(b) NON-COMPLIANCE. Borrower fails to meet the conditions of, or
fails to perform any obligation under:
(i) this Agreement, or
(ii) any other agreement made in connection with this Agreement.
(c) OTHER DEFAULTS. Any default occurs under any agreement in
connection with any credit Borrower has obtained from any other creditor if the
default consists of failing to make a payment when due or gives the other
creditor the right to accelerate the obligation.
(d) FALSE INFORMATION. Any representation or warranty under this
Agreement or any agreement, instrument or
16
<PAGE>
certificate executed pursuant to this Agreement or in connection with any
transaction contemplated hereby shall prove to have been false or misleading in
any material respect when made or when deemed to have been made.
(e) BANKRUPTCY. Borrower files a bankruptcy petition, a bankruptcy
petition is filed against Borrower or Borrower makes a general assignment for
the benefit of creditors. The default will be deemed cured if any bankruptcy
petition filed AGAINST borrower is dismissed within a period of sixty (60) days
after the filing; provided, however, that Bank will not be obligated to extend
any additional credit to Borrower during any bankruptcy period.
(f) RECEIVERS. A receiver or similar official is appointed for
Borrower's business, or the business is terminated.
(g) LAWSUITS. Any lawsuit or lawsuits are filed on behalf of one or
more trade creditors against Borrower in an aggregate amount of Ten Million
dollars ($10,000,000) and such lawsuit or lawsuits are not dismissed or fully
bonded within ten (10) calendar days after service of process upon Borrower.
(h) JUDGMENTS. Any judgments or arbitration awards are entered
against Borrower and, absent procurement of a stay of execution, such judgment
or award remains unbonded or unsatisfied for ten (10) calendar days after the
date of entry; or Borrower enters into any settlement agreement with respect to
any litigation or arbitration, in an aggregate amount of Ten Million dollars
($10,000,000) or more in excess of any insurance coverage.
(i) GOVERNMENT ACTION. Any government authority takes action that
Bank believes adversely affects Borrower's financial condition or ability to
repay.
(j) MATERIAL ADVERSE CHANGE. A material adverse change occurs in
Borrower's financial condition, properties or prospects, or ability to repay the
obligations hereunder. The entering into the Lease and the granting from time
to time of a security interest in assets of Borrower in connection with the
Lease as provided for in Sections 6.6 and 6.7 of this Agreement does not, and
will not, represent a material adverse change per this Section 7.1(j).
17
<PAGE>
(k) ERISA PLANS. The occurrence of a reportable event with respect
to a Plan which is, in the reasonable judgment of Bank, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, or could reasonably
be expected, in the judgment of Bank, to subject Borrower to any tax, penalty or
liability (or any combination of the foregoing) which, in the aggregate, would
have an adverse effect on the financial condition of Borrower with respect to a
Plan.
7.2 REMEDIES. Upon and after the occurrence of an Event of Default, Bank
shall have all of the following rights and remedies:
(a) All obligations and indebtedness hereunder may, at the
option of Bank and without demand, notice, or legal process of any kind, be
declared, and immediately shall become, due and payable;
(b) The Loans shall bear interest at the Default Rate;
7.3 COSTS AND EXPENSES. Upon the occurrence of any Event of Default, Bank
shall be entitled to recover all costs, expenses, and attorneys' fees (including
any allocated costs of in-house counsel) in connection with the administering or
enforcing of this Agreement, whether or not an action is filed.
8. MISCELLANEOUS
8.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to Bank and all financial covenants will be made under
generally accepted accounting principles consistently applied.
8.2 CALIFORNIA LAW. This Agreement is governed by California law.
8.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on Borrower's and
Bank's successors and assignees. Borrower agrees that it may not assign this
Agreement without Bank's prior written consent. Bank may sell participations in
or assign these loans, or any portion thereof, and may exchange financial
information about Borrower with actual or potential participants or assignees.
If a participation is sold or any portion of the loans is assigned, the
purchaser will have the right of set-off against Borrower.
18
<PAGE>
8.4 SEVERABILITY; WAIVERS. If any part of this Agreement is not
enforceable, the rest of the Agreement may be enforced. No failure on the part
of Bank to exercise, and no delay in exercising, any right, power, or remedy
under this Agreement shall operate as a waiver thereof; nor shall any single or
partial exercise of any right under this Agreement preclude any other or further
exercise thereof or the exercise of any other right. Any consent or waiver
under this Agreement must be in writing. If Bank waives a default, it may
enforce a later default.
8.5 COSTS AND EXPENSES. In addition to the recovery of costs and expenses
upon an occurrence of an Event of Default, if Bank incurs expenses in connection
with the preparation, administering or enforcing of this Agreement, Borrower
shall pay Bank all such costs and reasonable attorneys' fees, including any
allocated costs of in-house counsel.
8.6 ENTIRE AGREEMENT. This Agreement and any related security or other
agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and agreements
between Bank and Borrower concerning this credit; and
(b) replace any prior oral or written agreements between Bank
and Borrower concerning this credit; and
(c) are intended by Bank and Borrower as the final, complete and
exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other
agreements required by this Agreement, this Agreement will prevail.
8.7 NOTICES. Except as otherwise provided herein, all notices required
under this Agreement shall be personally delivered or sent by first class mail,
postage prepaid, to the addresses on the signature page of this Agreement, or to
such other addresses as Bank and Borrower may specify from time to time in
writing.
19
<PAGE>
8.8 HEADINGS. Article and paragraph headings are for reference only and
shall not affect the interpretation or meaning of any provisions of this
Agreement.
8.9 COUNTERPARTS. This Agreement may be executed in as many counterparts
as necessary or convenient, and by the different parties on separate
counterparts each of which, when so executed, shall be deemed an original but
all such counterparts shall constitute but one and the same agreement.
8.10 FURTHER ASSURANCES. Borrower shall, at its expense and without
expense to Bank, do, execute and deliver such further acts and documents as Bank
from time to time reasonably requires for the assuring to Bank the rights
created or intended to be created by this Agreement and for carrying out the
intention or facilitating the performance of the terms of this Agreement or any
document executed in connection with this Agreement.
8.11 HAZARDOUS WASTE INDEMNIFICATION. Borrower will indemnify and hold
harmless Bank from any loss or liability directly or indirectly arising out of
the use, generation, manufacture, production, storage, release, threatened
release, discharge, disposal or presence of a hazardous substance. This
indemnity will apply whether the hazardous substance is on, under or about
Borrower's property or operations or property leased to Borrower. The indemnity
includes but is not limited to attorneys' fees (including the reasonable
estimate of the allocated cost of in-house counsel and staff). The indemnity
extends to Bank, its parent, subsidiaries and all of their directors, officers,
employees, agents, successors, attorneys and assigns. For these purposes, the
term "hazardous substances" means any substance which is or becomes designated
as "hazardous" or "toxic" under any federal, state or local law. This indemnity
will survive repayment of Borrower's obligations to Bank.
Upon demand by Bank, Borrower will defend any investigation, action or
proceeding alleging the presence of any hazardous substance in any such
location, which affects any of Borrower's property or operations or property
leased to Borrower or which is brought or commenced against Bank, whether alone
or together with Borrower or any other person, all at Borrower's own cost and by
counsel to be approved by Bank in the exercise of its reasonable judgment. In
the alternative, Bank may elect to conduct its own defense at the expense of
Borrower.
20
<PAGE>
8.12 WAIVER OF JURY TRIAL. The parties to this Agreement acknowledge that
jury trials often entail additional expenses and delays not occasioned by
nonjury trials. The parties to this Agreement further agree and stipulate that
a fair trial may be had before a state or federal judge by means of a bench
trial without a jury. In view of the foregoing, and as a specifically
negotiated provision of this Agreement, each party to this Agreement hereby
expressly waives any right to trial by jury of any claim, demand, action or
cause of action (1) arising under this Agreement or any other instrument,
document or agreement executed or delivered in connection herewith, or (2) in
any way connected with or related or incidental to the dealings of the parties
hereto or any of them with respect to this Agreement or any other instrument,
document or agreement executed or delivered in connection herewith, or the
transactions related hereto or thereto, in each case whether now existing or
hereafter arising, and whether sounding in contract or tort or otherwise; and
each party hereby agrees and consents that any such claim, demand, action or
cause of action shall be decided by court trial without a jury, and that any
party to this Agreement may file an original counterpart or a copy of this
section with any court as written evidence of the consent of the parties hereto
to the waiver of their right to trial by jury.
21
<PAGE>
This Agreement is executed as of the date stated at the top of the first page.
NOVELLUS SYSTEMS, INC.
By /s/ illegible
----------------------------
Its Chief Financial Officer
----------------------------
By /s/ John P. Root
----------------------------
Its Treasurer
----------------------------
Address where notices to Borrower are to be sent:
Novellus Systems, Inc.
81 Vista Montana
San Jose, CA 95134
Attn: John P. Root
SUMITOMO BANK OF CALIFORNIA
By /s/ William G. Nelle Jr.
---------------------------
Its Vice President & Manager
---------------------------
Address where notices to Bank are to be sent:
Sumitomo Bank of California
84 West Santa Clara Street, Suite 700
San Jose, California 95113
Attn: W. G. Nelle, Jr.
22
<PAGE>
AMENDMENT AGREEMENT NUMBER 1
TO COMMERCIAL LOAN AGREEMENT
<PAGE>
AMENDMENT AGREEMENT NUMBER 1
TO COMMERCIAL LOAN AGREEMENT
This Amendment Agreement Number 1 to the Commercial Loan Agreement, dated
October 18, 1996 (this "Agreement"), is between Novellus Systems,
Inc.("Borrower") and Sumitomo Bank of California (the "Bank").
RECITALS
A. Bank and Borrower have entered into a Commercial Loan Agreement,
dated April 3, 1996 (the "Commercial Loan Agreement") and certain other related
documents pursuant to which Bank agreed to make certain loans to Borrower and
Borrower made certain covenants thereunder.
B. Borrower intends to enter into a transaction involving the
purchase of certain real property in an approximate amount of $6,000,000 and
utilize a financing structure known as a synthetic lease.
C. Bank and Borrower agree to modify the Commercial Loan Agreement
as more specifically described below for the purpose of allowing Borrower to
consummate the transaction described in paragraph B above.
D. All capitalized terms not otherwise defined herein shall have the
meanings given such terms in the Commercial Loan Agreement.
AGREEMENT
1. AMENDMENT OF COMMERCIAL LOAN AGREEMENT Bank and Borrower agree
that the Commercial Loan Agreement is, as of the date hereof, amended as
follows:
A. Section 5.6 is amended by deleting the final paragraph in its
entirety and inserting the following therefore:
"Since the dates of the financial statements specified above,
there has been no material adverse change in the assets or the
financial condition of Borrower. The Bank acknowledges that the
Borrower has entered into Purchase and Master Lease Agreements,
dated April 10, 1996 and October 24, 1996, by and among Novellus
Systems, Inc., the Lessors referred to therein and Sumitomo Bank
Leasing and Finance, Inc., as Agent for the Lessors, as the same
may be amended from time to time (individually, the "Lease" and
collectively, the "Leases") and that from time to time the
Borrower may grant a security interest with respect to its assets
in connection
1
<PAGE>
with the Borrower's obligations under the Leases as provided for
in Section 6.7(c) of the Agreement; and the Bank further
acknowledges and agrees that entering into the Leases and the
granting from time to time of the security interest shall not be
deemed to constitute a material adverse change in the assets or
financial condition of Borrower.
B. Section 6.6 (f) is amended by deleting the amount "$33,000,000"
in the second sentence and substituting the amount "$40,000,000"
therefore.
C. Section 6.7 (c) is amended by deleting the amount "$37 million"
in the second sentence and substituting the amount "$44 million"
therefore.
2. CONDITIONS. Before this Agreement becomes effective and any
party becomes obligated under it, all of the following conditions shall have
been satisfied at Borrower's sole cost and expense in a manner acceptable to
Bank in the exercise of Bank's sole judgment:
A. Borrower shall have executed and delivered to Bank this Agreement
and any and all other documents required by Bank in connection
herewith.
B. Bank shall have received from Borrower such other documents and
assurances as Bank may require in its sole discretion.
3. MISCELLANEOUS.
A. REAFFIRMATION AND FURTHER ASSURANCES. Borrower hereby reaffirms
the terms and conditions of the Commercial Loan Agreement, as amended
hereby, and each other document executed in connection with the
transactions contemplated by the Commercial Loan Agreement and agrees
that such documents shall be in full force and effect, as amended
hereby, from this day forward. Furthermore, Borrower shall promptly,
at its expense and without expense to Bank, do, execute and deliver
such further acts and documents as Bank from time to time reasonably
requires for the assuring to Bank of the rights created or intended to
be created by this Agreement, the Commercial Loan Agreement or any
agreement or instrument executed in connection therewith, and for
carrying out the intention or facilitating the performance of the
terms of this Agreement, the Commercial Loan Agreement or any
agreement or instrument executed in connection therewith.
B. CALIFORNIA LAW. This Agreement is governed by California law.
2
<PAGE>
C. SUCCESSORS AND ASSIGNS. This Agreement is binding on Borrower's
and Bank's successors and assignees.
D. SEVERABILITY. If any part of this Agreement is not enforceable,
the rest of the Agreement may be enforced.
E. NOTICES. Notices with respect to this Agreement shall be given
as set forth in Section 8.7 of the Commercial Loan Agreement.
F. HEADINGS. Article and paragraph headings are for reference only
and shall not affect the interpretation or meaning of any provisions
of this Agreement.
G. COUNTERPARTS. This Agreement may be executed in as many
counterparts as necessary or convenient, and by the different parties
on separate counterparts each of which, when so executed, shall be
deemed an original but all such counterparts shall constitute but one
and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
or caused their duly authorized representatives to execute this Agreement, as of
the day and year first above written.
NOVELLUS SYSTEMS, INC.
By /s/ illegible
----------------------------
Its CFO
----------------------------
By /s/ illegible
----------------------------
Its Treasurer
----------------------------
SUMITOMO BANK OF CALIFORNIA
By /s/ illegible
----------------------------
Its Vice President & Manager
----------------------------
3
<PAGE>
GUARANTY
TO: The Sumitomo Bank, Limited.
In regard to any and all obligations the Principal may at present or in future
owe to your Bank, the Guarantor hereby agrees, with the full understanding of
the terms and conditions of the Agreement on the Bank Transactions, which the
Principal has executed and delivered to your Bank, as well as the terms and
conditions hereinafter set forth, that the Guarantor shall be jointly and
severally liable with the Principal for the performance of all obligations.
ARTICLE 1. The liability of the Guarantor shall not exceed at any one time
the sum of yen 500,000,000 (Y )
ARTICLE 2. The Guarantor shall not object to your Bank's changing or
releasing any collateral or other guarantees at your Bank's sole
option.
ARTICLE 3. The Guarantor shall not offset the liability of the Guarantor
against the deposits or other credits of the Principal with your
Bank.
ARTICLE 4. If and when the Guarantor shall have performed any obligations
hereunder, the Guarantor shall not exercise any rights obtained
from your Bank by subrogation without the prior approval of your
Bank so long as transactions between your Bank and the Principal
continue. Upon your Bank's demand, the Guarantor shall assign
such rights and priority to your Bank without compensation.
ARTICLE 5. (1) In case the Guarantor has given any other guarantee in
regard to the Principal's transactions with your Bank, such
other guarantee shall not be affected by this guarantee
contract, and in case the Guarantor has given any other
guarantee with the provision of a certain maximum amount the
maximum amount of this guarantee shall be added to such
other guarantee.
(2) In case the Guarantor gives any other guarantee in future in
regard to the Principal's transactions with your Bank, the
Guarantor shall agree to your Bank's handling the matter
mutandis in the manner set forth in the preceding Paragraph.
Dated this 7 day of June Nineteen Hundred and 1996
The Principal: Signature:
Full Name:
Address :
- -------
Revenue
Stamp
- -------
The Guarantor: Signature: /s/ John P. Root,
treasurer for
Full Name: Novellus Systems, Inc.
Address : 3970 North First Street
San Jose, CA 95134 USA
The Liability of Guarantor shall be released on or after____________________
If any dispute arises in the interpretation of the terms or provisions herein
stated, it shall be decided by the Japanese text, of which this is a
translation.
<PAGE>
GUARANTY
Date: July 24, 1996
To: The Sanwa Bank Limited
I/We, the undersigned Guarantor, shall be jointly and severally liable
(RENTAI HOSHO) with the Obligor with respect to all obligations which the
Obligor owes, or may hereafter owe to the Bank pursuant to his transactions with
the Bank set forth in Article 1 of the Agreement on Bank Transactions.
I/We, the undersigned Guarantor, having approved of the "Agreement on Bank
Transactions" previously executed and delivered to The Sanwa Bank Ltd. ("Bank")
by the undersigned Obligor, hereby agree to the terms and conditions set forth
in this Agreement.
ARTICLE 1
The amount of the guarantee shall be up to Y Five Hundred Million
(Say:______________________________)
ARTICLE 2
The Guarantor shall not set off the deposits or any other credits of the
Obligor with the Bank.
ARTICLE 3
The Guarantor shall not be discharged from his obligations hereunder even if
the Bank changes or releases any security or other guarantee at the Bank's
convenience.
ARTICLE 4
If and when the Guarantor performs any obligations under this Agreement, the
Guarantor shall not exercise any rights obtained from the Bank by subrogation
without the prior approval of the Bank so long as transactions between the
Obligor and the Bank continue. Upon the Bank's demand, the Guarantor shall
assign such rights and priority to the Bank without compensation.
ARTICLE 5
1. If the Guarantor has provided the Bank with any other guarantees for
the obligations arising from the Obligor's transactions with the Bank,
such guarantees shall not be affected in any way by the guarantee given
hereunder, and if the Guarantor has provided the Bank with any other
guarantees with a limitation in amount, the amount secured hereunder shall
be added to such amount.
2. If the Guarantor provides the Bank with any other guarantee hereafter,
the preceding paragraph shall apply mutatis mutandis, and the Guarantor
shall raise no objection thereto.
(All questions that may arise within or without courts of law in regard to the
meaning of the words, provisions and stipulations of this Agreement shall be
decided in accordance with the Japanese text.)
<PAGE>
Guarantor Signature: /s/ William J. Wall
---------------------------------------------------
- --------
PLEASE
AFFIX A Full Name: William J. Wall
REVENUE ---------------------------------------------------
STAMP
- --------
Address: 81 Vista Montana
San Jose, CA 95134
---------------------------------------------------
Obligor Signature:
---------------------------------------------------
Full Name:
---------------------------------------------------
Address:
---------------------------------------------------
- --------------------------------------------------------------------------------
For Bank Use Only
- --------------------------------- -------------
- --------------------------------- -------------
<PAGE>
Date: July 24, 1996
To: THE BANK OF TOKYO-MITSUBISHI, LIMITED
GUARANTEE
The maximum amount guaranteed Five Hundred Million Japanese Yen
The term of this guarantee Valid Until August 21, 1997
In regard to any and all obligations the Principal presently owes and/or
may owe your Bank as a result of transactions at any time until the date set
forth above provided for in Article I of the Agreement on Bank Transactions
which the Principal separately executed and delivered to your Bank, the
Guarantor shall be jointly and severally liable with the Principal for the
performance of all such obligations to the extent of the maximum amount set
forth above, and the Guarantor hereby agrees to abide by the terms and
conditions of the said Agreement on Bank Transactions as well as the terms set
forth below with regard to the performance of any such obligations:
1. Even if your Bank changes or releases the security or other guarantees
at your Bank's convenience, the Guarantor shall not claim exemption from the
obligations.
2. The Guarantor shall not effect a setoff by any of the Principal's
deposits or credits with your Bank.
3. If and when the Guarantor performs any obligations of this guarantee,
the Guarantor shall not exercise any rights obtained from your Bank by
subrogation without the prior approval of your Bank so long as transactions
between the Principal and your Bank continue. Upon your Bank's demand, the
Guarantor shall assign such rights and priority to your Bank without
compensation.
4. In cases in which the Guarantor has given or gives in the future any
other guarantee in regard to any of the Principal's obligations to your Bank,
the total amount of the obligations guaranteed shall, unless otherwise agreed,
be the aggregate of such guarantees, and this guarantee shall not affect any
such other guarantees.
The Principal: Signature:
- -------
Revenue Full Name:
Stamp
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Address:
The Guarantor: Signature: /s/ William J. Wall
Full Name: William J. Wall
Address: 81 Vista Montana
San Jose, CA 95134
(All questions that may arise within or without courts of law in regard to the
meaning of the words, provisions and stipulations of this Agreement shall be
decided in accordance with the Japanese text.)
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PURCHASE AND MASTER LEASE AGREEMENT
Dated as of April 10, 1996
Among
THE LESSORS REFERRED TO HEREIN
(as Lessors),
NOVELLUS SYSTEMS, INC.
(as Lessee),
and
SUMITOMO BANK LEASING AND FINANCE, INC.
(as Agent for the Lessors)
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THIS PURCHASE AND MASTER LEASE AGREEMENT IS
NOT INTENDED TO CONSTITUTE A TRUE LEASE FOR
FEDERAL INCOME TAX PURPOSES.
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TABLE OF CONTENTS**
SECTION 1. Definitions; Interpretation................................... 1
SECTION 2. Representations and Warranties of Lessee...................... 25
(a) Corporate Matters................................................ 25
(b) Property Information Package..................................... 25
(c) Authorization; No Conflict....................................... 25
(d) Binding Agreement................................................ 25
(e) Financial Statements............................................. 26
(f) Litigation and Contingent Liabilities............................ 26
(g) Title to Property................................................ 26
(h) Liens............................................................ 27
(i) Chief Executive Office........................................... 27
(j) ERISA............................................................ 27
(k) Investment Company Act........................................... 27
(l) Public Utility Holding Company Act............................... 27
(m) Regulations G, T, U and X........................................ 28
(n) Labor Controversies.............................................. 28
(o) Tax Status....................................................... 28
(p) No Default....................................................... 28
(q) Compliance with Applicable Laws.................................. 28
(r) Licenses, etc.................................................... 28
(s) Intellectual Property............................................ 28
(t) Subjection to Regulation......................................... 29
(u) Impositions...................................................... 29
(v) Insurance........................................................ 29
(w) Brokers, etc..................................................... 29
(x) Security Interests............................................... 29
(y) Environmental.................................................... 30
(z) No Burdensome Agreements......................................... 31
(aa) Land Use Regulations............................................. 31
(ab) Development Plans................................................ 31
(ac) Utilities........................................................ 31
(ad) Mechanics' Lien Claims........................................... 32
(ae) Permits and Licenses............................................. 32
(af) Improvements..................................................... 32
(ag) Defects.......................................................... 32
(ah) Notice From Insurance Carriers................................... 32
(ai) Disclosure Generally............................................. 32
(aj) Solvency......................................................... 33
SECTION 3. Conditions to Closing......................................... 33
SECTION 4. Purchase and Lease of Property................................ 36
(a) Purchase by Lessor and Lease by Lessee........................... 36
(b) Each Lessor to Have an Undivided Interest........................ 36
(c) Funding to Agent................................................. 36
(d) Funding by Agent................................................. 37
(e) Acknowledgment by Lessee of Acceptance and Suitability
of Property...................................................... 37
(f) Transfer to Lessee upon Failure to Fund.......................... 37
_______________
** The Table of Contents does not form a part of this Agreement.
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(g) Collateralization................................................ 38
(i) Defined...................................................... 38
(ii) Mandatory Collateralization After Closing................... 38
(iii) Optional Collateralization After Closing................... 38
(iv) Discontinuing Collateralization............................. 39
(v) Effecting Collateralization.................................. 39
(vi) Adjustment of Collateralization.......................... 40
(h) Relationship With Certain Occupants.............................. 40
SECTION 5. Payment Absolute, No Warranties............................... 41
SECTION 6. Term.......................................................... 44
SECTION 7. Rent.......................................................... 44
SECTION 8. Other Payments................................................ 46
SECTION 9. Restricted Use; Compliance with Laws.......................... 50
SECTION 10. Maintenance, Improvement and Repair of the Property........... 52
SECTION 11. Insurance..................................................... 53
(a) Liability Insurance.............................................. 53
(b) Property Insurance............................................... 54
(c) Approved Policies................................................ 54
(d) Use of Insurance Proceeds........................................ 55
SECTION 12. General Indemnity............................................. 56
SECTION 13. Taxes......................................................... 58
SECTION 14. Rights to Purchase, Sell and Subdivide........................ 61
(a) Purchase Options of Lessee....................................... 61
(b) Termination Option of Lessee..................................... 62
(c) Failure of Sale.................................................. 64
(d) Procedures for Purchases......................................... 64
(i) Partial Purchase............................................ 64
(ii) Full Purchase.............................................. 66
(e) Subdivision of the Land.......................................... 67
SECTION 15. End of Term Options........................................... 68
SECTION 16. Amendments.................................................... 69
SECTION 17. Loss of or Damage to Property................................. 70
(a) Risk of Loss..................................................... 70
(b) Repair of Damage; Use of Proceeds................................ 70
(c) Event of Loss; Property Not Repaired............................. 71
(d) Event of Loss; Property Repaired................................. 71
SECTION 18. Surrender of Property......................................... 73
(a) Surrender Upon Termination....................................... 73
(b) No Voluntary Surrender........................................... 73
(c) Removal of Lessee Property by Lessee............................. 73
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(d) Removal of Lessee's Property by Agent............................ 74
(e) Agent's Property................................................. 74
(f) Agent's Actions on Property...................................... 74
(g) No Duty if Liabilities Paid...................................... 74
SECTION 19. Certain Covenants............................................. 75
(a) Reports, Certificates and Other Information...................... 75
(b) Mergers, Consolidations, Sales................................... 76
(c) Compliance with Applicable Laws.................................. 77
(d) ERISA............................................................ 77
(e) Corporate Existence and Franchises............................... 78
(f) Payment of Taxes................................................. 78
(g) Other Agreements................................................. 78
(h) Regulations G, T, U and X........................................ 79
(i) Maintenance of Tangible Property................................. 79
(j) Maintenance of Intangible Property............................... 79
(k) Sale of Stock of Subsidiaries.................................... 79
(l) Transfer of Assets............................................... 79
(m) Discontinuance or Change of Business............................. 79
(n) Accounting Change. .............................................. 80
(o) Financial Ratios. ............................................... 80
(p) Financial Covenants in Financings................................ 80
(q) Environmental Compliance......................................... 80
SECTION 20. Events of Default............................................. 82
SECTION 21. Rights upon Default........................................... 85
SECTION 22. Lease Assignment and Subletting............................... 90
SECTION 23. Sale of Rents, Assignments, Permitted Lessor Liens............ 90
(a) Sale of Rents.................................................... 90
(b) Assignments...................................................... 91
(c) Lessor Liens..................................................... 92
(d) Prohibited Assignees............................................. 92
SECTION 24. Taxes......................................................... 92
SECTION 25. Operating Lease............................................... 92
SECTION 26. Notices and Requests.......................................... 93
SECTION 27. Right to Perform for Lessee................................... 93
SECTION 28. The Agent..................................................... 94
(a) Appointment and Authorization.................................... 94
(b) Agent and Affiliates............................................. 94
(c) Action by Agent.................................................. 94
(d) Consultation with Experts........................................ 94
(e) Liability of Agent............................................... 94
(f) Indemnification.................................................. 95
(g) Failure to Act................................................... 95
(h) Credit Decision.................................................. 95
(i) Resignation and Removal.......................................... 95
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(j) Distributions.................................................... 96
(k) Lessee Rights.................................................... 96
SECTION 29. Security Interest; Further Assurances......................... 96
(a) Security Interest................................................ 96
(b) Further Assurances............................................... 96
SECTION 30. Miscellaneous................................................. 97
SCHEDULE I - Commitments.....................................................102
SCHEDULE II - Legal Description of Land......................................103
[Exhibits Follow]
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PURCHASE AND MASTER LEASE AGREEMENT (this "LEASE" or this
"AGREEMENT"), dated as of April 10, 1996, among each institution executing the
signature pages hereto as a lessor and/or receiving an assignment of a lessor's
interest from time to time pursuant to Section 23(b) hereof, for so long as such
institution shall hold a lessor's interest hereunder (each, individually, a
"LESSOR"; and, collectively, the "LESSORS"), NOVELLUS SYSTEMS, INC., a
California corporation (the "LESSEE"), and SUMITOMO BANK LEASING AND FINANCE,
INC., as agent for the Lessors (in its capacity as such, the "AGENT").
BACKGROUND AND RECITALS OF FACT
1. Lessee desires to lease the Property from the Lessors.
2. On the Closing Date, the parties anticipate that, subject to the
terms of this Agreement, (i) the Agent on behalf of the Lessors shall purchase
from California Second, Ltd., a Florida limited partnership ("Seller") the
Property to be leased hereunder pursuant to the Improved Real Property Purchase
and Sale Agreement and (ii) the Lessee shall lease such Property from the
Lessors.
NOW THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS; INTERPRETATION.
In each Lease Document, unless the context otherwise requires:
(a) any term defined below by reference to another instrument or
document shall continue to have the meaning ascribed thereto whether or not such
other instrument or document remains in effect;
(b) words importing the singular include the plural and vice versa;
(c) words importing a gender include any gender;
(d) a reference to a part, clause, party, section, article, exhibit
or schedule is a reference to a part and clause of, and a party, section,
article, exhibit and schedule to, such Lease Document;
(e) a reference to any statute, regulation, proclamation, ordinance
or law includes all statutes, regulations, proclamations, ordinances or laws
varying, consolidating or replacing them, and a reference to a statute includes
all regulations, proclamations and ordinances issued or otherwise applicable
under the statute;
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(f) a reference to a document includes an amendment or supplement to,
or replacement or novation of, that document;
(g) a reference to a party to a document includes that party's
successors and permitted assigns;
(h) where the character or amount of any asset or liability or item
of income or expense is required to be determined or any consolidation or other
accounting computation is required to be made for the purpose of this Agreement,
such determination or calculation shall, at any time and to the extent
applicable and except as otherwise specified in this Agreement, be made in
accordance with GAAP;
(i) All covenants, representations and Events of Default contained
herein shall be given independent effect, so that if any action or condition
would violate any of such covenants, would breach any of such representations or
would constitute any of such Event of Default, the fact that such action or
condition would not violate or breach another covenant or representation or
constitute another Event of Default shall not avoid the violation of such
covenant or representation or such Event of Default; and
(j) the following terms have the meanings set forth below:
"ACTIVE NEGLIGENCE" of an Indemnified Person means, and is limited to,
the negligent conduct of activities actually on or about the Property by the
Indemnified Person or its employees, agents or representatives in a manner that
proximately causes actual bodily injury or property damage to be incurred.
"Active Negligence" shall not include (1) any negligent failure of Lessor to act
when the duty to act would not have been imposed but for Lessor's status as
owner of the Property or as a party to the transactions described in this Lease,
(2) any negligent failure of any other Indemnified Person to act when the duty
to act would not have been imposed but for such party's contractual or other
relationship to Lessor or participation or facilitation in any manner, directly
or indirectly, of the transactions described in this Lease, or (3) the exercise
in a lawful manner by Lessor (or any party claiming through or under Lessor) of
any remedy provided herein, in the Improved Real Property Purchase and Sale
Agreement or the Security Agreement, at law, in equity or otherwise.
"ADDITIONAL BASE RENT" means all amounts payable by the Lessee to the
Agent for the account of the Lessors pursuant to Section 7(a)(ii) hereof.
"ADDITIONAL RENT" means all amounts owed by Lessee to any Indemnified
Person under any Lease Document, other than Base Rent and Additional Base Rent.
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"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. A Person shall be deemed to control another
Person if such first Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such other
Person, whether through ownership of voting securities, by contract or
otherwise.
"AFTER TAX BASIS" means in respect of an amount (the "base amount")
with respect to a Person, the base amount supplemented by a future payment, if
necessary, to such Person such that, after reduction for all Taxes, if any,
imposed on such Person in respect of the sum of the base amount and such future
payment, and after giving effect to all current deductions and credits, if any,
actually utilized by such Person with respect to the base amount or the event or
circumstance giving rise thereto, shall be equal to the base amount.
"AGENT'S REPRESENTATIONS" means, with respect to the Property being
transferred by the Agent to Lessee or a third Person: (i) the Agent has not
previously transferred title to such Property to any third Person; and (ii) such
Property is free of Lessor Liens.
"AGGREGATE DEBT LESSOR COMMITMENT" means the amount set forth on
Schedule I as the Aggregate Debt Lessor Commitment.
"AGGREGATE EQUITY LESSOR COMMITMENT" means the amount set forth on
Schedule I as the Aggregate Equity Lessor Commitment.
"AGGREGATE GUARANTEED RESIDUAL VALUE" means, at any time, the sum of
the Guaranteed Residual Values of all Apportioned Property subject to the Lease
at such time.
"AGGREGATE LEASE INVESTMENT BALANCE" means, at any time, the sum of
the Lease Investment Balances of all Apportioned Property subject to this Lease
at such time.
"AGGREGATE PROPERTY COST" means, at any time, the sum of the Property
Costs of all Apportioned Property subject to this Lease at such time; the
Aggregate Property Cost as of the Closing Date is set forth in paragraph 6 of
the Lease Supplement.
"APPLICABLE LAW" means all existing and future applicable laws, rules,
regulations (including Environmental Laws) statutes, treaties, codes,
ordinances, permits, certificates, orders and licenses of and interpretations
by, any Governmental Authority; and applicable judgments, decrees, injunctions,
writs, orders or like action of any court, arbitrator or other administrative,
judicial or quasi-judicial tribunal or agency of competent jurisdiction
(including those pertaining to health, safety or the environment (including,
without limitation, wetlands); and those pertaining to the
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construction, use or occupancy of the Property); and any restrictive covenant or
deed restriction or easement of record affecting the Property.
"APPORTIONED LAND AREA", with respect to the Improvements, Fixtures
and Personal Property located at a single address, means the portion of the Land
surrounding such Improvements, Fixtures and Personal Property having a gross
area equal to the respective Apportioned Land Area as shown on Part III of
Schedule 1 of the Lease Supplement, and having the exact dimensions and location
as Agent (on behalf of the Lessors) and Lessee agree to pursuant to Section
14(e).
"APPORTIONED PROPERTY" means the Improvements, Fixtures and Personal
Property located at a particular single address set forth in Part I of Schedule
1 of the Lease Supplement, together with the Apportioned Land Area pertaining
thereto as set forth on Part IV of Schedule I of such Lease Supplement.
"APPRAISAL" means an appraisal, prepared by Appraiser, of the Property
which in the judgment of counsel to the Agent, complies with all of the
provisions of the Financial Institutions Reform, Recovery and Enforcement Act of
1989, as amended, the rules and regulations adopted pursuant thereto, and all
other Applicable Laws.
"APPRAISER" means an independent appraiser of recognized national
standing that is (i) selected by the Agent on behalf of the Lessors to perform
any appraisal provided for hereunder and (ii) whose selection is consented to by
Lessee (whose consent shall not be unreasonably withheld or delayed).
"ASSIGNEE" has the meaning set forth in Section 23(b) hereof.
"ASSIGNMENT" has the meaning set forth in Section 23(b) hereof.
"ASSIGNMENT OF IMPROVED REAL PROPERTY PURCHASE AND SALE AGREEMENT"
means an assignment in substantially the form attached hereto as Exhibit Q.
"AUTHORIZED OFFICER" means, with respect to Lessee, the President, the
Chief Executive Officer, the Chief Financial Officer, the Treasurer or any
Assistant Treasurer thereof.
"BASE RATE" means, for any day, a rate per annum equal to the higher
of (i) the rate per annum established by Sumitomo Bank from time to time as the
reference rate for short-term commercial loans in Dollars to domestic corporate
borrowers (which Lessee acknowledges is not necessarily Sumitomo Bank's lowest
rate), and (ii) the sum of 0.50% plus the Federal Funds Rate for such day.
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"BASE RATE PORTION" has the meaning set forth in the definition of
Rent Period.
"BASE RENT" means all amounts payable by the Lessee to the Agent for
the account of the Lessors pursuant to Section 7(a)(i) hereof.
"BILL OF SALE AND ASSIGNMENT" means a bill of sale and assignment of
contracts and permits, substantially in the form of Exhibit B hereto, with
respect to any item or items of Personal Property executed and delivered by
Lessee to the Agent on behalf of the Lessors on the Closing Date.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or other
day on which banking institutions in New York, New York are authorized or
required by law or regulation to close.
"CERCLIS" means the Comprehensive Environmental Response, Compensation
and Liability Information System database.
"CLOSING DATE" means April 10, 1996, or any other Business Day not
later than April 12, 1996, agreed upon by the Agent and Lessee to be the Closing
Date.
"CLOSING DATE NOTICE" means a notice substantially in the form of
Exhibit C hereto, appropriately completed and signed by a Signing Officer of
Lessee.
"CLOSING FEE" means the fee payable to the Agent for the account of
the Lessors on the Closing Date pursuant to a separate written agreement between
Lessor and Lessee of even date herewith.
"CODE" means the U.S. Internal Revenue Code of 1986, as amended and as
in effect from time to time, and the regulations promulgated thereunder.
"COLLATERAL" means all of Lessee's right, title and interest in and to
each of the following, whether now existing or hereafter arising or acquired,
and wherever located:
(a) the Property;
(b) all reversions, remainders, rents, issues, profits and other
benefits arising or issuing from, and all leases of, all or any portion of the
Property;
(c) all awards, damages, payments and other compensation
(including but not limited to insurance proceeds) received by or payable to
Lessee, and all claims of Lessee therefor and rights of Lessee thereto, which
may result (i) from any Condemnation, (ii) from any damage, injury or
destruction in any manner caused to the Property, or (iii) from any change of
grade or vacation of any street abutting the Land;
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(d) all certificates of occupancy, other governmental permits,
and all water stock appurtenant to the Land or any portion thereof;
(e) all insurance policies required to be maintained under the
terms of this Lease or any other Lease Document, or otherwise carried by Lessee
covering the Property or any portion thereof, together with all unearned
premiums paid thereon and all other benefits received or to be received
therefrom;
(h) all refunds of taxes, assessments, levies and other charges
related to the Real Property, whether governmental or nongovernmental, and
including but not limited to water and sewer rents and assessments on
appurtenant water stock;
(i) all contracts relating to the purchase, operation and
maintenance of the Personal Property, including all warranties;
(j) any rebate (excluding sales or use tax refunds to Lessee),
offset or other similar rights under a purchase order, invoice or purchase
agreement with any manufacturer or vendor of any Person to the extent such
rebate relates to the Personal Property;
(k) all books, manuals, logs, records, writings, databases,
information and other property relating to, used or useful in connection with,
evidencing, embodying or incorporating any of the foregoing, but specifically
excluding the portions of any of the foregoing that constitute (i) trade
secrets,(ii) communications protected from disclosure by reason of an
evidentiary privilege or (iii) information that Lessee is prohibited from
disclosing by reason of a bona fide confidentiality agreement enforceable
against Lessee by a Person that is not an Affiliate of Lessee; and
(l) all products, accessions and proceeds of and from any and
all of the foregoing Collateral (including proceeds which constitute property of
the types described in clauses (a) through (k) above) and, to the extent not
otherwise included, all payments under insurance (whether or not the Agent or
any Lessor is the loss payee thereof), and any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral.
"COLLATERALIZATION" is defined is Section 4(g).
"COMMITMENT" means, with respect to each Lessor, the amount set forth
next to such Lessor's name on Schedule I hereto (as adjusted pursuant to Section
23(b) hereof).
"COMMITMENT FEE" means the fee payable to the Agent for the account of
the Lessors pursuant to Section 8(e) hereof.
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"COMMITMENT PERCENTAGE" means, with respect to each Lessor, the
quotient (expressed as a percentage) of such Lessor's Commitment divided by the
Total Commitment.
"CONDEMNATION" means any condemnation, requisition, confiscation,
seizure or other taking or sale of the use, access, occupancy, easement rights
or title to the Property or any part thereof, 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 Person having the power of eminent
domain, including an action by a Governmental Authority to change the grade of,
or widen the streets adjacent to, the Property or alter the pedestrian or
vehicular traffic flow to the 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, occupancy or
title vests in the condemning authority.
"CONSOLIDATED CURRENT ASSETS" shall mean all current assets of Lessee
and its Subsidiaries determined on a consolidated basis.
"CONSOLIDATED CURRENT LIABILITIES" shall mean all current liabilities
of Lessee and its Subsidiaries determined on a consolidated basis.
"CORPORATE TRANSACTION" has the meaning set forth in Section 19(b)
hereof.
"CUSTODIAN" has the meaning set forth in the Security Agreement.
"DEBT" shall mean, with respect to any Person, without duplication,
(i) all items (excluding reserves for deferred income taxes) which in accordance
with GAAP would be included in determining total liabilities as shown on the
liability side of a balance sheet of such Person as of the date on which Debt is
to be determined, (ii) all indebtedness secured by any Lien on any property or
asset owned or held by such Person subject thereto, whether or not the
indebtedness secured thereby shall have been assumed, (iii) all indebtedness of
others with respect to which such Person has become liable by way of a
guarantee, and (iv) all outstanding letters of credit with respect to which, if
drawn upon, such Person would have any repayment or reimbursement obligations
other than Documentary Letters of Credit.
"DEBT COMMITMENT FEE" is defined in Section 8(e).
"DEBT LESSOR" means a Lessor identified as a "Debt Lessor" in Schedule
I.
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"DEBT PORTION PROPERTY COST" means (a) the Aggregate Property Cost
times (b) the Aggregate Debt Lessor Commitment divided by the Commitment.
"DEBT SERVICE COVERAGE RATIO" means EBITDA divided by the sum of (a)
interest expense, (b) rent expense and (v) the current portion of Debt.
Lessee's obligations under this Lease shall not be included in the computation
of any component of Debt Service Coverage Ratio.
"DEED" means a grant deed with respect to the real property comprising
the Property, in conformity with Applicable Law and appropriate for recording
with the applicable Governmental Authorities, conveying fee simple title to such
real property to the Lessor, subject only to Permitted Liens and substantially
in the form of Exhibit O to this Lease.
"DEED OF TRUST" means a deed of trust with respect to the real
property comprising the Property, in conformity with Applicable Law and
appropriate for recording with the applicable Governmental Authorities,
conveying bare legal title to such real property to the trustee named therein
for the benefit of Agent (for the benefit of Lessors) as beneficiary thereunder,
subject only to Permitted Liens and substantially in the form of Exhibit P to
this Lease.
"DE MINIMIS AMOUNT" means a cumulative amount not in excess of
$100,000.
"DOCUMENTARY LETTER OF CREDIT" shall mean a letter of credit issued
for the account of Lessee or its Subsidiary in the ordinary course of business
of Lessee or its Subsidiary to secure the deferred purchase price of goods.
"DOLLARS" and "$" means lawful money of the United States.
"EBITDA" shall mean, for any period, consolidated net income (or net
loss) PLUS the sum of (a) interest expense, (b) income and franchise tax
expense, (c) depreciation expense, (d) amortization expense, (e) extraordinary
or unusual losses or other losses not incurred in the ordinary course of
business included in the calculation of net income, (f) any non-cash charge
against net income required to be recognized in connection with the issuance of
capital stock to employees (whether upon lapse of vesting restrictions, exercise
of employee options or otherwise), and (g) any non-cash charge against net
income required to be recognized in connection with employee pension plans, LESS
extraordinary or unusual gains or other gains not incurred in the ordinary
course of business included in the calculation of net income.
"ENVIRONMENT" means all air, surface water, groundwater, or land,
including land surface or subsurface,
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including all fish, wildlife, biota and all other natural resources.
"ENVIRONMENTAL AUDIT" means a "Phase One" environmental site
assessment (the scope and performance of which meets or exceeds ASTM Standard
Practice E1527-93 Standard Practice for Environmental Site Assessments: Phase
One Environmental Site Assessment Process) of the Property, dated not earlier
than six months prior to the date of this Agreement.
"ENVIRONMENTAL CLAIMS" means any and all administrative or judicial
actions, suits, orders, claims, liens, notices, notices of violations,
investigations, complaints, requests for information, proceedings, or other
communication (written or oral), whether criminal or civil, (collectively
"Claims") pursuant to or relating to any applicable Environmental Law by any
person (including but not limited to any Governmental Authority and citizens'
group) based upon, alleging, asserting, or claiming any actual or potential (i)
violation of or liability under any Environmental Law, (ii) violation of any
Environmental Permit, or (iii) liability for investigatory costs, cleanup costs,
removal costs, remedial costs, response costs, natural resource damages,
property damage, personal injury, fines, or penalties arising out of, based on,
resulting from, or related to the presence, or Release into the environment, of
any Hazardous Materials at any location, including but not limited to any
off-site location to which Hazardous Materials or materials containing Hazardous
Materials were sent for handling, storage, treatment, or disposal.
"ENVIRONMENTAL CLEANUP SITE" means any location which is listed or
proposed for listing on the National Priorities List, on CERCLIS, or on any
similar state list of sites requiring investigation or cleanup, or which is the
subject of any pending or threatened action, suit, proceeding, or investigation
related to or arising from any alleged violation of any Environmental Law or the
presence or Release of a Hazardous Material.
"ENVIRONMENTAL CONDITION" means the presence of a Hazardous Material
at any property or facility which has or may result in or form the basis of an
Environmental Claim.
"ENVIRONMENTAL LAW" means any and all federal, state, local, and
foreign laws, statutes, ordinances, orders, codes, rules, regulations, policies,
guidance documents, judgments, decrees, injunctions, or agreements with any
Governmental Authority, relating to the protection of health and the Environment
and/or governing the handling, use, generation, treatment, storage,
transportation, disposal, manufacture, distribution, formulation, packaging,
labeling, or Release of Hazardous Materials, whether now existing or
subsequently amended or enacted, including but not limited to: the Clean Air
Act, 42 U.S.C. Section 7401 ET SEQ.; the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. Section 9601 ET
SEQ.; the Federal Water Pollution Control Act, 33
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U.S.C. Section 1251 ET SEQ.; the Hazardous Material Transportation Act 49 U.S.C.
Section 1801 ET SEQ.; the Federal Insecticide, Fungicide and Rodenticide Act 7
U.S.C. Section 136 ET SEQ.; the Resource Conservation and Recovery Act of 1976
("RCRA"), 42 U.S.C. Section 6901 ET SEQ.; the Toxic Substances Control Act, 15
U.S.C. Section 2601 ET SEQ.; the Occupational Safety & Health Act of 1970, 29
U.S.C. Section 651 ET SEQ.; the Oil Pollution Act of 1990, 33 U.S.C. Section
2701 ET SEQ.; and the state analogies thereto, including but not limited to the
California Underground Storage of Hazardous Substances Act, California Health &
Safety Code Sections 25280 ET SEQ.; the California Hazardous Substances Account
Act California Health & Safety Code Sections 25300 ET SEQ.; the California
Hazardous Waste Control Act, California Health & Safety Code Sections 25100 ET
SEQ.; the California Safe Drinking Water and Toxic Enforcement Act, California
Health & Safety Code Sections 24249.5 ET SEQ.; the Porter-Cologne Water Quality
Act California Water Code Sections 13000 ET SEQ., together with all
administrative regulations promulgated under any of the foregoing, all as
amended from time to time; and any common law doctrine, including but not
limited to, negligence, nuisance, trespass, personal injury, or property damage
related to or arising out of the presence, Release, or exposure to a Hazardous
Material.
"ENVIRONMENTAL PERMIT" means any federal, state or local, or foreign
permit, license or authorization issued under or in connection with any
Environmental Law.
"EQUITY COMMITMENT FEE" is defined in Section 8(e).
"EQUITY LESSOR" means a Lessor identified as an "Equity Lessor" in
Schedule I.
"EQUITY PORTION PROPERTY COST" means (a) the Aggregate Property Cost
times (b) the Aggregate Equity Lessor Commitment divided by the Commitment.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
"ERISA AFFILIATE" means each "person" (as defined in Section 3(9) of
ERISA) which is under "common control" with the Lessee or any of its
Subsidiaries (within the meaning of Section 414(b), (c), (m) or (o) of the
Code).
"EUROCURRENCY LIABILITIES" has the meaning assigned thereto in
Regulation D.
"EUROCURRENCY RESERVE PERCENTAGE" means, with respect to any day, a
percentage (expressed as a decimal) equal to the percentage in effect on such
day as prescribed by the Board of Governors of the Federal Reserve System (or
any successor) for determining the maximum reserve requirement (including,
without limitation, any marginal, supplemental or emergency reserve requirement)
applicable to "Eurocurrency liabilities" pursuant to Regulation D or any other
then applicable regulation of said
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Board of Governors which prescribes reserve requirements applicable to
"Eurocurrency liabilities" as presently defined in Regulation D.
"EURO-DOLLAR BUSINESS DAY" means any Business Day on which dealings in
euro-dollar deposits are generally carried on the London interbank market.
"EURO-DOLLAR PORTION" has the meaning set forth in the definition of
Rent Period.
"EURO-DOLLAR RATE" means the mid-morning average one-, three- or
six-month LIBOR Rate published by Reuters Monitoring Systems (or Euro-Dollar
Portion thereof) (in each case rounded upwards, if necessary, to the next higher
1/16th of 1%) on the day two Euro-Dollar Business Days preceding the first day
of the term of that Rent Period (or Euro-Dollar Portion thereof); PROVIDED that
the selection of a three- or six-month LIBOR Rate shall remain in effect as the
Euro-Dollar Rate under this Lease until the expiration of the last day of the
last Rent Period in effect during such term of such LIBOR Rate. In the event
the Reuters quote is not available, the British Banker's Association's Interest
Settlement Rate shall be used. If there is no published rate corresponding to a
Rent Period (or Euro-Dollar Portion thereof), the rate for such Rent Period (or
Euro-Dollar Portion thereof) shall be determined by interpolating on a
straight-line basis from the published rate corresponding to a period nearest to
but less than such Rent Period (or Euro-Dollar Portion thereof) and the
published rate corresponding to a period nearest to but greater than such Rent
Period (or Euro-Dollar Portion thereof).
"EVENT OF DEFAULT" has the meaning set forth in Section 20 hereof.
"EVENT OF LOSS" as to any Property means that such Property has been
lost, stolen, destroyed, seized, Condemned, confiscated, eroded, subsided, lost
by avulsion, rendered unfit for use or damaged beyond repair in the opinion of
the Lessee or if the use of such Property by such Lessee in its regular course
of business is prevented by the act of any third Person or Persons (including a
governmental instrumentality) for a period exceeding 45 calendar days, or if any
Property is attached and the attachment is not removed within 45 calendar days.
"EXCLUDED TAXES" means Taxes which are either (i) imposed by the
jurisdiction in which an Indemnified Person is organized, a taxing authority
thereof or therein or by any other taxing authority as a result of such
Indemnified Person's doing business or maintaining an office in such
jurisdiction -- such as franchise taxes -- (other than any such taxes that the
Indemnified Person establishes would not have been imposed but for (A) such
Indemnified Person's having executed, or enforced, a Lease Document or (B) any
of the transactions to which Agent (on behalf of the Lessors) and Lessee are
parties (excluding documentary
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transfer taxes and any increase, throughout the Lease Term only, in property
taxes due to a "change in ownership" as defined in the California Revenue & Tax
Code), whether contemplated herein or in the other Lease Documents) or (ii)
imposed on, based on or measured by net income, capital or net worth of such
Indemnified Person (other than Taxes that are, or are in the nature of, sales,
use, rental, property or value added or similar taxes).
"EXISTING SERVICE CONTRACT OBLIGATIONS" means the contractual rights
and obligations transferred by Seller pursuant to the "Assignment of Service
Contracts, Warranties and Guaranties and other Intangible Property" in the form
attached as Exhibit "E" to the Improved Real Property Purchase and Sale
Agreement.
"EXISTING TENANCIES" means the tenancies of LTX Corporation and Sony
Electronics Inc. pursuant to the terms of their respective leases with Seller.
"EXISTING TENANCY OBLIGATIONS" means the rights and obligations
transferred by Seller pursuant to the "Assignment and Assumption of Leases" in
the form attached as Exhibit "D" to the Improved Real Property Purchase and Sale
Agreement.
"FAIR MARKET SALES VALUE" means the amounts, which in any event shall
not be 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, respectively, for
the ownership of all of the Property. The Fair Market Sales Value of the
Property shall be determined based on the assumption that, except for purposes
of Section 20 and Section 14(b) hereof, the Property is in the condition and
state of repair required under Section 10 hereof and the Lessee is in compliance
with the other requirements of the Lease Documents.
"FEDERAL FUNDS RATE" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Board of Governors of the Federal Reserve System
(including any such successor, "H.15(519)") for that 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 that day will 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, the "Composite
3:30 P.M. Quotations") for that day under the caption "Federal Funds Effective
Rate". If on any relevant day the appropriate rate for such day is not yet
published in either H.15(519) or the Composite 3:30 P.M. Quotations, the rate
for such day will be the arithmetic mean of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m., New York time, on that
day by each of three leading brokers of Federal funds transactions in New York
City, selected by the Agent.
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"FISCAL QUARTER" means a fiscal quarter of any Fiscal Year.
"FISCAL YEAR" means a fiscal year of 12 calendar months which begins
on January 1 and ends on December 31.
"FIXTURES" means all materials, supplies, fixtures, fittings,
appliances, apparatus, equipment, machinery, furnishings, furniture, carpets,
drapes, inventory, chattels and other articles of personal property of any
description, and replacements of any thereof, now or at any time hereafter owned
by Lessee and affixed to or attached to or used in construction upon or used in
any other way in connection with or located upon, under, within or deemed part
of the Real Property.
"FUNDED DEBT" shall mean (i) Indebtedness for Borrowed Money,
excluding Debt subordinated to the obligations of Lessee under the Lease
Documents in a manner satisfactory to the Agent; (ii) capital lease obligations;
(iii) all guarantees, direct or indirect, except (a) those that guarantee
financial obligations that would already be calculated in this definition and
(b) guarantees of obligations arising under Operating Leases; (iv) standby
letters of credit except those financial obligations that would already be
calculated in this definition; and (v) bankers' acceptances.
"FUNDING" has the meaning set forth in Section 4(c) hereof.
"FUNDING OFFICE" means, at any time with respect to any Lessor, the
office of such Lessor at which it is booking or funding its Outstanding
Investment, as set forth (i) opposite such Lessor's name in Schedule I to this
Lease, (ii) in Annex I to the Assignment pursuant to which such Lessor became a
Lessor, a copy of which has been delivered to the Lessee and the Agent, or (iii)
in a written notice from such Lessor to the Lessee and the Agent advising each
of a change in its Funding Office.
"GAAP" means the generally accepted accounting principles consistently
applied with the then effective principles promulgated or adopted by the
Financial Accounting Standards Board and its predecessors and successors.
"GOVERNMENTAL AUTHORITY" means any federal, state, county, municipal
or other governmental or regulatory authority, agency, board, body, commission,
instrumentality, court or quasi-Governmental Authority.
"GOVERNMENT SECURITIES" is defined in Section 4(g).
"GROSS AGGREGATE LEASE INVESTMENT BALANCE" means the Aggregate Lease
Investment Balance plus all then accrued and unpaid Base Rent and Additional
Base Rent and other amounts then due under the Lease Documents.
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"GUARANTEED RESIDUAL VALUE" means, as to a particular Apportioned
Property, the percentage of such Apportioned Property's Property Cost set forth
for such Apportioned Property in the Lease Supplement, expressed in Dollars.
Guaranteed Residual Value for a Term and a particular Apportioned Property is
calculated pursuant to the following four steps:
1. Calculate the present value of the Base Rent and Additional Base Rent for
such Apportioned Property as of the commencement of such Term on a monthly
basis.
2. Subtract the result of step 1 from 90% of the Property Cost of such
Apportioned Property.
3. Calculate the amount which when discounted monthly back from the end of
such Term to the commencement of such Term is less than the result of step
2.
4. Divide the result of step 3 by the Property Cost of such Apportioned
Property to obtain a percentage, expressed in Dollars.
The discount rate for steps 1 and 3 shall be the interest rate applicable to
Base Rent for the first Rent Period of such Term. The present value
calculations in steps 1 and 3 will be performed in accordance with the
provisions of Financial Accounting Standards Board Statement Number 13.
"GUARANTY" means any instrument or document by which a Person has
directly or indirectly guaranteed (whether by discount or otherwise), endorsed
(other than for collection or deposit in the ordinary course of business),
discounted with recourse to such Person or with respect to which such Person is
otherwise directly or indirectly liable for the indebtedness or obligations of
any other Persons, including, without limitation, indebtedness in effect
guaranteed by such Person through any agreement (contingent or otherwise) to (i)
purchase, repurchase or otherwise acquire such indebtedness, (ii) provide funds
for the payment or discharge of such indebtedness or any other liability of the
obligor of such indebtedness (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), (iii) maintain the solvency or
other financial condition of the obligor of such indebtedness, or (iv) make
payment for any products, materials, supplies, transportation or services
pursuant to an agreement which requires such payment regardless of the
non-delivery or non-furnishing thereof, if in any such case the purpose or
intent of such agreement is to provide assurance that such indebtedness will be
paid or discharged or that any agreements relating thereto will be complied with
or that the holders of such indebtedness will be protected against loss in
respect thereof.
"HAZARDOUS MATERIAL" means petroleum and petroleum products, petroleum
by-products, radioactive materials, asbestos, gasoline, diesel fuel, radon, urea
formaldehyde, lead-containing
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materials, polychlorinated biphenyls, and any other material, gas or substance
known or suspected to be toxic or hazardous which could cause a detriment to, or
impair the beneficial use of, the Property, or constitute a health, safety or
environmental risk to any occupant of the Real Property; and any other materials
or substances defined as or included in the definition of "hazardous
substances," "hazardous materials," "hazardous wastes," "toxic substances,"
"toxic pollutants," "pollutants," "regulated substances," "solid wastes," or
"contaminants" under any applicable Environmental Law.
"IMPROVED REAL PROPERTY PURCHASE AND SALE AGREEMENT" means the
agreement dated as of January 19, 1996, between Seller and Lessee as
"Purchaser", to be assigned to Lessor as of the Closing Date.
"IMPROVEMENTS" means all buildings, structures, and other improvements
of every kind existing at any time and from time to time on or under the Land,
together with any and all appurtenances to such buildings, structures or
improvements, including sidewalks, utility pipes, conduits and lines, parking
areas and roadways, and including all Modifications and other additions to or
changes in the Improvements at any time.
"INDEBTEDNESS FOR BORROWED MONEY" means with respect to any Person, as
of the date of determination thereof, (i) any and all of such Person's
indebtedness for borrowed money (including, without limitation, indebtedness for
borrowed money which is subordinated), (ii) any and all of such Person's
conditional sale obligations, (iii) any and all indebtedness secured by any Lien
with respect to any property or asset owned by such Person, regardless of
whether the indebtedness secured thereby shall be of or shall have been assumed
by such Person, and (iv) any and all indebtedness or obligations of any of the
types described in the preceding clauses (i), (ii) and (iii) for which such
Person is liable, directly or indirectly, under a Guaranty; PROVIDED, HOWEVER,
that the obligations of a lessee under a true lease shall not constitute
Indebtedness for Borrowed Money and any indebtedness incurred by such Person
which by the terms of the related agreement is required to be used to retire a
payment obligation to a trade creditor arising from the purchase by such Person
of goods and services acquired for the purpose of resale in the ordinary course
of such Person's business shall not constitute Indebtedness for Borrowed Money.
"INDEMNIFIED PERSON" means each of the Agent, each Lessor, each of
the respective Affiliates of the Agent and each Lessor and each of their
respective successors, assigns, officers, directors, employees, counsel,
servants, agents and other representatives.
"INITIAL TERM" has the meaning set forth in Section 6(a) hereof.
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"INSURANCE REQUIREMENTS" means (i) all terms of any insurance policy
covering or applicable to any item of Collateral, (ii) all requirements of the
issuer of any such policy and (iii) all requirements of Applicable Law related
to insurance of any Governmental Authority applicable to any item of Collateral,
in each case where the failure to comply with (i), (ii) or (iii) above,
individually or in the aggregate for all such failures, would be reasonably
likely to result in a Material Adverse Effect.
"INVESTMENT" in any Person shall mean:
(a) the acquisition (whether for cash, property, services or
securities or otherwise) of capital stock, bonds, notes, debentures,
partnership or other ownership interests or other securities of such
Person; and
(b) any deposit with, or advance, loan or other extension of
credit to, such Person (other than any such advance, loan or extension
of credit having a term not exceeding 120 days in the case of
unaffiliated Persons and one year in the case of Lessee Affiliates
representing the purchase price of inventory or supplies purchased in
the ordinary course of business) or guarantee or assumption of, or
other contingent obligation with respect to, Indebtedness for Borrowed
Money or other liability of such Person; and
(c) (without duplication of the amounts included in (a) and (b))
above any amount that may, pursuant to the terms of such investment,
be required to be paid, deposited, advanced, loaned or extended to or
guaranteed or assumed on behalf of such Person.
"LAND" means the real property described on Schedule II hereto, and
all easements and appurtenances thereto.
"LEASE ASSIGNEE" is defined in Section 22.
"LEASE ASSIGNMENT" is defined in Section 22.
"LEASE DOCUMENTS" means, this Lease, the Deed, the Bill of Sale, the
Deed of Trust, the Lessor Documents, and each financing statement and other
document or instrument delivered pursuant hereto or thereto.
"LEASE INVESTMENT BALANCE" means, with respect to an Apportioned
Property at any time, the Property Cost of such Apportioned Property PLUS all
fees and expenses of Lessee that Lessee elects to capitalize (subject to Agent's
prior written consent) MINUS amounts previously paid to the Agent for the
account of the Lessors in reduction thereof pursuant to Section 7(a)(ii) hereof.
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"LEASE SUPPLEMENT" means the form of "Lease Supplement" attached as
Exhibit A hereto.
"LEASE TERM" means the Initial Term plus the Renewal Term.
"LESSOR DOCUMENTS" means the Master Rent Purchase Agreement and the
Security Agreement.
"LESSOR LIENS" means Liens on any Property resulting from any act of,
or claim against, the Agent in its individual capacity or as agent for the
Lessors, not related to the transactions contemplated hereby, or arising out of
a Tax payable by Agent and not indemnified by Lessee under this Lease.
"LIABILITIES" means any and all of the Lessee's obligations to the
Agent and the Lessors, howsoever created, arising or evidenced, whether direct
or indirect, absolute or contingent, now or hereafter existing, or due or to
become due, which arise out of or in connection with this Agreement or any other
Lease Document.
"LIEN" means any lien, mortgage, security interest, chattel mortgage,
pledge or other encumbrance (statutory or otherwise) of any kind securing
satisfaction of an obligation, including any agreement to give any of the
foregoing, any conditional sales or other title retention agreement, any lease
in the nature thereof, and the filing of or the agreement to give any financing
statement under the Uniform Commercial Code of any jurisdiction or similar
evidence of any encumbrance, whether within or outside the United States.
"LITIGATION" means any litigation, proceeding (including, without
limitation, any governmental proceeding or arbitration proceeding), claim,
lawsuit and/or investigation (including, without limitation, any environmental
litigation, proceeding, claim, lawsuit and/or investigation) pending or
threatened against or involving Lessee or any Subsidiary or any of its or their
businesses or operations.
"MARGIN" shall mean:
(a) At such time as Collateralization is NOT in effect, one hundred
thirty-five (135) basis points.
(b) At such time as Collateralization IS in effect, twenty-five (25)
basis points.
"MASTER RENT PURCHASE AGREEMENT" means the agreement in substantially
in the form attached hereto as Exhibit T.
"MATERIAL ADVERSE EFFECT", with respect to any occurrence, failure,
act or omission of any nature, means, individually or in the aggregate, a
materially adverse effect on, or an effect which would materially impair, (i)
the ability of
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Lessee or any Subsidiary to conduct its business substantially as now conducted,
(ii) the consolidated business, operations, prospects or financial condition of
Lessee and its Subsidiaries, taken as a whole, (iii) the ability of Lessee to
perform any of its obligations (including, without limitation, those under
Section 15 hereof) under the Lease Documents, (iv) the validity or
enforceability of any of the Lease Documents, (v) the priority or enforceability
of any security interest, mortgage or deed of trust created thereby and intended
to be perfected thereunder, (vi) the value or utility of the Property, or (vii)
the ability of the Agent or the Lessors to exercise any of their rights or
remedies under the Lease Documents.
"MATERIAL LITIGATION" means any Litigation or development in any
Litigation which could individually or in the aggregate have a Material Adverse
Effect.
"MEMORANDUM OF LEASE" means the form of Memorandum of Lease attached
as Exhibit G hereto.
"MODIFICATIONS" has the meaning set forth in Section 10(d) hereof.
"MULTIEMPLOYER PLAN" shall mean any multiemployer plan (within the
meaning of section 3(37) of ERISA) to which either the Lessee, any Subsidiary,
or any ERISA Affiliate has an obligation to contribute.
"NET WORTH" shall mean the aggregate amount, determined on a
consolidated basis for Lessee and its Subsidiaries, of (a) capital stock
(including paid-in capital but excluding any treasury stock, capital stock
subscribed and unissued and other contra-equity accounts) and (b) retained
earnings, less intangibles.
"NON-UNITED STATES PERSON" has the meaning set forth in Section 13(c)
hereof.
"OPERATING LEASE" shall mean an operating lease as defined by GAAP.
"OUTSTANDING INVESTMENT" means, with respect to any Lessor as of any
date, the amount determined by multiplying (i) the Aggregate Lease Investment
Balance at such time by (ii) such Lessor's Commitment Percentage. The records
of the Agent shall be conclusive in the absence of manifest error as to the
Outstanding Investment of each Lessor.
"OVERDUE RATE" shall mean, for any payment, a fluctuating rate per
annum for each day equal to 2% per annum above the rate from time to time used
to determine Base Rent pursuant to Section 7(a)(i), 7(b) or 7(c) hereof.
"PERMITTED CONTEST" means actions taken by a Person to contest in good
faith, by appropriate proceedings, the legality,
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validity or applicability to any Property or any interest therein of any Person
of (a) any Lien; (b) any Tax; (c) any judgment, decree or order described in,
but subject to the terms of, Section 9(f); or (d) any Applicable Law; PROVIDED,
that the initiation of any such contest could not reasonably be expected to: (i)
result in, or materially increase the risk of, the imposition of any civil or
criminal liability on any Indemnified Person; or (ii) result in a Material
Adverse Effect; PROVIDED, FURTHER, that, in any event, adequate reserves are
maintained in accordance with GAAP against any adverse determination of any such
contest.
"PERMITTED LESSOR LIENS" means any Lien (i) in favor of the Agent
created by or arising under or in connection with this Lease or the other Lease
Documents, (ii) for Taxes payable by the Agent which are not yet delinquent or
are the subject of a Permitted Contest, (iii) of mechanics, materialmen,
laborers, employees or suppliers and similar liens arising by operation of
Applicable Law, incurred by the Agent in the ordinary course of business for
sums (not involving any Debt) which are not yet delinquent or are the subject of
a Permitted Contest, or (iv) arising out of any judgment or award against the
Agent which has been adequately bonded to protect the Lessee's interests.
"PERMITTED LIENS" shall mean:
(a) any Liens for current Taxes not yet due and payable or being
contested by a Permitted Contest;
(b) Liens in favor of the Agent and created by or arising under or in
connection with this Lease or the other Lease Documents;
(c) Liens of mechanics, materialmen, laborers, employees or suppliers
and similar liens arising by operation of Applicable Law, incurred by the
Lessee in the ordinary course of business for sums (not involving any Debt)
which are not yet delinquent or are the subject of a Permitted Contest,
(d) Liens arising out of any judgment or award against the Lessee
which have been adequately bonded to protect the Agent's interests (on
behalf of the Lessors); and
(e) All other Liens approved by Agent in writing.
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, limited liability corporation or
partnership, joint venture, joint stock company, Governmental Authority or other
entity of any kind.
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"PERSONAL PROPERTY" means:
(a) all currently owned or hereafter acquired personal property
necessarily incidental to the use or enjoyment of the Real Property subject to
this Lease, and all additions and accessions thereto and replacements therefor;
(b) all accounts, contract rights, general intangibles,
warehouse receipts and other documents, instruments, and other rights to the
payment of money or performance of services, now existing or hereafter arising,
in any way relating to the acquisition, operation or sale of the Real Property,
Fixtures, or any part thereof that is subject to this Lease, or the
construction, sale, lease, operation or other disposition of any Improvements
subject to this Lease, including without limitation construction and architects'
contracts, plans and specifications, permits, licenses and approvals,
engineering, consulting and management contracts, purchase agreements and
deposits, and leases and lease deposits;
(c) all choses in action, rights, claims and causes of action
(accrued and hereafter accruing) against any Person to the extent the same arise
out of or relate to the Property subject to this Lease or Lessee's rights in the
Property subject to this Lease; and
(d) all contract rights, development rights, development
entitlements, the Existing Service Contract Obligations, the Existing Tenancies,
and other general intangibles arising out of or pertaining to the use, occupancy
or ownership of any of the Property subject to this Lease, including the right
to use the name, tradename and/or style of the Property subject to this Lease.
"PLAN" shall mean any employee benefit plan (within the meaning of
section 3(3) of ERISA) maintained or contributed to by the Lessee, any
Subsidiary, or any ERISA Affiliate, other than a Multiemployer Plan.
"PLANS AND SPECIFICATIONS" means the plans and specifications for the
Improvements substantially in the form of the plans for the Improvements
prepared by V.C. Wong & Associates dated March 6, 1984.
"PROCEEDS" has the meaning set forth in Section 14(b)(iii)(x) hereof.
"PROPERTY" means the Land, the Improvements, the Fixtures and the
Personal Property.
"PROPERTY COST", with respect to any Apportioned Property described on
Schedule 1 to the Lease Supplement, means the Property Cost with respect thereto
specified in such Schedule.
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"PROPERTY INFORMATION PACKAGE" has the meaning set forth in Section
2(b) hereof.
"PURCHASE OPTION" has the meaning set forth in Section 15(a) hereof.
"QUICK RATIO" means the sum of cash, short term investments, net
accounts receivable and Government Securities pledged in accordance with Section
4(g), divided by current liabilities.
"REAL PROPERTY" means the Land, the Improvements and the Fixtures.
"RECEIVED REPORTS" means the written reports described on Exhibit U
attached hereto.
"RECONSTRUCTED PROPERTY" has the meaning set forth in Section 17(d)
hereof.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System.
"RELEASE" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leachate, dumping or disposing of a
Hazardous Material into the Environment.
"RENEWAL NOTICE" has the meaning set forth in Section 15(b) hereof.
"RENEWAL TERM" has the meaning set forth in Section 15(b) hereof.
"RENT PAYMENT DATE" means the last day of each Rent Period.
"RENT PERIOD" means:
(1) to the extent that Aggregate Property Cost is funded at the
Euro-Dollar Rate pursuant to Section 7(a)(i) hereof, the period commencing
initially on the Closing Date and ending at the end of the fifteenth day of the
calendar month in which the Closing Date occurrs and thereafter each period
commencing on and including the fifteenth day following the close of the
immediately preceding Rent Period and ending one month thereafter; PROVIDED,
that:
(i) any Rent Period which would otherwise end on a day which is not a
Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Rent Period shall end on the
next preceding Euro-Dollar Business Day; and
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(ii) any Rent Period which begins on the last Euro-Dollar Business Day
of the calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Rent Period)
shall end on the last Euro-Dollar Business Day of a calendar month; and
(2) to the extent that during any Rent Period the Aggregate Property Cost
is funded in whole or in part at the Base Rate pursuant to Section 7(b) or 7(c)
hereof, then the Rent Period (as determined by paragraph (1) above in this
definition of "Rent Period") shall consist of the following two portions,
namely, the "Base Rate Portion" (which shall be the period during such Rent
Period during which the provisions of Section 7(b) or 7(c) are applicable) and
the "EURO-DOLLAR PORTION" (which shall be the period during such Rent Period
during which the provisions of Section 7(b) or 7(c) are not applicable).
Notwithstanding the above, any Rent Period which would otherwise extend beyond
the Termination Date shall end on the Termination Date.
"RENT PURCHASER" has the meaning set forth in Section 23(a) hereof.
"REPORTABLE EVENT" shall mean, with respect to any Single Employer
Plan, an event described in section 4043(b) of ERISA, other than an event as to
which the notice requirement is waived under applicable Pension Benefit Guaranty
Corporation regulations.
"REQUIRED LESSORS" means, as of any date of determination, with
respect to any approval, action, waiver, direction or consent, Lessors whose
Outstanding Investments aggregate at least 51% of Aggregate Lease Investment
Balance as of such date of determination.
"REQUIRED MODIFICATION" has the meaning set forth in Section 10(d).
"RISK AMOUNT" means, at any time in question, the result of
subtracting Aggregate Guaranteed Residual Value from Aggregate Lease Investment
Balance.
"SALE NOTICE" has the meaning set forth in Section 14(b)(i) hereof.
"SECURITY AGREEMENT" means the agreement substantially in the form
attached hereto as Exhibit U.
"SELLER" has the meaning set forth in paragraph 2 of the Recitals.
"SELLER ANCILLARY TRANSFER DOCUMENTS" means, collectively, (i) the
"Assignment and Assumption of Leases" in the form attached as Exhibit "D" to the
Improved Real Property
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Purchase and Sale Agreement, and (ii) the "Assignment of Service Contracts,
Warranties and Guaranties and other Intangible Property" in the form attached as
Exhibit "E" to the Improved Real Property Purchase and Sale Agreement.
"SIGNING CERTIFICATE" means a certificate in the form of Exhibit M
hereto executed by an Authorized Officer of Lessee and delivered to Agent at
least five Business Days prior to the date on which Lessee wants Agent to rely
thereon.
"SIGNING OFFICER" means an officer of Lessee designated in the most
recent Signing Certificate of Lessee.
"SINGLE EMPLOYER PLAN" shall mean any Plan that is subject to Title IV
of ERISA.
"SUBORDINATED DEBT" means indebtedness of Lessee which is subordinated
to the prior payment of the Liabilities on terms and conditions acceptable to
the Agent; PROVIDED, that any payments of principal which are scheduled to occur
prior to the last occurring Termination Date shall not constitute Subordinated
Debt.
"SUBSIDIARY" means a corporation of which Lessee and/or its other
Subsidiaries own, directly or indirectly, such number of outstanding shares as
have more than 50% of the ordinary voting power for the election of such
corporation's directors.
"SUMITOMO BANK" means The Sumitomo Bank, Limited.
"TANGIBLE NET WORTH" shall mean the aggregate amount of the capital
stock accounts (including paid-in-capital and excluding treasury shares) plus
(or minus in the case of a deficit) the retained earnings of the Lessee
determined on a consolidated basis, plus non-current financial obligations
subordinated to payment of the obligations of Lessee under the Lease Documents
in a manner satisfactory to the Agent.
"TAXES" has the meaning set forth in Section 13 (a) hereof.
"TERM" means the Initial Term or, if applicable, the Renewal Term.
"TERMINATION DATE" means the date on which the lease of the Property
hereunder terminates.
"TERMINATION EVENT" shall mean (a) a Reportable Event, (b) the
withdrawal by the Lessee or any ERISA Affiliate from a Single Employer Plan
during a plan year in which it was a substantial employer (within the meaning of
section 4001(a)(2) or 4062(e) of ERISA, (c) the termination of a Single Employer
Plan, or the filing of a notice of intent to terminate a Single Employer Plan
under section 4041(c) of ERISA, (d) the institution of proceedings to terminate,
or the appointment of a trustee with
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respect to, a Single Employer Plan by the PBGC, (e) any other event or condition
which could constitute grounds under section 4042(a) of ERISA for the
termination of, or the appointment of a trustee to administer, any Single
Employer Plan, or (f) the imposition of a Lien pursuant to section 412 of the
Code or section 302 of ERISA as to the Lessee or any ERISA Affiliate.
"TERMINATION OPTION" has the meaning set forth in Section 14 (b) (i)
hereof.
"TITLE COMPANY" means First American Title Insurance Company.
"TOTAL CAPITALIZATION" shall mean Funded Debt plus Net Worth.
"TOTAL COMMITMENT" means the amount set forth as the Total Commitment
on Schedule I hereto.
"TRIGGERING EVENT" is defined in Section 4 (g).
"UCC" shall mean the Uniform Commercial Code, as in effect from time
to time in any applicable jurisdiction.
"UNMATURED EVENT OF DEFAULT" means any event which if it continues
uncured will, with lapse of time or notice or lapse of time and notice,
constitute an Event of Default.
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SECTION 2. REPRESENTATIONS AND WARRANTIES OF LESSEE.
The Lessee represents, warrants and covenants to the Lessors that,
except as expressly set forth in the Received Reports:
(a) CORPORATE MATTERS. Lessee and each Subsidiary (i) are duly
incorporated and validly existing corporations in good standing under the laws
of their state of incorporation, (ii) have full power, authority and legal right
to own and operate their properties and conduct their business as currently
conducted and, in the case of Lessee, to execute, deliver and perform its
obligations under the Lease Documents, (iii) are duly qualified to do business
as a foreign corporation in good standing in each jurisdiction in which their
ownership or leasing of properties or the conduct of their business requires
such qualification, except where the failure so to qualify would not result in a
Material Adverse Effect, and (iv) in the case of Lessee, has obtained all
necessary consents, licenses, authorizations or approvals of, and exemptions by,
such Governmental Authorities as may be necessary to authorize the execution,
delivery and performance of the Lease Documents, except where the failure so to
obtain the same would not result in a Material Adverse Effect.
(b) PROPERTY INFORMATION PACKAGE. Lessee has furnished to the Agent
a schedule describing the Land and all existing Improvements thereon and thereto
to be purchased by the Lessors and leased by the Lessors to Lessee pursuant to
Section 4 hereof and specifically including all of the items set forth on
Exhibit N hereto (the "PROPERTY INFORMATION PACKAGE"); and all information
contained in the Property Information Package is true and complete.
(c) AUTHORIZATION; NO CONFLICT. The execution, delivery and
performance of the Lease Documents by Lessee (i) are within its corporate
powers, (ii) have been duly authorized by all necessary corporate action, (iii)
do not require any governmental approval, consent, filing, recording, notice or
other action which has not been previously obtained and remains in full force
and effect, (iv) do not and will not contravene or conflict with any provision
of Applicable Law or of Lessee's charter or by-laws, and (v) do not and will not
contravene or conflict with, or cause any Lien to arise under, any provision of
any agreement binding upon Lessee, any Subsidiary of Lessee or any of their
respective properties.
(d) BINDING AGREEMENT. This Agreement is a legal, valid and binding
obligation of Lessee, enforceable against Lessee in accordance with its terms,
except as such enforcement may be limited by the application of bankruptcy,
moratorium, reorganization or other similar laws affecting the rights of
creditors generally or by general principles of equity (whether
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or not a proceeding is brought in a court of law or equity). Each of the other
Lease Documents to be executed by Lessee, when duly executed and delivered by
Lessee, will be a legal, valid and binding obligation of Lessee, enforceable
against Lessee in accordance with its terms, except as such enforcement may be
limited by the application of bankruptcy, moratorium, reorganization or other
similar laws affecting the rights of creditors generally or by general
principles of equity (whether or not a proceeding is brought in a court of law
or equity).
(e) FINANCIAL STATEMENTS. (i) Lessee has furnished to the Agent true
and correct copies of Lessee's audited consolidated financial statements as at
December 31, 1995. Such financial statements have been prepared in conformity
with GAAP (subject to normal recurring accruals and adjustments in the case of
such unaudited consolidated financial statements, and subject to the information
set forth in the footnotes to such audited consolidated financial statements),
and fairly present the financial condition of Lessee and its Subsidiaries as at
such dates and the results of their operations for the periods then ended.
(ii) Since either of the dates of the financial statements
referred to in Section 2 (e) (i) hereof, there has been no Material Adverse
Effect.
(f) LITIGATION AND CONTINGENT LIABILITIES. No Material Litigation is
pending or, to the knowledge of Lessee, threatened against Lessee or any
Subsidiary not provided for or disclosed in the financial statements referred to
in Subsection (e) hereof. Neither Lessee nor any of its Subsidiaries has any
contingent liabilities (other than any liability incident to such Material
Litigation) not provided for or disclosed in the financial statements referred
to in Subsection (e) hereof which could result in a Material Adverse Effect.
(g) TITLE TO PROPERTY.
(i) Effective as of the Closing Date, immediately prior to the
transfer to Lessor, Seller will own and hold marketable title to the Property,
free and clear of all liens (including, without limitation, Liens), covenants,
conditions, restrictions, rights of way, easements, and encumbrances of any kind
or character whatsoever, except for the Permitted Liens. Without limiting the
generality of the foregoing, there are no unrecorded easements affecting the
Real Property known to Lessee, no encroachments on the Real Property by
improvements on adjoining property, and no encroachments by the Improvements on
any adjoining property, easements or public or private streets.
(ii) Excluding the Property, Lessee and its Subsidiaries own and
hold good and marketable title to all of their respective material property,
including their respective assets and property reflected in the financial
statements referred to in Section 2 (e) hereof or acquired since such dates
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(other than assets and property sold or disposed of in the ordinary course of
business), free and clear of any Lien except those referred to in Section 2 (h)
hereof.
(h) LIENS. Excluding the Property, none of the assets of Lessee or
any Subsidiary is subject to any Lien, except any Permitted Lien.
(i) CHIEF EXECUTIVE OFFICE. The location of the principal place of
business and chief executive office of Lessee is as follows: 3950 North First
Street, San Jose, California 95125.
(j) ERISA. (i) Each Plan has been maintained and operated in all
material respects in accordance with all applicable laws, including ERISA and
the Code, and each Plan intended to qualify under section 401(a) of the Code so
qualifies. No Reportable Event has occurred in the last five years, and the
present value of all benefits under all Single Employer Plans (based on those
assumptions used to fund such Single Employer Plans) did not, in the aggregate,
as of the last annual valuation date applicable thereto, exceed the actuarial
value of the assets of such Single Employer Plans allocable to such benefits.
No material liability has been, and no circumstances exist pursuant to which any
material liability could be, imposed upon the Lessee or any ERISA Affiliate (i)
under sections 4971 through 4980B of the Code, sections 502(i) or 502(l) of
ERISA, or under Title IV of ERISA with respect to any Single Employer Plan or
Multiemployer Plan, or with respect to any plan heretofore maintained by the
Lessee or any ERISA Affiliate, or any entity that heretofore was an ERISA
Affiliate, (ii) for the failure to fulfill any obligation to contribute to any
Multiemployer Plan, or (iii) with respect to any Plan that provides
post-retirement welfare coverage (other than as required pursuant to Section
4980B of the Code). Neither the Lessee nor any ERISA Affiliate has received any
notification that any Multiemployer Plan is in reorganization or has been
terminated within the meaning of Title IV of ERISA, and no Multiemployer Plan is
reasonably expected to be in reorganization or to be terminated.
(ii) The execution, delivery and performance of the Lease
Documents and the consummation of the transactions contemplated hereby and
thereby will not involve any "prohibited transaction" within the meaning of
ERISA or the Code.
(k) INVESTMENT COMPANY ACT. Neither Lessee nor any Subsidiary is an
"investment company" nor a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
(l) PUBLIC UTILITY HOLDING COMPANY ACT. Neither Lessee nor any
Subsidiary is a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding
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company", within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
(m) REGULATIONS G, T, U AND X. Lessee is not engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying "margin stock" within the meaning of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System.
None of Lessee or any Affiliate of Lessee or any Person acting on their behalf
has taken or will take action to cause the execution, delivery or performance of
this Agreement, the other Lease Documents, the transactions contemplated hereby
or the use of proceeds of the sale of the Property to the Lessor to violate
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System.
(n) LABOR CONTROVERSIES. There are no labor controversies pending or
threatened against Lessee or any of its Subsidiaries which, if adversely
determined, could have a Material Adverse Effect.
(o) TAX STATUS. (i) All tax returns, reports and forms required to be
filed with any domestic or foreign taxing authority in connection with any
activities or assets of Lessee or any Subsidiary have been filed, except where
the failure to file any such return, report or form would not have any Material
Adverse Effect.
(ii) All Taxes required to be paid with respect to the activities
or assets of Lessee and its Subsidiaries have been duly paid or provisions
deemed appropriate were made by Lessee and its Subsidiaries, on the books and
records therefor, except such amounts (1) as are subject to a Permitted Contest
or (2) the non-payment of which would not have a Material Adverse Effect.
(p) NO DEFAULT. No event has occurred and no condition exists which,
upon the execution and delivery of this Agreement or upon the consummation of
the transactions to occur on any Closing Date, will constitute an Event of
Default or Unmatured Event of Default.
(q) COMPLIANCE WITH APPLICABLE LAWS. Lessee and its Subsidiaries are
in compliance with the requirements of all Applicable Laws, a breach of which
might result in a Material Adverse Effect.
(r) LICENSES, ETC. Neither Lessee nor any of its Subsidiaries has
failed to obtain any licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its respective properties or to the
conduct of its respective business, which violation or failure to obtain might
result in a Material Adverse Effect.
(s) INTELLECTUAL PROPERTY. There are no patents, patent rights,
trademarks, service marks, trade names,
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copyrights, licenses or other intellectual property rights with respect to the
Property, or proprietary, patented or patentable modifications or parts used in
connection with the Property, the absence of which would have a Material Adverse
Effect. Lessee owns and uses the Property free from known conflicts with the
rights of others.
(t) SUBJECTION TO REGULATION. Neither the Agent nor any Lessor will,
solely by reason of entering into the Lease Documents or the consummation and
performance of the transactions contemplated thereby (other than upon the
exercise of remedies under the Lease and without regard to any business in which
the Agent or any Lessor may presently be engaged, including the banking
business), (i) become subject to ongoing regulation by any Governmental
Authority as a company engaged in the business of Lessee in any jurisdiction or
(ii) become subject to any other ongoing regulation of its operations by any
Governmental Authority (other than any taxing authority).
(u) IMPOSITIONS. No Tax (other than such payments contemplated by
Sections 7 (a), (iii), 13, 14, 17, 19 and 29 hereof) shall result from the
transfer, delivery or leasing of any Property (or any interest therein) as
contemplated by the Lease Documents, except such Taxes that have been paid in
full on or prior to such Closing Date.
(v) INSURANCE. All insurance coverages required by Section 11 of
this Lease are in full force and effect and there are no past due premiums in
respect of any such insurance. Lessee and its Subsidiaries have at their own
cost and expense obtained in commercially reasonable kind and form and with
financially sound and reputable insurers, all risk of physical loss or damage
insurance covering the assets of Lessee and its Subsidiaries wherever the same
may be located, insuring against the risks of fire, explosion, theft and such
other risks as are prudently insured against by corporations engaged in the same
business and similarly situated with Lessee and its Subsidiaries (and
specifically including vandalism, malicious mischief coverage, loss overboard
and breakage), in an amount usually carried by corporations engaged in the same
business and similarly situated with Lessee and its Subsidiaries.
(w) BROKERS, ETC. Lessee has not engaged or authorized any broker,
finder, investment banker or other third party to act on its behalf, directly or
indirectly, as a broker, finder, investment banker, agent or in any other like
capacity in connection with any of the Lease Documents or the transactions
contemplated thereby, except for Lund Financial Corporation, for whose
commission Lessee shall be liable solely.
(x) SECURITY INTERESTS.
(i) Assuming the Memorandum of Lease and the Deed of Trust are
recorded in the office of the county recorder of the county in which the Land is
located, the Agent, on behalf of the
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Lessors, will have a first priority perfected lien in Lessee's interest in the
Real Property free and clear of all Liens other than Permitted Liens.
(ii) Assuming the UCC-1 financing statements referred to in
Section 3 (h) hereof are filed in the offices of the California Secretary of
State, the Agent, on behalf of the Lessors, will have a first priority perfected
security interest in the Personal Property free and clear of all Liens other
than Permitted Liens.
(y) ENVIRONMENTAL. (i) Lessee and its Subsidiaries are in compliance
with all applicable Environmental Laws and Environmental Permits, and to
Lessee's knowledge, no circumstances exist that would prevent or interfere with
such compliance during the term of the Lease, except to the extent that any such
non-compliance, individually or in the aggregate, would not have a Material
Adverse Effect;
(ii) Lessee and its Subsidiaries have obtained all Environmental
Permits required for the occupancy and operation of their property, equipment,
and facility, except to the extent that any such failure to obtain such
Environmental Permits, individually or in the aggregate, would not have a
Material Adverse Effect;
(iii) there are no past, pending, or threatened Environmental
Claims against Lessee or its Subsidiaries, and Lessee is not aware of any facts
or circumstances which could reasonably be expected to form the basis for any
Environmental Claim against Lessee or its Subsidiaries, except to the extent
that any such Environmental Claims if adversely decided, individually or in the
aggregate, would not have a Material Adverse Effect;
(iv) except as expressly set forth in the Environmental Audit and
on Exhibit R, no Hazardous Materials are present, no Releases of Hazardous
Materials have occurred at, from, in, on, under, to, or adjacent to the Property
during such time as Lessee has been in possession of the Property, and to
Lessee's knowledge, no Releases of Hazardous Materials have ever occurred at,
from, in, on, under, to, or adjacent to the Property;
(v) Lessee and its Subsidiaries have not transported, disposed
of, or arranged for the treatment, storage, handling or disposal of any
Hazardous Materials at any off-site location which is an Environmental Cleanup
Site;
(vi) No facility or property now owned, operated or leased by
Lessee or its Subsidiaries is or was previously an Environmental Cleanup Site;
and no facility or property previously owned, operated or leased by Lessee or
its Subsidiaries was an Environmental Cleanup Site during the time of Lessee's
ownership.
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(vii) There are no Liens arising under or pursuant to
Environmental Law on any property, facility, or equipment currently owned,
operated or leased by Lessee or its Subsidiaries, and there are no facts,
circumstances or conditions that could reasonably be expected to result in the
imposition of such a Lien; and
(viii) Costs of compliance with applicable Environmental Laws and
Environmental Permits in connection with the Property or Lessee's or its
Subsidiaries' operations, are not expected to materially increase during the
term of this Lease.
(z) NO BURDENSOME AGREEMENTS. Neither Lessee nor any Subsidiary is a
party to or bound by any agreement or instrument or subject to any corporate or
other restriction, the performance or observance of which now has or, as far as
Lessee or any Subsidiary can reasonably foresee, may have a Material Adverse
Effect.
(aa) LAND USE REGULATIONS. The present use and operation of the Real
Property is authorized under existing Applicable Laws and other land use
regulations applicable to the Real Property, and to Lessee's knowledge there is
no present plan, study or effort by any Governmental Authority or any private
party or entity which in any way adversely affects or would adversely affect the
continued authorization of the present use and operation of the Real Property;
there are no legal actions pending or to Lessee's knowledge threatened against
the Property, nor, to Lessee's knowledge are there any violations of Applicable
Laws, affecting or arising out of the use, operation or occupancy of the
Property by Persons other than Lessee or its Affiliates; there are no legal
actions pending or to Lessee's knowledge threatened against the Lessee or any of
its Affiliates, nor, are there any violations of Applicable Laws, affecting or
arising out of the use, operation or occupancy of the Property by Lessee or any
of its Affiliates;
(ab) DEVELOPMENT PLANS. There are no existing or, to Lessee's
knowledge, proposed or contemplated plans to widen, modify or realign any street
or highway, or any existing or, proposed or contemplated eminent domain
proceedings that would adversely affect the Property; and, there are no intended
public improvements which would result in any charge being levied or assessed
against, or in the creation of any lien upon, the Property.
(ac) UTILITIES. The Real Property is connected to and serviced by
water, sewage disposal, gas and electrical facilities that are adequate for the
present use of the Real Property and that are in accordance with all applicable
laws, statutes, ordinances, rules, and regulations of all public or quasi-public
authorities having or claiming jurisdiction over these utilities or facilities.
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(ad) MECHANICS' LIEN CLAIMS. There are no claims for labor performed
for or materials furnished to or with respect to the Property that could give
rise to a mechanics' or materialmen's lien on the Property or any portion
thereof.
(ae) PERMITS AND LICENSES. Lessee holds all permits, governmental
approvals and licenses necessary to own, occupy and operate the Real Property.
Lessee has not received any notice of revocation or non-renewal of any such
permits or licenses. Lessee shall not modify or rescind any of the permits and
licenses, and shall use its best efforts to obtain any renewal or extension of
such permits and licenses as may be required by Applicable Law in the ordinary
course of business. Lessee has taken no action, and no condition presently
exists arising out of the Lessee's activities in connection with the operation
of the Property, that would preclude transfer and/or issuance of any such
permits or licenses.
(af) IMPROVEMENTS. To Lessee's knowledge, the Improvements have been
constructed in accordance with (A) all land use and construction permits and
approvals relating to the Real Property; (B) accepted standards of good
materials and workmanship; and (C) all Applicable Laws (including, without
limitation, building codes, building ordinances, and the Americans With
Disabilities Act of 1990), covenants, conditions, restrictions, and agreements
of any kind or nature affecting the Real Property.
(ag) DEFECTS. To Lessee's knowledge there are no defects in the
Improvements and no repairs or replacements required to or of the electrical,
heating, air conditioning, or other operational systems in the Improvements
that, in total, would require the expenditure of more than a De Minimis Amount
to repair or replace. Lessee has received no written notice from any
governmental authority, any insurance company or any board of fire underwriters,
or other body exercising similar functions with respect to the need for any
material repairs to or replacements of any of the Improvements.
(ah) NOTICE FROM INSURANCE CARRIERS. Lessee has not received any
written notice from any insurance carrier which has issued a policy of insurance
with respect to the Property of any defects or deficiencies or requesting the
performance of any repairs, alterations or other work with respect to the
Property.
(ai) DISCLOSURE GENERALLY. The representations and statements made by
or on behalf of Lessee in connection with this Lease, including representations
and statements in each of the Lease Documents, do not contain any untrue
statement of a material fact or omit to state a material fact or any fact
necessary to make the representations made not materially misleading. No
written information, exhibit, report or financial statement furnished by Lessee
to Agent or any Lessor in connection with this Lease, or any Lease Document,
contains any material misstatement of fact or omits to state a material fact
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or any fact necessary to make the statements contained therein not materially
misleading.
(aj) SOLVENCY. Lessee is, and after giving effect to the transactions
contemplated hereby, will be, Solvent. "Solvent" means that the aggregate
present fair saleable value of Lessee's assets is in excess of the total amount
of its probable liability on its existing debts as they become absolute and
matured, Lessee has not incurred debts beyond its foreseeable ability to pay
such debts as they mature, and Lessee has capital adequate to conduct the
business it is presently engaged in or is about to engage in.
SECTION 3. CONDITIONS TO CLOSING. The obligation of the Lessors
to acquire the Property to be purchased and leased on the Closing Date is
subject to: (I) receipt of a Closing Date Notice for the Closing Date at least
five Euro-Dollar Business Days prior to the Closing Date; (II) performance by
the Lessee of all of its obligations under this Lease required to be performed
on and as of the Closing Date; (III) the fact that no Event of Loss has occurred
with respect to any of the Property to be purchased and leased on the Closing
Date; and (IV) the satisfaction of the following further conditions:
(a) receipt by the Agent on behalf of the Lessors of the
Assignment of Improved Real Property Purchase and Sale Agreement duly
executed by the Lessee;
(b) receipt by the Agent on behalf of the Lessors of the Deed,
the Bill of Sale and Assignment, and the Seller Ancillary Transfer
Documents duly executed (and notarized, where applicable) by the Seller;
(c) on and as of the Closing Date no Event of Default or
Unmatured Event of Default shall have occurred and be continuing;
(d) the representations and warranties contained in this Lease
and the other Lease Documents which have then been executed and delivered
by the Lessee shall be true on and as of the Closing Date as though made on
and as of the Closing Date, the Lessors shall have good and marketable
title to the Property to be purchased and leased on the Closing Date, free
and clear of any and all Liens other than Permitted Liens;
(e) receipt by the Agent on behalf of the Lessors of certified
copies of all corporate action taken by the Lessee to authorize the
execution, delivery and performance of this Lease and the other Lease
Documents delivered on the Closing Date, good standing certificates of the
Lessee in its state of incorporation and in states where Lessee is required
to qualify to do business, together with a certificate of the Secretary or
Assistant Secretary of
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Lessee as to the charter, by-laws of Lessee and such other corporate
documents and other papers as the Agent may reasonably request;
(f) on the Closing Date the filing for recording of the
Memorandum of Lease in the office of the county recorder of the county in
which the Land is located shall have duly occurred, or the same shall have
been delivered to Title Company with recording instructions satisfactory to
the Agent;
(g) on the Closing Date the filing for recording of the Deed of
Trust in the office of the county recorder of the county in which the Land
is located shall have duly occurred, or the same shall have been delivered
to Title Company with recording instructions satisfactory to the Agent;
(h) on the Closing Date all filings or recordings necessary or
advisable, in the opinion of the Agent (including, but not limited to,
filings of UCC-1 financing statements in the office of the California
Secretary of State) to perfect the right, title and interest of the Agent
on behalf of the Lessors in and to the Personal Property purchased and
leased on the Closing Date shall have been duly made (or duly executed and
appropriately completed UCC-1 financing statements shall have been
delivered to a filing service satisfactory to the Agent with filing
instructions satisfactory to the Agent);
(i) receipt by the Agent on behalf of the Lessors of opinions of
Messrs Morrison & Foerster LLP, special counsel for the Lessee, each dated
the Closing Date, and substantially in the forms included in Exhibit F
hereto (the Lessee hereby instructing such counsel so to deliver such
opinions to the Agent);
(j) receipt by the Agent on behalf of the Lessors of the
evidence of insurance referred to in Section 11 (e) hereof;
(k) receipt by the Agent on behalf of the Lessors of a
certificate, dated the Closing Date, of a duly Authorized Officer of Lessee
as to the incumbency, and setting forth a specimen signature, of each of
the persons (i) who has signed this Lease on behalf of Lessee; (ii) who
will sign the other applicable Lease Documents on behalf of Lessee; and
(iii) who will, until replaced by other persons duly authorized for that
purpose, act as the representatives of Lessee for the purpose of signing
documents in connection with the Lease Documents and the transactions
contemplated hereby;
(l) receipt by the Agent on behalf of the Lessors of a
certificate, dated the Closing Date, of an Authorized
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Officer of Lessee stating that the representations and warranties contained
in Section 2 hereof are true and correct on and as of the Closing Date as
though made on and as of the Closing Date;
(m) receipt by the Agent on behalf of the Lessors of such other
documents and information with respect to the matters contemplated hereby
as the Agent or any Lessor may reasonably request;
(n) on the Closing Date, the Lessee shall have paid to the Agent
for the account of the Lessors (pro rata according to their respective
Commitment Percentages) a fee equal to 0.45% of the Commitment on the
Closing Date;
(o) on the Closing Date, the Lessee shall have paid, or
reimbursed the Agent, for all costs and expenses (including without
limitation the fees of counsel in the amount of $50,000, and disbursements
of counsel) incurred by it in connection with the negotiation, execution
and delivery hereof and of the other Lease Documents on the transactions
occurring on the Closing Date; provided, however, at Lessee's option (to be
elected in writing prior to the Closing Date), the same may be capitalized
and added to the Aggregate Lease Investment Balance;
(p) Agent shall have received on behalf of the Lessors an
Appraisal in form and substance satisfactory to Agent, as to the Fair
Market Sales Value of the Property as of the Closing Date and as of the end
of the Initial Term and the Renewal Term of the Property;
(q) Agent shall have received on behalf of the Lessors an
Environmental Audit of the Real Property in form and substance acceptable
to Agent in its sole and absolute discretion; Agent acknowledges receipt
and approval of the Environmental Audit titled Limited Site Assessment
prepared by SECOR International Incorporated and dated February 13, 1996,
and based thereon, Agent acknowledges that this condition 3 (q) has been
satisfied;
(r) Lessee shall have elected to cause Collateralization to
become in effect by taking the actions set forth in Section 4 (g) (v); and
(s) Agent shall have received a Signing Certificate from Lessee.
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SECTION 4. PURCHASE AND LEASE OF PROPERTY.
(a) PURCHASE BY LESSOR AND LEASE BY LESSEE. On the Closing Date,
upon satisfaction or waiver of each of the conditions set forth in Section 3
hereof:
(i) pursuant to the Deed, the Bill of Sale and Assignment, the Seller
Ancillary Transfer Documents and the Improved Real Property Purchase and
Sale Agreement, Lessee shall cause the Seller to transfer to the Agent on
behalf and for the benefit of the Lessors, and the Agent shall purchase the
Property on behalf and for the benefit of the Lessors;
(ii) in consideration therefor, the Agent, on behalf and for the
benefit of the Lessors, shall pay to the Seller the amount provided for in
Section 4(d) hereof; and
(iii) the Agent, on behalf of the Lessors, shall lease to Lessee the
Property so purchased by the Agent (on behalf of the Lessors) from Seller
on such Closing Date, and Lessee shall accept delivery of, and lease from
the Lessors such Property pursuant to this Lease.
(b) EACH LESSOR TO HAVE AN UNDIVIDED INTEREST. Each Lessor shall
hold an undivided interest in the Property purchased from Seller and leased to
Lessee such interest being equal to such Lessor's Commitment Percentage of the
Aggregate Property Cost.
(c) FUNDING TO AGENT. On the Closing Date, subject to the terms and
conditions hereof, and in reliance on the representations and warranties
contained herein or made pursuant hereto, each Lessor agrees severally to
transfer to the Agent on such Closing Date an amount equal to the product of (i)
Aggregate Property Cost specified in the Closing Date Notice with respect
thereto, MULTIPLIED by (ii) such Lessor's Commitment Percentage (each such
transfer being referred to herein as a "FUNDING"). Remittances pursuant to this
Section 4 shall be made in immediately available federal funds by wire transfer
to the account of the Agent set forth below (or as otherwise specified by the
Agent to each Lessor from time to time not less than three calendar days prior
to the date of the requested Funding) and must be received by the Agent by 11:00
a.m., New York time on the Closing Date:
Morgan Guaranty Trust Company of New York
ABA Routing No. 021 000 238
For credit to: The Sumitomo Bank Limited, New York Branch
Acct. No.: 631-28-256
Further Credit to: Sumitomo Bank Leasing and Finance, Inc.
Acct. No.: 283 572
In no event shall any Lessor be required to provide funds under this Agreement
in an aggregate amount exceeding such Lessor's
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Commitment. In no event shall the Lessors be obligated to acquire Property
hereunder in excess of an Aggregate Property Cost that is greater than the Total
Commitment.
(d) FUNDING BY AGENT. On the Closing Date, upon satisfaction or
waiver of each of the conditions set forth in Section 3 hereof, in consideration
of the acquisition of Property by the Agent on behalf of the Lessors, the Agent,
on behalf and for the benefit of the Lessors, shall pay to the escrow holder
under the Improved Real Property Purchase and Sale Agreement, in accordance with
the instructions set forth below, an amount equal to the Aggregate Property
Cost. Such payment shall be in immediately available federal funds remitted by
wire transfer to the account of Lessee specified below or to such other account
(at a commercial bank in the continental United States) of Lessee as may be
specified by it in the Closing Date Notice with respect to the Closing Date.
ESCROW HOLDER ACCOUNT:
Bank: Union Bank -- Los Angeles
for Office No. 715
1800 Harrison Street
Oakland, California 94612
ABA Routing #: 1220 00 496
Account #: 715 00 820 26
Payee: First American Title Guaranty Company
Reference: Office No. 282-05
Escrow No. 510514
Escrow Officer: Susan Melton
(e) ACKNOWLEDGMENT BY LESSEE OF ACCEPTANCE AND SUITABILITY OF
PROPERTY. On the Closing Date, execution and delivery by Lessee of the Lease
Supplement shall constitute: (i) acknowledgement by Lessee that the Property has
been delivered to Lessee in good condition and has been accepted for lease
hereunder by Lessee as of such Closing Date and (ii) acknowledgement by Lessee
that the Property is subject to all of the covenants, terms and conditions of
this Lease, such Lease Supplement and any other applicable Lease Documents.
(f) TRANSFER TO LESSEE UPON FAILURE TO FUND. If on the Closing Date
Seller shall have failed to receive the Aggregate Property Cost for the Property
to be paid for on the Closing Date pursuant to Section 4(d) hereof, then upon
request of Lessee, the Agent, on behalf of the Lessors, shall transfer to
Lessee, on an "as-is" "where-is" basis and without any representation or
warranty of any kind, express or implied, whatever title to the Property it may
have by quitclaim deed (except that the Agent shall make the Agent's
Representations outside of the delivery of such deed) and the Agent shall
execute and deliver such UCC termination statements and other documents with
respect to the Property reasonably requested by Lessee to
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terminate the liens and security interests in the Property granted pursuant to
this Lease. Concurrently with such transfer, Lessee shall refund to the Agent
any amounts of Aggregate Property Cost actually paid to Lessee for the Property.
(g) COLLATERALIZATION.
(i) DEFINED. As used in this Lease, the term
"COLLATERALIZATION" shall mean that (A) Lessee has pledged (on behalf of the
Lessors) debt securities issued by the U.S. government with a maturity of three
years or less (the "GOVERNMENT SECURITIES") in an amount equal to 102% of the
Risk Amount, to Agent as security for Lessee's obligations under this Lease; and
(B) such pledge has been made in accordance with the terms of this Lease.
(ii) MANDATORY COLLATERALIZATION AFTER CLOSING. Upon the
occurrence of a Triggering Event, Lessor shall have the option to require the
Lessee to take such steps as are necessary to cause Collateralization to become
in effect not later than two Business Days after the occurrence of the
Triggering Event. "TRIGGERING EVENT" shall mean that any one of the financial
tests set forth on Exhibit S shall have occurred.
(iii) OPTIONAL COLLATERALIZATION AFTER CLOSING.
(1) GENERALLY. Subject to the limitations contained in
Section 4(g)(iii)(2), Lessee shall have the option (the "COLLATERALIZATION
OPTION") to cause Collateralization to become in effect by delivering written
notice (the "COLLATERALIZATION NOTICE") to Agent requesting that
Collateralization become in effect, and by complying with the provisions of
Section 4(g)(v). Collateralization shall become in effect on the first day of
the first Rent Period (a "First Rent Period Day") commencing after the later of
(A) the date of Agent's receipt of the Collateralization Notice or (B) the date
that Lessee has complied with the provisions of Section 4(g)(v) (the
"Satisfaction Day"); provided, however, that if such First Rent Period Day falls
within the ten (10) Business Day period after the Satisfaction Day, then
Collateralization shall become in effect on the first day of the second Rent
Period commencing after the Satisfaction Day.
(2) LIMITATIONS. Lessee may not exercise the
Collateralization Option unless more than twelve (12) consecutive months shall
have elapsed since the Uncollateralization Option, as defined in Section
4(g)(iv)(1), shall have last become effective pursuant to said Section.
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(iv) DISCONTINUING COLLATERALIZATION.
(1) GENERALLY. Subject to the limitations contained in
Section 4(g)(iv)(2), Lessee shall have the option (the "UNCOLLATERALIZATION
OPTION") to cause Collateralization to cease to be in effect by delivering
written notice (the "UNCOLLATERALIZATION NOTICE") to Agent requesting that
Collateralization no longer be in effect. Collateralization shall cease to be
in effect on the first day of the first Rent Period commencing after the date of
Agent's receipt of the Uncollateralization Notice, except that if such day falls
within the ten (10) Business Day period after Agent's receipt of the
Uncollateralization Notice, then Collateralization shall cease to be in effect
on the first day of the second Rent Period commencing after the date of Agent's
receipt of the Uncollateralization Notice. Agent shall instruct the Custodian
to cause the Government Securities together with all interest accrued thereon to
be returned to Lessee (or to such other party as Lessee may direct in the
Uncollateralization Notice) within twenty (20) Business Days after
Collateralization ceases to be in effect.
(2) LIMITATIONS. Lessee may not exercise the
Uncollateralization Option:
(A) if a Triggering Event has ever occurred; or
(B) while an Unmatured Event of Default exists; or
(C) if Lessee has failed to satisfy Agent that Lessee
is prepared to fully and completely perform each obligation of Lessee
under this Lease that is required to be performed during that time
that Collateralization is not in effect (including, without
limitation, the obligation of Lessee to maintain earthquake insurance
pursuant to Section 11(b)); or
(D) unless more than twelve (12) consecutive months
shall have elapsed since Collateralization shall have last become in
effect; or
(E) unless Agent shall have first notified Lessee in
writing that Agent has determined, in Agent's reasonable discretion,
that Agent has entered into (or is prepared to enter into) an
agreement with a third party or parties pursuant to which the right to
receive some or all of the Base Rent, Additional Base Rent and
Additional Rent to be paid by Lessee under this Lease shall be
transferred.
(v) EFFECTING COLLATERALIZATION. At such time as
Collateralization is to become in effect pursuant to this Lease, Lessee shall
(A) to the extent it has not previously done so,
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execute and deliver the Security Agreement to Agent, (B) cause the Government
Securities to be delivered to the Custodian in accordance with the Security
Agreement, and (C) take all such other action as required by Agent to cause
Collateralization to become in effect.
(vi) ADJUSTMENT OF COLLATERALIZATION. In the event that the
aggregate value (as determined by Custodian pursuant to the Security Agreement)
of the Government Securities decreases below 102% of the Risk Amount, then
Lessee shall, within two Business Days after notice by Custodian or Agent,
deposit sufficient Government Securities with Custodian to cause the aggregate
value (as determined by Custodian pursuant to the Security Agreement) of the
Government Securities to equal 102% of the Risk Amount. In the event that the
aggregate value (as determined by Custodian pursuant to the Security Agreement)
of the Government Securities increases above 102% of the Risk Amount, Agent or
Custodian shall notify Lessee of such event, and upon Lessee's written request,
Agent shall, within two Business Days thereafter, instruct the Custodian to
release sufficient accrued interest (first) and Government Securities (next) to
Lessee to cause the aggregate value (as determined by Agent in its sole and
absolute discretion) of the Government Securities to equal 102% of the Risk
Amount.
(h) RELATIONSHIP WITH CERTAIN OCCUPANTS. Lessee accepts the assignment of
Lessors' interest in and to the Existing Tenancies (including, without
limitation, the right to receive all rents, additional rents and security
deposits thereunder, subject to the terms of this Lease) and covenants to
perform each and every obligation of the named landlord thereunder. Lessee may
modify, extend (not later than the end of the Term) or terminate any of the
Existing Tenancies without the prior consent of Lessor, provided that no action
on the part of Lessee with respect to the Existing Tenancies may decrease the
Fair Market Sales Value of the Property as of the end of the Initial Term and
the Renewal Term of the Property (as previously determined by the Appraisal to
be delivered pursuant to Section 3(p)) as determined by Agent in its sole and
absolute discretion.
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SECTION 5. PAYMENT ABSOLUTE, NO WARRANTIES.
(a) Each payment of Base Rent, Additional Base Rent, Additional Rent
and any other amount due hereunder or under any other Lease Document made by
Lessee shall be final (absent manifest error).
(b) LESSEE HAS SELECTED OR SHALL SELECT THE PROPERTY LEASED HEREUNDER
ON THE BASIS OF ITS OWN JUDGMENT. NEITHER THE AGENT NOR ANY LESSOR NOR ANY
AFFILIATE OF EITHER MAKES ANY REPRESENTATION OR WARRANTY OF ANY KIND WHATSOEVER,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, AS TO THE SAFETY, TITLE,
CONDITION, QUALITY, QUANTITY, FITNESS FOR USE, MERCHANTABILITY, CONFORMITY TO
SPECIFICATION, OR ANY OTHER CHARACTERISTIC, OF ANY ITEM OF THE PROPERTY, OR AS
TO WHETHER THE PROPERTY OR THE OWNERSHIP, USE OR POSSESSION THEREOF COMPLIES
WITH ANY LAWS, RULES, REGULATIONS OR REQUIREMENTS OF ANY KIND. AS BETWEEN THE
LESSEE ON THE ONE HAND, AND THE LESSORS, THE AGENT OR ANY INDEMNIFIED PERSON ON
THE OTHER HAND, LESSEE ASSUMES ALL RISKS ARISING FROM THE PROPERTY.
(c) This Lease is a net lease and the obligations of the Lessee to
pay all amounts payable (including specifically and without limitation amounts
payable pursuant to this Lease under Sections 7, 8, 12 and 13 hereof) shall be
absolute and unconditional under any and all circumstances of any kind or
description, and such amounts shall be paid without, and Lessee hereby waives,
any notice, demand, defense, set-off, deduction or counterclaim and without
abatement, suspension, deferment, diminution or reduction arising from any
matter whatsoever, and any present or future law to the contrary
notwithstanding, this Lease shall not terminate, nor shall the obligations of
the Lessee hereunder be affected by reason of, including without limitation:
(i) ANY DEFECT IN THE CONDITION, MERCHANTABILITY, DESIGN,
CONSTRUCTION, QUALITY OR FITNESS FOR USE OF THE PROPERTY OR ANY PART THEREOF, OR
THE FAILURE OF THE PROPERTY TO COMPLY WITH ALL REQUIREMENTS OF LAW, INCLUDING
ANY INABILITY TO OCCUPY OR USE THE PROPERTY BY REASON OF SUCH NON-COMPLIANCE;
(ii) ANY DAMAGE TO OR DESTRUCTION OF, REMOVAL, ABANDONMENT,
SALVAGE, LOSS, FAILURE OR DELAY IN DELIVERY, THEFT, CESSATION OF THE USE OR
POSSESSION OF ANY ITEM OF PROPERTY BY LESSEE FOR ANY REASON WHATSOEVER AND OF
WHATEVER DURATION, OR ANY CONDEMNATION, CONFISCATION, REQUISITION, SEIZURE,
PURCHASE, TAKING OR FORFEITURE OF ANY ITEM OF PROPERTY, IN WHOLE OR IN PART, OR
ANY CONTAMINATION OF OR RELEASE FROM, THE PROPERTY OR ANY PART THEREOF;
(iii) ANY RESTRICTION, PREVENTION OR CURTAILMENT OF OR
INTERFERENCE WITH ANY USE OF THE PROPERTY OR ANY PART THEREOF INCLUDING
EVICTION;
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(iv) ANY DEFECT IN TITLE TO OR RIGHTS TO THE PROPERTY OR ANY LIEN
ON SUCH TITLE OR RIGHTS OR ON THE PROPERTY (OTHER THAN LESSOR LIENS);
(v) ANY CHANGE, WAIVER, EXTENSION, INDULGENCE OR OTHER ACTION OR
OMISSION OR BREACH IN RESPECT OF ANY OBLIGATION OR LIABILITY OF OR BY THE
LESSOR;
(vi) ANY BANKRUPTCY, INSOLVENCY, REORGANIZATION, COMPOSITION,
ADJUSTMENT, DISSOLUTION, LIQUIDATION OR OTHER LIKE PROCEEDINGS RELATING TO THE
LESSEE OR ANY OTHER PERSON, OR ANY ACTION TAKEN WITH RESPECT TO THIS LEASE BY
ANY TRUSTEE OR RECEIVER OF THE LESSEE OR ANY OTHER PERSON, OR BY ANY COURT, IN
ANY SUCH PROCEEDING;
(vii) ANY CLAIM THAT THE LESSEE HAS OR MIGHT HAVE AGAINST ANY
PERSON, INCLUDING WITHOUT LIMITATION THE LESSOR AND ANY VENDOR, MANUFACTURER,
CONTRACTOR OR ARCHITECT OF OR FOR ANY PORTION OF THE PROPERTY;
(viii) ANY FAILURE ON THE PART OF THE LESSOR TO PERFORM OR COMPLY
WITH ANY OF THE TERMS OF THIS LEASE (OTHER THAN PERFORMANCE BY LESSOR OF ITS
OBLIGATIONS SET FORTH IN SECTION 4(d) HEREOF), OF ANY OTHER LEASE DOCUMENT OR OF
ANY OTHER AGREEMENT;
(ix) ANY INVALIDITY OR UNENFORCEABILITY OR ILLEGALITY OR
DISAFFIRMANCE OF THIS LEASE AGAINST OR BY THE LESSEE OR ANY PROVISION HEREOF OR
ANY OF THE OTHER LEASE DOCUMENTS OR ANY PROVISION THEREOF;
(x) THE IMPOSSIBILITY OR ILLEGALITY OF PERFORMANCE BY THE LESSEE,
THE LESSOR OR BOTH, OR ANY FAILURE TO OBTAIN, OR THE EXPIRATION, SUSPENSION OR
OTHER TERMINATION OF, OR INTERRUPTION TO, ANY REQUIRED LICENSES, PERMITS,
CONSENTS, AUTHORIZATIONS, APPROVALS OR OTHER LEGAL REQUIREMENTS;
(xi) ANY ACTION BY ANY COURT, ADMINISTRATIVE AGENCY OR OTHER
GOVERNMENTAL AUTHORITY;
(xii) THE INVALIDITY OR UNENFORCEABILITY OF THIS LEASE OR ANY
OTHER LEASE DOCUMENT AS AGAINST THE AGENT OR ANY LESSOR OR ANY LACK OF POWER OR
AUTHORITY OF LESSEE TO ENTER INTO THIS AGREEMENT OR ANY OTHER LEASE DOCUMENT;
(xiii) THE FAILURE OF LESSOR TO DISCLOSE TO LESSEE THE PRESENCE
OF HAZARDOUS MATERIALS ON, ABOUT OR UNDER THE PROPERTY, IT BEING ACKNOWLEDGED
THAT LESSOR HAS NOT EVER BEEN IN POSSESSION OF THE PROPERTY AND IS RELYING
ENTIRELY UPON THE REPRESENTATIONS OF LESSEE AS TO THE PRESENCE OF HAZARDOUS
MATERIALS ON, ABOUT OR UNDER THE PROPERTY;
(xiv) ANY RESTRICTION, PREVENTION OR CURTAILMENT OF OR
INTERFERENCE WITH ANY CONSTRUCTION ON OR ANY USE OF THE PROPERTY OR ANY PART
THEREOF; OR
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(xv) ANY OTHER CIRCUMSTANCES OR HAPPENING WHATSOEVER, WHETHER OR
NOT SIMILAR TO ANY OF THE FOREGOING, WHETHER OR NOT THE LESSEE SHALL HAVE NOTICE
OR KNOWLEDGE OF ANY OF THE FOREGOING.
The parties intend that the obligations of the Lessee hereunder shall
be covenants and agreements that are separate and independent from any
obligations of the Lessor hereunder or under any other Lease Documents and the
obligations of the Lessee shall continue unaffected unless such obligations
shall have been modified or terminated in accordance with an express provision
of this Lease.
THE LESSEE HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
ANY AND ALL RIGHTS WHICH IT MAY NOW HAVE OR WHICH AT ANY TIME HEREAFTER MAY BE
CONFERRED UPON IT, BY STATUTE OR OTHERWISE, TO TERMINATE, CANCEL, QUIT, RESCIND
OR SURRENDER THIS LEASE EXCEPT IN ACCORDANCE WITH THE EXPRESS TERMS HEREOF.
WITHOUT LIMITING THE GENERALITY OF THE PRECEDING PARAGRAPH, LESSEE
SPECIFICALLY WAIVES:
(xvi) ANY RIGHT IT MAY HAVE TO TERMINATE THIS LEASE AS A RESULT
OF ANY STATUTORY PROVISION NOW OR HEREAFTER IN EFFECT PERTAINING TO THE DAMAGE
AND DESTRUCTION OF THE PROPERTY, AND LESSEE EXPRESSLY WAIVES THE PROVISIONS OF
CALIFORNIA CIVIL CODE SECTION 1932(2), CALIFORNIA CIVIL CODE SECTION 1933(4),
AND CALIFORNIA UNIFORM COMMERCIAL CODE SECTION 10221 WITH RESPECT TO ANY
DESTRUCTION OF THE PROPERTY; AND
(xvii) ANY RIGHT IT MAY HAVE TO MAKE REPAIRS AT LESSOR'S EXPENSE
UNDER SECTIONS 1941 AND 1942 OF THE CALIFORNIA CIVIL CODE OR UNDER ANY SIMILAR
LAW, STATUTE, OR ORDINANCE NOW OR HEREAFTER IN EFFECT.
(d) Notwithstanding any other provision contained in this Lease or
any other Lease Document, it is specifically understood and agreed that, except
as set forth in Sections 24 and 25 of this Lease, none of the Agent, nor any
Lessor nor any other Indemnified Person, nor anyone acting on behalf of any of
them makes any warranties or representations or has any responsibility to
disclose any relevant information or has any other responsibility or duty
regarding, nor has any of the Agent, any Lessor or any other Indemnified Person,
or anyone acting on behalf of any of them, made any covenants or undertakings as
to, the accounting treatment to be accorded the Lessee or the U.S. Federal or
any state income or any other tax consequences, if any, to the Lessee as a
result of or by virtue of the transactions contemplated by this Lease and the
other Lease Documents.
(e) Without in any way limiting (or otherwise affecting) the Lessee's
agreements in this Section 5, the Lessors hereby agree that payments hereunder
by Lessee shall not be deemed a waiver of Lessee's right to assert (by separate
suit) a
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claim for damages by reason of the breach by any Lessor of any of its
obligations hereunder.
SECTION 6. TERM.
(a) The "INITIAL TERM" shall commence on the Closing Date, and shall
continue until April 10, 2001, [INSERT DATE THAT IS 5 YEARS AFTER CLOSING DATE]
unless sooner terminated in accordance with the provisions of this Lease.
(b) The Lessee shall have the right pursuant to Section 15 hereof to
renew the terms of this Lease on the terms and subject to the conditions therein
specified.
SECTION 7. RENT.
(a) Lessee hereby agrees to pay the Agent for the account of the
Lessors (pro rata in accordance with their respective Outstanding Investments)
rent as follows:
(i) on each Rent Payment Date:
(x) unless the provisions of Section 7(b) or Section 7(c)
hereof are applicable, for each day during such Rent Period an
amount equal to the product of (A) the Aggregate Lease Investment
Balance MULTIPLIED by (B) the sum of the Euro-Dollar Rate for the
Rent Period PLUS the Margin, MULTIPLIED by (C) 1/360;
PROVIDED, HOWEVER, that
(y) to the extent that for any portion of a Rent Period the
provisions of Section 7(b) or 7(c) become applicable then (I) for
each day during the Base Rate Portion of such Rent Period, rent
pursuant to this Section 7(a)(i) shall be determined as an amount
equal to the product of (A) the Aggregate Lease Investment
Balance, MULTIPLIED by (B) the Base Rate then in effect,
MULTIPLIED by (C) 1/365 (or 1/366 as applicable), and (II) for
each day during the Euro-Dollar Portion of such Rent Period, rent
pursuant to this Section 7(a)(i) shall be determined as an amount
equal to the product of (A) the Aggregate Lease Investment
Balance, MULTIPLIED by (B) the sum of the Euro-Dollar Rate for
such Euro-Dollar Portion plus the Margin, MULTIPLIED by (C)
1/360; and
(z) as to each Rent Period, the amount payable under this
Section 7(a)(i) shall in each case be reduced by any amount of
Base Rent
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previously paid in respect of such Rent Period pursuant to
Section 14, 17 or 29 hereof.
(ii) on each Rent Payment Date set forth on Schedule 3 to the
Lease Supplement, the amounts of Additional Base Rent set forth opposite
such date; and
(iii) on each Rent Payment Date an amount equal to the amount of
lease or use Taxes payable by the Agent in respect of the Rent Period
ending on such Rent Payment Date.
(b) If, with respect to any Rent Period, any Lessor determines that:
(i) deposits in Dollars (in the applicable amount) are not being offered to such
Lessor in the relevant market for such Rent Period; or (ii) the Euro-Dollar Rate
will not adequately and fairly reflect the cost to such Lessor of maintaining or
funding its Outstanding Investment for such Rent Period; or (iii) by reason of
circumstances affecting the London interbank eurodollar market, adequate and
reasonable means do not exist for ascertaining the applicable Euro-Dollar Rate;
then such Lessor shall forthwith give notice thereof to the Agent, and Agent
shall forthwith give notice thereof to Lessee, whereupon Base Rent of Lessee
payable to Agent on behalf of such Lessor shall be determined pursuant to
Section 7(a)(i)(y) hereof, until such Lessor notifies the Agent (who shall
notify Lessee) that the circumstances giving rise to such previous notification
have ceased.
(c) If, after the date of this Agreement, the adoption of any
Applicable Law, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Lessor with any
request or directive (whether or not having the force of law) of any such
Governmental Authority shall (i) make it unlawful or impossible for any Lessor
to make, maintain or fund its Outstanding Investment in the euro-dollar market
or (ii) make the continued ownership and leasing of the Property by such Lessor
otherwise impracticable and, in either case, such Lessor shall so notify the
Lessee (with a copy to the Agent), whereupon Base Rent of Lessee payable to
Agent on behalf of such Lessor shall be determined pursuant to Section
7(a)(i)(y) hereof, until Lessor notifies Lessee (with a copy to the Agent) that
the circumstances giving rise to such previous notification have ceased.
(d) If (i) Lessee makes, or the Agent or any Lessor otherwise
receives, any payment (as purchase price, insurance proceeds, sales proceeds or
in any other manner whatsoever) of or with respect to Aggregate Lease Investment
Balance or the provisions of Section 7(b) or Section 7(c) hereof become
applicable on any day other than the last day of a Rent Period or (ii) the
Closing Date fails for any reason to occur on the date notified by the Lessee to
the Agent, the Lessee shall reimburse each Lessor (other than, in the case of
clause (ii) only, any defaulting Lessor) on demand for any resulting loss or
expense
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incurred by it including (without limitation) any net loss (or expense) incurred
in obtaining, liquidating or employing deposits or swaps or comparable
instruments from third parties.
(e) Base Rent shall accrue from and including the first day of each
Rent Period to, but excluding the last day of such Rent Period.
(f) The Agent shall determine the Base Rent payable from time to time
under Sections 7(a), 7(b) and 7(c) hereof, and the affected Lessor(s) shall
determine amounts payable under Section 7(d) hereof, each of which
determinations shall be conclusive and binding in the absence of manifest error.
Agent shall supply Lessee with such bank account information as Lessee shall
require to enable payment of Base Rent and Additional Rent by wire transfer of
Federal funds to the account described in Section 4(c). Payment of Base Rent
and Additional Rent shall be payable monthly in arrears on the fifteenth (15th)
day of each calendar month (the "INVOICE DUE DATE"), except that the last
installment of Base Rent and Additional Rent hereunder shall be due and payable
on the last day of the Term. No sooner that ten (10) days prior to the due date
for any installment of Base Rent or Additional Rent under this Lease, Agent
shall deliver to Lessee a written notice containing the exact dollar amount of
the Base Rent and the Additional Base Rent that is due on such Invoice Due Date
(the "Invoice"). If Agent fails to send the Invoice, Lessee shall pay the
amount shown on the previous month's Invoice, and any shortfall or overpayment
shall be charged or credited to Lessee on the following month's Invoice.
SECTION 8. OTHER PAYMENTS.
(a) If, as a result of changes in Regulation D occurring after the
Closing Date, Regulation D shall require reserves actually to be maintained in
connection with any Outstanding Investment or any Eurocurrency Liabilities with
respect thereto of any Lessor, such Lessor may require Lessee to pay (and Lessee
hereby agrees to pay) to the Agent for the account of such Lessor an amount in
addition to Base Rent with respect to such Outstanding Investment equal to the
amount by which the maintenance of such reserves reduces the return which would
otherwise be realized by such Lessor on its Outstanding Investment in respect of
the current Rent Period. Any Lessor wishing to require such payment with
respect to its Outstanding Investment or any Eurocurrency Liabilities with
respect thereto shall give notice thereof to Lessee (with a copy to the Agent)
at least three (3) Business Days prior to the last day of the Rent Period in
respect of which such payment is sought and the Lessee shall pay the additional
amount as so notified on the last day of such Rent Period. Once given, each
such notice by a Lessor shall be deemed automatically to continue in effect and
apply to the full amount of such Lessor's Outstanding Investment until such
Lessor revokes such notice. At such time, if any, as such Lessor
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shall not be required so to maintain reserves, such Lessor agrees so to notify
Lessee (with a copy to the Agent).
(b) If after the date hereof, the adoption of any Applicable Law, or
any change therein, or any change in the interpretation or administration
thereof by any Governmental Authority charged with the interpretation or
administration thereof or compliance by any Lessor or its Funding Office with
any request or directive, whether or not having the force of law, of any such
Governmental Authority:
(1) shall subject such Lessor to any Tax with respect to its
Outstanding Investment, or shall change the basis of taxation of payments
to such Lessor in respect of any portion of its Outstanding Investment or
in respect of any other amounts due under this Lease (except for changes in
the rate of Tax on the overall net income of such Lessor imposed by the
jurisdiction in which such Lessor's principal executive office or its
Funding Office is located); or
(2) shall impose, modify or deem applicable any reserve (including,
without limitation, any imposed by the Board of Governors of the Federal
Reserve System, but excluding any included in an applicable Reserve
Percentage), special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, such Lessor or
such Lessor's Funding Office or shall impose on such Lessor or its Funding
Office or on the London interbank market any other condition affecting its
Outstanding Investment;
and the result of any of the foregoing is to increase the cost to such Lessor of
making or maintaining Outstanding Investment, or to reduce the amount of any sum
received or receivable by such Lessor under this Lease, then, within 15 days
after written demand (which demand shall be accompanied by a statement setting
forth the basis for such demand) delivered to the Lessee by such Lessor (with a
copy to the Agent), the Lessee agrees to pay to the Agent for the account of
such Lessor, on an After-Tax Basis, such additional amount or amounts as will
compensate such Lessor for such increased cost or reduction.
(c) If, after the date hereof, any Lessor shall have reasonably
determined that the adoption after the date hereof of any Applicable Law
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any Governmental Authority charged
with the interpretation or administration thereof, or any request or directive
regarding capital adequacy, whether or not having the force of law, of any such
Governmental Authority, has or would have the effect of reducing the rate of
return on the capital of such Lessor (or its parent) as a consequence of its
obligations hereunder to a level below that which such Lessor (or its parent)
could have achieved but for such adoption, change or compliance (taking into
consideration such Lessor's (or its parent's)
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policies with respect to capital adequacy), then from time to time, within 15
days after written demand (which demand shall be accompanied by a statement
setting forth the basis for such demand) delivered to the Lessee by such Lessor
(with a copy to the Agent) by such Lessor (with a copy to the Agent), the Lessee
will pay to the Agent for the account of such Lessor such additional amount or
amounts as will compensate such Lessor (or its parent) for such reduction.
(d) Each Lessor promptly shall notify Lessee of any event of which it
has actual knowledge, occurring after the date of this Agreement which will
entitle such Lessor to compensation pursuant to Section 8(a), 8(b) or 8(c) and
will designate a different Funding Office if such designation will avoid the
need for, or reduce the amount of such compensation and will not, in such
Lessor's sole judgment, be otherwise disadvantageous to such Lessor; provided,
however, that each Lessor shall be barred from claiming compensation under
Sections 8(a), 8(b) or 8(c) for such matters arising as a result of actions or
omissions of such Lessor occurring prior to the forty-five (45) day period
preceding the date of the notice if such Lessor failed to previously claim such
compensation when such Lessor had actual written notice of the action or
omission entitling it to compensation, the amount of the compensation was
computed and undisputed, and the Lessor nevertheless failed to previously claim
it. A certificate of any Lessor claiming compensation under Section 8(a), 8(b)
or 8(c) hereof and setting forth the additional amount or amounts to be paid to
it hereunder shall be conclusive in the absence of manifest error. In
determining such amount, such Lessor may use any averaging and attribution
methods deemed reasonable by such Lessor.
(e) Unless an amount equal to the Total Commitment is disbursed on
the Closing Date, the Lessee shall pay to the Agent:
(i) While Collateralization IS in effect:
(A) on behalf of the Debt Lessors a fee (the "Debt
Commitment Fee") on the last day of each calendar month equal to
the product of (x) 0.15% multiplied by (y) 1/360 multiplied by
(z) for each day since the prior date on which a Debt Commitment
Fee was paid or, before any such Debt Commitment Fee has been
paid, since the date this Agreement was executed and delivered,
the Aggregate Debt Lessor Commitment less the Debt Portion
Property Cost outstanding on such day.
(B) on behalf of the Equity Lessors a fee (the "Equity
Commitment Fee") on the last day of each calendar month equal to
the product of (x) 0.25% multiplied by (y) 1/360 multiplied by
(z) for each day since the prior date on which a Equity
Commitment Fee was paid or, before any such Equity Commitment Fee
has been paid, since the
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date this Agreement was executed and delivered, the Aggregate
Equity Lessor Commitment less the Equity Portion Property Cost
outstanding on such day.
(ii) While Collateralization is NOT in effect:
(A) on behalf of the Debt Lessors a fee (the "Debt
Commitment Fee") on the last day of each calendar month equal to
the product of (x) 0.25% multiplied by (y) 1/360 multiplied by
(z) for each day since the prior date on which a Debt Commitment
Fee was paid or, before any such Debt Commitment Fee has been
paid, since the date this Agreement was executed and delivered,
the Aggregate Debt Lessor Commitment less the Debt Portion
Property Cost outstanding on such day.
(B) on behalf of the Equity Lessors a fee (the "Equity
Commitment Fee") on the last day of each calendar month equal to
the product of (x) 0.375% multiplied by (y) 1/360 multiplied by
(z) for each day since the prior date on which a Equity
Commitment Fee was paid or, before any such Equity Commitment Fee
has been paid, since the date this Agreement was executed and
delivered, the Aggregate Equity Lessor Commitment less the Equity
Portion Property Cost outstanding on such day.
(f) Without prejudice to the full exercise by the Agent and the
Lessors of rights under Sections 20 and 21 hereof and other remedies of the
Agent and the Lessors, the Lessee shall pay to the Agent for the account of the
Lessors (pro rata in accordance with their respective Outstanding Investments
or, in the case of amounts payable for the account of a particular Lessor, for
the account of such Lessor) from time to time, on demand, an amount equal to (i)
any amount not paid by the Lessee to the Agent or the Lessors as provided in the
Lease Documents on or before the date such payments are due, MULTIPLIED by (ii)
the Overdue Rate, and by (iii) a fraction having a numerator equal to the number
of days in the period from and including such due date to but excluding the date
of payment thereof and a denominator of 365. The Lessee shall also pay to the
Agent and the Lessors an amount equal to any costs or expenses incurred by any
and all of them in collecting such unpaid sums or any other amounts due and
unpaid under the Lease Documents; such payment shall be made on demand after
written notice by the Agent or the applicable Lessor to the Lessee of such costs
or expenses.
(g) Base Rent, Additional Base Rent, Additional Rent and any other
amount payable by the Lessee to the Agent or the Lessors shall be paid in
immediately available funds by 1:00 p.m. New York time, on the date due, to the
Agent to the account specified in Section 4(c) hereof or to such other account
as may
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be specified in writing by the Agent. For all purposes of this Agreement any
payment received by the Agent after 1:00 p.m. New York time on a Business Day
shall be deemed received on the next Business Day.
(h) The Lessee's obligations under Sections 8, 12 and 13 hereof are
independent, but are not intended to result in duplicative payments being made
by the Lessee.
SECTION 9. RESTRICTED USE; COMPLIANCE WITH LAWS.
(a) So long as no Event of Default shall have occurred and be
continuing, Lessee may use the Property in any manner which is in compliance
with Applicable Law and is consistent with the purpose for which it was
designed. Agent acknowledges that the tenancies of LTX Corporation and Sony
Electronics Inc. are uses of the Property that are consistent with the purposes
for which it was designed. Lessee shall comply and shall cause all Persons
operating or using Property to comply with all Insurance Requirements and
Applicable Law regarding the Property. Lessee will not do or permit any act or
thing which is contrary to any Applicable Law or Insurance Requirement or which
is reasonably likely to materially impair the value, residual value, utility or
condition of the Property; provided, however that the foregoing clause shall not
be construed to limit Lessee's right to maintain a Permitted Contest. Lessee
shall cause to be obtained and maintained all licenses, consents, approvals and
authorizations of, and filings and registrations with, any Governmental
Authority or other Person necessary for the performance by the Lessee of its
obligations under the Lease Documents or any agreement or instrument required
thereunder. During the Initial Term or the Renewal Term, if any, and so long as
no Event of Default or Unmatured Event of Default shall have occurred and be
continuing, the Lessors each covenant and agree that the Lessee shall have the
right to peaceful, quiet and uninterrupted use and enjoyment of the Property
subject to the other terms and conditions provided in the Lease Documents
without any interference, hindrance, ejection or molestation by or from the
Agent or the Lessors.
(b) Lessee shall, at its own sole cost and expense, promptly and
duly execute, deliver, file and record all such documents, statements,
filings and registrations, and take such further actions as the Agent or any
Lessor shall from time to time reasonably request in order to establish,
perfect and maintain the Agent's title to and interest in this Lease and in
the Property (on the behalf of the Lessors) as against Lessee or any third
party in any applicable jurisdiction. Lessee shall not, without the prior
written consent of the Agent, which shall not be unreasonably withheld,
remove any item of Personal Property or any Fixture from the Real Property;
provided, that Lessee shall have the right to remove any property which (i)
ceases to be Personal Property or Fixtures leased hereunder pursuant to the
provisions of Section 14, 15, 17 or 29 hereof or (ii) has been removed
temporarily so that Lessee may perform its
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obligations under Section 10 hereof. Notwithstanding the foregoing, Lessee may
not: (I) change its name or the location of its principal place of business or
chief executive office (as specified in Section 2(g)(i), 2(i) hereof) or (II)
change the location of any item of Personal Property or Fixtures (as so
specified), in the case of clause (I) or (II), without first taking appropriate
measures to maintain the perfection and priority of the security interest
therein granted pursuant to Section 29 hereof.
(c) Lessee shall use reasonable precautions to prevent loss or damage
to the Property and to prevent injury to third Persons (and, in any event, at
least (i) in accordance with manufacturers' recommendations and industry
standards; and (ii) in a manner consistent with the stricter of Insurance
Requirements or Applicable Laws). Lessee shall cooperate fully with the
reasonable requests of the Agent and the Lessors and all insurance companies
providing insurance pursuant to Section 11 hereof in the investigation and
defense of any claims or suits arising from the use, occupancy, construction,
installation, repair, maintenance or replacement of Property, PROVIDED that
nothing contained in this Section 9(c) shall be construed as imposing on the
Agent or any Lessor any duty to investigate or defend any such claims or suits
or as a waiver of any of the Lessee's rights with respect thereto.
(d) Lessee shall keep according to its customary practice accurate
and current records of the ownership and operation of the Property. The Agent
and the Lessors or any of their authorized representatives, upon reasonable
advance written notice to the Lessee, may inspect the Property and Lessee's
records applicable thereto during reasonable business hours from time to time,
any such inspection to be at the expense of the Lessee if it is conducted at a
time when an Event of Default has occurred and is continuing.
(e) The Lessee shall not without prior written consent of the Agent
permit, or suffer to exist, any Lien on the Property other than Permitted Liens.
(f) The Lessee shall not suffer to exist any judgment, decree or
order of any court or other Governmental Authority (including, without
limitation, any Federal, state or local Tax Lien, other than a Permitted Lien),
(i) on any Property or (ii) which is reasonably likely to interfere with the due
and timely payment by Lessee of any sum payable or the exercise of any of its
rights or the performance of any of its duties or responsibilities (including
without limitation under Section 17 hereof) under this Lease or the other Lease
Documents unless such judgment, decree or order (I) is not reasonably likely to
result in a Material Adverse Effect or (II) is the subject of a Permitted
Contest. The Lessee shall, on receipt of notice from the Agent or any Lessor to
the effect that any such judgment, decree or order exists, promptly take such
action as may be
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reasonably necessary to prevent or terminate such judgment, decree or order.
SECTION 10. MAINTENANCE, IMPROVEMENT AND REPAIR OF THE PROPERTY.
(a) The Lessee shall pay all costs, expenses, fees and charges
incurred in connection with the use, occupancy, construction, installation,
repair, maintenance or replacement of Property during the Initial Term and the
Renewal Term, if any, thereof. The Lessee, at its sole cost and expense, shall
maintain the Property in good condition (ordinary wear and tear excepted) 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 Applicable Law and Insurance
Requirements and on a basis consistent with the operation and maintenance of
properties comparable in type and location to the Property and in no event less
than the standards applied by the Lessee in the operation and maintenance of
other comparable properties owned or leased by the Lessee or its Affiliates.
(b) The Lessor shall under no circumstances be required to build any
improvements on the Land, make any repairs, replacements, alterations or
renewals of any nature or description to the Property, make any expenditure
whatsoever in connection with this Lease or maintain the Property in any way.
The Lessor shall not be required to maintain, repair or rebuild all or any part
of the Property, and the Lessee waives any right to (i) require the Lessor to
maintain, repair, or rebuild all or any part of the Property, or (ii) make
repairs at the expense of the Lessor pursuant to any Applicable Law, Insurance
Requirement, contract, agreement, or covenant, condition or restriction in
effect at any time during the Lease Term.
(c) The Lessee shall, upon the expiration or earlier termination of
this Lease, vacate and surrender such Property, to the Lessor in the condition
in which Lessee is required to maintain the Property pursuant to this Lease,
unless the Lessee has purchased the Property from the Lessor as provided herein.
(d) The Lessee, at its sole cost and expense, may at any time and
from time to time make alterations, renovations, improvements and additions to
the Property or any part thereof and substitutions and replacements therefor
(collectively, "MODIFICATIONS"); PROVIDED, HOWEVER, that: (i) except for any
Modification required to be made pursuant to Applicable Law (a "REQUIRED
MODIFICATION"), no Modification shall impair the value or residual value (other
than to a De Minimis Amount), utility, or useful life of the Property or any
part thereof from that which existed immediately prior to such Modification;
(ii) the Modification shall be completed expeditiously and in a good and
workmanlike manner; (iii) the Lessee shall comply with all
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Applicable Laws (including all Environmental Laws) and Insurance Requirements
applicable to the Modification, including the obtaining of all permits and
certificates of occupancy, and the structural integrity of the Property shall
not be adversely affected; (iv) subject to Permitted Contests, the Lessee shall
pay all costs and expenses and shall discharge (or cause to be insured or bonded
over) within sixty (60) days after the same shall be filed (or otherwise become
effective) any Liens arising with respect to the Modification; (v) such
Modifications shall comply with Sections 9(a) and 10(a); and (vi) the Lessee
shall be required to obtain the prior written approval of the Agent, which
approval shall not be unreasonably withheld, with respect to any alterations
(other than Required Modifications) that shall (A) Materially affect any
structural element of the Improvements or major building system therein, or (B)
cost in excess of $250,000 or (C) materially change the nature of the
Improvements or the amount of usable area therein or the utility or residual
value thereof as of the date hereof. All Modifications shall remain part of the
Real Property and shall be subject to this Lease and title thereto shall
immediately vest in the Lessor; PROVIDED, HOWEVER, that Modifications that meet
each of the following conditions shall not be subject to this Lease: (x) such
Modifications are not Required Modifications, (y) such Modifications were not
financed by the Lessors and (z) such Modifications are readily removable without
impairing the value, or residual value (other than to a De Minimis Amount) or
remaining useful life of the Property. So long as no Unmatured Event of Default
has occurred and is continuing, the Lessee may place upon the Property any trade
fixtures, machinery, equipment or other property belonging to the Lessee or
third parties and may remove the same at any time during the Term, subject,
however, to the terms of Section 10(a), provided that the removal of such trade
fixtures, machinery, equipment or other property does not damage or materially
impair the value or residual value (other than to a De Minimis Amount), utility,
or remaining useful life of the Property. Any Modification not complying with
the foregoing clauses (x), (y) or (z) shall (i) be free and clear of all Liens
(other than Permitted Liens) and, without necessity of further act, shall be
owned by Agent (on behalf of the Lessors) and become Property for all purposes
of this Lease, and (ii) be reported to Agent upon the completion thereof by the
delivery of a Lease Supplement to Agent.
SECTION 11. INSURANCE.
(a) LIABILITY INSURANCE. The Lessee shall, at its own cost and
expense, procure or cause to be procured and maintain or cause to be maintained
comprehensive general liability insurance with respect to the Property covering
both bodily injury (as to all Persons, including employees of the Lessee, the
Agent or the Lessors) and damage to property. Policies covering bodily injury
and property damage shall provide for coverage in scope and amount consistent
with both industry standards applicable to similarly situated companies and the
insurance Lessee carries for
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similar property owned by Lessee or any of its Affiliates. If liability
insurance is carried on a claims-made basis at any time during the last three
years before the termination of this Lease, Lessee shall deliver to Lessor a
"tail" insurance policy covering claims made or to be made within a period of
not less than three years after the termination of this Lease; this covenant
shall survive the termination of this Lease. The Lessee shall cause the Agent,
the Lessors and their respective affiliates, officers, directors, employees and
agents (the "ADDITIONAL INSUREDS") to be named as Additional Insureds in all
insurance policies described in this Section 11(a) with respect to the Property.
(b) PROPERTY INSURANCE.
(i) GENERALLY. The Lessee shall, at its own cost and expense,
procure or cause to be procured and maintain or cause to be maintained all-risk
physical damage insurance on the Property (including flood and earthquake
coverage); PROVIDED, that, the amount of such insurance at any time shall be no
less than the greater of (i) the then Aggregate Lease Investment Balance plus
the amount of one Base Rent Payment and (ii) 100% of the replacement cost of the
Property. The policy shall contain an agreed value endorsement in an amount
acceptable to Agent in its sole and absolute discretion. The Agent (on behalf
of the Lessors) shall be named as an additional insured, as its interests may
appear, and shall be the sole loss payee in all insurance policies covering
physical damage carried with respect to the Property.
(ii) LIMITATIONS. Notwithstanding anything to the contrary
contained in Section 11(b)(i):
(1) While Collateralization is not in effect, Lessee shall
maintain earthquake insurance in an amount equal to not less than
fifty percent (50%) of the Aggregate Lease Investment Balance;
(2) Lessee shall not be required to maintain earthquake
insurance while Collateralization is in effect; provided, however,
that Lessee shall maintain the earthquake coverage required under this
Section 11(b) for a period of ninety (90) days after Collateralization
ceases to be in effect for any reason.
(c) APPROVED POLICIES. All insurance required by Sections 11(a) and
11(b) hereof shall either be approved by Agent or shall be with companies as to
which A.M. Best Company (or any nationally recognized successor thereto) has a
current general policyholder rating of at least "A" and a financial rating of at
least XIII. All such policies (A) shall provide for at least 30 days' prior
written notice to the Agent of any cancellation, lapse for non-payment of
premium, non-renewal or material adverse alteration of such policies, (B) shall
provide that in respect of the respective interests of the Additional Insureds
in such
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policies the insurance shall not be invalidated by any action or inaction of the
Lessee, any Person having possession with permission of the Lessee or any other
Additional Insured (other than the Additional Insured claiming coverage) and
shall insure the Additional Insured's interests, as they appear, regardless of
any breach or violation of any warranty, declaration or condition contained in
such policies by the Lessee, any such Person having possession or any other
Additional Insured (other than the Additional Insured claiming coverage), (C)
shall provide that there shall be no recourse against any Additional Insured for
the payment of premiums, commissions, assessments or advances, (D) shall be
primary without right of contribution from any other insurance that is carried
by any Additional Insured or any other Person, (E) shall, in the case of
liability policies, expressly provide that all the provisions thereof, except
the limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured and Additional Insured, (F) shall waive
any right of the insurers to any setoff, counterclaim or other deduction,
whether by attachment or otherwise, in respect of any liability of any
Additional Insured to the extent of any moneys due such Person and (G) shall
waive any rights of the insurers to subrogation against any Additional Insured.
(d) USE OF INSURANCE PROCEEDS. As between the Agent and the Lessee,
all insurance payments under Section 11(b) shall be paid to, or retained by, the
Agent, as security for the Lessee's obligations hereunder and shall be applied
as follows: so much of such payments remaining after reimbursement of the Agent
for costs and expenses incurred in connection with the damage or loss of the
Property shall be applied against the amounts required to be paid by the Lessee
pursuant to Section 17 hereof (plus any other amounts then due and payable under
the Lease Documents), if not already paid by the Lessee, or, if already paid by
the Lessee, shall be applied to reimburse the Lessee for its payment of such
amounts and the balance, if any, of such payment remaining thereafter shall be
paid over to, or retained by, the Lessee. Any amount referred to in the
preceding sentence that is payable to the Lessee shall not be paid to the Lessee
if at the time of such payment an Unmatured Event of Default or an Event of
Default shall have occurred and be continuing, but shall be held by the Agent as
security for the obligations of the Lessee under this Lease and, at such time as
there shall not be continuing any Unmatured Event of Default or any Event of
Default, such amount shall, to the extent not applied to satisfy the obligations
of the Lessee, be paid to the Lessee.
The insurance required by this Section 11 may be subject to such
reasonable deductible amounts, and the Lessee may self-insure such portions of
the required coverage, as is customary for companies similarly situated so to
self-insure provided that the aggregate self-insurance and deductibles for the
insurance required by Section 11(a) or 11(b) shall be not greater than [ten
percent (10%)] of the face amount of the respective policy.
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(e) The Lessee shall furnish to the Agent ACORD evidences of
insurance (and not certificates of insurance) evidencing compliance by the
Lessee with the provisions of Sections 11(a)-(c) hereof as of the Closing Date
and, thereafter, annually prior to each anniversary of the Closing Date, but the
Agent shall be under no duty to examine such certificates or to advise Lessee in
the event its insurance is not in compliance herewith.
(f) The Lessee covenants that it will not use, occupy or permit
others to use or occupy the Property at any time when the insurance required by
this Section 11 is not in force with respect to the Property.
(g) If Lessee shall fail to acquire and maintain any insurance
required hereby or if any required insurance shall for any cause become void,
the Agent may (but without any obligation so to do and without prejudice to the
Agent's or the Lessors' other rights and remedies hereunder) acquire and
maintain such insurance at the cost of Lessee and Lessee will forthwith upon
demand repay to the Agent all premiums and other reasonable moneys from time to
time paid or payable by the Agent and the Lessors in respect of such insurance
(which amount shall be certified in writing by the Agent), together with
interest thereon accrued daily at the Overdue Rate.
(h) Pro forma copies of the insurance policies, as amended and
endorsed, required under this Section 11 with respect to the insurance required
under this Section 11 shall be made available to Agent for inspection, upon
reasonable prior notice to the Lessee.
SECTION 12. GENERAL INDEMNITY.
(a) The Lessee shall indemnify, defend, protect and hold harmless, on
an After Tax Basis, each Indemnified Person (whether or not such Indemnified
Person is a party to any legal proceeding) from and against all liabilities,
losses, obligations, claims, damages, penalties, causes of action, suits or
other legal proceedings (actual or threatened, judicial, administrative or
arbitral), reasonable costs and expenses (including, without limitation,
reasonable attorneys' and accountants' fees and expenses) or judgments
(including, without limitation, strict liability in tort) (collectively
"LOSSES") of any nature, directly or indirectly, arising out of, or relating to:
(i) this Lease or any of the other Lease Documents; or any of the
transactions contemplated hereby or thereby;
(ii) the use, occupancy, construction, installation, repair,
maintenance, replacement, sale or other disposition of Property or any
interest therein;
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(iii) the invalidation of any of Lessee's insurance policies required
to be maintained under this Lease;
(iv) any accident, injury or death of any person or loss of or damage
to any property related to the Property;
(v) the assertion of any claim or demand based upon any infringement or
alleged infringement of any patent, trademark, license or other right, by
or in respect of any item of Property;
(vi) the inaccuracy, or alleged inaccuracy, as at any time made or in
any of the Lease Documents deemed made, of any representation or warranty
of Lessee contained herein; or any violation, or alleged violation, of any
provision of this Lease or any other Lease Document by Lessee or of any
contract or agreement to which Lessee is bound or of any Applicable Laws of
any Governmental Authority or of any Insurance Requirements;
(vii) any breach of environmental representations and warranties set
forth herein, any Environmental Claim relating to the Property, or any
existing or future Release of Hazardous Materials at, on, in, under, about,
to or from the Property or any off-site location to which Hazardous
Materials generated by Lessee or its Subsidiaries were sent for handling,
treatment, storage, or disposal; or
(viii) any breach of the covenants of Lessee with respect to the
Existing Tenancies as set forth in Section 4(h), and all obligations under
the Existing Service Contract Obligations.
(b) Notwithstanding any provisions of this Section 12 to the
contrary, the Lessee shall not indemnify and hold harmless any Indemnified
Person under this Section 12 against any Loss: (i) to the extent arising from
the Active Negligence, gross negligence or willful misconduct of such
Indemnified Person; (ii) for any Tax whatsoever whether or not covered by the
indemnity in Section 13 hereof (which Section 13 shall exclusively govern the
availability of any indemnification for Taxes), except to the extent necessary
to make payments on an After-Tax Basis; or (iii) for Losses arising from acts or
conditions arising after the end of the term of this Lease except while an Event
of Default is continuing, or (iv) for Losses arising in connection with any
Lessor Liens. Except as set forth in the immediately preceding sentence, the
indemnification provided in this Section 12 shall apply to Losses whenever
arising, including without limitation, Losses arising from events or conditions
occurring prior to the date hereof.
(c) Any Indemnified Person shall notify the Lessee, promptly after
such Indemnified Person's receipt of notice, or such Indemnified Person
otherwise becoming aware, of any third party claim with respect to which
indemnification may be sought
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under this Section 12 but the failure to so notify shall not, except to the
extent such failure prejudices the ability of the Lessee to defend such third
party claim, relieve the Lessee from any of its obligations under this Section
12 or otherwise. The Indemnified Person shall proceed to resist and dispose of
such claim as it deems appropriate; PROVIDED, that, so long as no Event of
Default is continuing, the Lessee may, by sending written notice to the
Indemnified Person acknowledging the Lessee's indemnification obligations
hereunder with respect to such claim in full, have the right to assume the
defense thereof, with counsel reasonably satisfactory to such Indemnified
Person. If the Lessee so elects to assume the defense of such claim, any one or
more of the Indemnified Persons shall have the right to employ separate counsel
in any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Person or
Indemnified Persons, unless (i) the employment of such counsel has been
specifically authorized in writing by the Lessee or (ii) the representation of
both the Lessee and such Indemnified Person or Indemnified Persons by the same
counsel would be inappropriate due to actual or potential differing interests
between them. Unless an Event of Default is continuing, the Lessee shall not be
liable for any settlement of any such action effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff in any such action with or without consent, the Lessee agrees to
indemnify and hold harmless the Indemnified Persons from and against any loss or
liability by reason of such settlement or final judgment. If the Lessee elects
not to participate in a third party claim, all legal and other expenses incurred
by the Indemnified Person with respect to such third party claim shall be for
the account of the Lessee.
(d) The parties hereto agree that the provisions of this Section
shall not be applied to indemnify any Indemnified Person for any Loss which the
Lessee proves arose solely, immediately and directly from the application (in
strict compliance with the provisions therefor) of the Risk Amount limitations
contained in clause (y) or (z) of Section 14(b)(iii) hereof in connection with
the exercise by the Lessee of the Termination Option, which exercise is
permitted by, and has been consummated in strict conformity with, all
limitations specified in Section 14 hereof or elsewhere herein or in any other
Lease Document.
SECTION 13. TAXES.
(a) The Lessee agrees promptly to pay when due, and to indemnify,
defend, protect and hold each Indemnified Person, harmless from, all license and
registration fees and all income, gross receipts, rental, franchise, excise,
occupational, capital, value added, sales, use, ad valorem (real and personal),
property (real and personal) and excise taxes, fees, levies, imposts, charges or
withholdings of any nature whatsoever, together with any assessments, penalties,
fines, additions to tax and interest
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thereon (individually, a "TAX," and collectively called "TAXES"), howsoever
imposed (whether imposed upon any Indemnified Person, all or any part of the
Property or otherwise), by any federal, state or local government or taxing
authority in the United States or by any foreign government, foreign
governmental subdivision or other foreign or international taxing authority,
upon or with respect to, based upon or measured by:
(i) the Property or any item thereof or the receipts, earnings, gains
or revenues arising therefrom or from any application or disposition
thereof or any item thereof or interest therein;
(ii) the construction, acquisition, purchase, financing, mortgaging,
ownership, acceptance, rejection, delivery, leasing, subleasing, insuring,
inspection, registration, possession, use, operation, presence, repair,
transfer of title, modification, rebuilding, imposition of any Lien, sale
or other disposition of the Property or any item thereof or interest
therein;
(iii) the payment of Base Rent, Additional Base Rent, Additional Rent,
Aggregate Lease Investment Balance and other sums payable under the Lease
Documents, the rentals, receipts or earnings arising from the purchase,
financing, ownership, delivery, leasing, possession, use, operation,
return, storage, transfer of title, sale or other disposition of the
Property or any item thereof or any other interest therein;
(iv) the Lease Documents, and any other documents or agreements
executed and delivered in connection with the purchase, leasing, sale or
other disposition of the Property or any item thereof or interest therein;
or
(v) otherwise in connection with any transaction contemplated by the
Lease Documents.
Notwithstanding anything to the contrary contained in this Section 13(a), the
application of the indemnity set forth in this Section 13(a) with respect to
Taxes imposed by a state shall apply only if the state imposing the Taxes
asserts jurisdiction to impose such Taxes solely by reason of the parties'
having entered into this Lease. Notwithstanding the provisions of Section 12
or 13, the Lessee shall not be required to indemnify any Indemnified Person
in respect of any Excluded Taxes.
(b) The indemnity amounts payable under Subsection (a) above shall be
computed on an After-Tax Basis.
(c) Each Lessor which is a non-United States person for U.S. federal
tax purposes (a "NON-UNITED STATES PERSON") agrees (to the extent it is
permitted to do so under the laws and any applicable double taxation treaty of
the jurisdiction of its incorporation and the jurisdiction in which its Funding
Office is
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located) to execute and deliver to the Agent for delivery to the Lessee, before
the first scheduled payment date hereunder in each calendar year, either (i) two
United States Internal Revenue Service Forms 1001 or (ii) two United States
Internal Revenue Service Forms 4224 together with two United States Internal
Revenue Service Forms W-9, or any successor forms, or certificates or
identifications, as appropriate, properly completed and claiming complete or
partial, as the case may be, exemption from withholding and deduction of United
States Federal Taxes. Each Lessor which is a Non-United States Person
represents and warrants to the Lessee that, at the date it first became a Lessor
hereunder, (x) its Funding Office is entitled to receive payments of interest
hereunder without deduction or withholding for or on account of any Taxes
imposed by the United States or any political subdivision thereof and (y) it is
permitted to take the actions described in the preceding sentence under the laws
and any applicable double taxation treaties of the jurisdictions specified in
the preceding sentence.
(d) With respect to all Taxes with respect to which indemnification
may be sought above, where legally permissible, the Lessee shall prepare and
timely file all reports and returns under each relevant taxing authority (and to
send a copy thereof to the Agent). In all other cases, the Lessee shall notify
the Agent at least 60 days prior to the due date for such reports or returns and
shall prepare them on behalf of, and in a manner satisfactory to, the Agent.
The Lessee shall pay all such Taxes reflected as being due on such reports or
returns directly to the relevant taxing authority. The provisions of this
Section 13(d) shall not limit the Lessee's obligations under Section 13(a).
(e) Each Lessor promptly shall notify Lessee, in accordance with
Section 13(h) hereof, of any event of which it has knowledge, occurring after
the date of this Agreement which will entitle such Lessor to compensation
pursuant to this Section 13 and will designate a different Funding Office if
such designation will avoid the need for, or reduce the amount of such
compensation and will not, in such Lessor's sole judgment, be otherwise
disadvantageous to such Lessor.
(f) Lessee shall not be obligated under this Agreement to make any
greater payment to any Lessor which changes any Funding Office than such Lessor
would have been entitled to receive if such Funding Office had not been changed,
unless such Funding Office was changed (i) with Lessee's prior written consent,
(ii) at Lessee's request, (iii) to mitigate or avoid the suspension of such
Lessor's obligations or the requirement of payment of increased costs in the
circumstances contemplated by Section 8(a), 8(b), 8(c) or 13 hereof, but in such
event only to the extent of such increase, and in no event in an amount greater
than if the Funding Office had not been changed, or (iv) at a time when the
circumstances giving rise to such greater payment did not exist.
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(g) The Agent agrees that it will from time to time file with the
appropriate authorities all tax returns required to be filed in connection with
the lease to or use by the Lessee of the Property hereunder, it being
understood, however, that the Agent may from time to time demand in writing that
the Lessee pay to the Agent such amounts as the Agent shall require to indemnify
the Agent and the Lessors from any Taxes payable by the Agent or the Lessors in
connection with such returns. In no event shall Lessee be responsible for the
payment of any interest or penalties (other than Additional Rent pursuant to
Section 8(f) hereof or any such payment of interest or penalty primarily due to
the direct fault of Lessee) with respect to any amounts payable under any such
tax returns required to be filed by the Agent. Agent will consult with Lessee
prior to filing any business property return required to be filed by the tax
assessor in which the Property is located.
(h) Any demand by the Agent or the Lessors for indemnification
pursuant to this Section 13 shall be accompanied by a statement setting forth
the basis of such demand and a calculation of the amounts payable by the Lessee
in connection with such demand, and no such amount shall be payable by the
Lessee until 30 days after receipt by the Lessee of the demand for such amount.
Each of the Agent and each Lessor agrees that within 30 days of first obtaining
knowledge by it of any amounts owing by the Lessee under this Section 13 it will
notify the Lessee thereof and of the amount so owed. If any amount paid by
either Lessee to the Agent pursuant to this Section 13 exceeds the amount
actually owed by Lessee under this Section 13, then upon learning of such excess
the Agent shall promptly advise such Lessee thereof and remit such amount to
Lessee upon demand by such Lessee.
SECTION 14. RIGHTS TO PURCHASE, SELL AND SUBDIVIDE.
(a) PURCHASE OPTIONS OF LESSEE. During the term of this Lease, the
Lessee may, on a Rent Payment Date and upon 30 days' prior written notice
substantially in the form included in Exhibit H hereto appropriately completed
(a "LESSEE PURCHASE NOTICE") to the Agent by an Authorized Officer of Lessee,
elect to purchase all or some of the Property leased hereunder. Any such
purchase shall be effected pursuant to the provisions of Section 14(d) hereof;
PROVIDED that the Lessee Purchase Notice may be delivered as little as one day
in advance if the purchase is to take place on the last day of the Term and the
Lessee had previously elected the Termination Option. Any election by the
Lessee made pursuant to this Section 14(a) shall be irrevocable; except that
Lessee shall have a one-time right to extend the closing date for the purchase
of the Property, provided that (i) Lessee so notifies Agent in writing not fewer
than ten (10) days prior to the date completed by Lessee in paragraph of
Exhibit "H" and (ii) the extended date is a specific date not later than one (1)
Business Day prior to the expiration of the Term. The option of the Lessee
provided in this Section 14(a) may be
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assigned without the prior consent of Lessor; provided that no assignment shall
be binding upon Lessor unless Lessee shall have notified Lessor in writing of
the name, address and telephone number of the assignee, and the effective date
of the assignment.
(b) TERMINATION OPTION OF LESSEE. (i)The Lessee shall have the right,
upon 180 days' prior written notice in substantially the form of Exhibit J
hereto appropriately completed and executed by an Authorized Officer of Lessee
(the "SALE NOTICE") to the Agent, to terminate the Lease at the end of the
Initial Term or at the end of the Renewal Term, so long as no Event of Default
or Unmatured Event of Default has occurred and is continuing, by electing (and
thereafter Lessee shall be obligated to consummate) an all-cash sale to one or
more Persons not Affiliates of Lessee of all but not less than all of the
remaining Property (the "TERMINATION OPTION") as provided in Section 14(b)(ii)
hereof; PROVIDED that Lessee shall not be obligated to consummate such sale if
it elects and consummates a purchase of all the Property pursuant to Section
14(a) hereof. Upon receipt by the Agent on behalf of the Lessors of all
Proceeds to be paid to it in connection with the Termination Option and the Base
Rent and Additional Base Rent due on such date and all other amounts then due
and owing under the Lease Documents (including, without limitation, (A) any
indemnity payments and (B) any Taxes (other than Excluded Taxes) resulting from
the exercise of the Termination Option, provided that the Agent shall have
furnished to the Lessee the information necessary to compute the Taxes resulting
from the exercise of the Termination Option and the Lessee shall have not
furnished the Agent (for the benefit of the Lessors) a certificate evidencing an
exemption available to the Agent from such Taxes), the Agent on behalf of the
Lessors shall transfer to such Person or Persons on an as-is, where-is basis,
without any representation or warranty of any kind, express or implied, whatever
title to the Property it may have (except that the Agent shall warrant the Agent
Representations); and the Agent (on behalf of the Lessors) shall at Lessee's
expense execute and deliver such quitclaim deeds, requests for full reconveyance
and UCC termination statements and other documents reasonably requested by the
Lessee to terminate the lien and security interests granted pursuant to this
Lease.
(ii) In the event the Lessee elects the Termination Option,
Lessee shall use its best efforts to obtain the highest all cash purchase price
for the Property. Neither the Agent nor any Lessor shall have any
responsibility for procuring any purchaser. If, nevertheless, the Agent or a
Lessor undertakes any sales efforts, the Lessee shall promptly reimburse the
Agent or such Lessor for any charges, costs and expenses incurred in such
effort, including any allocated time charges, reasonable costs and expenses of
internal counsel or other reasonable attorneys' fees and expenses. The Lessee
must accept the highest such offer received by it (which may be composed of a
combination of offers from several buyers of different items of Property) if
such offer is in excess of the Aggregate Lease
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Investment Balance at the end of the Term. The Agent shall determine whether to
accept the highest all cash offer for the Property if not in excess of the
Aggregate Lease Investment Balance and in the case of such an all cash offer
which was obtained, and is otherwise, in strict compliance with the provisions
of this Section 14, if the offer is rejected by the Agent, the Lessee shall
(subject to Lessee's rights under Section 14(a), and assuming no Event of
Default or Unmatured Event of Default has occurred) surrender the Property (in
strict compliance with Section 18 hereof) and pay the Agent the sum of (I) the
Aggregate Guaranteed Residual Value plus (II) all then accrued and unpaid Base
Rent and Additional Base Rent PLUS (III) all other amounts then due under the
Lease Documents.
(iii) In the event Lessee elects the Termination Option and Agent
accepts such offer:
(x) if the net proceeds of sale received by Agent
(which shall mean the gross proceeds received by Agent less all costs
paid to non-Affiliates of Lessee and related to such sale and delivery
(which Agent hereby agrees to pay, but only out of such proceeds),
including, without limitation (to the extent not previously paid
pursuant to Section 14(b)(ii), the cost of brokerage commissions,
advertising costs, appraisal fees, preparation of the Property for
marketing, delivery of documents and Property, certification and
testing of the Property in any location chosen by the buyer or
prospective buyer, legal costs, costs of notices, or other information
and any repairs or modifications desired by a buyer or prospective
buyer, without regard to whether such costs were initially incurred by
the Agent, the Lessors, the Lessee or any potentially qualified buyer
(the "PROCEEDS")) are greater than the Gross Aggregate Lease
Investment Balance, the Agent, for the account of the Lessors, shall
pay to the Lessee the amount by which such Proceeds exceed the Gross
Aggregate Lease Investment Balance;
(y) if the Proceeds are less than the Gross Aggregate
Lease Investment Balance, the Lessee shall pay to the Agent for the
account of the Lessors an amount equal to the sum of (A) the lesser of
(I) Aggregate Lease Investment Balance less the Proceeds and (II) the
Aggregate Guaranteed Residual Value, plus (B) all then accrued and
unpaid Base Rent and Additional Base Rent and all other amounts then
due under the Lease Documents; and
(z) if the Proceeds are less than the excess of (I)
the Gross Aggregate Lease Investment Balance over (II) the Aggregate
Guaranteed Residual Value on such date, the Lessee shall pay to the
Agent for the account of the Lessors, in addition to the
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amounts required to be paid by the Lessee pursuant to clause (y)
above, an amount (which, together with the other amounts referred to
in this clause (z), shall not exceed the Gross Aggregate Lease
Investment Balance) equal to the amount (as determined if requested in
the sole discretion of the Agent, at the sole expense of the Lessee,
by an Appraiser) by which the residual value of the Property has been
reduced by waste, extraordinary use, failure to maintain or replace,
failure to use, improper workmanship or any other cause or condition
within the power of Lessee to control or affect.
All payments referred to in this clause (iii) shall be made on the date the
Proceeds are due and payable to the Agent. The Agent shall have no obligation
to make any payment required of it under Section 14(b)(iii)(x) hereof until the
Agent on behalf of the Lessors shall have received the Proceeds, Base Rent,
Additional Base Rent and all other amounts then due and owing under the Lease
Documents (including, without limitation, any indemnity payments).
(c) FAILURE OF SALE. If the Termination Option is elected and a sale
of all of the remaining Property is not effected prior to the end of the Initial
Term or the Renewal Term, as the case may be, other than as a result of Agent's
failure to accept an offer as provided in Section 14(b)(ii), the Lessee shall
(x) pay on the last day of the Term the amounts described in the last sentence
of Section 14(b)(ii), and (y) immediately quit possession of the Property and
tender the same to Agent in compliance with Lessee's obligations under this
Lease.
(d) PROCEDURES FOR PURCHASES. The following procedures shall apply
to any purchase by Lessee of the Property subject to this Lease pursuant to any
provision of Section 14, 17, 21 or 29 hereof:
(i) PARTIAL PURCHASE. If, under any provision of this Lease,
Lessee shall purchase one or more, but less than all of the Apportioned
Property then subject to this Lease, such purchase shall be effected as
follows:
(v) the Lessee shall pay to the Agent for the account of the
Lessors by wire transfer of immediately available funds an amount
equal to (I) the Lease Investment Balance of the Apportioned Property,
PLUS (II) any Base Rent and Additional Base Rent accrued with respect
thereto and unpaid and (III) any other amounts then due under the
Lease Documents (including, without limitation, any Taxes resulting
from such purchase), MINUS (IV) if, at the time any insurance proceeds
are being held by the Agent with respect to any Property pursuant to
Section 17 hereof, the amount of such insurance proceeds then held by
the Agent
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(including the net earnings thereon), which insurance proceeds (and
net earnings) (A) shall (but not in excess of the total of the amounts
referred to in clause (I) of this paragraph) no longer be subject to
the provisions of Section 17 hereof and shall be deemed to be part of
the purchase price paid by the Lessee, and (B) to the extent any such
insurance proceeds remain in the possession of Agent after being
applied to part of the purchase price as described in the preceding
clause (A), the excess shall be forthwith delivered to Lessee; and
MINUS (V) any Taxes that Lessee has paid to the Agent in respect of
the Apportioned Property that Agent has not duly delivered to the
Governmental Authority entitled thereto in accordance with Section
13(g),
(w) the following conditions must be satisfied: (A) the
Apportioned Property must be a legal parcel on a recorded final map
pursuant to the Subdivision Map Act, and Lessee, at its sole expense,
shall have fully complied with all applicable federal, state, and
local laws, ordinances, and rules, including, without limitation, the
California Subdivision Map Act (Cal. Gov. Code Sections 66410 et seq.)
and all local ordinances pertaining thereto in connection with any
Apportioned Property to be purchased and the remaining portion of the
Property; (B) all remaining Property shall have adequate ingress and
egress and direct access to open, dedicated public streets and to
operating, connected utilities for which all connection fees and
construction costs have been fully paid; (C) Title Company shall be
irrevocably committed to issue to Lessor a CLTA Form 111 endorsement
to the Title Policy (in form and substance acceptable to Agent),
together with such other endorsements as Lessor may require; (D)
Lessee shall have paid or otherwise provided for to Agent's
satisfaction, all costs incurred by Lessee and Agent connection with
the transfer of the Apportioned Property, including without
limitation, the fees and costs of Agent's counsel,
(x) rights that are appurtenant to the Apportioned Property
will be transferred to Lessee with the transfer of the Apportioned
Property, provided, however, that such appurtenant rights will only be
transferred with respect to the Apportioned Property and Agent will
retain (on behalf of the Lessors) such easement rights to all
Property, if any, remaining subject to this Lease;
(y) the Agent, on behalf of the Lessors, shall transfer to
Lessee, on an as-is, where-is, basis, without any representation or
warranty of any kind, express or implied, whatever title to the
Apportioned
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Property to be acquired by Lessee it may have (except that the Agent
shall warrant the Agent's Representations) and
(z) Lessee shall be subrogated to the Agent's and the
Lessors' rights in connection with or related to such Apportioned
Property and the Agent (on behalf of the Lessors) shall execute and
deliver (I) such assignments and instruments of further assurance as
may be reasonably necessary to enable Lessee to collect any unpaid
insurance proceeds relating to such Apportioned Property and otherwise
to receive the benefits of such rights and (II) such quitclaim deeds,
requests for full reconveyance, UCC termination statements and other
documents reasonably requested by the Lessee to terminate the lien and
security interests granted pursuant to this Lease. Upon such
transfer, the lease of the Property under this Agreement shall
terminate.
(ii) FULL PURCHASE. If, under any provision of this Section 14,
the Lessee shall purchase all, but not less than all, of the Property then
subject to this Lease, such purchase shall be effected as follows:
(x) the Lessee shall pay to the Agent for the account of the
Lessors by wire transfer of immediately available funds an amount
equal to (I) the Aggregate Lease Investment Balance and all other
amounts then due under the Lease Documents (including, without
limitation, any Taxes resulting from such purchase, provided that the
Lessee shall have not first furnished the Agent (for the benefit of
the Lessors) a certificate evidencing an exemption available to the
Agent from such Taxes), plus (II) any Base Rent and Additional Base
Rent accrued and unpaid, plus (III) any other amounts due under the
Lease Documents, MINUS (IV) if, at such time any insurance proceeds
are being held by the Agent with respect to any Property pursuant to
Section 17 hereof, the amount of such insurance proceeds then held by
the Agent (including the net earnings thereon), which insurance
proceeds (and net earnings) (A) shall (but not in excess of the total
of the amounts referred to in clauses (I) and (II) of this paragraph)
no longer be subject to the provisions of Section 17 hereof and shall
be deemed to be part of the purchase price paid by the Lessee, and (B)
to the extent any such insurance proceeds remain in the possession of
Agent after being applied to part of the purchase price as described
in the preceding clause (A), the excess shall be forthwith delivered
to Lessee; and MINUS (V) any Taxes that Lessee has paid to the Agent
that Agent has not duly delivered to the Governmental Authority
entitled thereto in accordance with Section 13(g),
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(y) the Agent, on behalf of the Lessors, shall transfer to
Lessee, on an as-is, where-is basis, without any representation or
warranty of any kind, express or implied, whatever title to the
Property it may have (except that the Agent shall warrant the Agent's
Representations) and
(z) Lessee shall be subrogated to the Agent's and the
Lessors' rights with respect to the Property and the Agent (on behalf
of the Lessors) shall, at Lessee's expense, execute and deliver (I)
such assignments and instruments of further assurance as may be
reasonably necessary to enable Lessee to collect any unpaid insurance
proceeds relating to the Property and otherwise to receive the
benefits of such rights and (II) such quitclaim deeds, requests for
full reconveyance, UCC termination statements and other documents
reasonably requested by the Lessee to terminate the lien and security
interests granted pursuant to this Lease. Upon such transfer, the
lease of the Property under this Agreement shall terminate.
(e) SUBDIVISION OF THE LAND. So long as no Event of Default shall
have occurred and be continuing, Agent (on behalf of the Lessors) shall execute,
acknowledge and deliver such applications, maps and other documentation as
Lessee may reasonably request, at Lessee's sole cost and liability, in
connection with the lawful subdivision of the Property into not more than five
(5) parcels containing the gross land areas apportioned thereto in accordance
with Part IV of Schedule 1 of the Lease Supplement. Agent shall be under no
obligation to take any action under this Section 14(e) unless: (i) Agent (on
behalf of the Lessors) shall have approved the final subdivision map in its
reasonable discretion, (ii) Title Company shall have irrevocably committed to
assure Agent (on behalf of the Lessors) that, upon the filing for recordation of
a final subdivision map in the county in which the Land is located, (A) the Deed
of Trust shall continue to encumber the Property with the same enforceability
and priority as then insured by Title Company, (B) the subdivision of the Land
constitutes a lawful subdivision under Applicable Law, (C) the legal description
of the Land contained in the Title Policy describes the same land as described
in the final subdivision map, and (D) the interest of Lessor in the Land that is
to remain subject to this Lease is subject to no exceptions to title other than
those set forth in the final subdivision map and in the Title Policy and any
Liens created after the Closing Date that are Permitted Liens; (iii) Lessee
shall have paid or otherwise provided for to Agent's satisfaction, all costs
incurred by Lessee and Agent in connection with the transfer of the Apportioned
Property, including without limitation, the fees and costs of Agent's counsel;
(iv) the Agent, on behalf of the Lessors, shall not be required to assume or
incur any liability or obligation to any Person; and (v) the subdivision of the
Property shall not decrease the Fair Market Sales Value of the Property as of
the
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end of the Initial Term and the Renewal Term of the Property (as previously
determined by the Appraisal to be delivered pursuant to Section 3(p)) as
determined by Agent in its sole and absolute discretion.
(f) RIGHT TO PURCHASE OR SELL AFTER EVENT OF DEFAULT. If an Event of
Default has occurred but Agent (on behalf of the Lessors) has not previously
terminated the Lease, Lessee may exercise the Purchase Option or the Termination
Option, and the 30 days advance notice requirement in Section 14(a), and the 180
days advance notice requirement in Section 14(b), shall be reduced to five days
in each case; provided that nothing in this Section 14(f) shall limit or impair
any right or remedy of Agent (on behalf of the Lessors) under this Lease, except
that Agent (on behalf of the Lessors) shall not exercise its right to terminate
the Lease during the five day period beginning on the date that Lessee delivers
the written notice required by the first sentences, respectively, of Sections
14(a) and 14(b).
SECTION 15. END OF TERM OPTIONS.
(a) In connection with the expiration of the Initial Term or the
Renewal Term, as applicable, the Lessee shall be obligated to (i) renew the
Lease (upon the terms and subject to the conditions specified in Subsection (b)
below); (ii) exercise the Termination Option or (iii) purchase the Property
subject to this Lease pursuant to Section 14(a) hereof (the "PURCHASE OPTION").
In the event that by the 74th day prior to the expiration of the Initial Term or
the Renewal Term, as applicable, the Lessee has not elected any of the options
in clauses (i), (ii) or (iii), the Lessee shall be required to exercise the
Purchase Option at the end of the Lease Term, except that the notice described
in the first sentence of Section 14(a) need not be given, and Lessee shall not
have the right to extend the closing date for the purchase of the Property as
described in Section 14(a).
(b) If (i) no Event of Default or Unmatured Event of Default shall
have occurred and be continuing, (ii) this Lease shall not have been earlier
terminated, (iii) Agent (on behalf of the Lessors), in its sole and absolute
discretion, shall have first notified Lessee that it has consented to the
exercise by Lessee of the rights set forth in this Section 15(b), then Lessee
shall have the right (which right shall be exercised by the delivery of an
appropriately completed Renewal Notice (the "RENEWAL NOTICE") sent to the Agent
at least 75 days prior to the end of the Lease Term substantially in the form of
Exhibit I hereto) to extend this Lease as to all of the Property then subject to
this Lease, for a period ("RENEWAL TERM") of five (5) years. The Renewal Term
shall commence, if at all, on the last day of the Initial Lease Term. In no
event may the Renewal Term extend beyond the last day of the Rent Period ending
in April 10, 2006 [INSERT DATE THAT IS 5 YEARS AFTER END OF INITIAL
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TERM]. During such Renewal Term all the same terms of this Lease shall apply,
except for the provisions of this Section 15(b).
SECTION 16. AMENDMENTS.
(i) This Lease and each of the other Lease Documents shall be changed,
waived, discharged or terminated with respect to Lessee, the Agent and each
Lessor upon the ratification in writing of such change, waiver, discharge or
termination by Lessee, the Agent and the Required Lessors, in which case such
change, waiver, discharge or termination shall be effective as to each Lessor,
Lessee and the Agent; PROVIDED, that no such change, waiver, discharge, or
termination shall, without the written ratification of each Lessor:
(A) modify, amend, waive or supplement any of the provisions of
this Section 16 or Section 3 hereof, change the definitions of "LEASE INVESTMENT
BALANCE", "AGGREGATE LEASE INVESTMENT BALANCE", "CLOSING FEE", "COMMITMENT",
"COMMITMENT PERCENTAGE", "EXCLUDED TAXES" "INDEMNIFIED PERSON", "OUTSTANDING
INVESTMENT", "PROPERTY COST", "AGGREGATE PROPERTY COST", "REQUIRED LESSORS",
"GUARANTEED RESIDUAL VALUE", or "TAXES", or release any Collateral (except as
otherwise specifically provided in any Lease Document);
(B) modify, amend, waive or supplement any of the provisions of
Section 4, 12 or 13 hereof (except as otherwise expressly provided in this
Section 16); PROVIDED that the Required Lessors may waive an Event of Default
other than an Event of Default under Section 20(a) hereof;
(C) reduce, modify, amend or waive any indemnities in favor of
the Agent or any Lessor pursuant to Section 12 or 13 hereof (except that any
Person may consent to any reduction, modification, amendment or waiver of any
indemnity payable to it);
(D) modify, postpone, reduce or forgive, in whole or in part,
any payment of Base Rent or Additional Base Rent (other than pursuant to the
terms of any Lease Document) or any other amount payable under this Lease or any
other Lease Document, or modify the definition or method of calculation of any
payment of Base Rent or Additional Base Rent (other than pursuant to the terms
of any Lease Document) or any other amount payable hereunder or thereunder;
(E) consent to any assignment of this Lease releasing Lessee
from its obligations in respect of the payments due pursuant to the Lease
Documents or changing the absolute and unconditional character of such
obligations; or
(F) except as contemplated in the Lease Documents, permit the
creation of any Lien on the Collateral or any part thereof or deprive the Agent
or any Lessor of the
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benefit of the security interest in the Collateral granted by Lessee.
(ii) Without the prior written consent of the Agent, no amendment of,
supplement to, or waiver or modification of, any Lease Document shall adversely
affect Agent's rights or immunities or modify or increase the duties or
obligations of Agent with respect to any Lease Document.
SECTION 17. LOSS OF OR DAMAGE TO PROPERTY.
(a) RISK OF LOSS. The Lessee hereby assumes all risk of loss of or
damage to the Property, however caused. No loss of or damage to the Property or
any item thereof shall impair any obligation of the Lessee under this Lease,
which shall continue in full force and effect with respect to any lost or
damaged Property.
(b) REPAIR OF DAMAGE; USE OF PROCEEDS. In the event of damage of any
kind whatsoever (other than ordinary wear and tear as contemplated by Section 10
hereof) to any item or items of Property (unless such Property is, as a
consequence thereof, subject to an Event of Loss) the Lessee, at its own cost
and expense, shall (i) if the Lease Investment Balance of such item or items
plus all other items previously so damaged since the previous notice pursuant to
this clause (i) shall exceed $50,000, immediately notify the Agent in writing of
the damage to such item or items and the Lease Investment Balance thereof and of
any material facts with respect thereto and (ii) take all necessary action to
place the same in good operating order, repair, condition and appearance. If
the insurance proceeds, if any, received by the Agent on behalf of the Lessors
for damage to such Property upon the occurrence of a single event or series of
related events of damage are not greater than $250,000, the Agent shall pay said
insurance proceeds to Lessee promptly upon receipt. Upon the completion of the
repairs, Lessee shall deliver a certificate to Agent certifying that the
Property has been repaired to the standards required under this Lease. If the
insurance proceeds, if any, received by the Agent on behalf of the Lessors for
damage to the Property upon the occurrence of a single event or series of
related events of damage are greater than $250,000, the Agent shall deposit said
proceeds in a separate interest bearing account in the name of the Agent on
behalf of the Lessors (and Lessee shall reimburse the Agent upon demand for any
bank charges and other expenses incurred by the Agent with respect to such
account). Upon the receipt of a certificate from an Authorized Officer of
Lessee (i) requesting and authorizing payment to a contractor for the repair of
such damaged Property, (ii) stating the payment is due under the repair contract
with such contractor, (iii) attaching a copy of an invoice or other evidence
showing that payment is due under such repair contract and (iv) certifying the
then estimated total cost to repair such damaged Property and if such estimated
cost is greater than said insurance proceeds, certifying that Lessee
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has paid from its own funds an amount of such repair costs at least equal to
such excess, the Agent shall pay to Lessee from such separate account (to the
extent of funds therein, including net earnings thereon) an amount equal to such
requested payment. The balance of such account, if any, shall be paid to
Lessors (PRO RATA in accordance with their respective Outstanding Investments),
by the Agent to reduce the Aggregate Lease Investment Balance.
(c) EVENT OF LOSS; PROPERTY NOT REPAIRED. If an Event of Loss occurs
as to any item or items of Property and such Property is not repaired or
replaced pursuant to paragraph (d) below, then in any such event, (i) Lessee
shall promptly notify the Agent in writing of such event, (ii) Lessee shall pay
to the Agent (for the account of the Lessors PRO RATA in accordance with their
respective Outstanding Investments) within 10 calendar days an amount equal to
(x) the Lease Investment Balance of such Property, PLUS (y) any Base Rent
accrued and unpaid on such Property to and including the date of such payment,
PLUS (z) any other amounts owing under the Lease Documents (including, without
limitation, any Taxes resulting from such transfer and any amounts due under
Section 7(d) hereof) MINUS any insurance proceeds received and retained by Agent
on behalf of the Lessors, (iii) the Agent, on behalf of the Lessors, shall
transfer title to such Property to Lessee, on an as-is, where-is, basis, without
any warranty of any kind by, or any recourse of any kind to, the Agent or any
Lessor (except that the Agent shall make the Agent's Representations), (iv)
Lessee shall be subrogated to the Lessors' rights in the affected transaction
and (v) the Agent (on behalf of the Lessors) shall at Lessee's expense execute
and deliver (I) such assignments and instruments of further assurance as may be
reasonably necessary to enable Lessee to collect any unpaid insurance proceeds
and (II) such quitclaim deeds, requests for full reconveyance, UCC termination
statements and other documents reasonably requested by the Lessee to terminate
the security interest in such Property created hereunder. Upon such transfer,
the lease of such Property under this Agreement shall terminate and such
Property shall cease to be Property hereunder.
(d) EVENT OF LOSS; PROPERTY REPAIRED. If an Event of Loss shall have
occurred with respect to one or more items of Property, the Lessee may elect not
more than 30 days after such event to replace such Property by reconstructing it
in accordance with the Plans and Specifications or to repair the Property with
labor and materials (in either case, the "RECONSTRUCTED PROPERTY") that restore
the Property to the condition required to be maintained under this Lease such
that the value, utility, Guaranteed Residual Value or remaining useful life of
the Reconstructed Property has not been impaired (compared to the Property
immediately before the Event of Loss) other than to a De Minimis Amount, to have
such Reconstructed Property constitute "Property" for the purposes of this Lease
and to have this Lease continue in full force and effect by delivery to the
Agent of a certificate of an Authorized Officer stating (i) that Lessee will
replace such item or items with Reconstructed Property, (ii)
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specifying and describing in reasonable detail such Reconstructed Property and
(iii) stating that Lessee will comply with the provisions of the second and
third sentences of this paragraph (d). Any such Reconstructed Property that is
Personal Property or a Fixture shall (i) have a fair market value (as determined
by an Appraiser if such Reconstructed Property is not new and has a claimed
value in excess of $100,000 or as determined by the invoice for such
Reconstructed Property if such Reconstructed Property is new) not less than the
Lease Investment Balance allocable by Agent to the item of Personal Property
replaced, (ii) have a useful life, utility and residual value at least as great
as the Personal Property or Fixture being replaced and (iii) be free of all
Liens (except Permitted Liens) as provided in Section 9 hereof. All other
Reconstructed Property shall (i) consist of new, first class quality materials
of like kind, quality and style as those damaged, shall cause the item of
Property so restored to have a useful life and residual value not less than the
Lease Investment Balance (as determined by and allocable by Agent to the item of
Property restored in Agent's sole and absolute discretion), (ii) be free of all
Liens (except Permitted Liens), and shall result in the Property so restored to
be free of Liens (except Permitted Liens), as provided in Section 9 hereof, and
(iii) be constructed using first class workmanship. Lessee shall as soon as
practicable transfer title to the Reconstructed Property to the Agent on behalf
of the Lessors and execute all instruments reasonably requested by the Agent to
so transfer title to the Agent (and to subject the Reconstructed Property to
this Lease and to the security interest of the Agent on behalf of the Lessors),
including, without limitation, a Bill of Sale, a Lease Supplement and
appropriate UCC financing statements, if any, with respect thereto. If the
insurance proceeds, if any, received by the Agent for Property to be replaced
upon the occurrence of a single Event of Loss are not greater than US $250,000,
the Agent shall pay to such Lessee said insurance proceeds promptly upon
receipt. If the insurance proceeds received by the Agent for Property to be
replaced upon the occurrence of a single Event of Loss are greater than
$250,000, the Agent shall deposit said proceeds in a separate interest bearing
account in the name of the Agent on behalf of the Lessors (Lessee shall
reimburse the Agent for bank charges and other expenses incurred by the Agent
with respect to such account). Upon receipt of a certificate of an Authorized
Officer of Lessee (i) requesting and authorizing payment to the vendor of an
item of Reconstructed Property, (ii) stating the payment is due under the
purchase order or contract for such item, (iii) attaching a copy of an invoice
or other evidence showing that payment is due under such purchase order or
contract and (iv) certifying the then estimated total cost of the Reconstructed
Property and if such estimated cost is greater than said insurance proceeds,
certifying that Lessee has paid from its own funds to vendors of Reconstructed
Property an amount at least equal to such excess, the Agent shall pay to Lessee
from such separate account (to the extent of funds therein including net
earnings thereon) an amount equal to such requested payment. The balance of
such account, if any, shall be paid to Lessors (PRO
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RATA in accordance with their respective Outstanding Investments, by the Agent
to reduce the Aggregate Lease Investment Balance.
(e) For the purposes of this Agreement, all fees and expenses of any
Appraiser retained pursuant to the provisions hereof shall be paid by Lessee.
(f) In the event that, with respect to any event or series of related
events referred to above in this Section 17, the Lessee shall, in advance of
receipt of insurance proceeds, pay (or apply) its own funds in the amounts and
otherwise in the same manner as such insurance proceeds are required to be paid
and/or applied as provided above, then the Agent shall, to the extent it
subsequently receives such insurance proceeds, pay the same to the Lessee.
SECTION 18. SURRENDER OF PROPERTY.
(a) SURRENDER UPON TERMINATION. Subject to the provisions of
Sections 13, 14, 15 and 19 hereof, upon termination of the Lease, the Lessee
shall, at its sole cost and expense, and subject further to the provisions of
this Section 18, quit and surrender possession of the Property to Agent (on
behalf of Lessors) in as good order and condition as when Lessee took possession
and as thereafter improved by Agent (on behalf of Lessors) and/or Lessee,
reasonable wear and tear excepted. Upon such surrender Lessee shall deliver to
the Agent (on behalf of the Lessors) all keys to areas within and outside of the
Property, and all combinations to vaults, secure areas and security systems.
Lessee shall also deliver to Agent all records and manuals pertaining to the
operation, maintenance, repair, use and occupancy of the Property.
(b) NO VOLUNTARY SURRENDER. No act or thing done by Agent or any
agent or employee of Agent during the Lease Term shall be deemed to constitute
an acceptance by Agent of a surrender of the Property unless such intent is
specifically acknowledged in a writing signed by Agent. The delivery of keys to
the Property to Agent shall not constitute a surrender of the Property or effect
a termination of this Lease, whether or not the keys are thereafter retained by
Agent, and notwithstanding such delivery Lessee shall be entitled to the return
of such keys at any reasonable time upon request until this Lease shall have
been properly terminated. The voluntary or other surrender of this Lease by
Lessee, whether accepted by Agent or not, or a mutual termination hereof, shall
not work a merger, and at the option of Agent shall operate as an assignment to
Agent of all subleases or subtenancies affecting the Property.
(c) REMOVAL OF LESSEE PROPERTY BY LESSEE. Upon the expiration or
termination of the Lease, Lessee shall remove or cause to be removed, at its
sole expense, from the Property all debris and rubbish, and such items of
furniture, equipment, free-standing cabinet work, and other articles of personal
property
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owned by Lessee or installed or placed by Lessee at its expense in the Property,
and such similar articles of any other persons claiming under Lessee, as Agent
may, in its sole discretion, require to be removed, and Lessee shall repair at
its own expense all damage to the Property resulting from such removal.
(d) REMOVAL OF LESSEE'S PROPERTY BY AGENT. Whenever Agent shall
re-enter the Property as provided in this Lease, any personal property of Lessee
not leased under this Lease and not removed by Lessee upon the expiration of the
Lease Term, or within forty-eight (48) hours after a termination by reason of
Lessee's default as provided in this Lease, shall be deemed abandoned by Lessee
and may be disposed of by Agent in accordance with Sections 1980 through 1991 of
the California Civil Code and Section 1174 of the California Code of Civil
Procedure, or in accordance with any laws or judicial decisions which may
supplement or supplant those provisions from time to time.
(e) AGENT'S PROPERTY. All fixtures, alterations, additions, repairs,
improvements and/or appurtenances attached to or built into, on, or about the
Real Property prior to or during the Lease Term, whether by Agent at its expense
or whether at the expense of Lessee, or by Lessee at its expense, or by previous
occupants of the Property, shall be and remain part of the Property and shall
not be removed by Lessee at the end of the Lease Term unless otherwise expressly
provided for in this Lease. Such fixtures, alterations, additions, repairs,
improvements and/or appurtenances shall include, without limitation, floor
coverings, drapes, paneling, molding, doors, kitchen and dishwashing fixtures
and equipment, plumbing systems, electrical systems, lighting systems, security
systems, communication systems, computer network cabling and appurtenances, all
fixtures and outlets for the systems mentioned above and for all telephone,
television, radio, telegraph, facsimile, electronic data, satellite transmission
and reception, cellular and microcellular telephony, and television purposes,
and any special flooring or ceiling installations.
(f) AGENT'S ACTIONS ON PROPERTY. Lessee hereby waives all claims for
damages or other liability in connection with Agent's reentering and taking
possession of the Property or removing, retaining, storing or selling the
property of Lessee not leased under this Lease, as herein provided, and Lessee
shall indemnify, defend, protect and hold Agent harmless from any such claims,
damages or other liability, and no such re-entry shall be considered or
construed to be a forcible entry, nor shall Agent be guilty of forcible entry or
forcible detainer.
(g) NO DUTY IF LIABILITIES PAID. Notwithstanding the foregoing, the
provisions of this Section 18 shall not apply if at the time of surrender each
Lessor has recovered the full amount of its Outstanding Investment and all of
the Liabilities have been paid.
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SECTION 19. CERTAIN COVENANTS.
From the date hereof until the later of (I) the Termination Date and
(II) the payment in full of all amounts due or to become due under the Lease
Documents:
(a) REPORTS, CERTIFICATES AND OTHER INFORMATION. Lessee shall
furnish or cause to be furnished to the Agent and each Lessor:
(i) AUDIT REPORT. Within 90 days after each Fiscal Year, a copy
of an annual audit report of Lessee and its respective Subsidiaries
prepared on a consolidated basis and in conformity with GAAP duly
certified by independent certified public accountants of recognized
standing selected by Lessee, together with a letter from such
accountants stating that, based on the results of their audit report,
no Event of Default has occurred under this Lease as of the date of
the audit report.
(ii) INTERIM REPORTS. Within 45 days after each Fiscal Quarter
(except the last Fiscal Quarter in a Fiscal Year), a copy of the
unaudited consolidated financial statements of Lessee and its
respective Subsidiaries prepared in accordance with GAAP (subject to
normal recurring accruals and adjustments) consisting of at least a
balance sheet as at the close of such Fiscal Quarter, statements of
earnings for such Fiscal Quarter and for the period from the beginning
of such Fiscal Year to the close of such Fiscal Quarter, and a
statement of changes in cash flow from the beginning of such Fiscal
Year to the close of such Fiscal Quarter.
(iii) OFFICER'S CERTIFICATE. Contemporaneously with the
furnishing of a copy of each annual audit report and of each set of
quarterly statements provided for in this Section 19(a), a certificate
in the form of Exhibit E hereto duly completed, dated the date of such
annual report or such quarterly statements and signed by an Authorized
Officer on behalf of Lessee and containing the computations and other
information provided for therein.
(iv) REPORTS TO SEC AND TO SHAREHOLDERS. Within 15 days of the
filing or making thereof, copies of each filing and report made by the
Lessee or its respective Subsidiaries with or to the SEC or any other
securities exchange, and, if Lessee shall have registered under the
Securities Exchange Act of 1934, as amended, as to any of Lessee's
equity securities, copies of each communication from Lessee to
shareholders generally.
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(v) NOTICE OF DEFAULT. Forthwith upon learning of the occurrence
of an Event of Default or Unmatured Event of Default, written notice
thereof describing the same and the steps (if any) being taken by
Lessee and its Subsidiaries with respect thereto.
(vi) NOTICE OF CERTAIN LITIGATION. Written notice of the
institution of any Litigation or the occurrence of any development
with respect to any Litigation, together with a description thereof
and the steps being taken by Lessee and its Subsidiaries with respect
thereto, all to such extent and at such time as Lessee would be
required to make such disclosure if Lessee were a public reporting
company under the Securities Exchange Act of 1934, as amended (it
being understood that to the extent such disclosures are contained in
the reports filed by Lessee with the SEC, then the disclosure
hereunder required to be made by Lessee to the Lessor may be made by
furnishing to the Lessor a copy of such reports as filed with the
SEC).
(vii) ENVIRONMENTAL. Promptly upon becoming aware of any of the
following conditions or occurrences, Lessee shall provide Agent with
written notice thereof, including the details surrounding the
occurrence or condition and any action taken or proposed to be taken
by the Lessee in connection therewith: (a) any actual, pending or
threatened Environmental Claim against Lessee or its Subsidiaries and
(b) any Environmental Condition at the property where the Property is
located.
(viii) OTHER INFORMATION. From time to time such other
information concerning Lessee and its Subsidiaries as the Agent or any
Lessor may reasonably request.
(b) MERGERS, CONSOLIDATIONS, SALES. Lessee will not permit any
consolidation of Lessee with or merger of Lessee into any other corporation or
corporations or successive consolidations in which Lessee or its successor or
successors shall be a party or parties or any sale or conveyance of the property
of Lessee as an entirety or substantially as an entirety, to any other Person
authorized to acquire and operate the same (any such consolidation, merger, sale
or conveyance is referred to herein as a "CORPORATE TRANSACTION") unless each of
the following conditions is met:
(i) upon the occurrence of any such Corporate Transaction all the
obligations of Lessee under this Agreement shall be expressly assumed
in writing by the corporation formed by such consolidation, or into
which Lessee shall have been merged, or by the corporation which shall
have acquired such property (in each such case, the "SURVIVING
ENTITY"), such assumption to be
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accompanied by an opinion of counsel for the surviving entity to the
effect that such assumption has been duly authorized, executed and
delivered by, and is the legal, valid and binding obligation of, the
surviving entity;
(ii) immediately after giving effect to such Corporate
Transaction and to the retirement of any Debt to be retired
substantially concurrently therewith, no Event of Default or Unmatured
Event of Default shall have occurred and be continuing, and Lessee
shall deliver a certificate signed by an Authorized Officer of Lessee
to such effect;
(iii) the surviving entity shall be domiciled in the United
States; and
(iv) Lessee shall have given at least 30 days' prior written
notice of such Corporate Transaction to the Agent.
Upon consummation of the Corporate Transaction with respect to Lessee and the
assumption of Lessee's obligations under this Agreement and the other Lease
Documents by the surviving entity, such surviving entity shall succeed to and be
substituted for Lessee, with the same effect as if it were an original party to
this Agreement and the other Lease Documents and, in the event of any such sale
or conveyance, Lessee shall be released from its obligations under this
Agreement and the other Lease Documents. Except for the merger of any
Subsidiary into Lessee or another Subsidiary, Lessee shall not permit any
Subsidiary to be a party to any Corporate Transaction if before or after giving
effect thereto an Event of Default or Unmatured Event of Default shall exist.
(c) COMPLIANCE WITH APPLICABLE LAWS. The Lessee will not, and will
not permit any of its Subsidiaries to, knowingly violate in any material respect
any of the requirements of Applicable Laws.
(d) ERISA. (i) The Lessee will give notice to Agent promptly after
it learns (other than by notice from all of such holders) that (A) any
Reportable Event has occurred; (B) any "accumulated funding deficiency" (within
the meaning of Section 412(a) of the Code) has been incurred with respect to any
Plan or that an application may be or has been made to the Secretary of the
Treasury of a waiver or modification of the minimum funding standard (including
any required installment payments) or an extension of any amortization period
under Section 412 of the Code, in each case with respect to any Plan; (C) any
Single Employer Plan or Multiemployer Plan has been terminated, reorganized,
petitioned or declared insolvent under Title IV of ERISA; (D) any Single
Employer Plan has a under current liability giving rise to a Lien under ERISA
or the Code; (E) any proceeding has been instituted pursuant to Section 515 of
ERISA to collect a
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REAL PROPERTY in the City of San Jose, County of Santa Clara, State of
California, described as follows:
PARCEL ONE:
Pcl. 1 as shown on that certain Parcel Map filed in the office of the
Recorder of the County of Santa Clara, State of California on August 18, 1983
in Book 516 of Maps, page(s) 34 and 35, Santa Clara County Records.
PARCEL TWO:
A non-exclusive easement for ingress and egress over PCL. 2, as said parcel
is shown on the Parcel Map recorded in Book 516 of Maps, at pages 34 and 35,
Santa Clara County Records, and being more particularly described as follows:
Strip 1
A strip of land 26.00 feet wide extending entirely across said PCL. 2 and
lying 13.00 feet on each side of a line described as follows:
Beginning at the most Easterly corner of said PCL. 2, said corner being on
the Southwesterly line of Rose Orchard Way; thence along said Southwesterly
line N. 59 DEG. 57 MIN. 13 SEC. W., 38.00 feet to the true point of beginning
of said strip of land; thence S. 30 DEG. 02 MIN. 47 SEC. W., 28.14 feet;
thence S. 37 DEG. 32 MIN. 59 SEC. W., 423.45 feet to the Southwesterly line
of said PCL. 2.
Strip 2
A strip of land 26.00 feet wide extending entirely across said PCL. 2 and
lying 13.00 feet on each side of a line described as follows:
Beginning at the most Northerly corner of said PCL. 2, said corner being on
the Southwesterly line of Rose Orchard Way; thence along said Southwesterly
line S. 59 DEG. 57 MIN. 13 SEC. E., 388.93 feet to the true point of
beginning of said strip of land; thence S. 30 DEG. 02 MIN. 47 SEC. W., 33.86
feet; thence S. 37 DEG. 32 MIN. 48 SEC. W., 335.99 feet to the Southwesterly
line of said PCL. 2.
Strip 3
A strip of land 26.00 feet wide extending Southwesterly from the
Southwesterly line of said Rose Orchard Way to the Northwesterly line of the
above described and designated Strip 2 and lying 13.00 feet on each side of a
line described as follows:
Beginning at the most Northerly corner of said PCL. 2, said corner being on
the Southwesterly line of Rose Orchard Way; thence along said Southwesterly
line S. 59 DEG. 57 MIN. 13 SEC. E., 30.78 feet to the true point of beginning
of said strip of land; thence S. 30 DEG. 02 MIN. 47 SEC. W., 26.86 feet;
thence S. 37 DEG. 32 MIN. 48 SEC. W., 262.18 feet; thence S. 52 DEG. 27 MIN.
12 SEC. E. 343.00 feet to the Northwesterly line of the above described and
designated Strip 2.
(LEGAL DESCRIPTION CONTINUED NEXT PAGE)
<PAGE>
LEGAL DESCRIPTION: (Continued)
PARCEL THREE:
A non-exclusive easement for Landscaping, Lighting and Irrigation Facilities
over PCL. 2, as said parcel is shown on the Parcel Map recorded in Book 516 of
Maps, at pages 34 and 35, Santa Clara County Records, and being more
particularly described as follows:
A strip of land 10.00 feet wiDe extending Southeasterly from the
Northwesterly line of said PCL. 1 and PCL. 2 and lying 5.00 feet on each side
of a line that begins at the most Northerly corner of said PCL. 1 and runs
thence along the Northeasterly line of said PCL. 1, S. 52 DEG. 27 MIN. 12
SEC. E. 375.00 feet.
Excepting Therefrom that portion lying within the bounds of Parcel One
mentioned hereinabove.
PARCEL FOUR:
PCL. 2 as shown on that certain Parcel Map filed in the office of the
Recorder of the County of Santa Clara, State of California on August 18, 1983
in Book 516 of Maps, page(s) 34 and 35, Santa Clara County Records.
PARCEL FIVE:
A non-exclusive easement for ingress and egress over PCL. 1, as said parcel
is shown on the Parcel Map recorded in Book 516 of Maps, at pages 34 and 35,
Santa Clara County Records, and being more particularly described as follows:
Strip 1
A strip of land 26.00 feet wide extending entirely across said PCL. 1 and
lying 13.00 feet on each side of a line as follows:
Beginning at the Southerly corner of said PCL. 1, said corner being on the
Northeasterly line of North First Street; thence along said Northeasterly
line N. 52 DEG. 27 MIN. 12 SEC. W., 34.00 feet to the true point of beginning
of said strip of land; thence N. 37 DEG. 32 MIN. 59 SEC. E., 540.00 feet to
the Northeasterly line of said PCL. 1.
Strip 2
A strip of land 40.00 feet wide extending entirely across said PCL. 1 and
lying contiguous to and Southeasterly of a line described as follows:
Beginning at the most Southerly corner of said PCL. 1, said corner being on
the Northeasterly line of North First Street; thence along said Northeasterly
line N. 52 DEG. 27 MIN. 12 SEC. W., 429.25 feet to the true point of
beginning of said strip of land; thence N. 37 DEG. 32 MIN. 48 SEC. E., 600.00
feet to the Northeasterly line of said PCL. 1; the Northerly terminus of said
40 foot wide strip of land being the Northeasterly line of said PCL. 1.
(LEGAL DESCRIPTION CONTINUED NEXT PAGE)
<PAGE>
LEGAL DESCRIPTION: (Continued)
PARCEL FIVE: (Continued)
Strip 3
A strip of land 26.00 feet wide, extending Northeasterly from the
Southwesterly line of said PCL. 1 to the Northwesterly line of the above
described and designated Strip 2 and lying 13.00 feet on each side of a line
described as follows:
Beginning at the Westerly corner of said PCL. 1, said corner being on the
Northeasterly line of North First Street; thence along said Northeasterly
line S. 52 DEG. 27 MIN. 12 SEC. E., 34.00 feet to the true point of beginning
of said strip of land; thence N. 37 DEG. 32 MIN. 48 SEC. E. 566.00 feet;
thence S. 52 DEG. 27 MIN. 12 SEC. E., 355.25 feet to said Northwesterly line
of said Strip 2.
Strip 4
A strip of land 13.00 feet wide lying contiguous to and Northwesterly of the
Northwesterly line of the above described and designated Strip 2 and
extending Southwesterly from the Northeasterly line of said PCL. 1
approximately 21.00 feet to the Northeasterly line of the above described and
designated Strip 3.
PARCEL SIX:
The right from time to time to construct, install, maintain, replace, remove,
and use storm drain sewers, together with a right of way therefor, over a
portion of PCL. 1 as said parcel is shown on the Parcel Map recorded in Book
516 of Maps, at pages 34 and 35, Santa Clara County Records, being more
particularly described as follows:
Strip 1
A strip of land 10.00 feet wide extending entirely across said PCL. 1 and
lying 5.00 feet on each side of a line described as follows:
Beginning at the most Westerly corner of said PCL. 1 said corner being on the
Northeasterly line of North First Street; thence along said Northeasterly
line S. 52 DEG. 27 MIN. 12 SEC. E., 402.75 feet to the true point of
beginning of said strip of land; thence along the centerline of a existing
storm drain line the following courses: thence N. 37 DEG. 32 MIN. 48 SEC. E.,
28.00 feet to a point herein designated Point A; thence N. 52 DEG. 27 MIN. 12
SEC. W., 278.00 feet; thence N. 00 DEG. 51 MIN. 00 SEC. E., 198.30 feet;
thence N. 37 DEG. 32 MIN. 33 SEC. E., 279.75 feet; thence S. 51 DEG. 19 MIN.
51 SEC. E., 89.02 feet; thence N. 50 DEG. 06 MIN. 47 SEC. E., 133.18 feet;
thence N. 37 DEG. 32 MIN. 48 SEC. E., 5.00 feet to the Northeasterly line of
said PCL. 1.
Strip 2
A strip of land 10 feet wide extending Northeasterly from the Northeasterly
line of the above described and designated Strip 1 and lying 5.00 feet on
each side of a line which begins at said Point A; thence along the centerline
of an existing storm drain line the following courses: thence N. 26 DEG. 55
MIN. 37 SEC. E., 154.65 feet; thence N. 32 DEG. 55 MIN. 53 SEC. E., 96.31 feet;
thence N. 43 DEG. 21 MIN. 28 SEC. E., 113.58 feet; thence N. 54 DEG. 44 MIN.
21 SEC. E., 105.72 feet to a point herein designated as Point B; thence S. 41
DEG. 57 MIN. 14 SEC. E., 65.85 feet; thence N. 37 DEG. 32 MIN. 48 SEC. E.,
62.00 feet to the Northeasterly line of said PCL. 2.
(LEGAL DESCRIPTION CONTINUED NEXT PAGE)
<PAGE>
LEGAL DESCRIPTION: (Continued)
PARCEL SIX: (Continued)
Strip 3
A strip of land 5.00 feet wide lying contiguous to and Southwesterly of the
Northeasterly line of said PCL. 1 and extending Southeasterly from the
Southeasterly line of the above described and designated Strip 2
approximately 225 feet.
Strip 4
A strip of land 10.00 feet wide extending Northeasterly from the
Northeasterly line of the above described and designated Strip 2 to the
Northeasterly line of said PCL. 1 and lying 5.00 feet on each side of a line
that begins at said Point B; thence along the centerline of an existing storm
drain line N. 37 DEG. 32 MIN. 48 SEC. E., 50.00 feet to the Northeasterly
line of said PCL. 1.
PARCEL SEVEN:
The right from time to time to construct, install, inspect, maintain,
replace, remove and use any and all Public Service Facilities necessary or
useful, together with a right of way therefor, over a portion of PCL. 1 as
said parcel is shown on the Parcel Map recorded in Book 516 of Maps, at pages
34 and 35, Santa Clara County Records, being more particularly described as
follows:
Strip 5
A strip of land 15.00 feet wide extending entirely across said PCL. 1 and
lying 7.50 feet on each side of a line described as follows:
Beginning at the most Southerly corner of said PCL. 1, said corner being on
the Northeasterly line of North First Street; thence along said Northeasterly
line N. 52 DEG. 27 MIN. 12 SEC. W., 60.50 feet to the true point of beginning
of said strip of land; thence N. 37 DEG. 32 MIN. 59 SEC. E. 394.80 feet to a
point herein designated Point C; thence N. 37 DEG. 32 MIN. 59 SEC. E., 105.20
feet; thence N. 7 DEG. 27 MIN. 01 SEC. W., 56.57 feet to the Northeasterly
line of said PCL. 1.
Strip 6
A strip of land 15.00 feet wide extending Northerly from the Northerly line
of the above described and designated Strip 5 to the Northeasterly line of
said PCL. 1 and lying 7.5 feet on each side of a line that begins at said
Point C; thence N. 30 DEG. 01 MIN. 00 SEC. E., 59.5 feet; thence N. 8 DEG. 41
MIN. 00 SEC. E., 98.44 feet to the Northeasterly line of said PCL. 1.
Strip 7
A strip of land 15.00 feet wide extending entirely across said PCL. 1 and
lying 7.5 feet and each side of a line described as follows:
(LEGAL DESCRIPTION CONTINUED NEXT PAGE)
<PAGE>
LEGAL DESCRIPTION: (Continued)
PARCEL SEVEN: (Continued)
Beginning at the most Westerly corner of said PCL. 1 said corner being on the
Northeasterly line of North First Street; thence along said Northeasterly
line S. 52 DEG. 27 MIN. 12 SEC. E., 30.00 feet to the true point of
beginning of said strip of land; thence N. 37 DEG. 32 MIN. 33 SEC. E., 600.00
feet to the Northeasterly line of said PCL. 1.
Strip 8
That area located within those portions of PCL. 1, of the Parcel Map
mentioned hereinabove, lying within the easements designated as "P.S.E.", as
shown on said Parcel Map.
PARCEL EIGHT:
A non-exclusive easement for Landscaping, Lighting and Irrigation Facilities
over PCL. 1, as said parcel is shown on the Parcel Map recorded in Book 516
of Maps, at pages 34 and 35, Santa Clara County Records, and being more
particularly described as follows:
A strip of land 10.00 feet wide extending Southeasterly from the
Northwesterly line of said PCL. 1 and PCL. 2 and lying 5.00 feet on each side
of a line that begins at the most Northerly corner of said PCL. 1 and runs
thence along the Northeasterly line of said PCL. 1, S. 52 DEG. 27 MIN. 12 SEC.
E. 375.00 feet.
Excepting Therefrom that portion lying within the bounds of Parcel Four
mentioned hereinabove.
<PAGE>
EXHIBIT A
TO
LEASE AGREEMENT
[FORM OF LEASE SUPPLEMENT]
LEASE SUPPLEMENT, dated as of ______ ____ 199_, to PURCHASE AND MASTER
LEASE AGREEMENT dated as of __________ __, 199_ (the "Lease Agreement"), among
the lessors referred to therein (the "Lessors") and Novellus Systems, Inc., a
California corporation ("Lessee"), and Sumitomo Bank Leasing and Finance, Inc.,
as agent for the Lessors (in its capacity as such, the "Agent").
In consideration of the mutual agreements herein contained and other
good and valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned thereto in the Lease Agreement.
2. The date of this Lease Supplement is _______________ ____, ______
(the "Closing Date") and the Lessors hereby lease to Lessee under the Lease
Agreement, and the Lessee hereby leases from the Lessors under the Lease
Agreement, the Property described in Part I of Schedule 1 to this Lease
Supplement and said items of Property are subject to all of the covenants, terms
and conditions of the Lease Agreement and this Lease Supplement.
3. The Initial Term for the Property described in Part I of Schedule
1 to this Lease Supplement commences as of the date hereof and continues to and
including _______________ ____, ______, unless extended or earlier terminated as
provided in the Lease Agreement.
4. Lessee hereby acknowledges and confirms that it has inspected and
approved the Property set forth on Part I of Schedule 1 hereto for all purposes
of the Lease Agreement and the other Lease Documents and, as between the Lessors
and the Lessee, such Property is complies with the Plans and Specifications for
such Property, is in first class repair, condition and appearance, and without
defect therein with respect to design, construction, condition, operation and
fitness for use or in any other respect, and all systems and other Personal
Property located therein is in good working order, whether or not any of the
foregoing is discoverable by Lessee as of the date hereof and are accepted for
lease under the Lease Agreement as of the date specified above.
A-1
<PAGE>
5. Lessee hereby represents and warrants that no event which would
constitute an Event of Loss under the Lease Agreement has occurred with respect
to the Property set forth on Part I of Schedule 1 hereto as of the date hereof.
Lessee hereby reaffirms each of the representations and warranties set forth in
Section 2 of the Lease Agreement as if made on the date hereof, including that
the Property set forth on Schedule 1 hereto is free and clear of all Liens other
than Permitted Liens.
6. The Aggregate Property Cost for the Property described in Part I
of Schedule 1 to this Lease Supplement is $________.
7. The respective percentages of the Aggregate Property Cost for the
Property described in Part I of Schedule 1 to this Lease Supplement are
correctly indicated Part II of Schedule 1 of this Lease Supplement.
8. The Aggregate Guaranteed Residual Value for the Property
described in Part I of Schedule 1 to this Lease Supplement is $_________.
9. The location(s) (address, county and state) for the Property
described in Schedule 1 to this Supplement is set forth on Schedule 1 to this
Lease Supplement.
10. Initially, and until changed pursuant to the Lease Agreement,
Base Rent will be based on the Euro-Dollar Rate.
11. The Memorandum of Lease and the Deed of Trust have been recorded
in the office of the county recorder, and the UCC-1 Filings have been made in
the office of the California Secretary of State, as shown on Schedule 2 to this
Supplement and Additional Base Rent for the Property described herein is as set
forth in Schedule 3 to this Supplement.
12. Any and all notices, requests, certificates and other instruments
executed and delivered concurrently with or after the execution and delivery of
the Lease Supplement may refer to the "Purchase and Master Lease Agreement,
dated as of __________ __, 199_", or may identify the Lease Agreement in any
other respect without making specific reference to this Lease Supplement, but
nevertheless all such references shall be deemed to include this Lease
Supplement, unless the context shall otherwise require.
13. This Lease Supplement may be executed in any number of
counterparts, each executed counterpart constituting an original but all
together one and the same instrument. This Lease Supplement shall be construed
in connection with and as part of the Lease Agreement, and all terms, conditions
and covenants contained in the Lease Agreement, as supplemented by this Lease
Supplement, shall be and remain in full force and effect and shall govern the
Property described on Part I of Schedule 1 hereto.
A-2
<PAGE>
14. This Lease Supplement has been delivered in the State of
California and shall in all respects be governed by, and construed in accordance
with, the laws of the State of California, including all matters of
construction, validity and performance.
IN WITNESS WHEREOF, Agent, on behalf of the Lessors, and the Lessee
have caused this Lease Supplement to be executed and delivered by their duly
authorized officers as of the day and year first above written.
AGENT (ON BEHALF OF
THE LESSORS): SUMITOMO BANK LEASING AND FINANCE, INC.
By:
------------------------------
Title:
---------------------------
LESSEE: NOVELLUS SYSTEMS, INC.,
a California corporation
By:
--------------------------------
Title:
Receipt of this original counterpart of this Lease Supplement is
hereby acknowledged this __________ day of ______, 199_:
SUMITOMO BANK LEASING
AND FINANCE, INC., as Agent
By:
--------------------------------
Title:
-----------------------------
A-3
<PAGE>
SCHEDULE 1
TO
LEASE SUPPLEMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PART I PART II PART III
Apportioned Property Property Cost Apportioned Land
Percentage Area (Square Feet)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3930 N. First St., 20.8427% 70,848
San Jose, California
- --------------------------------------------------------------------------------
3940/3942 N. First 17.6232% 59,904
St., San Jose,
California
- --------------------------------------------------------------------------------
3950 N. First St., 38.3978% 42,624
San Jose, California
- --------------------------------------------------------------------------------
3960 N. First St., 9.9977% 33,984
San Jose, California
- --------------------------------------------------------------------------------
3970 N. First St., 13.1386% 42,048
San Jose, California
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTALS: 100.0000% 249,408 sq. ft.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-4
<PAGE>
SCHEDULE 2
TO
LEASE SUPPLEMENT
Recording and
UCC-1 Filing Schedule
(California)
MEMORANDUM OF LEASE
Recording Date County Instrument No.
- --------------- ------ -------------
Santa Clara
DEED OF TRUST
Recording Date County Instrument No.
- -------------- ------ -------------
Santa Clara
UCC-1 FILINGS
Filing Date File No.
- ----------- -------
A-5
<PAGE>
SCHEDULE 3
TO
LEASE SUPPLEMENT
Additional Base Rent
Rent Payment Date Additional Base Rent
----------------- --------------------
Not Applicable None
A-6
<PAGE>
EXHIBIT B
TO
LEASE AGREEMENT
[FORM OF BILL OF SALE FOR LESSEE]
BILL OF SALE
For good and valuable consideration the receipt of which is hereby
acknowledged, CALIFORNIA SECOND, LTD., a Florida limited partnership ("Seller"),
does hereby sell, transfer, and convey to SUMITOMO BANK LEASING AND FINANCE,
INC., for the benefit of and as agent for the Lessors (as such term is defined
in that certain Purchase and Master Lease Agreement dated as of _______________,
1996, between Novellus Systems, Inc. ("Novellus") and Buyer (the "Lease
Agreement")), all personal property owned by Seller and located on or in or used
exclusively in connection with the Real Property and Improvements (as such terms
are defined in that certain Purchase Agreement dated as of January 19, 1996),
including, without limitation, those items described in SCHEDULE A attached
hereto.
Seller does hereby represent to Buyer that Seller is the lawful owner
of such personal property, that such personal property is free and clear of all
encumbrances, and that Seller 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 as of this ______ day of _________________, 1996.
Seller: CALIFORNIA SECOND, LTD., a Florida limited
partnership
By: McCandless Partnership, a California general
partnership, as its General Partner
By:
-------------------------------------
Birk S. McCandless, as Trustee under the
Birk S. McCandless and Mary McCandless
Inter Vivos Trust Agreement dated
February 7, 1982, as a General Partner
B-1
<PAGE>
Schedule A to
BILL OF SALE
B-2
<PAGE>
EXHIBIT C
TO
LEASE AGREEMENT
[FORM OF CLOSING DATE NOTICE]
CLOSING DATE NOTICE
DATE:
TO: Sumitomo Bank Leasing and Finance, Inc., not individually, but
solely as Agent (the "Agent"), under that certain Purchase and
Master Lease Agreement, dated as of ________________, 199_, (the
"Lease Agreement") among Novellus Systems, Inc., a California
corporation ("Lessee"), the Agent, and the Lessors identified
therein (all capitalized terms used herein and not otherwise
defined shall have the meaning assigned to them in the Lease
Agreement, unless the context otherwise requires).
FROM: The Lessee
REGARDING: Closing Date
1. The Closing Date under the Lease Agreement is scheduled for 10:00
a.m. local time on ____________, _______, at the offices of __________________
_________ located at ____________________________________________.
2. The Property Information Package is complete, and there have been
no changes thereto [except as follows: ______________________________, true and
complete copies of which are attached hereto.]
3. The Aggregate Property Cost of the Closing Date is $ to
be funded by each Lessor ratably in accordance with its Commitment Percentage.
4. The Aggregate Property Cost as of the Closing Date shall be sent
by wire transfer of immediately available funds to Lessee at the following
account:
Bank: Union Bank -- Los Angeles
for Office No. 715
1800 Harrison Street
Oakland, California 94612
ABA Routing #: 1220 00 496
Account #: 715 00 820 26
C-1
<PAGE>
Payee: First American Title Guaranty Company
Reference: Office No. 282-05
Escrow No. 510514
Escrow Officer: Susan Melton
IN WITNESS WHEREOF, the Lessee has caused this Closing Date Notice to
be executed and delivered by its duly authorized officer as of the day and year
first above written.
NOVELLUS SYSTEMS, INC.,
a California corporation
By:
--------------------------------
Title:
C-2
<PAGE>
EXHIBIT D
TO
LEASE AGREEMENT
[FORM OF ASSIGNMENT AGREEMENT]
ASSIGNMENT AGREEMENT
Reference is made to the Purchase and Master Lease Agreement described in
Item 2 of Annex I annexed hereto (the "Lease Agreement"). Terms defined in the
Lease Agreement are used herein with the meanings assigned thereto in the Lease
Agreement.
_________________ (the "Assignor") and ________________ (the "Assignee")
hereby agree as follows:
1. The Assignor hereby sells and assigns and delegates to the Assignee,
without recourse, representation or warranty except as specifically set forth in
paragraph 2 below, and the Assignee hereby purchases and assumes from the
Assignor, that interest in and to all of the Assignor's rights, benefits and
obligations under the Lease Agreement as of the date hereof which represents the
percentage interest specified in Item 4 of Annex I of all outstanding Lessors'
rights and obligations under the Lease Agreement, including, without limitation,
such interest in the Assignor's Commitment (if applicable) and the Base Rent,
Additional Base Rent and Guaranteed Residual Value owing to the Assignor
relating to such Commitment. After giving effect to such sale and assignment,
the Assignee's Commitment will be as set forth in Item 4 of Annex I.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any lien or adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Lease Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Lease Agreement or any other instrument
or document furnished pursuant thereto; and (iii) makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Lessee or the performance or observance by the Lessee of any of its
obligations under the Lease Agreement or any other instrument or document
furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of the Lease
Agreement, together with copies of the financial statements referred to therein
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;
(ii) agrees that it will, independently and without reliance on
D-1
<PAGE>
Assignor, as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Lease Agreement; (iii)
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under the Lease Agreement as are delegated to Agent by
the terms thereof, together with such powers as are reasonably incidental
thereto; (iv) agrees that it will perform in accordance with their terms all of
the obligations which by the terms of the Lease Agreement are required to be
performed by it as a Lessor, [and (v) attaches the forms prescribed by the
Internal Revenue Service of the United States certifying as to the Assignee's
status for purposes of determining exemption from United States withholding
taxes with respect to all payments to be made to the Assignee under the Lease
Agreement or such other documents as are necessary to indicate that all such
payments are subject to such rates at a rate reduced by the applicable tax
treaty].(1)
4. Following the execution of this Assignment Agreement by the Assignor
and Assignee, it will be delivered to the Agent for registration by the Agent.
The effective date of this Assignment Agreement shall be the date of execution
hereof by the Assignor and the Assignee, unless otherwise specified on Item 6 of
Annex I hereto (the "Settlement Date").
5. Upon such acceptance and registration by the Agent, as of the
Settlement Date, (i) the Assignee shall be a party to the Lease Agreement and,
to the extent provided in this Assignment Agreement, have the rights and
obligations of a Lessor thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment Agreement, relinquish its rights and be released
from its obligations under the Lease Agreement.
6. Upon such acceptance and registration by the Agent, from and after the
Settlement Date, the Agent shall make all payments under the Lease Agreement in
respect of the interest assigned hereby (including, without limitation, all
payments of Base Rent, Additional Base Rent and fees (if applicable) with
respect thereto) to the Assignee. [Upon the Settlement Date, the Assignee shall
pay to the Assignor outstanding Additional Base Rent under the Lease
Agreement](2) The Assignor and Assignee shall make all appropriate adjustments
in payments under the Lease Agreement for periods prior to the Settlement Date
directly between themselves on the Settlement Date.
7. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA.
- --------------------
(1) If the Assignee is organized under the laws of a jurisdiction outside the
United States.
(2) To be adjusted as is appropriate.
D-2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
[NAME OF ASSIGNOR]
as Assignor
By:
-------------------------------
Title:
----------------------------
[NAME OF ASSIGNEE]
as Assignee
By:
-------------------------------
Title:
----------------------------
Accepted this ____ day
of___________, 19__
SUMITOMO BANK LEASING AND FINANCE, INC.
as Agent
By:
--------------------------
Title:
-----------------------
D-3
<PAGE>
ANNEX I
1. Lessee: Novellus Systems, Inc.
2. Name and Date of Lease Agreement: Purchase and Master Lease Agreement dated
as of ________________, 1996 by and among the Lessors named therein (the
"Lessors"), Novellus Systems, Inc., a California corporation ("Lessee"),
and Sumitomo Bank Leasing and Finance, Inc., as agent for the Lessors (in
its capacity as such, the "Agent") (as such Lease Agreement may from time
to time be amended, supplemented or otherwise modified).
3. Date of Assignment Agreement: _________________, 19__.
4. Amounts (as of Date of Item #3 above):
- --------------------------------------------------
- --------------------------------------------------
a. Total Lease
Agreement
/Commitment $
----------------
- --------------------------------------------------
b. Assigned
Commitment %
----------------
- --------------------------------------------------
c. Amount of Assigned
Commitment $
----------------
- --------------------------------------------------
- --------------------------------------------------
5. Assignee's Funded
Commitment: $
------------------
6. Settlement Date(1):
7. Notice and Payment
Instructions: PAYMENT
ASSIGNEE:
------------------
------------------
------------------
Attention:
Reference:
Telecopier:
Reference:
- --------------------
(1) This date should be no earlier than the date of acceptance by the
Agent.
D-4
<PAGE>
NOTICE
---------------
---------------
---------------
Attention:
Reference:
8. Assignee's Funding
Office:
---------------
D-5
<PAGE>
EXHIBIT E
TO
LEASE AGREEMENT
[FORM OF OFFICER'S CERTIFICATE]
OFFICER'S CERTIFICATE
(Pursuant to Section 19(a)(iii) of the
Lease Agreement referred to below)
This Certificate is furnished pursuant to SECTION 19(A)(III) of the
Purchase and Master Lease Agreement, dated as of ________, 199_ (the "Lease
Agreement") among the lessors named therein (the "Lessors"), Novellus Systems,
Inc., a California corporation ("Lessee"), and Sumitomo Bank Leasing and
Finance, Inc., as agent for the Lessors (in its capacity as such, the "Agent").
Capitalized terms used herein but not otherwise defined herein shall have the
same meanings as those assigned to them in the Lease Agreement.
The Lessee hereby certifies to Agent as follows:
1. Since _____________________, 19__, the undersigned has been the
duly qualified and acting ______________ of Lessee, and is familiar with the
financial statements and financial affairs of Lessee. The undersigned is
authorized to execute this Certificate on behalf of Lessee.
2. A true and correct copy of the [annual audit report] [quarterly
unaudited consolidated financial statement] of Lessee and its Subsidiaries for
the [Fiscal Year] [Fiscal Quarter] ended on _____________, 19__, is attached
hereto as ANNEX A.
3. As of the date of this Certificate, no Event of Default or
Unmatured Event of Default has occurred and is continuing (except as follows:
[include description of any such event and the steps being taken, if any, with
respect thereto]].
4. Attached hereto as Annex B is a true and correct computation as
of the dates referred to therein of the financial ratios and/or financial
restrictions contained in Section 19 of the Lease Agreement.
5. Attached hereto as Annex C is a complete description (to the
extent such disclosure would be required to be made by Lessee if Lessee were a
public reporting company under the Securities Exchange Act of 1934, as amended)
as of the date of this Certificate of any Material Litigation which has been
E-1
<PAGE>
instituted or which has occurred since the date of the most recent Officer's
Certificate of Lessee [or, in the case of the first Officer's Certificate, since
the date of the Lease Agreement.]
IN WITNESS WHEREOF, the Lessee has caused its duly authorized
officer(s) to set his hand this ___day of ________________, 19__.(1)
NOVELLUS SYSTEMS, INC.,
a California corporation(2)
By:
-------------------------
Name:
-------------------------
Title:
- --------------------
(1) Such date shall be the date of the annual report or the quarterly
statement that is attached as ANNEX A.
(2) To be executed by an Authorized Officer.
E-2
<PAGE>
ANNEX A TO
EXHIBIT E
TO OFFICER'S CERTIFICATE DATED AS OF , 19
- --------------------------------------------------------------
[Attach copy of annual audit report or quarterly unaudited consolidated
financial statement, as appropriate]
E-3
<PAGE>
ANNEX B TO
EXHIBIT E
TO OFFICER'S CERTIFICATE DATED AS OF , 19
- -------------------------------------------------------------
[Computation of financial ratios and/or financial restrictions]
E-4
<PAGE>
ANNEX C TO
EXHIBIT E
TO OFFICER'S CERTIFICATE DATED AS OF ,19
- -----------------------------------------------------------
[Description of any Material Litigation to the extent such disclosure
would be required to be made by Lessee if Lessee were a reporting company under
the Securities Exchange Act of 1934.]
E-5
<PAGE>
EXHIBIT F
TO
LEASE AGREEMENT
[FORM OF OPINION OF LESSEE COUNSEL]
[Follows this page]
F-1
<PAGE>
[MORRISON & FOERSTER LLP LETTERHEAD]
April 10, 1996
Sumitomo Bank Leasing and Finance, Inc.,
as Agent and as a Lessor
277 Park Avenue
New York, New York 10172
Re: NOVELLUS SYSTEMS, INC.
Ladies and Gentlemen:
We have acted as special counsel to Novellus Systems, Inc. (the
"Lessee"), in connection with the negotiation, execution and delivery by the
Lessee of the following documents, all dated as of April 10, 1996, unless
otherwise indicated (the "Operative Documents"):
(i) that certain Purchase and Master Lease Agreement (the "Lease
Agreement") by and among the Lessee, the lessors named therein (the
"Lessors") and Sumitomo Bank Leasing and Finance, Inc., as agent for the
Lessors (the "Agent");
(ii) that certain Security Agreement (the "Security Agreement")
between Lessee and Agent as the Secured Party;
(iii) that certain Deed of Trust and Assignment of Rents (the "Deed of
Trust") by and among Lessee as Trustor, Agent as the Beneficiary and First
American Title Insurance Company as Trustee;
pa-75346
F-2
<PAGE>
Sumitomo Bank Leasing
and Finance, Inc. [MORRISON & FOERSTER LLP LETTERHEAD]
April 10, 1996
Page Two
(iv) that certain letter agreement re: Account No. H 10-6438369 by and
among Hambrecht & Quist LLC as Custodian, Agent as Secured Party and Lessee
(the "Custodian Agreement"); and
(v) that certain Assignment of Improved Real Property Purchase and
Sale Agreement among Lessee as Assignor, Agent as Assignee, and California
Second, Inc. as Seller.
This opinion is furnished to you pursuant to Section 3(i) of the Lease
Agreement. Capitalized terms used herein and not otherwise defined herein
have the meanings provided in the Operative Documents.
In connection with this opinion, we have examined originals, or copies
certified or otherwise identified to our satisfaction, as being true copies
of the Operative Documents, those certain credit agreements listed on Exhibit
"A" attached hereto (the "Credit Agreements"), corporate documents and
records, and other certificates, opinions and instruments as we have deemed
necessary as a basis for the opinions expressed below. As to questions of
fact material to such opinions, we have, without independent investigation,
relied upon all of the foregoing and upon a certificate of an officer of the
Lessee as set forth in Annex I attached hereto. Our opinion in paragraph (1)
below as to the good standing of Lessee is based solely upon a certificate of
public officials in the state named in that paragraph. We have made no
independent investigation as to whether those certificates are accurate or
complete; provided, however, that in the course of our representation of the
Company in connection with the transactions contemplated in the Operative
Documents, nothing to the contrary has come to our attention.
Whenever our opinion with respect to the existence or absence of facts
is indicated to be based on our knowledge or awareness, we are referring
solely to the actual knowledge of the particular attorneys of the undersigned
who have represented Lessee in connection with the Operative Documents.
Except as expressly set forth herein, we have not undertaken any independent
investigation to determine the existence or absence of such facts and no
inference as to our knowledge concerning such facts should be drawn from the
fact that such representation has
pa-75346
F-3
<PAGE>
Sumitomo Bank Leasing
and Finance, Inc. [MORRISON & FOERSTER LLP LETTERHEAD]
April 10, 1996
Page Three
been undertaken by us; provided, however, that in the course of our
representation of the Company in connection with the transactions
contemplated in the Operative Documents, nothing to the contrary has come to
our attention.
We express no opinion herein as to the proper characterization of the
legal relationship between the Lessee and any one or more of the Lessors or
Agents (individually, "Other Party" and collectively "Other Parties") created
by the Operative Documents, or as to the proper characterization of the
Operative Documents; we note in this respect that it is possible that this
relationship could be characterized not only as that of lessee and lessor or
buyer and seller, but also as that of borrower and lender in a loan
transaction in which Agent is considered to hold legal title as security for
such loan and in which any one or more of the Other Parties may be deemed to
have an equitable mortgage or actual deed of trust or mortgage lien. In
addition, we express no opinion herein as to the proper characterization of
the legal relationship between or among any of the Other Parties, INTER SE,
arising under any of the Operative Documents, or as to the enforceability of
any of the obligations of the Other Parties, INTER SE, arising under any of
the Operative Documents or as to any assignment of rights under the Operative
Documents by one of the Other Parties to another of the Other Parties.
For the purposes of this opinion, we have assumed the genuineness of
all signatures and the authenticity of all items submitted to us as originals
and the conformity with originals of all items submitted to us as copies. In
making our examination of the Operative Documents, we have assumed that each
party to one or more of the Operative Documents other than the Lessee has the
power and capacity to enter into and perform its obligations thereunder, has
duly authorized, executed and delivered such Operative Documents, and that such
Operative Documents constitute the legal, valid and binding obligations of each
such party and are enforceable against each such party in accordance with their
terms.
Based upon and subject to the assumptions, exceptions and
qualifications set forth herein, we are of the opinion that:
pa-75346
F-4
<PAGE>
Sumitomo Bank Leasing
and Finance, Inc. [MORRISON & FOERSTER LLP LETTERHEAD]
April 10, 1996
Page Four
1. Lessee is a corporation duly organized, validly existing and in good
standing under the laws of the State of California.
2. The execution, delivery and performance by Lessee of the Operative
Documents (a) are within Lessee's corporate powers, (b) have been duly
authorized, (c) do not require any approval, consent, filing, registration,
notice or other action with or by any Governmental Authority which has not
been previously obtained (and each that has been previously obtained remains
effective), (d) do not conflict with any provision of the Lessee's charter or
by-laws, and (e) except with respect to the Credit Agreements, to our
knowledge, will not violate or result in a breach of, or cause any Lien
(except for the Lien in favor of the Agent under the Operative Documents) to
arise under, any provision of any agreement binding upon the Lessee, any
Subsidiary of the Lessee or any of their respective properties, provided,
however, we exclude from the scope of the opinion set forth in this
subparagraph (e) any potential violation of any covenant relating to the
financial condition of the Lessee contained in such agreements.
3. The execution, delivery and performance by Lessee of the Operative
Documents do not violate or result in a breach of, or cause any Lien (except
for the Lien in favor of the Agent under the Operative Documents) to arise
under any provision of the Credit Agreements, provided, however, we exclude
from the scope of the opinion set forth in this paragraph (3), any potential
violation of (i) Sections 6.3, 6.4, 6.5, and 6.6 of the Sumitomo Credit
Agreement, as that term is defined on Exhibit "A" hereto, (ii) Section 5.11
of the Sanwa Credit Agreement, as that term is defined on Exhibit "A" hereto,
and (iii) Sections 4.5, 4.6, 4.7, and 4.8 of the Bank of America Credit
Agreement, as that term is defined on Exhibit "A" hereto.
4. The Operative Documents have been duly executed and delivered and
are, in each case, the valid and binding obligations of Lessee enforceable
against Lessee in accordance with their respective terms subject to the
following:
(a) if the Lease Agreement is recharacterized by
a court of competent jurisdiction as a loan
from Lessors to Lessee (whether secured by an
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<PAGE>
Sumitomo Bank Leasing
and Finance, Inc. [MORRISON & FOERSTER LLP LETTERHEAD]
April 10, 1996
Page Five
equitable mortgage or actual deed of trust or
mortgage lien), Lessee's obligations to make
payments characterized as "Base Rent" and
"Additional Base Rent" under the Lease are
enforceable, insofar as a breach of the Lease
Agreement will entitle the Agent (on behalf
of the Lessors) to pursue its rights and
remedies under the Lease Agreement against
the collateral encumbered thereby; however,
we express no opinion as to the nature or
characterization of such payments as "Base
Rent" or "Additional Base Rent"; and
(b) if the Lease Agreement is characterized by a
court of competent jurisdiction as a lease
between Lessors, as landlord, and Lessee, as
tenant, then (i) the obligations of Lessee to
make payments characterized as "Base Rent"
and "Additional Base Rent" under the Lease
are enforceable and (ii) Agent (on behalf of
Lessors) would be entitled to exercise the
rights of the Agent (on behalf of the
Lessors) under the Lease; however, we express
no opinion as to the nature or
characterization of Lessee's obligations to
make payments characterized as "Base Rent"
and "Additional Base Rent".
5. Neither Lessee nor any of its Subsidiaries is an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
6. To our knowledge, except as set forth in Annex 1, no Material
Litigation is pending or threatened against Lessee and its Subsidiaries.
7. Neither Lessee nor any of its Subsidiaries is a "holding company,"
or a "subsidiary company" of a "holding company," or an "affiliate", of a
"holding company" or of a "subsidiary
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F-6
<PAGE>
Sumitomo Bank Leasing
and Finance, Inc. [MORRISON & FOERSTER LLP LETTERHEAD]
April 10, 1996
Page Six
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
8. The Security Agreement and the Custody Agreement create a valid
security interest in favor of Agent on behalf of Lessors in the Eligible U.S.
Government Obligations held by the Custodian pursuant to the Security
Agreement and the Pledge Agreement (the "Securities"), and such security
interest is perfected.
The opinions set forth above are subject to the following additional
qualifications:
With respect to the opinion expressed in paragraph (2) above, we have
assumed that neither Agent nor any of the Lessors has any present intention
of distributing its interests in the Operative Documents other than in
compliance with the requirements, if any, of all applicable state and federal
securities laws.
With respect to the opinions expressed in paragraphs (4) and (8) above,
we have assumed that at all times material to our opinions (i) the granting
of a security interest in property, other than the Securities, consisting of
a governmental permit, license or other authorization is not prohibited or
restricted by law; (ii) the granting of a security interest in property,
other than the Securities, consisting of rights under a contract is not
restricted by the terms of such contract or by law; (iii) the Lessee has
"rights" in the Property and the Collateral (as defined in the Lease
Agreement and the Security Agreement, respectively) within the meaning of
Section 9203(1)(c) of the California Uniform Commercial Code (the "CUCC") and
Section 9-203(1)(c) of the New York Uniform Commercial Code ("NYUCC") ; (iv)
each Other Party is exempt from the usury laws of the State of California;
(v) either Division 8 of the CUCC or Article 8 of the NYUCC governs the
creation and perfection of security interests in the Securities ; (vi) the
Securities have been transferred and delivered to the Custodian as
contemplated by the Security Agreement and the Custody Agreement and are held
by the Custodian in accordance with, and the Custodian has complied with, the
terms of the Security Agreement and the Custody Agreements; and (vii) the
Custodian is a "financial intermediary" (as defined in Section 8-313(4) of
the NYUCC and Division 8313(4)of the CUCC) on
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<PAGE>
Sumitomo Bank Leasing
and Finance, Inc. [MORRISON & FOERSTER LLP LETTERHEAD]
April 10, 1996
Page Seven
the books of which the interest of Agent in the Securities appears. In
addition, we have assumed that Agent purchased the personal property, other
than the Securities, "for value" and "good faith" within the meaning of CUCC
Section 10308(c) and California Civil Code Section 3440.1(k).
We express no opinion as to (i) the due recordation or filing of any of
the Operative Documents or of any UCC Financing Statement filed in connection
with the Operative Documents; (ii) except as expressly set forth herein, the
creation, perfection or priority of any liens or any interests in the
Property or the Collateral arising under the Operative Documents; (iii) the
effect of the absence of such creation, perfection or priority; (iv) the
state of title to the Property or the Collateral; (v) the accuracy or legal
sufficiency of any description of the Property or the Collateral; (vi) the
effect of any regulation, law, covenant or agreement relating to zoning,
building codes, subdivision or similar requirements as applied to the
Property; or (vii) compliance by the Property (or by any person with respect
to the Property) with any laws relating to environmental control or relating
to the use or occupancy of the Property. We bring to your attention that in
the case of any issuance, division, transfer or distribution in respect of
the Securities or the distribution of identifiable cash proceeds, dividends
or interest with respect thereto, the security interest of the Agent will be
perfected only if actual possession of the Securities or the distribution of
identifiable cash proceeds, dividends or interest with respect thereto is
obtained in accordance with the Custodian Agreement and the Security
Agreement. We further bring to your attention that in the case of
non-identifiable proceeds, dividends or interest, continuation of the
perfection of such security interest is limited to the extent set forth in
Section 9-306 of the NYUCC and 9306 of the CUCC.
We express no opinion herein as to the proper tax or accounting
treatment of the transactions contemplated by the Operative Documents. In
addition, we express no opinion as to the enforceability of any rights or
remedies set forth in the Operative Documents for a breach or default by the
Lessee thereunder to the extent such rights or remedies are inconsistent with
the rights and remedies provided for the same breach or default in other
provisions of the Operative Documents.
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F-8
<PAGE>
Sumitomo Bank Leasing
and Finance, Inc. [MORRISON & FOERSTER LLP LETTERHEAD]
April 10, 1996
Page Eight
The opinions hereinabove expressed are subject to the following further
qualifications and exceptions, which qualifications and exceptions apply
regardless of whether the relationship of the Lessee, on the one hand, and
the Other Parties on the other hand, is viewed as that of a lessor and lessee
or that of a borrower and lender:
(1) The effect of bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws relating to or affecting the rights of
landlords and creditors generally, including, without limitation, laws
relating to fraudulent transfers or conveyances, preferences, equitable
subordination and the rejection of leases and other executory contracts.
(2) Limitations imposed by general principles of equity upon the
availability of equitable remedies or the enforcement of provisions of the
Operative Documents; and the effect of judicial decisions which have held
that certain provisions are unenforceable where their enforcement would
violate the implied covenant of good faith and fair dealing, or would be
commercially unreasonable, or where a default under the Operative Documents
is not material;
(3) The effect of statutes or judicial decisions rendering ineffective
or limiting certain provisions contained in the Operative Documents.
However, in our opinion, the Security Agreement contains adequate provisions
for the practical realization of the benefits afforded thereby, and subject
to all other qualifications herein, such statutes and decisions do not
invalidate the Operative Documents in their entirety and will not prevent the
Other Parties from enforcing the Lessee's obligation to pay any accrued Base
Rent, Additional Base Rent or the Guaranteed Residual Value pursuant to the
Operative Documents upon a material breach by the Lessee of a material
covenant contained in the Operative Documents, provided the rules and
restrictions set forth in those statutes and judicial decisions are observed,
and provided that such enforcement (to the extent it includes a judicial or
non-judicial foreclosure) is consistent with and subject to the provisions of
California Civil Code Section 2924c.
The statutes referred to in paragraph (3) include, without limitation,
Sections 726, 580a, 580b and 580d of the California Code of Civil Procedure
(sometimes referred to as the "one-form-
pa-75346
F-9
<PAGE>
Sumitomo Bank Leasing
and Finance, Inc. [MORRISON & FOERSTER LLP LETTERHEAD]
April 10, 1996
Page Nine
of-action" and "anti-deficiency" rules), which provide procedural and
substantive rules with respect to foreclosure on real, and in some
circumstances, personal property, application of foreclosure proceeds, and
deficiency judgments against a borrower. In general, under those statutes
(i) a borrower may require its lender to foreclose on all of its security
before a personal judgment against the borrower may be obtained for a
deficiency, (ii) the exercise by the lender of any other remedies prior to
foreclosure on its security may impair the subsequent ability to realize on
such security or to obtain a deficiency judgment, (iii) no deficiency
judgment may be rendered on certain purchase money obligations, (iv) no
deficiency judgment may be rendered after exercise of the power of sale, and
(v) the amount of any deficiency judgment will be limited. In addition,
under Section 726.5 and 736 of the California Code of Civil Procedure, an
attempt by Lender to recover costs beyond those allowable under Section 736
or other than in the manner described in Section 726.5 could have the
consequences described above under the form-of-action and anti-deficiency
rules. In addition, under Section 2924c of the California Civil Code, the
borrower is permitted to cure its default and reinstate its obligations after
maturity of those obligations is accelerated. Section 9504 of the CUCC and
Section 9-504 of the NYUCC provides procedural and substantive rules
applicable in some circumstances with respect to foreclosure on personal
property security. Failure to comply with those rules may result in a loss
of the right to a deficiency judgment.
The provisions referred to in paragraph (3) which may be so limited or
rendered ineffective include, without limitation: (i) those which purport to
waive statutory or common law rights to the extent such waiver is against
public policy; (ii) those which permit a party to increase the rate of
interest or to collect a late charge, a prepayment charge or liquidated
damages in the event of default, or any charge or fee which is deemed to
constitute a penalty or forfeiture or to be unreasonable under the
circumstances; (iii) those which provide for indemnification to the extent
such indemnification is against public policy; (iv) those which provide for
the exercise of set-off or similar rights, to the extent inconsistent with
statutory provisions or case law; and (v) those which purport to establish a
particular court as the forum for the adjudication of any controversy
relating to such Operative Documents may not be enforceable.
pa-75346
F-10
<PAGE>
Sumitomo Bank Leasing
and Finance, Inc. [MORRISON & FOERSTER LLP LETTERHEAD]
April 10, 1996
Page Ten
(4) Agent's rights and remedies as landlord under the Lease Agreement
can only be enforced in compliance with, and are subject to, the requirements
of Sections 1950.7, 1951.2 through 1951.8, Sections 1995.010 through
1995.340, and Sections 1997.010 through 1997.270 of California Civil Code.
(5) We express no opinion as to the effect on the opinions expressed
herein of (1) the compliance or non-compliance of any Other Party with any
laws or regulations applicable to it, or (2) the legal or regulatory status
of any Other Party.
We express no opinion as to matters governed by any laws other than the
substantive laws of the State of California (without reference to its
conflicts of laws rules), federal laws of the United States, and, with
respect to the opinion expressed in paragraph (viii) only, the substantive
laws of the State of New York (without reference to its choice of law rules),
all as in effect on the date hereof. We express no opinion with respect to
any choice of law provision contained in the Operative Documents.
This opinion is solely for the benefit of Agent and the Lessors and
their successors and assigns and may not be relied upon by, nor may copies be
delivered to, any other person or entity or for any other purpose without our
prior written consent. Notwithstanding the foregoing grant of permission to
a successor or an assignee to rely on this opinion, we express no opinion
with respect to the effect of the successor's or assignee's failure to comply
with any legal requirement in order for it to enforce the Operative
Documents. We express no opinion as to the enforceability of the Operative
Documents by a participant.
Very truly yours,
/s/ Morrison & Foerster LLP
---------------------------
Morrison & Foerster LLP
F-11
<PAGE>
EXHIBIT G
TO LEASE
FORM OF
MEMORANDUM
OF LEASE
Recording requested by:
When recorded, mail to:
MORGAN, LEWIS & BOCKIUS LLP
801 South Grand Avenue
Twenty-Second Floor
Los Angeles, California 90017
Attn: John M. DeMarco, Esq.
DOCUMENTARY TRANSFER TAX:
The undersigned declares that the
Documentary Transfer Tax is $-0-,
and that the term of the Lease, including
any and all unexercised extension options
is less than 35 years.
MEMORANDUM OF LEASE
By this Memorandum of Lease, made ______________, 1996, concurrently with
that certain PURCHASE AND MASTER LEASE AGREEMENT (the "Lease") dated as of
_________________, 1996, between the same parties covering the same property
(the "Lease"), Sumitomo Bank Leasing and Finance, Inc., as agent for the Lessors
named in the Lease ("Lessor") and Novellus Systems, Inc., a California
corporation ("Lessee") agree as follows:
Lessor leases the property described in Exhibit "A" attached hereto and
incorporated herein by this reference (the "Property") to Lessee upon the terms
and conditions set forth in the Lease.
AGENT FOR LESSORS: SUMITOMO BANK LEASING AND FINANCE, INC.
By:______________________________
Title:___________________________
LESSEE: NOVELLUS SYSTEMS, INC.,
a California corporation
By:______________________________
Title:
G-1
<PAGE>
Exhibit "A" to Memorandum of Lease
LEGAL DESCRIPTION
G-2
<PAGE>
STATE OF ______________ )
) ss.
COUNTY OF _____________ )
On ________________, 19__, before me, a notary public, personally
appeared _______________________________, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that ___he executed
the same in his/her authorized capacity, and that by his/her signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal. (seal)
_________________________________
Notary public
STATE OF ______________ )
) ss.
COUNTY OF _____________ )
On ________________, 19__, before me, a notary public, personally
appeared _______________________________, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that ___he executed
the same in his/her authorized capacity, and that by his/her signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal. (seal)
_________________________________
Notary public
G-3
<PAGE>
EXHIBIT H
TO LEASE
[FORM OF NOTICE OF PURCHASE]
________________, 19_______ (1)
Sumitomo Bank Leasing and Finance, Inc.
277 Park Avenue
New York, New York 10172
Attn: Chief Financial Officer
1. Reference is made to that certain Purchase and Master Lease
Agreement dated as of ________, 199_ (the "LEASE AGREEMENT"), among the lessors
referred to therein (the "LESSORS"), Novellus Systems, Inc., a California
corporation ("LESSEE"), and Sumitomo Bank Leasing and Finance, Inc., as Agent
for the Lessors ("AGENT"). Capitalized terms used herein but not otherwise
defined herein shall have the same meanings as those assigned to them in the
Lease Agreement.
2. Pursuant to Section 14(a) of the Lease Agreement, notice is
hereby given that Lessee elects to purchase [all] [certain] of the Property
currently leased pursuant to the terms of the Lease Agreement. Such purchase
shall be effected pursuant to the provisions of Section 14(d) of the Lease
Agreement.
3. [IF LESS THAN ALL OF THE PROPERTY:] The Apportioned Property to
be purchased is described as follows: [DESCRIBED APPORTIONED PROPERTY TO BE
PURCHASED].
4. The date on which the Property will be purchased is
_________________.
___________________
(1) 30 days' prior written notice
H-1
<PAGE>
IN WITNESS WHEREOF, Lessee has executed this Notice of Purchase on the
date set forth above.
NOVELLUS SYSTEMS, INC.,
a California corporation
By __________________________________
Name:
Title: Authorized Officer
H-2
<PAGE>
EXHIBIT I
TO LEASE
[FORM OF RENEWAL NOTICE]
_____________, 19_____ (1)
Sumitomo Bank Leasing and Finance, Inc.
277 Park Avenue
New York, New York 10172
Attn: Chief Financial Officer
Pursuant to Section 15(b) of the Purchase and Master Lease Agreement
dated as of ________, 199_ (the "LEASE AGREEMENT"; capitalized terms used
herein but not otherwise defined herein shall have the same meanings as those
assigned to them in the Lease Agreement) among the lessors referred to therein
(the "LESSORS"), Novellus Systems, Inc., a California corporation ("LESSEE"),
and Sumitomo Bank Leasing and Finance, Inc., as Agent for the Lessors ("AGENT")
Lessee hereby request Lessors to extend the Lease Term for an additional five
year period (the "RENEWAL TERM").
Except as specifically amended hereby, all terms, covenants and
conditions of the Lease Agreement shall remain in full force and effect.
Very truly yours,
NOVELLUS SYSTEMS, INC.,
a California corporation
By:__________________________________
Name:
Title:
_________________
(1) At least 75 days prior to the end of the Lease Term.
I-1
<PAGE>
EXHIBIT J
TO LEASE
[FORM OF SALE NOTICE]
_____________, 19_____ (1)
Sumitomo Bank Leasing and Finance, Inc.
277 Park Avenue
New York, New York 10172
Attn: Chief Financial Officer
1. Reference is made to that certain Purchase and Master Lease
Agreement dated as of ________, 199_ (the "LEASE AGREEMENT"), among the lessors
referred to therein (the "LESSORS"), Novellus Systems, Inc., a California
corporation ("LESSEE"), and Sumitomo Bank Leasing and Finance, Inc., as Agent
for the Lessors ("AGENT"). Capitalized terms used herein but not otherwise
defined herein shall have the same meanings as those assigned to them in the
Lease Agreement.
2. Pursuant to Section 14(b)(i) of the Lease Agreement, notice is
hereby given that Lessee shall terminate the lease of all of the Property at the
end of the [Initial Term/Renewal Term] by electing and thereafter consummating a
sale to third parties of all but not less than all of the Property as provided
in Section 14(b) of the Lease Agreement.
IN WITNESS WHEREOF, Lessee has executed this Sale Notice on the date
set forth above.
NOVELLUS SYSTEMS, INC.,
a California corporation
By:___________________________________
Name:
Title: Authorized Officer
_________________
(1) At least 180 days prior to the end of the Lease Term
J-1
<PAGE>
EXHIBIT K
TO LEASE
[Reserved]
K-1
<PAGE>
EXHIBIT M
TO LEASE
[Form of Signing Certificate]
SIGNING CERTIFICATE
Novellus Systems, Inc., a California corporation ("Lessee"), does hereby
certify to Sumitomo Bank Leasing and Finance, Inc., as Agent (the "Agent") for
certain Lessors under the Purchase and Master Lease Agreement (the "Lease"),
dated as of __________ , 199____ that the following persons are authorized to
execute and deliver to the Agent Closing Date Notices referenced in the Lease
and that any such Notices shall bind Lessee to the contents thereof and the
Agent may rely thereon without further inquiry of the Lessee as to the
authorization or capacity of such persons. Also set forth below is a sample of
the signatures of such persons.
Name Title Signature
_____________ _____________ __________________
IN WITNESS WHEREOF the Lessee has caused this Certificate to have been
duly executed by its duly authorized officer as of this ___ day of
_____________, 199___.
NOVELLUS SYSTEMS, INC.,
a California corporation
By:_______________________
Title: Authorized Officer
M-1
<PAGE>
EXHIBIT N
TO LEASE
CONTENTS OF PROPERTY INFORMATION PACKAGE
(1) TITLE MATTERS
(A) Legal description of the Land.
(B) Preliminary title report regarding the Land.
(C) Legible and reproducible copies of all recorded
documents relating to the Land.
(D) "As-built" survey of the Real Property prepared in
compliance ALTA/ASTM Specification _______________, and
dated not earlier than six (6) months prior to the date
of this Agreement.
(E) Certified search of UCC records at California Secretary
of State's office and certified copies of all filed
financing statements, amendment and releases relating
to Lessee, dated not earlier than one month prior to
the date of this Agreement.
(2) PROPERTY USE AND CONSTRUCTION ANALYSIS
(A) Evidence of
(i)compliance of the Improvements with all applicable
general and specific plans, zoning laws, conditional
use permits, variances, subdivision map or parcel map
conditions, building permit conditions, building code
requirements, the Americans With Disabilities Act;
(ii)compliance of the Land with the California
Subdivision Map Act;
(iii)whether the Real Property is located within a
special flood zone area as indicated on any Flood
Hazard Boundary Maps published by the Federal Emergency
Management Agency; and
(iv)whether the Real Property is located in an
earthquake fault zone (as defined in the California
Alquist-Priolo Earthquake Fault Zone Act), or in a
seismic hazard zone (as defined in California Public
Resources Code Section 2694).
(B) Copy of any Environmental Impact Report or Negative
Declaration pertaining to the Land.
(C) Evidence that all necessary approvals, licenses and
permits relating to the use and occupancy of the Real
Property are
N-1
<PAGE>
in full force and effect and copies thereof.
(D) Site plan and soils report.
(E) Copy of Plans and Specifications for the Improvements.
(F) Structural engineer's report with respect to Plans and
Specifications.
(G) A report of the physical condition of the Land and the
Improvements.
(H) The Environmental Audit.
(I) If any portion of the Property is leased or rented to
third parties or Affiliates: a rent roll, copies of all
existing leases and an estoppel certificate from each
tenant thereunder in form satisfactory to Lessor
(J) Copy of any management agreements for the Real
Property.
N-2
<PAGE>
EXHIBIT O
TO LEASE
FORM OF DEED
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
MORGAN, LEWIS & BOCKIUS LLP
801 South Grand Avenue
Twenty-Second Floor
Los Angeles, California 90017
Attention: John M. DeMarco, Esq.
MAIL TAX STATEMENTS TO:
Novellus Systems, Inc.
3950 North First Street
San Jose, California 95125
Attention: ___________________
Documentary Transfer Tax is not of public record and is shown on a separate
sheet attached to this deed.
- --------------------------------------------------------------------------------
GRANT DEED
FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
CALIFORNIA SECOND, LTD., a Florida limited partnership, hereby grants to
SUMITOMO BANK LEASING AND FINANCE, INC., as agent, the real property located in
the City of San Jose, County of Santa Clara, State of California, described on
EXHIBIT A attached hereto and made a part hereof.
This Deed is made and subject to the matters listed on EXHIBIT B
attached hereto and made a part hereof.
Executed as of this ______ day of ______________, 1996.
CALIFORNIA SECOND, LTD., a Florida limited partnership
By: McCandless Partnership, a California general
partnership, as its General Partner
By:________________________________
Birk S. McCandless, as Trustee under the Birk
S. McCandless and Mary McCandless Inter Vivos
Trust Agreement dated February 7, 1982, as a
General Partner
MAIL TAX STATEMENTS AS DIRECTED ABOVE
O-1
<PAGE>
EXHIBIT A TO GRANT DEED
Legal Description
O-2
<PAGE>
EXHIBIT B TO GRANT DEED
O-3
<PAGE>
State of California
County of ___________________
On ___________________, 1996, before me, _______________________, personally
appeared _______________________, personally known to me (or proved to me on the
basis of satisfactory evidence) to the person whose name is subscribed to the
within instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the person, or
the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Signature: ___________________________ (Seal)
Notary Public
O-4
<PAGE>
____________________ 1996
Santa Clara County Recorder
County Government Center
70 West Hedding Street, East Wing
San Jose, California 95110
Re: Request That Statement of
Documentary Transfer Tax Not be
Recorded
-------------------------------
Dear Sir or Madam:
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 in the deed.
The attached deed names CALIFORNIA SECOND, LTD., a Florida limited
partnership, as grantor, and SUMITOMO BANK LEASING AND FINANCE, INC., as agent,
as grantee.
The Property being transferred and described in the attached deed is
located in the City of San Jose, County of Santa Clara, State of California.
The amount of Documentary Transfer Tax due on the attached deed is
$____________ computed on full value of the property conveyed.
CALIFORNIA SECOND, LTD., a Florida limited partnership
By: McCandless Partnership, a California general
partnership, as its General Partner
By:________________________________
Birk S. McCandless, as Trustee under the Birk
S. McCandless and Mary McCandless Inter Vivos
Trust Agreement dated February 7, 1982, as a
General Partner
O-5
<PAGE>
EXHIBIT P
TO LEASE
FORM OF DEED OF TRUST
Recording requested by:
When recorded, mail to:
MORGAN, LEWIS & BOCKIUS LLP
801 South Grand Avenue
Twenty-Second Floor
Los Angeles, California 90017
Attn: John M. DeMarco, Esq.
DEED OF TRUST AND ASSIGNMENT OF RENTS
THIS DEED OF TRUST AND ASSIGNMENT OF RENTS, dated as of _________________,
199__ (this "Deed of Trust"), between SUMITOMO BANK LEASING AND FINANCE, INC.,
as the beneficiary (the "Beneficiary") as agent for the "Lessors" as defined
below, having address at 277 Park Avenue, New York, New York 10172 and NOVELLUS
SYSTEMS, INC., a California corporation, as the trustor (the "Trustor"), having
an address at 3950 First Street, San Jose, California 95125, and First American
Title Insurance Company, a California corporation, as trustee ("Trustee"), is
made, executed and delivered with reference to the following recitals of fact:
WHEREAS, the Beneficiary is the owner in fee simple of the land described
on Exhibit "A" hereto (the "Land") and the improvements, buildings and other
structures now or hereafter located thereon (collective, the "Improvements"; the
Land and the Improvements being collectively called the "Property");
WHEREAS, the Beneficiary has leased the Property to the Trustor pursuant to
that certain Purchase and Master Lease Agreement dated as of __________________,
1996 between Beneficiary as Agent for certain lessors named therein, and as the
same may change from time to time (the "Lessors") and Trustor as "Lessee" (the
"Lease"); and
WHEREAS, the Trustor desires to encumber the Property, and all of Trustor's
right, title and interest therein, to Beneficiary, to secure, among other
things, Trustor's obligations to Beneficiary under the Lease.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS; INTERPRETATION. For purposes of this Deed of
Trust, capitalized terms used herein and not
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<PAGE>
otherwise defined herein shall have the respective meanings ascribed to in the
Lease (as the same may be amended, restated, supplemented or otherwise modified
from time to time), and the rules of interpretation set forth in the Lease shall
apply to this Deed of Trust.
SECTION 2. THE PROPERTY. Attached hereto as Exhibit "A" is description of
the Land.
SECTION 3. OWNERSHIP OF THE PROPERTY; CONVEYANCE OF DEED OF TRUST LIEN AND
GRANT OF SECURITY AGREEMENT; REMEDIES. (a) It is intent of the parties hereto
that for financial accounting uses the Lease constitutes an "operating lease"
pursuant to Statement of Financial Accounting Standards No. 13, as amended, and
that for purposes of commercial, real estate, bankruptcy and federal, state and
local income tax law, the transaction contemplated by the Lease and hereby is a
financing arrangement and preserves ownership of the Property in the Trustor.
(b) It is the intent of the parties hereto that (i) the obligations of the
Trustor under the Lease to pay Base Rent, Additional Rent, and the Aggregate
Lease Investment Balance in connection with the purchase of the Property
pursuant to the Lease shall be treated as payments of interest on and principal
of, respectively, loans from the Beneficiary to the Trustor, and (ii) the Lease
grants to the Beneficiary a security interest in and lien upon, and hereby
grants to the Trustee, in trust, with power of sale, the portions of the
Property which constitute interests in real property, and a security interest
and lien on the portions of the Property which do not constitute interests in
real property, in each case to secure the Trustor's performance hereunder, and
under and payment of all amounts under the Lease and the other Lease Documents.
(c) Specifically, without limiting the generality of SUBSECTION (b), the
Beneficiary and the Trustor intend and agree that with respect to the nature of
the transactions evidenced by the Lease in the context of the exercise of
remedies under the Lease Documents, including, without limitation, in the case
of any insolvency or receivership proceedings or a petition under the United
States bankruptcy laws or any other applicable insolvency laws or statute of the
United States of America or any State or Commonwealth thereof affecting the
Trustor and the Beneficiary, or any enforcement or collection actions, the
transactions evidenced by the Lease are loans made by the Beneficiary as
unrelated third party lender to the Trustor secured by the Property (it being
understood that the Trustor hereby mortgages, grants, bargains, sells, releases,
confirms, conveys, assigns, transfers and sets over to the Beneficiary, and
grants a security interest in, the Property which is not real property, and
Trustor hereby grants to Trustee, in trust with power of sale, all right title
and interest of the Trustor in and to the Property that constitutes real
property (consisting of a fee deed of trust with respect to all right, title and
interest of the Trustor in and to the fee title to, and reversionary
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<PAGE>
interest in, the Land and Improvements) and a leasehold deed of trust on the
Trustor's leasehold estate under the Lease, all to secure such loans, effective
on the date hereof, to have and to hold such interests in the Property unto the
Beneficiary and its successors and assigns, forever.
(d) As additional security for the Base Rent, Additional Rent and the
Aggregate Lease Investment Balance and all other sums owed to the Beneficiary by
the Trustor under the Lease, the Trustor does hereby grant, bargain, sell,
transfer and convey unto Trustee, in trust with power of sale, all of the
Trustor's right, title interest in and to the Property and the Fixtures,
including, without limitation, all buildings, structures and other improvements,
and all fixtures and other property now or hereafter attached to or affixed to
any such buildings, structures or other improvements, and any additions and
alterations thereto or replacements thereof, now or hereafter built, constructed
or located upon the Property, and immediately, irrevocably and absolutely, all
rents, additional rents, issues, income, revenues, distributions, royalties and
profits now or in the future payable in respect of the Property, together with
all of the right, power and authority of the Trustor to alter, modify or change
the terms, conditions and provisions of the Lease and any other lease pertaining
to the Property, to consent to any request made by a tenant or landlord pursuant
thereto, or to surrender, cancel or terminate the same or to accept any
surrender, cancellation or termination of the same, together with all of the
options, rights, powers and privileges of the Trustor under any lease or
sublease pertaining to the Property, whether heretofore or hereafter existing,
including, without limitation, the rights and options to purchase the Property
contained in the Lease, and all present and future right, title and interest of
the Trustor in and to (i) all refunds, tax abatement agreements, rebates,
reserves, deferred payments, deposits, cost savings, awards and payments of any
kind due from or payable by (a) any Governmental Authority, or (b) any insurance
or utility company, in each case under clause (a) or (b) above in respect of the
Property, and (ii) all refunds, rebates and payments of any kind due from or
payable by any Governmental Authority for any taxes, assessments, or
governmental or quasi-governmental charges or levies imposed upon the Trustor in
respect of the Property, and all plans and specifications, designs, drawings and
other information, materials and matters heretofore or hereafter prepared
relating to the Property or any construction on the Property, all proceeds
(including claims and demands therefor) of the conversion, voluntary or
involuntary, of any of the foregoing into cash or liquidated claims, including
without limitations the proceeds of insurance and condemnation awards in respect
of the Property or any portion thereof, all additional estates, rights and
interests hereafter acquired by the Trustor in the Property, or any portion
thereof, together with all proceeds of the conversion, whether voluntary or
involuntary, of any of the Property into cash or other liquid claims, including
without limitation, all awards, payments or proceeds, including interest
thereof, and the right to receive the same, which may be made as
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<PAGE>
a result of any casualty, any exercise of the right of eminent domain or deed in
lieu thereof, any injury to the Property and any defect in title in the Property
or other matter insured under any policy of title insurance, together with
attorney's fees, costs and disbursements incurred by the Beneficiary in
connection with the collection of such awards, payments and proceeds, and the
Trustor further grants to the Beneficiary, pursuant to the California Uniform
Commercial Code (the "UCC"), a security interest in all present and future
right, title and interest of the Trustor in and to any portion of the foregoing
property for which a security interest may be created under the UCC.
(d) Specifically, but without limiting the generality of SUBSECTION (b),
the Beneficiary and the Trustor further intend and agree that, with respect to
that portion of the Property constituting personal property, for the purpose of
securing the Trustor's obligations for the repayment of the above-described
obligations from the Trustor to the Beneficiary, (i) the Lease shall also be
deemed to be a security agreement and financing statement within the meaning of
Article 9 of the UCC; (ii) the conveyance provided for hereby shall be deemed to
be a grant by the Trustor to the Beneficiary of a lien and security interest in
all of the Trustor's present and future right, title and interest in and to such
portion of the Property, including but not limited to the Trustor's leasehold
estate therein and all proceeds of the conversion, voluntary or involuntary, of
the foregoing into cash, investments, securities or other property, whether in
the form of cash, investments, securities or other property to secure such
obligations, effective on the date hereof, to have and to hold such interests in
the Property unto the Beneficiary and its successors and assigns, forever,
provided always that these presents are upon the express condition that, if all
amounts due under the Lease shall have been paid and satisfied in full, then, as
to such personal property, this instrument and the estate hereby granted shall
cease; (iii) the possession by the Beneficiary of notes and such other items of
property as constitute instruments, money, negotiable documents or chattel paper
shall be deemed to be "possession by the secured party" for purposes of
perfecting the security interest pursuant to Section 9-305 of the UCC; and (iv)
notifications to Persons holding such personal property, and acknowledgments,
receipts or confirmations from financial intermediaries, bankers or agents (as
applicable) of the Trustor shall be deemed to have been given for the purpose of
perfecting such security interest under Applicable Law. The Beneficiary and the
Trustor shall, to the extent consistent with this Deed of Trust, take such
actions and execute, deliver, file and record such other documents, financing
statements, mortgages and deeds of trust as may be necessary to ensure that, if
the Lease were deemed to create a security interest in the Property, such
security interest would be deemed to be a perfected security interest with
priority over all Liens other than Permitted Liens, under Applicable Law and
will be maintained as such throughout the Lease Term.
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<PAGE>
TO HAVE AND TO HOLD the same whether now owned or held or hereafter
acquired unto the Trustee, forever, in trust, however, to secure to the
Beneficiary the payment of the Base Rent, Additional Rent, the Aggregate Lease
Investment Balance and all other sums owing to the Beneficiary under the Lease
and the performance and observance of the terms, covenants, warranties,
conditions, agreements and obligations under the Lease. If the Trustor shall
pay all sums due under the Lease when due according to the terms thereof and
shall otherwise fully and properly perform and comply with all of the
obligations, agreements, terms and conditions of the Lease, then Beneficiary
shall instruct the Trustee to reconvey this Deed of Trust to the party entitled
thereto, without representation or warranty.
Upon the occurrence of any Event of Default, the Beneficiary may, in
addition to any other remedies set forth in the Lease or the other Lease
Documents, exercise any one or more of the following rights and remedies as it,
in its sole discretion, may deem necessary or appropriate:
(1) collect the Aggregate Lease Investment Balance, together
with all unpaid Base Rent, Additional Base Rent and Additional Rent, all at the
Overdue Rate;
(2) either in person or by agent, with or without bringing any
action or proceeding, or by a receiver appointed by a court, and without regard
to the adequacy of security, enter upon and take possession of the Property, or
any part thereof, in its own name or in the name of Trustor, and do any acts
which it deems necessary or desirable to preserve the value, marketability or
rentability of the Property, or any part thereof or interest therein, to
increase the income therefrom or to protect the security hereof and, with or
without taking possession of the Property, to sue for or otherwise to collect
the rents, issues and profits thereof, including, without limitation, those past
due and unpaid, and to apply the same, less costs and expenses of operation and
collection, including, without limitation, attorneys' fees, upon any obligations
secured hereby, all in such order as the Beneficiary may determine. The
entering upon and taking possession of the Property, and the collection of such
rents, issues and profits and the application thereof as aforesaid, shall not
cure or waive any Event of Default or notice of default hereunder or invalidate
any act done in response to such Event of Default or pursuant to such notice of
default and, notwithstanding the continuance in possession of the Beneficiary or
the collection, receipt and application of rents, issues or profits by the
Beneficiary, Trustee or the Beneficiary shall be entitled to exercise every
right provided for in any of the Lease Documents or by law upon occurrence of
any Event of Default, including, without limitation, the right to exercise the
power of sale;
(3) should the Event of Default include the failure of Trustor
to perform any of Trustor's obligations under the Lease Documents, including,
without limitation, the
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<PAGE>
obligation to pay any amount due to any person, corporation, partnership or
other entity or any governmental agency when required, either the Beneficiary or
Trustee may, but shall not be obligated to, perform the same without notice to
or demand upon Trustor, without regard to the adequacy of its security and
without prejudice to its right to declare a default hereunder. Any amounts so
paid and all costs and expenses incurred by the Beneficiary or Trustee in
connection with such payment or performance, including, without limitation,
attorneys' fees, and any other amounts for which Trustor is specifically
obligated to reimburse the Beneficiary or Trustee, or which Trustee or the
Beneficiary is authorized to advance, pursuant to provisions hereof, shall be
payable by Trustor to the Beneficiary or Trustee on demand with interest at the
Overdue Rate from the date paid by the Beneficiary or Trustee, and shall be
secured by this Lease. The payment by the Beneficiary or Trustee of any tax,
assessment or governmental charge for which no receipt is provided by Trustor as
required hereunder, or any lien or encumbrance which the Beneficiary believes
has not been paid, shall be conclusive between the parties as to the legality
and amount of the payment. The Beneficiary or Trustee, as the case may be,
shall be subrogated to all rights, equities and liens discharged by any such
expenditure;
(4) exercise the power of sale described above;
(5) in lieu of sale pursuant to the power of sale conferred
hereby, foreclose upon the lien created herein and hereby in the manner provided
by law for the foreclosure of mortgages on real property, except that nothing
herein shall preclude the commencement of such an action prior to the
consummation of the Trustee's sale of the Property under said power of sale;
(6) declare immediately due and payable without notice or
demand, all monies advanced under the Lease Documents which are then unpaid,
with all interest and sums accrued, and all other obligations of Trustor to
Beneficiary, and accelerate payment thereof notwithstanding contrary terms of
payment stated therein, and exercise all rights and remedies available under any
Lease Document, at law, in equity or otherwise;
(7) as a matter of right, and without notice to Trustor or
anyone claiming under Trustor and without regard to the adequacy of its security
or the then value of the Property or the interest of Trustor therein, apply to
any court having jurisdiction to appoint a receiver or receivers of the Property
and Trustor hereby irrevocably consents to such appointment and waives notice of
any application therefor. Any such receiver or receivers shall have all the
usual powers and duties of receivers in like or similar cases and all the powers
of the Beneficiary provided for hereinabove, and shall continue as a receiver
and exercise all such powers until the date of confirmation of sale of the
Property unless such receivership is sooner terminated by the Beneficiary in its
sole discretion.
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<PAGE>
Trustee and the Beneficiary shall be entitled to enforce payment and
performance of any obligations secured hereby and to exercise all rights and
powers under any Lease Document or any laws now or hereafter in force,
notwithstanding that some or all of said obligations secured hereby may now or
hereafter be otherwise secured, whether by mortgage, deed of trust, pledge,
lien, assignment or otherwise. Neither the acceptance of this Lease nor the
enforcement of any remedy hereunder, whether by court action or pursuant to the
power of sale or other powers herein contained, shall prejudice or in any manner
affect Trustee's or the Beneficiary's right to realize upon or enforce any other
security interests now or hereafter held by Trustee or the Beneficiary, it being
agreed that Trustee and the Beneficiary, and each of them, shall be entitled to
enforce this Lease and any other security interests now or hereafter held by the
Beneficiary or Trustee in such order and manner as they or either of them may in
their absolute discretion determine. No remedy conferred upon or reserved to
Trustee or the Beneficiary by this Lease or any other Lease Document is intended
to be exclusive of any other remedy, but each shall be cumulative and shall be
in addition to every other remedy given by this Lease or any other Lease
Document or now or hereafter existing at law or in equity or by statute. Every
power or remedy given by any of the Lease Documents to Trustee or the
Beneficiary or to which either of them may be otherwise entitled, may be
exercised, concurrently or independently, from time to time and as often as may
be deemed expedient by Trustee or the Beneficiary, and either or both of them
may pursue inconsistent remedies.
SECTION 4. GOVERNING LAW. THIS DEED OF TRUST SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
SECTION 5. COUNTERPART EXECUTION. This Deed of Trust may be executed in
any number of counterparts and by each of the parties hereto in separate
counterparts, all such counterparts together constituting but one and the same
instrument.
SECTION 6. FUTURE ADVANCES; REVOLVING CREDIT. In the event a court of
competent jurisdiction rules that the Lease constitutes a mortgage, deed of
trust or other secured financing, then this instrument will be deemed given to
secure not only existing financing, but also future advances made pursuant to or
as provided in the Lease, whether such advances are obligatory or to be made at
the option of the Beneficiary, or otherwise, to the same extent as if such
future advances were made on the date of execution of this instrument, although
there may be no advance made at the time of execution hereof, and although there
may be no financing outstanding at the time any advance is made. To the fullest
extent permitted by law, the lien of this instrument shall be valid as to all
such amounts, including all future advances, from the time this instrument is
recorded. Notwithstanding anything in this instrument to the contrary, although
the amount of the financing secured by this instrument
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<PAGE>
may increase or decrease from time to time, the maximum principal amount of the
financing secured by this instrument at any one time shall not exceed
Thirty-Three Million Dollars ($33,000,000), which amount shall be payable as
set forth in the Lease, plus all costs of enforcement and collection of this
instrument, the Lease and the other Lease Documents, plus the total amount of
any advances made pursuant thereto to protect the collateral and the security
interest and lien created hereby, together with interest and other sums accruing
on all of the foregoing as provided in the Lease Documents.
IN WITNESS WHEREOF, the undersigned Trustor has caused this Deed of Trust
to be duly executed by an officer thereunto duly authorized as of the date and
year first above written.
NOVELLUS SYSTEMS, INC.,
a California corporation
as the Trustor
By:__________________________
Name:
Title:
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<PAGE>
Exhibit "A" to Deed of Trust
LEGAL DESCRIPTION
P-9
<PAGE>
STATE OF ______________ )
) ss.
COUNTY OF _____________ )
On ________________, 19__, before me, a notary public, personally
appeared _______________________________, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that ___he executed
the same in his/her authorized capacity, and that by his/her signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal. (seal)
_________________________________
Notary public
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<PAGE>
EXHIBIT Q
TO LEASE
FORM OF ASSIGNMENT
OF IMPROVED REAL PROPERTY
PURCHASE AND SALE AGREEMENT
ASSIGNMENT
OF
OF IMPROVED REAL PROPERTY
PURCHASE AND SALE AGREEMENT
THIS ASSIGNMENT is made as of _________________, 1996, by and between
NOVELLUS SYSTEMS, INC., a California corporation ("Assignor"), and SUMITOMO BANK
LEASING AND FINANCE, INC., as agent for the Lessors ("Assignee").
A. Assignor (as lessee) and Assignee (as lessor) have concurrently
herewith entered into the Purchase and Master Lease Agreement (the "Lease").
B. Assignor has agreed to assign Assignor's rights under the Purchase
Agreement to Assignee, and Assignee has agreed to accept the assignment of
Assignee's entire interest in the Purchase Agreement.
C. The undersigned Seller has consented to the assignment of the Purchase
Agreement to Assignee, and acknowledges that Assignee shall have all of the
rights of Assignor under the Purchase Agreement.
IN CONSIDERATION OF the mutual covenants and conditions set forth
hereinbelow, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Assignor and Assignee (together,
the "Parties" and each sometimes a "Party") do hereby act and agree as follows:
1. ASSIGNMENT OF PURCHASE AGREEMENT. Assignor hereby sells, assigns,
sets over and transfers to Assignee, all of Assignor's right, title and interest
as the Purchaser under, in and to the Real Property Purchase Agreement dated
January 19, 1996 between CALIFORNIA SECOND, LTD., a Florida limited partnership
("Seller"), and Assignor (the "Purchase Agreement").
2. WARRANTIES AND REPRESENTATIONS. Assignor hereby warrants and
represents to Assignee that:
(a) Assignor has made no other assignment, pledge, hypothecation
or other transfer of any of its rights, title and interest as the Purchaser
under the Purchase Agreement.
(b) Assignor is fully empowered and duly authorized to make the
assignment set forth herein and such
Q-1
<PAGE>
assignment does not breach or conflict with any of the articles of
incorporation, bylaws, resolutions, agreements, indentures, judgments,
orders or decrees to which Assignor is a party or otherwise subject.
(c) Assignor is not in default of any of its obligations under
the Purchase Agreement and no event or condition exists which, by notice or
passage of time, will become such a default.
3. INDEMNIFICATION. Assignor shall hold harmless, indemnify and
defend Assignee against any claim, liability, loss or damages, and all expenses
related thereto, which such Assignee incurs by reason of any of Assignor's
warranties and representations herein proving to be untrue in any material
respect.
4. ASSIGNMENT OF DEPOSIT. Assignor represents and warrants to
Assignee that (a) pursuant to paragraph 4.1 of the Purchase Agreement, Assignor
has deposited $500,000 (together, with interest earned in escrow, the "Deposit")
with First American Title Company, a California corporation, as escrow holder;
and (b) the Deposit is to be applied to payment of the purchase price under the
Purchase Agreement at the Closing (as defined in the Purchase Agreement) or, if
the Purchaser in breach of its obligations under the Purchase Agreement fails to
close, the Deposit is due to the Seller as liquidated damages for such default.
Assignor hereby assigns to Assignee all of its rights to and interest in the
Deposit.
5. DEFINITIONS. Terms defined in any other part of this Assignment
shall have the defined meanings wherever capitalized herein. Capitalized terms
not otherwise defined in this Assignment shall have the meaning ascribed to them
in the Lease. As used in this Assignment, the terms "herein," "hereof" and
"hereunder" refer to this Assignment in its entirety and are not limited to any
specific sections; and the term "person" means any natural person, other legal
entity or combination of natural persons and/or other legal entities. Wherever
appropriate in this Assignment, the singular shall be deemed to refer to the
plural and the plural to the singular, and pronouns of certain genders shall be
deemed to comprehend either or both of the other genders.
6. CAPTIONS. Paragraph headings used herein are for convenience of
reference only and shall not affect the construction of any provision of this
Assignment.
7. COUNTERPARTS. This Assignment, and any amendment hereto, may be
executed in any number of counterparts and by each Party on separate
counterparts, each of which when so executed and delivered shall be deemed an
original and all of which taken together shall constitute but one and the same
instrument.
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<PAGE>
8. GOVERNING LAW. This Assignment shall be deemed to be an agreement
made under the laws of the State of California and for all purposes shall be
governed by and construed in accordance with such laws.
9. NOTICE OF ASSIGNMENT. A copy of this Assignment shall be
sufficient notice to all persons of the assignments contained herein and may be
relied upon by any third party.
IN WITNESS WHEREOF, the Parties have each caused this Assignment to be
duly executed and delivered, by their representative(s) authorized thereunto, as
of the date first above-written.
ASSIGNOR:
NOVELLUS SYSTEMS, INC.,
a California corporation
By:___________________________
Title:
ASSIGNEE:
SUMITOMO BANK LEASING AND FINANCE, INC.
By:______________________________
Title:
THE UNDERSIGNED SELLER CONSENTS AND AGREES TO THE FOREGOING.
CALIFORNIA SECOND, LTD., a Florida limited partnership
By: McCandless Partnership, a California general partnership, as its General
Partner
By:________________________________
Birk S. McCandless, as
Trustee under the Birk S.
McCandless and Mary McCandless
Inter Vivos Trust Agreement dated
February 7, 1982, as a General Partner
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<PAGE>
EXHIBIT R
TO LEASE
HAZARDOUS MATERIALS
PERMITTED BY LESSOR
[To be completed]
R-1
<PAGE>
EXHIBIT S
TO LEASE
COLLATERALIZATION
TRIGGERING EVENTS
1. Lessee's Quick Ratio equals or becomes less than 2.5.
2. Lessee's Tangible Net Worth equals or becomes less than the sum of (a)
$249,600,000 plus (ii) the sum of 80% of total reported consolidated net
income of the Lessee on a consolidated basis for each fiscal quarter during
the period from December 31, 1995 through the end of the fiscal quarter
most recently ended. The calculations required by the preceding sentence
shall be determined in accordance with GAAP without deduction for any
losses.
3. Lessee's Debt divided by Tangible Net Worth equals or becomes greater than
0.35.
4. Lessee fails to maintain on a consolidated basis a positive net income
before taxes and extraordinary items, and a positive net income after taxes
and extraordinary items, for each fiscal quarter.
5. Lessee fails to maintain unencumbered cash and marketable securities in an
aggregate amount not less than $56,000,000.
S-1
<PAGE>
EXHIBIT T
TO LEASE
FORM OF MASTER
RENT PURCHASE AGREEMENT
[To be inserted]
T-1
<PAGE>
MASTER
RENT PURCHASE AGREEMENT
Master Rent Purchase Agreement, dated ____________, 1996 (the
"Agreement") between SUMITOMO BANK LEASING AND FINANCE, INC. (the "Seller") and
___________________________ (the "Purchaser").
WHEREAS, Seller as "Lessor" has entered into a Purchase and Master
Lease Agreement, dated as of _________, 1996 (the "Lease"), with Novellus
Systems, Inc. (the "Lessee");
WHEREAS, capitalized terms used herein and not otherwise defined
herein shall have the meanings set forth in the Lease;
WHEREAS, pursuant to the Lease (i) Seller has agreed to purchase one
or more parcels of Land and one or more Improvements on the Land and to lease
such Land and such Improvements to Lessee and (ii) Lessee has agreed to lease
such Land and such Improvements from Seller; and
WHEREAS, the Seller desires to sell certain interests in the rents and
certain other proceeds received under the Lease, and the Purchaser is willing to
purchase such interests under the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged and confessed, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
meanings set forth in this Section 1:
"Acquisition Price" for a Funding with respect to a Property shall
mean an amount equal to the Applicable Percentage of the Property Cost of the
Property being purchased on the related Closing Date.
"Applicable Percentage" with respect to a Property shall have the
meaning set forth in the Supplement hereto for such Property.
"Base Rent Interest" with respect to a Property means the Seller's
right to receive, in the order of priority set forth in Section 3 hereof, the
sum of (A) so much of (x) each installment of Base Rent with respect to such
Property payable by
<PAGE>
the Lessee under the Lease that does not exceed (1) the aggregate of all
Acquisition Prices paid by Purchaser with respect to such Property, times (2)
the LIBOR Rate plus the number of basis points set forth in the related
Supplement (or, to the extent Section 7(a)(y)(I) of the Lease is applicable,
the Base Rate) times (3) a fraction, the numerator of which is the number of
days elapsed in the period for which such Base Rent was paid and the denominator
of which is 360 plus (y) the same portion of each payment of interest paid by
Lessee at the Overdue Rate on Base Rent with respect to such Property plus (B)
so much of (x) each installment of Additional Base Rent with respect to such
Property payable by Lessee under the Lease that does not exceed the Applicable
Percentage thereof plus (y) the same portion of each payment of interest paid by
Lessee at the Overdue Rate on Additional Base Rent with respect to such
Property.
"Default Amounts" with respect to a Property shall mean all amounts
received by Seller in respect of such Property as a result of the exercise of
remedies under Section 21 of the Lease or otherwise during the continuance of an
Event of Default under the Lease.
"Default Interest" with respect to a Property means the Seller's
right to receive, in the order of priority set forth in Section 3 hereof, so
much of the Default Amounts with respect to such Property as does not exceed
the sum of (A) the aggregate amount of the accrued and unpaid Base Rent
Interests with respect to such Property, (B) the Purchase Price Interests
with respect to such Property and (C) interest on the amounts included in
clause (A) and (B) at the Overdue Rate from the date due under the Lease to
the date of payment.
"Interests" with respect to a Property means the Base Rent Interest,
the Default Interest, the Purchase Price Interest and the Termination Option
Interest with respects to such Property.
"Other Base Rent Interests" with respect to a Property means the
rights to receive amounts with respect to such Property, comparable to the Base
Rent Interest, which have been sold by the Seller pursuant to Other Rent
Purchase Agreements.
"Other Default Interests" with respect to a Property means the
rights to receive amounts, comparable to the Default Interest with respect to
such Property, which have been sold by the Seller pursuant to Other Rent
Purchase Agreements.
"Other Interests" with respect to a Property means the Other Base Rent
Interests, the Other Default Interests, the Other Termination Option Interests
and the rights of the Other Purchasers under Section 3.2.7 hereof and any
similar section in
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<PAGE>
any Other Rent Purchase Agreements, all with respect to such Property.
"Other Purchase Price Interests" with respect to a Property (or, in
the case of a payment pursuant to Section 17(c) of the lease, an item of
Property) means the rights to receive amounts with respect to such Property
(or item), comparable to the Purchase Price Interest, which have been sold by
the Seller pursuant to Other Rent Purchase Agreements.
"Other Rent Purchase Agreements" shall mean one or more Master Rent
Purchase Agreements substantially in the form of this Agreement, providing for
the sale of interests (other than the Interests) in the payments due under the
Lease as provided for herein.
"Other Termination Option Interests" with respect to a Property means
the rights to receive amounts with respect to such Property comparable to the
Termination Option Interest, which have been sold by the Seller pursuant to
Other Rent Purchase Agreements.
"Property" means one of more parcels of Land and/or one or more
Improvements, plus related Fixtures and Personal Property, described in a single
Lease Supplement or, if the context indicates otherwise, described in all Lease
Supplements.
"Purchase Price Interest" with respect to a Property (or, in the case
of a payment pursuant to Section 17(c) of the Lease, an item of Property) means
the Seller's right to receive, in the order of priority set forth in Section 3
hereof, so much of (x) the Lease Investment Balance with respect to such
Property (or item) payable by the Lessee to Landlord pursuant to an election
under Section 14(a) of the Lease, or pursuant to Section 17(c) of the Lease,
that does not exceed the Applicable Percentage of the Guaranteed Residual Value
with respect to such Property (or item) plus (y) the same portion of each
payment of interest paid by Lessee at the Overdue Rate on the amounts described
in the preceding clause (x).
"Retained Base Rent Interest" means all rights to receive and retain,
in the order of priority set forth in Section 3 hereof, so much of the Base Rent
and interest due, thereon at the Overdue Rate payable by the Lessee under the
Lease that exceeds the Base Rent Interest and the Other Base Rent Interests.
"Retained Default Interest" means the right to receive, in the order
of priority set forth in Section 3 hereof, so much of the Default Amounts as
shall exceed the Default Interest and the Other Default Interests.
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"Retained Interests" means the Retained Base Rent Interest, the
Retained Default Interest, the Retained Purchase Price Interest and the Retained
Termination Option Interest.
"Retained Purchase Price Interest" means all rights to receive and
retain, in the order of priority set forth in Section 3 hereof, so much of
the Lease Investment Balance payable by the Lessee under the Section 14(a) or
17(c) of the Lease that exceeds the Purchase Price Interest and the Other
Purchase Price Interests.
"Retained Residual Interests" means all of the Seller's rights,
title and interest in and to the Lease that are not included in the Interests,
the Other Interests or the Retained Interests, including, without limitation,
the rights of Seller under Section 12 and 13 of the Lease and all costs and
expenses (including counsel fees) incurred by Seller in connection with an Event
of Default.
"Retained Termination Option Interest" means all rights to receive and
retain, in the order of priority set forth in Section 3 hereof, so much of the
Termination Amount that exceeds the Termination Option Interest and the Other
Termination Option Interests.
"Security" means the Collateral and the "Collateral" as defined in the
Security Agreement.
"Termination Amount" with respect to a Property means the amount
payable by Lessee under the Lease upon exercise of the Termination Option, being
either the Proceeds with respect to such Property or amounts paid by the Lessee
under the Lease pursuant to Sections 14(c)(iii)(y)(A) and 14(c)(iii)(z), or
Section 14(d), of the Lease with respect to such Property.
"Termination Option Interest" with respect to a Property means the
Seller's right to receive with respect to such Property, in the order of
priority set forth in Section 3 hereof, so much of (x) the Termination Amount
that does not exceed the Applicable Percentage of the Guaranteed Residual Value
for such Property plus (y) the same portion of each payment of interest paid by
Lessee at the Overdue Rate on the Termination Amount with respect to such
Property.
SECTION 2. PURCHASE AND SALE OF INTERESTS
2.1. AGREEMENT TO PURCHASE AND SELL
Subject to the satisfaction or waiver by the Purchaser of the
conditions set forth in Section 2.2, the Purchaser agrees hereby to purchase
the Interests with respect to each Property by
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paying the Acquisition Price for each Funding for such Property on the terms and
conditions set forth herein; PROVIDED, HOWEVER, that in no event shall the
aggregate of the Acquisition Prices for all Properties exceed $______________.
Subject to the payment of the Acquisition Prices, Seller does hereby
ABSOLUTELY SELL, ASSIGN, TRANSFER and CONVEY unto the Purchaser all Seller's
right, title and interest in and to the Interests with respect to each Property;
provided that this sale is without recourse to Seller (except to the extent of
the representations expressly set forth herein).
The sale of the Interests herein is a presently effective, absolute
and unconditional assignment and transfer of the Interests.
As a further inducement to the Purchaser, Seller covenants and agrees
not to assert any claim or cause of action against the Purchaser or seek to
recover the Interests on the grounds that this Agreement is a collateral
assignment or is given as security for indebtedness rather than as an absolute
present assignment.
2.2. CONDITIONS PRECEDENT TO SALE
The obligations of the Purchaser to purchase the Interests with
respect to a Property on a Closing Date and the Seller to sell the Interests
with respect to such Property on such Closing Date are subject to the prior
fulfillment to the satisfaction of, or the waiver by, the Seller and the
Purchaser, of the following conditions precedent:
(i) this Agreement and the Lease Documents with respect to such
Property shall have been duly authorized, executed and delivered by the
respective party or parties thereto, and executed counterparts or certified
copies thereof shall have been delivered to the Purchaser.
(ii) The Purchaser shall have received from the Seller copies of the
following, in each case in form and substance satisfactory to it:
(1) a copy of the charter documents and by-laws of Lessee and
of resolutions of the board of directors of Lessee (or other evidence of
authorization), certified by the Secretary or an Assistant Secretary of Lessee,
duly authorizing the lease by Lessee of such Property under the Lease and the
execution, delivery and performance by Lessee of the Lease Documents; and
(2) an incumbency certificate of Lessee regarding the persons
who executed the Lease Documents with respect to such Property on behalf of
Lessee.
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(iii) No action or proceeding shall have been instituted nor shall
governmental action be threatened before any court or governmental agency, nor
shall any order, judgment or decree have been issued or proposed to be issued by
any court or governmental agency to set aside, restrain, enjoin or prevent the
completion and consummation of this Agreement or the transactions contemplated
hereby.
(iv) The Purchaser shall have received the notice referred to in
Section 2.3 hereof with respect to such Property and Closing Date.
(v) Each representation and warranty of Lessee contained in the
Lease or in any other Lease Document shall be true and correct as of such
Closing Date.
(vi) No change shall have occurred after the Business Day immediately
prior to the date of execution of this Agreement in any applicable laws or
regulations that, in the opinion of the Purchaser, the Seller or their
respective counsel, would make it illegal for the Purchaser or Seller to
participate in the transactions contemplated by this Agreement with respect to
such Property.
(vii) The Purchaser shall have received a copy of the appraisal
obtained by the Seller with respect to such Property.
2.3. PROCEDURES FOR PURCHASE AND SALE
The Seller agrees to give the Purchaser three Business Days' notice of
each proposed Closing Date. Any such notice shall specify (i) the Property to
be financed on such date, (ii) the Closing Date and (iii) the Acquisition Price
for the related Funding.
On the Closing Date, the Purchaser shall make a payment in respect of
its purchase of the Interests being funded on such Closing Date by making the
Acquisition Price for such Closing available to the Seller prior to 12:00 noon
New York time by wire transfer in immediately available funds at the account of
the Seller at The Sumitomo Bank, Limited, New York Branch, or at such other
account that Seller shall notify Purchaser in writing. In the event that
Purchaser shall fail to make available to the Seller the full amount of such
Acquisition Price by 12:00 noon New York time, the Seller may, but shall have no
obligation to, fund such Acquisition Price, and the amount of the Acquisition
Price so funded shall be for the account of the Purchaser. In the event that
the Seller shall advance any such amount, the Purchaser shall pay to the Seller
on demand the amount of such advance with interest thereon at a rate equal to
the average federal funds rate for the period from the Closing Date to the date
on which the Purchaser makes such advance available to the
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Seller in immediately available funds at the account referenced above. If the
Purchaser does not make such advance available to the Seller within three
Business Days after the Closing Date, the Seller shall be entitled to recover
such advance with interest thereon at the Overdue Rate, on demand, from the
Purchaser.
2.4. UCC FILING
Upon request of Purchaser, Seller agrees that it will cause a Uniform
Commercial Code financing statement or statements covering all the Interests
sold pursuant to this Agreement to be executed and delivered by the Seller, as
debtor, and by the Purchaser, as secured party, and such financing statement or
statements will be duly filed in all places necessary to perfect the sale of the
Interests pursuant to this Agreement, and any additional Uniform Commercial Code
financing statements deemed advisable by the Purchaser, and all filing and
recordation fees payable in connection therewith will be paid by Purchaser.
Such financing statements shall state that they are being filed to perfect a
sale of the Interests, and that no inference that a security interest has been
granted to the Purchaser shall be made as a result of such filing.
SECTION 3. DISTRIBUTIONS
3.1. GENERAL
The Seller shall promptly upon the receipt in collected funds of any
amount constituting a part of the Interests, the Other Interests or the Retained
Interests distribute the same in the order of priority set forth in this Section
3. Distributions to the Purchaser shall be made by wire transfer in immediately
available funds to the [Purchaser's account at The Sumitomo Bank, Limited, New
York Branch, or such other account in the United States as the Purchaser shall
notify the Seller in writing at least five Business Days before the date of such
distribution]. The Seller shall in no event be held accountable for any amount
in excess of the amounts actually collected by the Seller under the Lease and
the Lease Documents.
If the Seller receives any amount to be distributed pursuant to this
Section 3 prior to 11:00 a.m. New York time, it shall distribute any amount
distributable to the Purchaser by 2:00 p.m. New York time. If the Seller
receives any such amount after 11:00 a.m. New York time it shall distribute such
amount to the Purchaser on the next Business day. In the event that the Seller
shall fail to make any such distribution by the time specified, the Seller shall
pay to Purchaser on demand the amount of such distribution with interest thereon
at a rate equal to the average federal funds rate for the period from the
required date of distribution to the date on which the Seller makes such
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distribution available to the Purchaser in immediately available funds at the
account referenced above. If the Seller does not make such distribution
available to the Purchaser within three Business Days after the required date of
distribution, the Purchaser shall be entitled to recover such distribution with
interest thereon at the Overdue Rate, on demand, from the Seller.
3.2. PRIORITY
3.2.1. RETAINED RESIDUAL INTERESTS
Except as provided in Sections 3.2.6 and [3.2.7], all amounts
received by the Seller constituting a part of the Interests, the Other Interests
or the Retained Interests shall be distributed FIRST, to the Seller for
application by the Seller to any unpaid amounts due to the Seller in respect of
the Retained Residual Interests, and SECOND, as provided in Sections 3.2.2 to
3.2.5 below; PROVIDED, that if the Seller shall receive from the Lessee at any
time after the Seller shall have made a distribution in respect of clause FIRST
of this Section 3.2.1 an amount (a "Reimbursed Amount") in respect of the amount
so distributed, the Seller shall distribute such Reimbursed Amount as provided
in clause SECOND of this Section 3.2.1.
3.2.2. BASE RENT
So much of the amount of any payment of Base Rent with respect
to a Property or interest on any overdue installment of such Base Rent remaining
after application of clause FIRST of Section 3.2.1 shall be distributed by the
Seller pro rata among the Purchaser, the Other Purchasers, if any, and the
Seller, in proportion to their respective Base Rent Interest, Retained Rent
Interest and Other Base Rent Interests with respect to such Property.
3.2.3. PURCHASE PRICE
So much of the amount of any payment of Purchase Price with
respect to a Property remaining after the application of clause FIRST of Section
3.2.1 shall be distributed by the Seller in the following order of priority:
FIRST: so much of such amount remaining that does not
exceed an amount equal to the difference between the Lease Investment
Balance with respect to such Property and the Guaranteed Residual Value
with respect to such Property shall be paid to the Seller;
SECOND: so much of such amount remaining after application
pursuant to clause FIRST, that does not exceed the Guaranteed Residual
Value, shall be paid pro rata
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to the Seller, the Purchaser and the Other Purchasers in proportion to
their respective Retained Purchase Price Interest, Purchase Price Interest
and Other Purchase Price Interests; and
THIRD: the balance, if any, shall be retained by the
Seller.
3.2.4. TERMINATION OPTION
So much of the Termination Amount payable by the Lessee with respect
to a Property remaining after application of clause FIRST of Section 3.2.1 shall
be distributed by the Seller in the following order of priority:
FIRST: so much of such amount remaining that does not
exceed the Guaranteed Residual Value for such Property shall be paid pro
rata to the Seller, the Purchaser and the Other Purchasers in proportion to
their respective Retained Purchase Price Interest, Purchase Price Interest
and Other Purchase Price Interests; and
SECOND: the balance, if any, shall be retained by the
Seller.
3.2.5. DEFAULT
So much of the amount of any payment of Default Amounts with respect
to a Property remaining after application of clause FIRST of Section 3.2.1 shall
be distributed by the Seller in the following order of priority in the case of
Default Amounts arising from the exercise by Seller of remedies against the
Collateral:
FIRST: so much of such amount remaining that does not
exceed an amount equal to the Risk Amount for such Property shall be paid
to the Seller;
SECOND: so much of such amount remaining after application
of clause FIRST that does not exceed the amount of accrued and unpaid Base
Rent for such Property and interest on any overdue Base Rent for such
Property shall be distributed as provided in Section 3.2.2;
THIRD: so much of such amount remaining after application
pursuant to clause SECOND, that does not exceed the Guaranteed Residual
Value for such Property shall be paid pro rata to the Seller, the Purchaser
and the Other Purchasers in proportion to their respective Retained
Purchase Price Interest, Purchase Price Interest and Other Purchase Price
Interests; and
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FOURTH: the balance, if any, shall be retained by the
Seller.
In the event more than one Property is sold as a unit as a result of
the exercise of remedies under the Lease, the portion of the proceeds from such
sale allocable to each Property shall be finally determined by mutual agreement
of the Seller and the Purchaser and, failing such agreement within 10 days after
either requests agreement of the other, by an independent appraiser selected by
Seller and reasonably acceptable to Purchaser.
So much of the amount of any payment of Default Amounts with respect
to a Property remaining after application of clause FIRST of Section 3.2.1 shall
be distributed by the Seller in the following order of priority in the case of
Default Amounts arising from the collection by Seller of amounts from the
Lessee:
FIRST: so much of such amount remaining that does not
exceed the Guaranteed Residual Value for such Property shall be paid pro
rata to the Seller, the Purchaser and the Other Purchasers in proportion to
their respective Retained Purchase Price Interest, Purchase Price Interest
and Other Purchase Price Interests; and
SECOND: so much of such amount remaining after application
of clause FIRST that does not exceed the amount of accrued and unpaid Base
Rent for such Property and interest on any overdue Base Rent for such
Property shall be distributed to the Purchaser and the Other Purchasers in
proportion to the Base Rent Interest and the Other Base Rent Interests;
THIRD: the balance, if any, shall be retained by the
Seller.
3.2.6. FEE COMPONENT
The Seller shall distribute to the Purchaser as its share of each
_____ Fee with respect to a Property paid by the Lessee or advanced on behalf of
the Lessee pursuant to the Lease an amount equal to _____.
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1. REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller represents and warrants to the Purchaser on the date hereof
and on each Closing Date as follows:
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(i) the Seller is organized and validly existing in good standing
under the laws of its jurisdiction of incorporation, and has the corporate
power and authority to enter into and perform its obligations under this
Agreement;
(ii) this Agreement has been duly authorized by all necessary
corporate action on the part of the Seller and the execution, delivery and
performance hereof by the Seller do not require the consent or approval of,
the giving of notice to, the registration with, or the taking of any other
action in respect of, any Federal, state or foreign governmental authority
or agency by Seller, except as contemplated by Section 2.4 and such as have
been duly obtained and are in full force and effect and do not require any
approval of stockholders of the Seller or any approval or consent of any
trustee or holders of any indebtedness or obligations of the Seller, and
has been duly executed and delivered by the Seller, and neither the
execution and delivery hereof, nor the consummation of the transactions
contemplated hereby, nor compliance by the Seller with any of the terms and
provisions hereof will contravene any law of the country and state of
incorporation of the Seller or any judgment, governmental rule, regulation
or order applicable to or binding on the Seller or contravene or result in
any breach of or constitute any default under, or result in the creation of
any Lien upon any property of the Seller under, any indenture, mortgage,
chattel mortgage, deed of trust, conditional sales contract, bank loan or
credit agreement, charter, by-law or other agreement or instrument to which
the Seller is a party or by which it or its properties may be bound or
affected;
(iii) this Agreement constitutes a legal, valid and binding obligation
of the Seller enforceable against the Seller in accordance with the terms
hereof; and
(iv) there are no suits or proceedings pending, or, to the best
knowledge of the Seller, threatened, against or affecting the Seller before
any court, governmental agency or arbitrator, which in the good faith
opinion of the Seller after consultation with counsel, would if adversely
determined have a material adverse effect on the Interests or the financial
condition of the Seller or which would purport to affect the legality,
validity or enforceability of this Agreement; and
(v) Seller acknowledges receiving a copy of the Lease Documents.
The Seller shall, by accepting each Acquisition Price as provided in
this Agreement on any Closing Date, be deemed to
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have reaffirmed the representations and warranties made by it in this Agreement
on such Closing Date.
4.2. REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser represents and warrants to the Seller on the date hereof
and on each Closing Date as follows:
(i) the Purchaser is organized and validly existing in good standing
under the laws of the its jurisdiction of incorporation, and has the
corporate power and authority to enter into and perform its obligations
under this Agreement;
(ii) this Agreement has been duly authorized by all necessary
corporate action on the part of the Purchaser and the execution, delivery
and performance hereof by the Purchaser do not require the consent or
approval of, the giving of notice to, the registration with, or the taking
of any other action in respect of, any Federal, state or foreign
governmental authority or agency by Purchaser, except such as have been
duly obtained and are in full force and effect and do not require any
approval of stockholders of the Purchaser or any approval or consent of any
trustee or holders of any indebtedness or obligations of the Purchaser, and
has been duly executed and delivered by the Purchaser, and neither the
execution and delivery hereof, nor the consummation of the transactions
contemplated hereby, nor compliance by the Purchaser with any of the terms
and provisions hereof will contravene any law of the country and state of
incorporation of the Purchaser or any judgment, governmental rule,
regulation or order applicable to or binding on the Purchaser or contravene
or result in any breach of or constitute any default under, or result in
the creation of any Lien upon any property of the Purchaser under, any
indenture, mortgage, chattel mortgage, deed of trust, conditional sales
contract, bank loan or credit agreement, charter, by-law or other agreement
or instrument to which the Purchaser is a party or by which it or its
properties may be bound or affected;
(iii) this Agreement constitutes a legal, valid and binding obligation
of the Purchaser enforceable against the Purchaser in accordance with the
terms hereof; and
(iv) there are no suits or proceedings pending, or, to the best
knowledge of the Purchaser, threatened, against or affecting the Purchaser
before any court, governmental agency or arbitrator, which in the good
faith opinion of the Purchaser after consultation with counsel, would if
adversely determined have a material adverse effect on or the financial
condition of the Purchaser or which would
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purport to affect the legality, validity or enforceability of this
Agreement.
The Purchaser shall, by making the Acquisition Price available as
provided in this Agreement on any Closing Date, be deemed to have reaffirmed the
representations and warranties made by it in this Agreement on such Closing
Date.
4.3. COVENANTS
4.3.1. PERFORMANCE OF LESSOR'S OBLIGATIONS
Purchaser is not hereby obligated to perform or discharge any
obligation or duty of the Seller or the Agent under the Lease, and this
Agreement shall not be deemed to impose upon Purchaser or Seller any liability
or responsibility of any nature for, or pertaining to, the control, maintenance,
management, or repair of any Property.
4.3.2. EXERCISE OF RIGHTS UNDER LEASE
The Purchaser acknowledges and agrees that (i) all rights of the
Seller to exercise any remedy (including remedies against the Security),
election or option, or make any decision or determination, or give any notice,
consent, waiver or approval under or in respect of, the Lease or any other Lease
Document, (ii) all rights of the Seller to receive and to enforce the payment of
the full amount of any damages (whether or not an Event of Default under the
Lease has occurred), each installment of Base Rent, Additional Base Rent and all
other amounts payable under the Lease and any other Lease Documents, all amounts
payable on account of any actual or constructive loss or damage to any Property
or any part thereof, all payments of or on account of Termination Amount or
purchase price and all insurance proceeds, condemnation or requisition payments
or other payments of any kind for or with respect to any Property or any part
thereof have been expressly retained by the Seller as part of the Retained
Residual Interests and that the Seller may exercise such rights in its sole
discretion. Notwithstanding the foregoing, the Seller agrees that, so long as
no Event of Default under the Lease exists, it will not amend or modify the
Lease Documents or grant any waiver or exercise any election or option, if the
effect thereof would be to change the amount or timing of payment of any amount
comprising a part of the Interests (other than Default Amounts) or to discharge
Agent's Lien on the Security.
Without limiting the foregoing, the Purchaser agrees that, if an Event
of Default under the Lease occurs and is continuing, the Seller shall have the
sole right to enforce the payment of all amounts (including amounts comprising
the Interests) due under the Lease Documents and that in enforcing such payment
(including by realizing against the Security), the
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Seller may enter into any compromise or settlement with the Lessee or may
exercise any remedy available to the Seller under the Lease Documents and as a
result of such compromise, settlement or exercise of remedies, the Lessee's
obligation to pay any amount comprising a part of the Interests may be satisfied
or waived. The Seller may enter into any compromise or settlement (whether or
not by satisfaction and accord) or exercise any remedy in its sole discretion,
without regard to any consequences to the Purchaser and the Seller shall have no
duty (fiduciary or other) to consider such consequences in dealing with the
Lessee.
Seller can take any of the actions described in the preceding two
paragraphs directly, or indirectly through the Agent.
For avoidance of doubt and without limiting the foregoing, the Seller
may exercise any of its rights with respect to the sale or reletting of any
Property in its own self interest without regard to the interests of the
Purchaser and the Seller shall have no obligation to seek any amount in excess
of the amounts distributable to Seller pursuant to Section 3.2.5 hereof or to
increase or maximize such excess by any means whatsoever.
4.3.3. SALE OF OTHER INTERESTS
The Purchaser acknowledges that the Seller has sold or may sell a
part, but not all, of the Retained Interests to Other Purchasers pursuant to
Other Rent Purchase Agreements. The Purchaser agrees that the rights of such
Other Purchasers in each element comprising the Other Interests shall rank PARI
PASSU with the rights of the Purchaser in the corresponding elements of the
Interests. In the event that the Purchaser shall receive any amount pursuant to
a distribution under Section 3 hereof that is greater than its pro rata share
(based on the relative percentage interests comprising the Interests and the
Other Interests with respect to a particular Property) of such amount, the
Purchaser shall pay over to the Other Purchasers of which it has received notice
so much of such distribution as is necessary to make the distribution (after
such payment) pro rata. The Seller agrees that it will not enter into an Other
Rent Purchase Agreement unless such Other Rent Purchase Agreement contains a
provision identical of this Section 4.3.3.
4.3.4. RETURN OF DISTRIBUTION
In the event that the Seller shall be required, as the result of any
bankruptcy or insolvency proceeding of the Lessee or otherwise, to return to the
Lessee or pay over to any court or other entity an amount (a "Returned Amount")
that was distributed pursuant to Section 3 hereof, the Purchaser shall on demand
from the Seller pay to the Seller so much of the Returned Amount that
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was distributed to the Purchaser. On such payment, the Purchaser's right to
receive such payment shall be reinstated as if no distribution of the Returned
Amount has been made.
4.3.5. THIRD PARTY BENEFICIARY
Seller acknowledges that Purchaser is a third party beneficiary of
certain of Lessee's obligations as provided in the last sentence of Section
23(a) of the Lease and that Purchaser may enforce directly against Lessee (but
not the Collateral) any obligations of Lessee to Purchaser under Sections 8, 12
or 13 of the Lease.
SECTION 5. MISCELLANEOUS
5.1. COUNTERPARTS
This Agreement may be executed by the parties hereto in multiple
counterparts and each counterpart, when so executed, shall be deemed an
original, but all of which shall be considered as one agreement. Further, in
making proof of this Agreement, it shall not be necessary to produce or account
for more than one such counterpart.
5.2. SURVIVAL
The representations, warranties, indemnities and agreements of the
Seller and Purchaser provided for in this Agreement, shall survive the purchase
of the Interests by the Purchaser.
5.3. MODIFICATION, BINDING EFFECT, ETC.
Neither this Agreement nor any of the terms hereof may be terminated,
amended, supplemented, waived or modified, except by an instrument in writing
signed by the party against which the enforcement of the termination, amendment,
supplement, waiver or modification is sought. The terms of this Agreement shall
be binding upon, and inure to the benefit of, the Purchaser and its successors
and permitted assigns and the Seller and its successors and the permitted
assigns. This Agreement shall in all respects be governed by, and construed in
accordance with, the laws of the State of New York, including all matters of
construction, validity and performance.
5.4. ASSIGNMENT
Purchaser may not assign any of its rights or obligations hereto (by
participation or otherwise) without the prior written consent of Seller. Seller
may assign its rights and obligations hereunder to any successor "Lessor" under
the Lease without consent from Purchaser.
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5.5 LIABILITY
Neither the Seller nor any of its Affiliates, directors, officers,
agents or employees shall be responsible for or have any duty to ascertain,
inquire into or verify (a) any statement, warranty or representation made in
connection with the Lease Documents; (b) the performance or observance of any of
the covenants or agreements of Lessee; (c) the satisfaction of any condition
specified in Section 3 of the Lease; or (d) the validity, effectiveness or
genuineness of any of the Lease Documents or any other instrument or writing
furnished in connection herewith or therewith.
Purchaser acknowledges that it has, independently and without reliance
upon the Seller, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Purchaser also acknowledges that it will, independently and without
reliance upon the Seller, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking any action under this Agreement.
5.6. AGENT
The parties agree that Seller is not a party hereto in its capacity as
Agent under the Lease and Seller is not assigning, and Purchaser is not
obtaining, any of the rights or obligations whatsoever of Agent under the Lease
Documents.
5.7. NOTICES
Any notice hereunder shall be in writing. Notices given by telegram,
telecopier or personal delivery shall be deemed to have been given and received
when sent and notices given by mail shall be deemed to have been given and
received four Business Days after the date when sent by registered or certified
mail, postage prepaid, and addressed to Seller or Purchaser at its address shown
below its signature hereto, or at such other address as Seller or Purchaser may,
by written notice received by the other, have designated as its address for such
purpose.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SUMITOMO BANK LEASING AND FINANCE, INC.
277 Park Avenue
New York, New York 10172
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<PAGE>
Attention:
------------------------------
By:
-----------------------------------
Name:
Title:
[ ]
-----------------------
[Address]
By:
-----------------------------------
Name:
Title:
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<PAGE>
EXHIBIT A
Supplement No. ___ to Master Rent Purchase Agreement
1. The parties hereto agree that this is Supplement No. ___ to
Master Rent Purchase Agreement, dated _______________, 1996, between the parties
hereto.
2. The Supplement relates to the following Property:
________________________________________________________________
3. The Applicable Percentage for calculation of the Acquisition
Price is ___%.
4. The number of basis points applicable to the definition of Base
Rent is ___ basis points.
5. The Applicable Percentage for calculation of the Base Rent
Interest, the Purchase Price Interest and the Termination Option Interest is
___%.
IN WITNESS WHEREOF the parties have caused this Supplement to be duly
executed and delivered this ___ day of ______________, 1996.
SUMITOMO BANK LEASING
AND FINANCE, INC.
By:
-------------------------------------
Title:
[ ]
By:
-------------------------------------
Title:
<PAGE>
EXHIBIT U
TO LEASE
LIST OF
REPORTS RECEIVED
1. The Plans and Specifications
2. Permits delivered under cover of letter dated March 7, 1996 from Lund
Financial Corporation to William D. Ellis, Esq. of Morgan, Lewis & Bockius
LLP ("MLB")
3. Pre-purchase Survey of McCandless Business Park, prepared by Devcon
Construction, Inc., dated January 23, 1996
4. The Environmental Audit
5. ALTA Survey dated January, 1996, prepared by Kier & Wright Civil Engineers
and Surveyors
U-1
<PAGE>
INDEX OF CLOSING DOCUMENTS
PURCHASE AND MASTER LEASE AGREEMENT
Dated as of ________, 199_
Among
THE LESSORS REFERRED TO THEREIN
(as Lessors)
------------
(as Lessee)
and
SUMITOMO BANK LEASING AND FINANCE, INC.
(as Agent for the Lessors)
1. Purchase and Master Lease Agreement.
2. Schedules to Lease Agreement.
3. Exhibits to Lease Agreement.
4. Bill of Sale.
5. Lease Supplement.
6. UCC-1 financing statements naming Lessee as debtor and the Agent as secured
party for the jurisdictions as listed in Schedule 2 to the Lease Agreement.
7. Certificates of the Secretaries of the States of ___________________,
___________________, ____________________, ______________________,
___________________, each dated reasonably near the Closing Date, stating
that Lessee is in good standing.
8. Certificate dated the Closing Date of the Assistant Secretary of Lessee as
to: (a) charter, (b) bylaws, (c) resolutions and (d) incumbency.
9. Officer's Certificate of Lessee, dated the Closing Date, pursuant to
Section 3 of the Lease Agreement.
10. Opinion of Morrison & Foerster special counsel for Lessee, pursuant to
Section 3(a)(vii) of the Lease Agreement and dated the Closing Date.
11. Insurance Certificates referred to in Section 11(e) of the Lease Agreement.
12. Closing Date Notice.
13. Deed
14. Deed of Trust
15. Memorandum of Lease
16. Property Information Package
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PURCHASE AND MASTER LEASE AGREEMENT
Dated as of October 24, 1996
Among
THE LESSORS REFERRED TO HEREIN
(as Lessors),
NOVELLUS SYSTEMS, INC.
(as Lessee),
and
SUMITOMO BANK LEASING AND FINANCE, INC.
(as Agent for the Lessors)
(PROPERTY LOCATION:
CORNER OF 1ST ST. AND HEADQUARTERS DRIVE,
SAN JOSE, CALIFORNIA)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THIS PURCHASE AND MASTER LEASE AGREEMENT IS NOT INTENDED TO
CONSTITUTE A TRUE LEASE FOR FEDERAL INCOME TAX PURPOSES.
<PAGE>
TABLE OF CONTENTS**
SECTION 1. Definitions; Interpretation....................................... 1
SECTION 2. Representations and Warranties of Lessee..........................18
(a) Corporate Matters.................................................18
(b) Property Information Package......................................19
(c) Authorization; No Conflict........................................19
(d) Binding Agreement.................................................19
(e) Financial Statements..............................................19
(f) Litigation and Contingent Liabilities.............................19
(g) Title to Property.................................................20
(h) Liens.............................................................20
(i) Chief Executive Office............................................20
(j) ERISA.............................................................20
(k) Investment Company Act............................................21
(l) Public Utility Holding Company Act................................21
(m) Regulations G, T, U and X.........................................21
(n) Labor Controversies...............................................21
(o) Tax Status........................................................21
(p) No Default........................................................21
(q) Compliance with Applicable Laws...................................21
(r) Licenses, etc.....................................................21
(s) Intellectual Property.............................................22
(t) Subjection to Regulation..........................................22
(u) Impositions.......................................................22
(v) Insurance.........................................................22
(w) Brokers, etc......................................................22
(x) Security Interests................................................22
(y) Environmental.....................................................23
(z) No Burdensome Agreements..........................................23
(aa) Land Use Regulations..............................................24
(bb) Development Plans.................................................24
(cc) Utilities.........................................................24
(dd) Mechanics' Lien Claims............................................24
(ee) Permits and Licenses..............................................24
(ff) Defects...........................................................24
(gg) Notice From Insurance Carriers....................................24
(hh) Disclosure Generally..............................................25
(ii) Solvency..........................................................25
SECTION 3. Conditions to Closing.............................................25
SECTION 4. Purchase and Lease of Property....................................27
(a) Purchase by Lessor and Lease by Lessee............................27
(b) Each Lessor to Have an Undivided Interest.........................28
- ---------------------------------------------------------------
**The Table of Contents does not form a part of this Agreement.
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<PAGE>
(c) Funding to Agent..................................................28
(d) Funding by Agent..................................................28
(e) Acknowledgment by Lessee of Acceptance and Suitability of
Property.......................................................29
(f) Transfer to Lessee upon Failure to Fund...........................29
SECTION 5. Payment Absolute, No Warranties...................................29
SECTION 6. Lease Term........................................................32
SECTION 7. Rent..............................................................33
SECTION 8. Other Payments....................................................35
SECTION 9. Restricted Use; Compliance with Laws..............................37
SECTION 10. Maintenance, Improvement and Repair of the Property...............38
SECTION 11. Insurance.........................................................40
(a) Liability Insurance...............................................40
(b) Property Insurance................................................40
(c) Approved Policies.................................................40
(d) Use of Insurance Proceeds.........................................41
SECTION 12. General Indemnity.................................................42
SECTION 13. Taxes.............................................................44
SECTION 14. Purchase Option and Termination Option............................46
(a) Purchase Option of Lessee.........................................46
(b) Termination Option of Lessee......................................46
(c) Failure of Sale...................................................48
(d) Procedures for Purchases..........................................48
SECTION 15. End of Term Options...............................................49
SECTION 16. Amendments........................................................49
SECTION 17. Loss of or Damage to Property.....................................50
(a) Risk of Loss......................................................50
(b) Repair of Damage; Use of Proceeds.................................50
(c) Event of Loss; Property Not Repaired..............................51
(d) Event of Loss; Property Repaired..................................51
SECTION 18. Surrender of Property.............................................53
(a) Surrender Upon Termination........................................53
(b) No Voluntary Surrender............................................53
(c) Removal of Lessee Property by Lessee..............................53
(d) Removal of Lessee's Property by Agent.............................53
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<PAGE>
(e) Agent's Property..................................................53
(f) Agent's Actions on Property.......................................54
(g) No Duty if Liabilities Paid.......................................54
SECTION 19. Certain Covenants.................................................54
(a) Reports, Certificates and Other Information.......................54
(b) Mergers, Consolidations, Sales....................................55
(c) Compliance with Applicable Laws...................................56
(d) ERISA.............................................................56
(e) Corporate Existence and Franchises................................57
(f) Payment of Taxes..................................................57
(g) Other Agreements..................................................57
(h) Regulations G, T, U and X.........................................57
(i) Maintenance of Tangible Property..................................57
(j) Maintenance of Intangible Property................................57
(k) Sale of Stock of Subsidiaries.....................................58
(l) Transfer of Assets................................................58
(m) Discontinuance or Change of Business..............................58
(n) Accounting Change. ...............................................58
(o) Financial Ratios. ................................................58
(p) Financial Covenants in Financings.................................58
(q) Environmental Compliance..........................................59
SECTION 20. Events of Default.................................................60
SECTION 21. Rights upon Default...............................................63
SECTION 22. Lease Assignment and Subletting...................................67
SECTION 23. Sale of Rents, Assignments, Permitted Lessor Liens................67
(a) Sale of Rents.....................................................67
(b) Assignments.......................................................68
(c) Lessor Liens......................................................69
(d) Prohibited Assignees..............................................69
SECTION 24. Taxes.............................................................69
SECTION 25. Operating Lease...................................................69
SECTION 26. Notices and Requests..............................................69
SECTION 27. Right to Perform for Lessee.......................................70
SECTION 28. The Agent.........................................................70
(a) Appointment and Authorization.....................................70
(b) Agent and Affiliates..............................................70
(c) Action by Agent...................................................71
(d) Consultation with Experts.........................................71
(e) Liability of Agent................................................71
(f) Indemnification...................................................71
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<PAGE>
(g) Failure to Act....................................................71
(h) Credit Decision...................................................71
(i) Resignation and Removal...........................................72
(j) Distributions.....................................................72
(k) Lessee Rights.....................................................72
SECTION 29. Security Interest; Further Assurances.............................72
(a) Security Interest.................................................72
(b) Further Assurances................................................73
SECTION 30. Miscellaneous.....................................................73
SCHEDULE I- Commitments.......................................................77
SCHEDULE II- Legal Description of Land........................................78
[Exhibits Follow]
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<PAGE>
PURCHASE AND MASTER LEASE AGREEMENT
(Corner of 1st St. and Headquarters Drive)
PURCHASE AND MASTER LEASE AGREEMENT (this "LEASE" or this
"AGREEMENT"), dated as of October 24, 1996, among each institution
executing the signature pages hereto as a lessor and/or receiving an
assignment of a lessor's interest from time to time pursuant to Section 23(b)
hereof, for so long as such institution shall hold a lessor's interest
hereunder (each, individually, a "LESSOR"; and, collectively, the "LESSORS"),
NOVELLUS SYSTEMS, INC., a California corporation (the "LESSEE"), and SUMITOMO
BANK LEASING AND FINANCE, INC., as agent for the Lessors (in its capacity as
such, the "AGENT").
BACKGROUND AND RECITALS OF FACT
1. Lessee desires to lease the Property from the Lessors.
2. On the Closing Date, the parties anticipate that, subject to
the terms of this Agreement, (i) the Agent on behalf of the Lessors shall
purchase from Zuken-Redac, Inc., a California corporation ("Seller") the
Property to be leased hereunder pursuant to the Real Property Purchase and
Sale Agreement and (ii) the Lessee shall lease such Property from the Lessors.
NOW THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS; INTERPRETATION.
In each Lease Document, unless the context otherwise requires:
(a) any term defined below by reference to another instrument or
document shall continue to have the meaning ascribed thereto whether or not
such other instrument or document remains in effect;
(b) words importing the singular include the plural and vice versa;
(c) words importing a gender include any gender;
(d) a reference to a part, clause, party, section, article,
exhibit or schedule is a reference to a part and clause of, and a party,
section, article, exhibit and schedule to, such Lease Document;
(e) a reference to any statute, regulation, proclamation,
ordinance or law includes all statutes, regulations, proclamations,
ordinances or laws varying, consolidating or replacing them, and a reference
to a statute includes all regulations, proclamations and ordinances issued or
otherwise applicable under the statute;
(f) a reference to a document includes an amendment or supplement
to, or replacement or novation of, that document;
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<PAGE>
(g) a reference to a party to a document includes that party's
successors and permitted assigns;
(h) where the character or amount of any asset or liability or
item of income or expense is required to be determined or any consolidation
or other accounting computation is required to be made for the purpose of
this Agreement, such determination or calculation shall, at any time and to
the extent applicable and except as otherwise specified in this Agreement, be
made in accordance with GAAP;
(i) All covenants, representations and Events of Default contained
herein shall be given independent effect, so that if any action or condition
would violate any of such covenants, would breach any of such representations
or would constitute any of such Event of Default, the fact that such action
or condition would not violate or breach another covenant or representation
or constitute another Event of Default shall not avoid the violation of such
covenant or representation or such Event of Default; and
(j) the following terms have the meanings set forth below:
"ACTIVE NEGLIGENCE" of an Indemnified Person means, and is limited
to, the negligent conduct of activities actually on or about the Property by
the Indemnified Person or its employees, agents or representatives in a
manner that proximately causes actual bodily injury or property damage to be
incurred. "Active Negligence" shall not include (1) any negligent failure of
Lessor to act when the duty to act would not have been imposed but for
Lessor's status as owner of the Property or as a party to the transactions
described in this Lease, (2) any negligent failure of any other Indemnified
Person to act when the duty to act would not have been imposed but for such
party's contractual or other relationship to Lessor or participation or
facilitation in any manner, directly or indirectly, of the transactions
described in this Lease, or (3) the exercise in a lawful manner by Lessor (or
any party claiming through or under Lessor) of any remedy provided herein, in
the Real Property Purchase and Sale Agreement or the Security Agreement, at
law, in equity or otherwise.
"ADDITIONAL BASE RENT" means all amounts payable by the Lessee to
the Agent for the account of the Lessors pursuant to Section 7(a)(ii) hereof.
"ADDITIONAL RENT" means all amounts owed by Lessee to any
Indemnified Person under any Lease Document, other than Base Rent and
Additional Base Rent.
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. A Person shall be deemed to
control another Person if such first Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such other Person, whether through ownership of voting
securities, by contract or otherwise.
"AFTER TAX BASIS" means in respect of an amount (the "base amount")
with respect to a Person, the base amount supplemented by a future payment,
if necessary, to such Person such that, after reduction for all Taxes, if
any, imposed on such Person in respect of the sum of the base amount and such
future payment, and after giving effect to all current deductions and
credits, if any, actually utilized by such Person with respect to the base
amount or the event or circumstance giving rise thereto, shall be equal to
the base amount.
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<PAGE>
"AGENT'S REPRESENTATIONS" means, with respect to the Property being
transferred by the Agent to Lessee or a third Person: (i) the Agent has not
previously transferred title to such Property to any third Person; and (ii)
such Property is free of Lessor Liens.
"DEBT LESSOR COMMITMENT" means the amount set forth on Schedule I
as the Debt Lessor Commitment.
"EQUITY LESSOR COMMITMENT" means the amount set forth on Schedule I
as the Equity Lessor Commitment.
"APPLICABLE LAW" means all existing and future applicable laws,
rules, regulations (including Environmental Laws) statutes, treaties, codes,
ordinances, permits, certificates, orders and licenses of and interpretations
by, any Governmental Authority; and applicable judgments, decrees,
injunctions, writs, orders or like action of any court, arbitrator or other
administrative, judicial or quasi-judicial tribunal or agency of competent
jurisdiction (including those pertaining to health, safety or the environment
(including, without limitation, wetlands); and those pertaining to the
construction, use or occupancy of the Property); and any restrictive covenant
or deed restriction or easement of record affecting the Property.
"APPRAISAL" means an appraisal, prepared by Appraiser, of the
Property which in the judgment of counsel to the Agent, complies with all of
the provisions of the Financial Institutions Reform, Recovery and Enforcement
Act of 1989, as amended, the rules and regulations adopted pursuant thereto,
and all other Applicable Laws.
"APPRAISER" means an independent appraiser of recognized national
standing that is (i) selected by the Agent on behalf of the Lessors to
perform any appraisal provided for hereunder and (ii) whose selection is
consented to by Lessee (whose consent shall not be unreasonably withheld or
delayed).
"ASSIGNEE" has the meaning set forth in Section 23(b) hereof.
"ASSIGNMENT" has the meaning set forth in Section 23(b) hereof.
"ASSIGNMENT OF REAL PROPERTY PURCHASE AND SALE AGREEMENT" means an
assignment in substantially the form attached hereto as Exhibit Q.
"AUTHORIZED OFFICER" means, with respect to Lessee, the President,
the Chief Executive Officer, the Chief Financial Officer, the Treasurer or
any Assistant Treasurer thereof.
"BASE RATE" means, for any day, a rate per annum equal to the
higher of (i) the rate per annum established by Sumitomo Bank from time to
time as the reference rate for short-term commercial loans in Dollars to
domestic corporate borrowers (which Lessee acknowledges is not necessarily
Sumitomo Bank's lowest rate), and (ii) the sum of 0.50% plus the Federal
Funds Rate for such day.
"BASE RATE PORTION" has the meaning set forth in the definition of
Rent Period.
"BASE RENT" means all amounts payable by the Lessee to the Agent
for the account of the Lessors pursuant to Section 7(a)(i) hereof.
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<PAGE>
"BUSINESS DAY" means any day other than a Saturday, a Sunday or
other day on which banking institutions in New York, New York are authorized
or required by law or regulation to close.
"CERCLIS" means the Comprehensive Environmental Response,
Compensation and Liability Information System database.
"CLOSING DATE" means October 24, 1996, or any other Business Day
not later than October 24, 1996, agreed upon by the Agent and Lessee, in
writing, to be the Closing Date.
"CLOSING DATE NOTICE" means a notice substantially in the form of
Exhibit C hereto, appropriately completed and signed by a Signing Officer of
Lessee.
"CLOSING FEE" means the fee payable to the Agent for the account of
the Lessors on the Closing Date pursuant to a separate written agreement
between Lessor and Lessee of even date herewith.
"CODE" means the U.S. Internal Revenue Code of 1986, as amended and
as in effect from time to time, and the regulations promulgated thereunder.
"COLLATERAL" means all of Lessee's right, title and interest in and
to each of the following, whether now existing or hereafter arising or
acquired, and wherever located:
(a) the Property;
(b) all reversions, remainders, rents, issues, profits and
other benefits arising or issuing from, and all leases of, all or any portion
of the Property;
(c) all awards, damages, payments and other compensation
(including but not limited to insurance proceeds) received by or payable to
Lessee, and all claims of Lessee therefor and rights of Lessee thereto, which
may result (i) from any Condemnation, (ii) from any damage, injury or
destruction in any manner caused to the Property, or (iii) from any change of
grade or vacation of any street abutting the Land;
(d) all certificates of occupancy, other governmental
permits, and all water stock appurtenant to the Land or any portion thereof;
(e) all insurance policies required to be maintained under
the terms of this Lease or any other Lease Document, or otherwise carried by
Lessee covering the Property or any portion thereof, together with all
unearned premiums paid thereon and all other benefits received or to be
received therefrom;
(h) all refunds of taxes, assessments, levies and other
charges related to the Real Property, whether governmental or
nongovernmental, and including but not limited to water and sewer rents and
assessments on appurtenant water stock;
(i) all contracts relating to the purchase, operation and
maintenance of the Personal Property, including all warranties;
-4-
<PAGE>
(j) any rebate (excluding sales or use tax refunds to
Lessee), offset or other similar rights under a purchase order, invoice or
purchase agreement with any manufacturer or vendor of any Person to the
extent such rebate relates to the Personal Property;
(k) all books, manuals, logs, records, writings, databases,
information and other property relating to, used or useful in connection
with, evidencing, embodying or incorporating any of the foregoing, but
specifically excluding the portions of any of the foregoing that constitute
(i) trade secrets,(ii) communications protected from disclosure by reason of
an evidentiary privilege or (iii) information that Lessee is prohibited from
disclosing by reason of a bona fide confidentiality agreement enforceable
against Lessee by a Person that is not an Affiliate of Lessee; and
(l) all products, accessions and proceeds of and from any and
all of the foregoing Collateral (including proceeds which constitute property
of the types described in clauses (a) through (k) above) and, to the extent
not otherwise included, all payments under insurance (whether or not the
Agent or any Lessor is the loss payee thereof), and any indemnity, warranty
or guaranty, payable by reason of loss or damage to or otherwise with respect
to any of the foregoing Collateral.
"COLLATERALIZATION" is defined in Section 19(r).
"COMMITMENT" means, with respect to each Lessor, the amount set
forth next to such Lessor's name on Schedule I hereto (as adjusted pursuant
to Section 23(b) hereof).
"COMMITMENT PERCENTAGE" means, with respect to each Lessor, the
quotient (expressed as a percentage) of such Lessor's Commitment divided by
the Total Commitment.
"CONDEMNATION" means any condemnation, requisition, confiscation,
seizure or other taking or sale of the use, access, occupancy, easement
rights or title to the Property or any part thereof, 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 Person having the
power of eminent domain, including an action by a Governmental Authority to
change the grade of, or widen the streets adjacent to, the Property or alter
the pedestrian or vehicular traffic flow to the 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, occupancy or title vests in the condemning authority.
"CONSOLIDATED CURRENT ASSETS" shall mean all current assets of
Lessee and its Subsidiaries determined on a consolidated basis.
"CONSOLIDATED CURRENT LIABILITIES" shall mean all current
liabilities of Lessee and its Subsidiaries determined on a consolidated basis.
"CORPORATE TRANSACTION" has the meaning set forth in Section 19(b)
hereof.
"CUSTODIAN" has the meaning set forth in the Security Agreement.
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"DEBT" shall mean, with respect to any Person, without duplication,
(i) all items (excluding reserves for deferred income taxes) which in
accordance with GAAP would be included in determining total liabilities as
shown on the liability side of a balance sheet of such Person as of the date
on which Debt is to be determined, (ii) all indebtedness secured by any Lien
on any property or asset owned or held by such Person subject thereto,
whether or not the indebtedness secured thereby shall have been assumed,
(iii) all indebtedness of others with respect to which such Person has become
liable by way of a guarantee, and (iv) all outstanding letters of credit with
respect to which, if drawn upon, such Person would have any repayment or
reimbursement obligations other than Documentary Letters of Credit.
"DEBT LESSOR" means a Lessor identified as a "Debt Lessor" in
Schedule I.
"DEBT PORTION PROPERTY COST" means (a) the Property Cost times (b)
the Debt Lessor Commitment divided by the Commitment.
"DEBT SERVICE COVERAGE RATIO" means EBITDA divided by the sum of
(a) interest expense, (b) rent expense and (v) the current portion of Debt.
Lessee's obligations under this Lease shall not be included in the
computation of any component of Debt Service Coverage Ratio.
"DEED" means a grant deed with respect to the real property
comprising the Property, in conformity with Applicable Law and appropriate
for recording with the applicable Governmental Authorities, conveying fee
simple title to such real property to the Lessor, subject only to Permitted
Liens and substantially in the form of Exhibit O to this Lease.
"DEED OF TRUST" means a deed of trust with respect to the real
property comprising the Property, in conformity with Applicable Law and
appropriate for recording with the applicable Governmental Authorities,
conveying bare legal title to such real property to the trustee named therein
for the benefit of Agent (for the benefit of Lessors) as beneficiary
thereunder, subject only to Permitted Liens and substantially in the form of
Exhibit P to this Lease.
"DE MINIMIS AMOUNT" means a cumulative amount not in excess of
$100,000.
"DOCUMENTARY LETTER OF CREDIT" shall mean a letter of credit issued
for the account of Lessee or its Subsidiary in the ordinary course of
business of Lessee or its Subsidiary to secure the deferred purchase price of
goods.
"DOLLARS" and "$" means lawful money of the United States.
"EBITDA" shall mean, for any period, consolidated net income (or
net loss) PLUS the sum of (a) interest expense, (b) income and franchise tax
expense, (c) depreciation expense, (d) amortization expense, (e)
extraordinary or unusual losses or other losses not incurred in the ordinary
course of business included in the calculation of net income, (f) any
non-cash charge against net income required to be recognized in connection
with the issuance of capital stock to employees (whether upon lapse of
vesting restrictions, exercise of employee options or otherwise), and (g) any
non-cash charge against net income required to be recognized in connection
with employee pension plans, LESS extraordinary or unusual gains or other
gains not incurred in the ordinary course of business included in the
calculation of net income.
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"ENVIRONMENT" means all air, surface water, groundwater, or land,
including land surface or subsurface, including all fish, wildlife, biota and
all other natural resources.
"ENVIRONMENTAL AUDIT" means a "Phase One" environmental site
assessment (the scope and performance of which meets or exceeds ASTM Standard
Practice E1527-93 Standard Practice for Environmental Site Assessments:
Phase One Environmental Site Assessment Process) of the Property, dated not
earlier than six months prior to the date of this Agreement.
"ENVIRONMENTAL CLAIMS" means any and all administrative or judicial
actions, suits, orders, claims, liens, notices, notices of violations,
investigations, complaints, requests for information, proceedings, or other
communication (written or oral), whether criminal or civil, (collectively
"Claims") pursuant to or relating to any applicable Environmental Law by any
person (including but not limited to any Governmental Authority and citizens'
group) based upon, alleging, asserting, or claiming any actual or potential
(i) violation of or liability under any Environmental Law, (ii) violation of
any Environmental Permit, or (iii) liability for investigatory costs, cleanup
costs, removal costs, remedial costs, response costs, natural resource
damages, property damage, personal injury, fines, or penalties arising out
of, based on, resulting from, or related to the presence, or Release into the
environment, of any Hazardous Materials at any location, including but not
limited to any off-site location to which Hazardous Materials or materials
containing Hazardous Materials were sent for handling, storage, treatment, or
disposal.
"ENVIRONMENTAL CLEANUP SITE" means any location which is listed or
proposed for listing on the National Priorities List, on CERCLIS, or on any
similar state list of sites requiring investigation or cleanup, or which is
the subject of any pending or threatened action, suit, proceeding, or
investigation related to or arising from any alleged violation of any
Environmental Law or the presence or Release of a Hazardous Material.
"ENVIRONMENTAL CONDITION" means the presence of a Hazardous
Material at any property or facility which has or may result in or form the
basis of an Environmental Claim.
"ENVIRONMENTAL LAW" means any and all federal, state, local, and
foreign laws, statutes, ordinances, orders, codes, rules, regulations,
policies, guidance documents, judgments, decrees, injunctions, or agreements
with any Governmental Authority, relating to the protection of health and the
Environment and/or governing the handling, use, generation, treatment,
storage, transportation, disposal, manufacture, distribution, formulation,
packaging, labeling, or Release of Hazardous Materials, whether now existing
or subsequently amended or enacted, including but not limited to: the Clean
Air Act, 42 U.S.C. Section 7401 ET SEQ.; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C.
Section 9601 ET SEQ.; the Federal Water Pollution Control Act, 33 U.S.C.
Section 1251 ET SEQ.; the Hazardous Material Transportation Act 49 U.S.C.
Section 1801 ET SEQ.; the Federal Insecticide, Fungicide and Rodenticide Act
7 U.S.C. Section 136 ET SEQ.; the Resource Conservation and Recovery Act of
1976 ("RCRA"), 42 U.S.C. Section 6901 ET SEQ.; the Toxic Substances Control
Act, 15 U.S.C. Section 2601 ET SEQ.; the Occupational Safety & Health Act of
1970, 29 U.S.C. Section 651 ET SEQ.; the Oil Pollution Act of 1990, 33 U.S.C.
Section 2701 ET SEQ.; and the state analogies thereto, including but not
limited to the California Underground Storage of Hazardous Substances Act,
California Health & Safety Code Sections 25280 ET SEQ.; the California
Hazardous Substances Account Act California Health & Safety Code Sections
25300 ET SEQ.; the California Hazardous Waste Control Act, California Health
& Safety Code Sections 25100 ET SEQ.; the California Safe Drinking Water and
Toxic Enforcement Act, California Health & Safety Code Sections 24249.5 ET
SEQ.; the Porter-Cologne Water Quality Act California Water Code Sections
13000 ET SEQ., together with all administrative regulations promulgated under
any of the foregoing, all as amended from time to time; and any common law
doctrine, including but not limited to, negligence, nuisance, trespass,
personal injury, or property damage related to or arising out of the
presence, Release, or exposure to a Hazardous Material.
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"ENVIRONMENTAL PERMIT" means any federal, state or local, or
foreign permit, license or authorization issued under or in connection with
any Environmental Law.
"EQUITY LESSOR" means a Lessor identified as an "Equity Lessor" in
Schedule I.
"EQUITY PORTION PROPERTY COST" means (a) the Property Cost times
(b) the Equity Lessor Commitment divided by the Commitment.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
"ERISA AFFILIATE" means each "person" (as defined in Section 3(9)
of ERISA) which is under "common control" with the Lessee or any of its
Subsidiaries (within the meaning of Section 414(b), (c), (m) or (o) of the
Code).
"EUROCURRENCY LIABILITIES" has the meaning assigned thereto in
Regulation D.
"EUROCURRENCY RESERVE PERCENTAGE" means, with respect to any day, a
percentage (expressed as a decimal) equal to the percentage in effect on such
day as prescribed by the Board of Governors of the Federal Reserve System (or
any successor) for determining the maximum reserve requirement (including,
without limitation, any marginal, supplemental or emergency reserve
requirement) applicable to "Eurocurrency Liabilities" pursuant to Regulation
D or any other then applicable regulation of said Board of Governors which
prescribes reserve requirements applicable to "Eurocurrency Liabilities" as
presently defined in Regulation D.
"EURO-DOLLAR BUSINESS DAY" means any Business Day on which dealings
in euro-dollar deposits are generally carried on the London interbank market.
"EURO-DOLLAR PORTION" has the meaning set forth in the definition
of Rent Period.
"EURO-DOLLAR RATE" means the mid-morning average of four banks'
(selected by Agent) one-, three- or six-month LIBOR Rate appearing on the
LIBO page published by Reuters Monitoring Systems (or Euro-Dollar Portion
thereof) (in each case rounded upwards, if necessary, to the next higher
1/16th of 1%) on the day two Euro-Dollar Business Days preceding the first
day of the term of that Rent Period (or Euro-Dollar Portion thereof);
PROVIDED that the selection of a three- or six-month LIBOR Rate shall remain
in effect as the Euro-Dollar Rate under this Lease until the expiration of
the last day of the last Rent Period in effect during such term of such LIBOR
Rate. In the event the Reuters quote is not available, the British Banker's
Association's Interest Settlement Rate shall be used. If there is no
published rate corresponding to a Rent Period (or Euro-Dollar Portion
thereof), the rate for such Rent Period (or Euro-Dollar Portion thereof)
shall be determined by interpolating on a straight-line basis from the
published rate corresponding to a period nearest to but less than such Rent
Period (or Euro-Dollar Portion thereof) and the published rate corresponding
to a period nearest to but greater than such Rent Period (or Euro-Dollar
Portion thereof).
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"EVENT OF DEFAULT" has the meaning set forth in Section 20 hereof.
"EVENT OF LOSS" as to any Property means that such Property has
been lost, stolen, destroyed, seized, Condemned, confiscated, eroded,
subsided, lost by avulsion, rendered unfit for use or damaged beyond repair
in the opinion of the Lessee or if the use of such Property by such Lessee in
its regular course of business is prevented by the act of any third Person or
Persons (including a governmental instrumentality) for a period exceeding 45
calendar days, or if any Property is attached and the attachment is not
removed within 45 calendar days.
"EXCLUDED TAXES" means Taxes which are either (i) imposed by the
jurisdiction in which an Indemnified Person is organized, a taxing authority
thereof or therein or by any other taxing authority as a result of such
Indemnified Person's doing business or maintaining an office in such
jurisdiction -- such as franchise taxes -- (other than any such taxes that
the Indemnified Person establishes would not have been imposed but for (A)
such Indemnified Person's having executed, or enforced, a Lease Document or
(B) any of the transactions to which Agent (on behalf of the Lessors) and
Lessee are parties (excluding documentary transfer taxes and any increase,
throughout the Lease Term only, in property taxes due to a "change in
ownership" as defined in the California Revenue & Tax Code), whether
contemplated herein or in the other Lease Documents) or (ii) imposed on,
based on or measured by net income, capital or net worth of such Indemnified
Person (other than Taxes that are, or are in the nature of, sales, use,
rental, property or value added or similar taxes).
"EXISTING SERVICE CONTRACT OBLIGATIONS" means the contractual
rights and obligations transferred by Seller pursuant to the "Assignment of
Service Contracts, Warranties and Guaranties and other Intangible Property"
in the form attached as Exhibit I to the Real Property Purchase and Sale
Agreement.
"FAIR MARKET SALES VALUE" means the amounts, which in any event
shall not be 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,
respectively, for the ownership of all of the Property. The Fair Market
Sales Value of the Property shall be determined based on the assumption that,
except for purposes of Section 20 and Section 14(b) hereof, the Property is
in the condition and state of repair required under Section 10 hereof and the
Lessee is in compliance with the other requirements of the Lease Documents.
"FEDERAL FUNDS RATE" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Board of Governors of the Federal Reserve
System (including any such successor, "H.15(519)") for that 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 that day will 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, the "Composite 3:30 P.M. Quotations") for that day under the
caption "Federal Funds Effective Rate". If on any relevant day the
appropriate rate for such day is not yet published in either H.15(519) or the
Composite 3:30 P.M. Quotations, the rate for such day will be the arithmetic
mean of the rates for the last transaction in overnight Federal funds
arranged prior to 9:00 a.m., New York time, on that day by each of three
leading brokers of Federal funds transactions in New York City, selected by
the Agent.
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"FISCAL QUARTER" means a fiscal quarter of any Fiscal Year.
"FISCAL YEAR" means a fiscal year of 12 calendar months which
begins on January 1 and ends on December 31.
"FIXTURES" means all materials, supplies, fixtures, fittings,
appliances, apparatus, equipment, machinery, furnishings, furniture, carpets,
drapes, inventory, chattels and other articles of personal property of any
description, and replacements of any thereof, now or at any time hereafter
owned by Lessee and affixed to or attached to or used in construction upon or
used in any other way in connection with or located upon, under, within or
deemed part of the Real Property.
"FUNDED DEBT" shall mean (i) Indebtedness for Borrowed Money,
excluding Debt subordinated to the obligations of Lessee under the Lease
Documents in a manner satisfactory to the Agent; (ii) capital lease
obligations; (iii) all guarantees, direct or indirect, except (a) those that
guarantee financial obligations that would already be calculated in this
definition and (b) guarantees of obligations arising under Operating Leases;
(iv) standby letters of credit except those financial obligations that would
already be calculated in this definition; and (v) bankers' acceptances.
"FUNDING" has the meaning set forth in Section 4(c) hereof.
"FUNDING OFFICE" means, at any time with respect to any Lessor, the
office of such Lessor at which it is booking or funding its Outstanding
Investment, as set forth (i) opposite such Lessor's name in Schedule I to
this Lease, (ii) in Annex I to the Assignment pursuant to which such Lessor
became a Lessor, a copy of which has been delivered to the Lessee and the
Agent, or (iii) in a written notice from such Lessor to the Lessee and the
Agent advising each of a change in its Funding Office.
"GAAP" means the generally accepted accounting principles
consistently applied with the then effective principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors and
successors.
"GOVERNMENTAL AUTHORITY" means any federal, state, county,
municipal or other governmental or regulatory authority, agency, board, body,
commission, instrumentality, court or quasi-Governmental Authority.
"GOVERNMENT SECURITIES" is defined in Section 19(r).
"GROSS LEASE INVESTMENT BALANCE" means the Lease Investment Balance
plus all then accrued and unpaid Base Rent and Additional Base Rent and other
amounts then due under the Lease Documents.
"GUARANTEED RESIDUAL VALUE" means the Guaranteed Residual Value for
the Property set forth in the Lease Supplement.
"GUARANTY" means any instrument or document by which a Person has
directly or indirectly guaranteed (whether by discount or otherwise),
endorsed (other than for collection or deposit in the ordinary course of
business), discounted with recourse to such Person or with
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respect to which such Person is otherwise directly or indirectly liable for
the indebtedness or obligations of any other Persons, including, without
limitation, indebtedness in effect guaranteed by such Person through any
agreement (contingent or otherwise) to (i) purchase, repurchase or otherwise
acquire such indebtedness, (ii) provide funds for the payment or discharge of
such indebtedness or any other liability of the obligor of such indebtedness
(whether in the form of loans, advances, stock purchases, capital
contributions or otherwise), (iii) maintain the solvency or other financial
condition of the obligor of such indebtedness, or (iv) make payment for any
products, materials, supplies, transportation or services pursuant to an
agreement which requires such payment regardless of the non-delivery or
non-furnishing thereof, if in any such case the purpose or intent of such
agreement is to provide assurance that such indebtedness will be paid or
discharged or that any agreements relating thereto will be complied with or
that the holders of such indebtedness will be protected against loss in
respect thereof.
"HAZARDOUS MATERIAL" means petroleum and petroleum products,
petroleum by-products, radioactive materials, asbestos, gasoline, diesel
fuel, radon, urea formaldehyde, lead-containing materials, polychlorinated
biphenyls, and any other material, gas or substance known or suspected to be
toxic or hazardous which could cause a detriment to, or impair the beneficial
use of, the Property, or constitute a health, safety or environmental risk to
any occupant of the Real Property; and any other materials or substances
defined as or included in the definition of "hazardous substances,"
"hazardous materials," "hazardous wastes," "toxic substances," "toxic
pollutants," "pollutants," "regulated substances," "solid wastes," or
"contaminants" under any applicable Environmental Law.
"IMPROVEMENTS" means all buildings, structures, and other
improvements of every kind existing at any time and from time to time on or
under the Land, together with any and all appurtenances to such buildings,
structures or improvements, including sidewalks, utility pipes, conduits and
lines, parking areas and roadways, and including all Modifications and other
additions to or changes in the Improvements at any time.
"INDEBTEDNESS FOR BORROWED MONEY" means with respect to any Person,
as of the date of determination thereof, (i) any and all of such Person's
indebtedness for borrowed money (including, without limitation, indebtedness
for borrowed money which is subordinated), (ii) any and all of such Person's
conditional sale obligations, (iii) any and all indebtedness secured by any
Lien with respect to any property or asset owned by such Person, regardless
of whether the indebtedness secured thereby shall be of or shall have been
assumed by such Person, and (iv) any and all indebtedness or obligations of
any of the types described in the preceding clauses (i), (ii) and (iii) for
which such Person is liable, directly or indirectly, under a Guaranty;
PROVIDED, HOWEVER, that the obligations of a lessee under a true lease shall
not constitute Indebtedness for Borrowed Money and any indebtedness incurred
by such Person which by the terms of the related agreement is required to be
used to retire a payment obligation to a trade creditor arising from the
purchase by such Person of goods and services acquired for the purpose of
resale in the ordinary course of such Person's business shall not constitute
Indebtedness for Borrowed Money.
"INDEMNIFIED PERSON" means each of the Agent, each Lessor, each of
the respective Affiliates of the Agent and each Lessor and each of their
respective successors, assigns, officers, directors, employees, counsel,
servants, agents and other representatives.
"INSURANCE REQUIREMENTS" means (i) all terms of any insurance
policy covering or applicable to any item of Collateral, (ii) all
requirements of the issuer of any such policy and (iii)
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all requirements of Applicable Law related to insurance of any Governmental
Authority applicable to any item of Collateral, in each case where the
failure to comply with (i), (ii) or (iii) above, individually or in the
aggregate for all such failures, would be reasonably likely to result in a
Material Adverse Effect.
"INVESTMENT" in any Person shall mean:
(a) the acquisition (whether for cash, property, services or
securities or otherwise) of capital stock, bonds, notes, debentures,
partnership or other ownership interests or other securities of such
Person; and
(b) any deposit with, or advance, loan or other
extension of credit to, such Person (other than any such advance,
loan or extension of credit having a term not exceeding 120 days
in the case of unaffiliated Persons and one year in the case of
Lessee Affiliates representing the purchase price of inventory or
supplies purchased in the ordinary course of business) or
guarantee or assumption of, or other contingent obligation with
respect to, Indebtedness for Borrowed Money or other liability of
such Person; and
(c) (without duplication of the amounts included
in (a) and (b)) above any amount that may, pursuant to the
terms of such investment, be required to be paid, deposited,
advanced, loaned or extended to or guaranteed or assumed
on behalf of such Person.
"LAND" means the real property described on Schedule II hereto, and
all easements and appurtenances thereto.
"LEASE ASSIGNEE" is defined in Section 22.
"LEASE ASSIGNMENT" is defined in Section 22.
"LEASE DOCUMENTS" means, this Lease, the Deed, the Deed of Trust,
the Lessor Documents, and each financing statement and other document or
instrument delivered pursuant hereto or thereto.
"LEASE INVESTMENT BALANCE" means, at any time, the Property Cost of
such Property PLUS all fees and expenses of Lessee that Lessee elects to
capitalize (subject to Agent's prior written consent) MINUS amounts
previously paid to the Agent for the account of the Lessors in reduction
thereof pursuant to Section 7(a)(ii) hereof.
"LEASE SUPPLEMENT" means the form of "Lease Supplement" attached as
Exhibit A hereto.
"LEASE TERM" means the "Lease Term" as defined in Section 6.
"LESSOR DOCUMENTS" means the Rent Purchase Agreement and the
Security Agreement.
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"LESSOR LIENS" means Liens on any Property resulting from any act
of, or claim against, the Agent in its individual capacity or as agent for
the Lessors, not related to the transactions contemplated hereby, or arising
out of a Tax payable by Agent and not indemnified by Lessee under this Lease.
"LIABILITIES" means any and all of the Lessee's obligations to the
Agent and the Lessors, howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent, now or hereafter existing, or due
or to become due, which arise out of or in connection with this Agreement or
any other Lease Document.
"LIEN" means any lien, mortgage, security interest, chattel
mortgage, pledge or other encumbrance (statutory or otherwise) of any kind
securing satisfaction of an obligation, including any agreement to give any
of the foregoing, any conditional sales or other title retention agreement,
any lease in the nature thereof, and the filing of or the agreement to give
any financing statement under the Uniform Commercial Code of any jurisdiction
or similar evidence of any encumbrance, whether within or outside the United
States.
"LITIGATION" means any litigation, proceeding (including, without
limitation, any governmental proceeding or arbitration proceeding), claim,
lawsuit and/or investigation (including, without limitation, any
environmental litigation, proceeding, claim, lawsuit and/or investigation)
pending or threatened against or involving Lessee or any Subsidiary or any of
its or their businesses or operations.
"MARGIN" shall mean thirty(30) basis points.
"MATERIAL ADVERSE EFFECT", with respect to any occurrence, failure,
act or omission of any nature, means, individually or in the aggregate, a
materially adverse effect on, or an effect which would materially impair, (i)
the ability of Lessee or any Subsidiary to conduct its business substantially
as now conducted, (ii) the consolidated business, operations, prospects or
financial condition of Lessee and its Subsidiaries, taken as a whole, (iii)
the ability of Lessee to perform any of its obligations (including, without
limitation, those under Section 15 hereof) under the Lease Documents, (iv)
the validity or enforceability of any of the Lease Documents, (v) the
priority or enforceability of any security interest, mortgage or deed of
trust created thereby and intended to be perfected thereunder, (vi) the value
or utility of the Property, or (vii) the ability of the Agent or the Lessors
to exercise any of their rights or remedies under the Lease Documents.
"MATERIAL LITIGATION" means any Litigation or development in any
Litigation which could individually or in the aggregate have a Material
Adverse Effect.
"MEMORANDUM OF LEASE" means the form of Memorandum of Lease
attached as Exhibit G hereto.
"MODIFICATIONS" has the meaning set forth in Section 10(d) hereof.
"MULTIEMPLOYER PLAN" shall mean any multiemployer plan (within the
meaning of section 3(37) of ERISA) to which either the Lessee, any
Subsidiary, or any ERISA Affiliate has an obligation to contribute.
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"NET WORTH" shall mean the aggregate amount, determined on a
consolidated basis for Lessee and its Subsidiaries, of (a) capital stock
(including paid-in capital but excluding any treasury stock, capital stock
subscribed and unissued and other contra-equity accounts) and (b) retained
earnings, less intangibles.
"NON-UNITED STATES PERSON" has the meaning set forth in Section
13(c) hereof.
"OPERATING LEASE" shall mean an operating lease as defined by GAAP.
"OUTSTANDING INVESTMENT" means, with respect to any Lessor as of
any date, the amount determined by multiplying (i) the Lease Investment
Balance at such time by (ii) such Lessor's Commitment Percentage. The
records of the Agent shall be conclusive in the absence of manifest error as
to the Outstanding Investment of each Lessor.
"OVERDUE RATE" shall mean, for any payment, a fluctuating rate per
annum for each day equal to 2% per annum above the rate from time to time
used to determine Base Rent pursuant to Section 7(a)(i), 7(b) or 7(c) hereof.
"PERMITTED CONTEST" means actions taken by a Person to contest in
good faith, by appropriate proceedings, the legality, validity or
applicability to any Property or any interest therein of any Person of (a)
any Lien; (b) any Tax; (c) any judgment, decree or order described in, but
subject to the terms of, Section 9(f); or (d) any Applicable Law; PROVIDED,
that the initiation of any such contest could not reasonably be expected to:
(i) result in, or materially increase the risk of, the imposition of any
civil or criminal liability on any Indemnified Person; or (ii) result in a
Material Adverse Effect; PROVIDED, FURTHER, that, in any event, adequate
reserves are maintained in accordance with GAAP against any adverse
determination of any such contest.
"PERMITTED LESSOR LIENS" means any Lien (i) in favor of the Agent
created by or arising under or in connection with this Lease or the other
Lease Documents, (ii) for Taxes payable by the Agent which are not yet
delinquent or are the subject of a Permitted Contest, (iii) of mechanics,
materialmen, laborers, employees or suppliers and similar liens arising by
operation of Applicable Law, incurred by the Agent in the ordinary course of
business for sums (not involving any Debt) which are not yet delinquent or
are the subject of a Permitted Contest, or (iv) arising out of any judgment
or award against the Agent which has been adequately bonded to protect the
Lessee's interests.
"PERMITTED LIENS" shall mean:
(a) any Liens for current Taxes not yet due and
payable or being contested by a Permitted Contest;
(b) Liens in favor of the Agent and created by or
arising under or in connection with this Lease or the other
Lease Documents;
(c) Liens of mechanics, materialmen, laborers,
employees or suppliers and similar liens arising by operation of
Applicable Law, incurred by the Lessee in the ordinary course
of business for sums (not involving any Debt) which are not yet
delinquent or are the subject of a Permitted Contest,
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(d) Liens arising out of any judgment or award against
the Lessee which have been adequately bonded to protect the
Agent's interests (on behalf of the Lessors); and
(e) All other Liens approved by Agent in writing.
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, limited liability corporation or
partnership, joint venture, joint stock company, Governmental Authority or
other entity of any kind.
"PERSONAL PROPERTY" means:
(a) all currently owned or hereafter acquired personal
property necessarily incidental to the use or enjoyment of the Real Property
subject to this Lease, and all additions and accessions thereto and
replacements therefor;
(b) all accounts, contract rights, general intangibles,
warehouse receipts and other documents, instruments, and other rights to the
payment of money or performance of services, now existing or hereafter
arising, in any way relating to the acquisition, operation or sale of the
Real Property, Fixtures, or any part thereof that is subject to this Lease,
or the construction, sale, lease, operation or other disposition of any
Improvements subject to this Lease, including without limitation construction
and architects' contracts, plans and specifications, permits, licenses and
approvals, engineering, consulting and management contracts, purchase
agreements and deposits, and leases and lease deposits;
(c) all choses in action, rights, claims and causes of action
(accrued and hereafter accruing) against any Person to the extent the same
arise out of or relate to the Property subject to this Lease or Lessee's
rights in the Property subject to this Lease; and
(d) all contract rights, development rights, development
entitlements, the Existing Service Contract Obligations, and other general
intangibles arising out of or pertaining to the use, occupancy or ownership
of any of the Property subject to this Lease, including the right to use the
name, tradename and/or style of the Property subject to this Lease.
"PLAN" shall mean any employee benefit plan (within the meaning of
section 3(3) of ERISA) maintained or contributed to by the Lessee, any
Subsidiary, or any ERISA Affiliate, other than a Multiemployer Plan.
"PROCEEDS" has the meaning set forth in Section 14(b)(iii)(x)
hereof.
"PROPERTY" means the Land, the Improvements, the Fixtures and the
Personal Property.
"PROPERTY COST", with respect to any Property means the amount of
the acquisition cost of the Property as set forth in the Lease Supplement.
"PROPERTY INFORMATION PACKAGE" has the meaning set forth in Section
2(b) hereof.
"PURCHASE OPTION" has the meaning set forth in Section 15 hereof.
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"QUICK RATIO" means the sum of cash, short term investments, net
accounts receivable and Government Securities pledged in accordance with
Section 19(r), divided by current liabilities.
"REAL PROPERTY" means the Land, the Improvements and the Fixtures.
"REAL PROPERTY PURCHASE AND SALE AGREEMENT" means the Real Property
Purchase and Sale Agreement dated as of June 7, 1996, between Seller and
Lessee as "Purchaser", to be assigned to Lessor as of the Closing Date.
"RECEIVED REPORTS" means the written reports described on Exhibit U
attached hereto.
"RECONSTRUCTED PROPERTY" has the meaning set forth in Section 17(d)
hereof.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System.
"RELEASE" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leachate, dumping or disposing of
a Hazardous Material into the Environment.
"RENT PAYMENT DATE" means the last day of each Rent Period.
"RENT PERIOD" means:
(1) to the extent that Property Cost is funded at the Euro-Dollar Rate
pursuant to Section 7(a)(i) hereof, the period commencing initially on the
Closing Date and ending at the end of the fifteenth day of the calendar month
in which the Closing Date occurs and thereafter each period commencing on the
day immediately succeeding the close of the immediately preceding Rent Period
and ending one month thereafter; PROVIDED, that:
(i) any Rent Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Rent Period shall end on the
next preceding Euro-Dollar Business Day; and
(ii) any Rent Period which begins on the last Euro-Dollar Business
Day of the calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Rent Period)
shall end on the last Euro-Dollar Business Day of a calendar month; and
(2) to the extent that during any Rent Period the Property Cost is
funded in whole or in part at the Base Rate pursuant to Section 7(b) or 7(c)
hereof, then the Rent Period (as determined by paragraph (1) above in this
definition of "Rent Period") shall consist of the following two portions,
namely, the "Base Rate Portion" (which shall be the period during such Rent
Period during which the provisions of Section 7(b) or 7(c) are applicable)
and the "EURO-DOLLAR PORTION" (which shall be the period during such Rent
Period during which the provisions of Section 7(b) or 7(c) are not
applicable).
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Notwithstanding the above, any Rent Period which would otherwise extend
beyond the Termination Date shall end on the Termination Date.
"RENT PURCHASE AGREEMENT" means the agreement substantially in the
form attached hereto as Exhibit S.
"RENT PURCHASER" has the meaning set forth in Section 23(a) hereof.
"REPORTABLE EVENT" shall mean, with respect to any Single Employer
Plan, an event described in section 4043(b) of ERISA, other than an event as
to which the notice requirement is waived under applicable Pension Benefit
Guaranty Corporation regulations.
"REQUIRED LESSORS" means, as of any date of determination, with
respect to any approval, action, waiver, direction or consent, Lessors whose
Outstanding Investments aggregate at least 51% of Lease Investment Balance as
of such date of determination.
"REQUIRED MODIFICATION" has the meaning set forth in Section 10(d).
"RISK AMOUNT" means, at any time in question, the result of
subtracting Guaranteed Residual Value from Lease Investment Balance.
"SALE NOTICE" has the meaning set forth in Section 14(b)(i) hereof.
"SECURITY AGREEMENT" means the agreement substantially in the form
attached hereto as Exhibit T.
"SELLER" has the meaning set forth in paragraph 2 of the Recitals.
"SELLER ANCILLARY TRANSFER DOCUMENTS" means, collectively, the
documents to be delivered by the Seller pursuant to Section 7 of the Real
Property Purchase and Sale Agreement.
"SIGNING CERTIFICATE" means a certificate in the form of Exhibit M
hereto executed by an Authorized Officer of Lessee and delivered to Agent at
least five Business Days prior to the date on which Lessee wants Agent to
rely thereon.
"SIGNING OFFICER" means an officer of Lessee designated in the most
recent Signing Certificate of Lessee.
"SINGLE EMPLOYER PLAN" shall mean any Plan that is subject to Title
IV of ERISA.
"SUBORDINATED DEBT" means indebtedness of Lessee which is
subordinated to the prior payment of the Liabilities on terms and conditions
acceptable to the Agent; PROVIDED, that any payments of principal which are
scheduled to occur prior to the last occurring Termination Date shall not
constitute Subordinated Debt.
"SUBSIDIARY" means a corporation of which Lessee and/or its other
Subsidiaries own, directly or indirectly, such number of outstanding shares
as have more than 50% of the ordinary voting power for the election of such
corporation's directors.
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"SUMITOMO BANK" means The Sumitomo Bank, Limited.
"TANGIBLE NET WORTH" shall mean the aggregate amount of the capital
stock accounts (including paid-in-capital and excluding treasury shares) plus
(or minus in the case of a deficit) the retained earnings of the Lessee
determined on a consolidated basis, plus non-current financial obligations
subordinated to payment of the obligations of Lessee under the Lease
Documents in a manner satisfactory to the Agent.
"TAXES" has the meaning set forth in Section 13(a) hereof.
"TERMINATION DATE" means the date on which the lease of the
Property hereunder terminates.
"TERMINATION EVENT" shall mean (a) a Reportable Event, (b) the
withdrawal by the Lessee or any ERISA Affiliate from a Single Employer Plan
during a plan year in which it was a substantial employer (within the meaning
of section 4001(a)(2) or 4062(e) of ERISA, (c) the termination of a Single
Employer Plan, or the filing of a notice of intent to terminate a Single
Employer Plan under section 4041(c) of ERISA, (d) the institution of
proceedings to terminate, or the appointment of a trustee with respect to, a
Single Employer Plan by the PBGC, (e) any other event or condition which
could constitute grounds under section 4042(a) of ERISA for the termination
of, or the appointment of a trustee to administer, any Single Employer Plan,
or (f) the imposition of a Lien pursuant to section 412 of the Code or
section 302 of ERISA as to the Lessee or any ERISA Affiliate.
"TERMINATION OPTION" has the meaning set forth in Section 14(b)(i)
hereof.
"TITLE COMPANY" means First American Title Insurance Company.
"TOTAL CAPITALIZATION" shall mean Funded Debt plus Net Worth.
"TOTAL COMMITMENT" means the amount set forth as the Total
Commitment on Schedule I hereto.
"UCC" shall mean the Uniform Commercial Code, as in effect from
time to time in any applicable jurisdiction.
"UNMATURED EVENT OF DEFAULT" means any event which if it continues
uncured will, with lapse of time or notice or lapse of time and notice,
constitute an Event of Default.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF LESSEE.
The Lessee represents, warrants and covenants to the Lessors that,
except as expressly set forth in the Received Reports:
(a) CORPORATE MATTERS. Lessee and each Subsidiary (i) are duly
incorporated and validly existing corporations in good standing under the
laws of their state of incorporation, (ii) have full power, authority and
legal right to own and operate their properties and conduct their business as
currently conducted and, in the case of Lessee, to execute, deliver and
perform
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its obligations under the Lease Documents, (iii) are duly qualified to do
business as a foreign corporation in good standing in each jurisdiction in
which their ownership or leasing of properties or the conduct of their
business requires such qualification, except where the failure so to qualify
would not result in a Material Adverse Effect, and (iv) in the case of
Lessee, has obtained all necessary consents, licenses, authorizations or
approvals of, and exemptions by, such Governmental Authorities as may be
necessary to authorize the execution, delivery and performance of the Lease
Documents, except where the failure so to obtain the same would not result in
a Material Adverse Effect.
(b) PROPERTY INFORMATION PACKAGE. Lessee has furnished to the
Agent a schedule describing the Land and all existing Improvements thereon
and thereto to be purchased by the Lessors and leased by the Lessors to
Lessee pursuant to Section 4 hereof and specifically including all of the
items set forth on Exhibit N hereto (the "PROPERTY INFORMATION PACKAGE"); and
all information contained in the Property Information Package is true and
complete.
(c) AUTHORIZATION; NO CONFLICT. The execution, delivery and
performance of the Lease Documents by Lessee (i) are within its corporate
powers, (ii) have been duly authorized by all necessary corporate action,
(iii) do not require any governmental approval, consent, filing, recording,
notice or other action which has not been previously obtained and remains in
full force and effect, (iv) do not and will not contravene or conflict with
any provision of Applicable Law or of Lessee's charter or by-laws, and (v) do
not and will not contravene or conflict with, or cause any Lien to arise
under, any provision of any agreement binding upon Lessee, any Subsidiary of
Lessee or any of their respective properties.
(d) BINDING AGREEMENT. This Agreement is a legal, valid and
binding obligation of Lessee, enforceable against Lessee in accordance with
its terms, except as such enforcement may be limited by the application of
bankruptcy, moratorium, reorganization or other similar laws affecting the
rights of creditors generally or by general principles of equity (whether or
not a proceeding is brought in a court of law or equity). Each of the other
Lease Documents to be executed by Lessee, when duly executed and delivered by
Lessee, will be a legal, valid and binding obligation of Lessee, enforceable
against Lessee in accordance with its terms, except as such enforcement may
be limited by the application of bankruptcy, moratorium, reorganization or
other similar laws affecting the rights of creditors generally or by general
principles of equity (whether or not a proceeding is brought in a court of
law or equity).
(e) FINANCIAL STATEMENTS. (i) Lessee has furnished to the Agent
true and correct copies of Lessee's audited consolidated financial statements
as at December 31, 1995 and unaudited consolidated financial statements as at
March 31, 1996 and June 30, 1996. Such financial statements have been
prepared in conformity with GAAP (subject to normal recurring accruals and
adjustments in the case of such unaudited consolidated financial statements,
and subject to the information set forth in the footnotes to such audited
consolidated financial statements), and fairly present the financial
condition of Lessee and its Subsidiaries as at such dates and the results of
their operations for the periods then ended.
(ii) Since the dates of the financial statements referred to
in Section 2(e)(i) hereof, there has been no Material Adverse Effect.
(f) LITIGATION AND CONTINGENT LIABILITIES. No Material Litigation
is pending or, to the knowledge of Lessee, threatened against Lessee or any
Subsidiary not provided for or
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disclosed in the financial statements referred to in Subsection (e) hereof.
Neither Lessee nor any of its Subsidiaries has any contingent liabilities
(other than any liability incident to such Material Litigation) not provided
for or disclosed in the financial statements referred to in Subsection (e)
hereof which could result in a Material Adverse Effect.
(g) TITLE TO PROPERTY.
(i) Effective as of the Closing Date, immediately prior to
the transfer to Lessor, Seller will own and hold marketable title to the
Property, free and clear of all liens (including, without limitation, Liens),
covenants, conditions, restrictions, rights of way, easements, and
encumbrances of any kind or character whatsoever, except for the Permitted
Liens. Without limiting the generality of the foregoing, there are no
unrecorded easements affecting the Real Property known to Lessee, no
encroachments on the Real Property by improvements on adjoining property, and
no encroachments by the Improvements on any adjoining property, easements or
public or private streets.
(ii) Excluding the Property and any other real property leased
from Agent, as agent, Lessee and its Subsidiaries own and hold good and
marketable title to all of their respective material property, including
their respective assets and property reflected in the financial statements
referred to in Section 2(e) hereof or acquired since such dates (other than
assets and property sold or disposed of in the ordinary course of business),
free and clear of any Lien except those referred to in Section 2(h) hereof.
(h) LIENS. Excluding the Property, none of the assets of Lessee
or any Subsidiary is subject to any Lien, except any Permitted Lien.
(i) CHIEF EXECUTIVE OFFICE. The location of the principal place
of business and chief executive office of Lessee is as follows: 3970 North
First Street, San Jose, California 95134.
(j) ERISA. (i) Each Plan has been maintained and operated in all
material respects in accordance with all applicable laws, including ERISA and
the Code, and each Plan intended to qualify under section 401(a) of the Code
so qualifies. No Reportable Event has occurred in the last five years, and
the present value of all benefits under all Single Employer Plans (based on
those assumptions used to fund such Single Employer Plans) did not, in the
aggregate, as of the last annual valuation date applicable thereto, exceed
the actuarial value of the assets of such Single Employer Plans allocable to
such benefits. No material liability has been, and no circumstances exist
pursuant to which any material liability could be, imposed upon the Lessee or
any ERISA Affiliate (i) under sections 4971 through 4980B of the Code,
sections 502(i) or 502(l) of ERISA, or under Title IV of ERISA with respect
to any Single Employer Plan or Multiemployer Plan, or with respect to any
plan heretofore maintained by the Lessee or any ERISA Affiliate, or any
entity that heretofore was an ERISA Affiliate, (ii) for the failure to
fulfill any obligation to contribute to any Multiemployer Plan, or (iii) with
respect to any Plan that provides post-retirement welfare coverage (other
than as required pursuant to Section 4980B of the Code). Neither the Lessee
nor any ERISA Affiliate has received any notification that any Multiemployer
Plan is in reorganization or has been terminated within the meaning of Title
IV of ERISA, and no Multiemployer Plan is reasonably expected to be in
reorganization or to be terminated.
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(ii) The execution, delivery and performance of the Lease
Documents and the consummation of the transactions contemplated hereby and
thereby will not involve any "prohibited transaction" within the meaning of
ERISA or the Code.
(k) INVESTMENT COMPANY ACT. Neither Lessee nor any Subsidiary is
an "investment company" nor a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as
amended.
(l) PUBLIC UTILITY HOLDING COMPANY ACT. Neither Lessee nor any
Subsidiary is a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
(m) REGULATIONS G, T, U AND X. Lessee is not engaged principally,
or as one of its important activities, in the business of extending credit
for the purpose of purchasing or carrying "margin stock" within the meaning
of Regulation G, T, U or X of the Board of Governors of the Federal Reserve
System. None of Lessee or any Affiliate of Lessee or any Person acting on
their behalf has taken or will take action to cause the execution, delivery
or performance of this Agreement, the other Lease Documents, the transactions
contemplated hereby or the use of proceeds of the sale of the Property to the
Lessor to violate Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System.
(n) LABOR CONTROVERSIES. There are no labor controversies pending
or threatened against Lessee or any of its Subsidiaries which, if adversely
determined, could have a Material Adverse Effect.
(o) TAX STATUS. (i) All tax returns, reports and forms required to
be filed with any domestic or foreign taxing authority in connection with any
activities or assets of Lessee or any Subsidiary have been filed, except
where the failure to file any such return, report or form would not have any
Material Adverse Effect.
(ii) All Taxes required to be paid with respect to the
activities or assets of Lessee and its Subsidiaries have been duly paid or
provisions deemed appropriate were made by Lessee and its Subsidiaries, on
the books and records therefor, except such amounts (1) as are subject to a
Permitted Contest or (2) the non-payment of which would not have a Material
Adverse Effect.
(p) NO DEFAULT. No event has occurred and no condition exists
which, upon the execution and delivery of this Agreement or upon the
consummation of the transactions to occur on any Closing Date, will
constitute an Event of Default or Unmatured Event of Default.
(q) COMPLIANCE WITH APPLICABLE LAWS. Lessee and its Subsidiaries
are in compliance with the requirements of all Applicable Laws, a breach of
which might result in a Material Adverse Effect.
(r) LICENSES, ETC. Neither Lessee nor any of its Subsidiaries has
failed to obtain any licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its respective properties or to
the conduct of its respective business, which violation or failure to obtain
might result in a Material Adverse Effect.
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(s) INTELLECTUAL PROPERTY. There are no patents, patent rights,
trademarks, service marks, trade names, copyrights, licenses or other
intellectual property rights with respect to the Property, or proprietary,
patented or patentable modifications or parts used in connection with the
Property, the absence of which would have a Material Adverse Effect. Lessee
owns and uses the Property free from known conflicts with the rights of
others.
(t) SUBJECTION TO REGULATION. Neither the Agent nor any Lessor
will, solely by reason of entering into the Lease Documents or the
consummation and performance of the transactions contemplated thereby (other
than upon the exercise of remedies under the Lease and without regard to any
business in which the Agent or any Lessor may presently be engaged, including
the banking business), (i) become subject to ongoing regulation by any
Governmental Authority as a company engaged in the business of Lessee in any
jurisdiction or (ii) become subject to any other ongoing regulation of its
operations by any Governmental Authority (other than any taxing authority).
(u) IMPOSITIONS. No Tax (other than such payments contemplated by
Sections 7(a)(iii), 13, 14, 17, 19 and 29 hereof) shall result from the
transfer, delivery or leasing of any Property (or any interest therein) as
contemplated by the Lease Documents, except such Taxes that have been paid in
full on or prior to such Closing Date.
(v) INSURANCE. All insurance coverages required by Section 11 of
this Lease are in full force and effect and there are no past due premiums in
respect of any such insurance. Lessee and its Subsidiaries have at their own
cost and expense obtained in commercially reasonable kind and form and with
financially sound and reputable insurers, all risk of physical loss or damage
insurance covering the assets of Lessee and its Subsidiaries wherever the
same may be located, insuring against the risks of fire, explosion, theft and
such other risks as are prudently insured against by corporations engaged in
the same business and similarly situated with Lessee and its Subsidiaries
(and specifically including vandalism, malicious mischief coverage, loss
overboard and breakage), in an amount usually carried by corporations engaged
in the same business and similarly situated with Lessee and its Subsidiaries.
(w) BROKERS, ETC. Lessee has not engaged or authorized any
broker, finder, investment banker or other third party to act on its behalf,
directly or indirectly, as a broker, finder, investment banker, agent or in
any other like capacity in connection with any of the Lease Documents or the
transactions contemplated thereby, except for Lund Financial Corporation, for
whose commission Lessee shall be liable solely.
(x) SECURITY INTERESTS.
(i) Assuming the Memorandum of Lease and the Deed of Trust are
recorded in the office of the county recorder of the county in which the Land
is located, the Agent, on behalf of the Lessors, will have a first priority
perfected lien in Lessee's interest in the Real Property free and clear of
all Liens other than Permitted Liens.
(ii) Assuming the UCC-1 financing statements referred to in
Section ? hereof are filed in the offices of the California Secretary of
State, the Agent, on behalf of the Lessors, will have a first priority
perfected security interest in the Personal Property free and clear of all
Liens other than Permitted Liens.
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(y) ENVIRONMENTAL. (i) Lessee and its Subsidiaries are in
compliance with all applicable Environmental Laws and Environmental Permits,
and to Lessee's knowledge, no circumstances exist that would prevent or
interfere with such compliance during the term of the Lease, except to the
extent that any such non-compliance, individually or in the aggregate, would
not have a Material Adverse Effect;
(ii) Lessee and its Subsidiaries have obtained all
Environmental Permits required for the occupancy and operation of their
property, equipment, and facility, except to the extent that any such failure
to obtain such Environmental Permits, individually or in the aggregate, would
not have a Material Adverse Effect;
(iii) there are no past, pending, or threatened Environmental
Claims against Lessee or its Subsidiaries, and Lessee is not aware of any
facts or circumstances which could reasonably be expected to form the basis
for any Environmental Claim against Lessee or its Subsidiaries, except to the
extent that any such Environmental Claims if adversely decided, individually
or in the aggregate, would not have a Material Adverse Effect;
(iv) except as expressly set forth in the Environmental Audit
and on Exhibit R, no Hazardous Materials are present, no Releases of
Hazardous Materials have occurred at, from, in, on, under, to, or adjacent to
the Property during such time as Lessee has been in possession of the
Property, and to Lessee's knowledge, no Releases of Hazardous Materials have
ever occurred at, from, in, on, under, to, or adjacent to the Property;
(v) Lessee and its Subsidiaries have not transported, disposed
of, or arranged for the treatment, storage, handling or disposal of any
Hazardous Materials at any off-site location which is an Environmental
Cleanup Site;
(vi) No facility or property now owned, operated or leased by
Lessee or its Subsidiaries is or was previously an Environmental Cleanup
Site; and no facility or property previously owned, operated or leased by
Lessee or its Subsidiaries was an Environmental Cleanup Site during the time
of Lessee's ownership.
(vii) There are no Liens arising under or pursuant to
Environmental Law on any property, facility, or equipment currently owned,
operated or leased by Lessee or its Subsidiaries, and there are no facts,
circumstances or conditions that could reasonably be expected to result in
the imposition of such a Lien; and
(viii) Costs of compliance with applicable Environmental Laws
and Environmental Permits in connection with the Property or Lessee's or its
Subsidiaries' operations, are not expected to materially increase during the
term of this Lease.
(z) NO BURDENSOME AGREEMENTS. Neither Lessee nor any Subsidiary
is a party to or bound by any agreement or instrument or subject to any
corporate or other restriction, the performance or observance of which now
has or, as far as Lessee or any Subsidiary can reasonably foresee, may have a
Material Adverse Effect.
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(aa) LAND USE REGULATIONS. The present use and operation of the
Real Property is authorized under existing Applicable Laws and other land use
regulations applicable to the Real Property, and to Lessee's knowledge there
is no present plan, study or effort by any Governmental Authority or any
private party or entity which in any way adversely affects or would adversely
affect the continued authorization of the present use and operation of the
Real Property; there are no legal actions pending or to Lessee's knowledge
threatened against the Property, nor, to Lessee's knowledge are there any
violations of Applicable Laws, affecting or arising out of the use, operation
or occupancy of the Property by Persons other than Lessee or its Affiliates;
there are no legal actions pending or to Lessee's knowledge threatened
against the Lessee or any of its Affiliates, nor, are there any violations of
Applicable Laws, affecting or arising out of the use, operation or occupancy
of the Property by Lessee or any of its Affiliates;
(bb) DEVELOPMENT PLANS. There are no existing or, to Lessee's
knowledge, proposed or contemplated plans to widen, modify or realign any
street or highway, or any existing or, proposed or contemplated eminent
domain proceedings that would adversely affect the Property; and, there are
no intended public improvements which would result in any charge being levied
or assessed against, or in the creation of any lien upon, the Property.
(cc) UTILITIES. Water, sewage disposal, gas and electrical
facilities and utilities are available to or at the boundaries of the Land
adequate for the present and future anticipated use of the Land and that are
in accordance with all applicable laws, statutes, ordinances, rules, and
regulations of all public or quasi-public authorities having or claiming
jurisdiction over these utilities or facilities.
(dd) MECHANICS' LIEN CLAIMS. There are no claims for labor
performed for or materials furnished to or with respect to the Land that
could give rise to a mechanics' or materialmen's lien on the Land or any
portion thereof.
(ee) PERMITS AND LICENSES. Lessee holds all permits, governmental
approvals and licenses necessary to own, occupy and operate the Land as its
is currently being used. Lessee has not received any notice of revocation or
non-renewal of any such permits or licenses. Lessee shall not modify or
rescind any of the permits and licenses, and shall use its best efforts to
obtain any renewal or extension of such permits and licenses as may be
required by Applicable Law in the ordinary course of business. Lessee has
taken no action, and no condition presently exists arising out of the
Lessee's activities in connection with the operation of the Land, that would
preclude transfer and/or issuance of any such permits or licenses.
(ff) DEFECTS. To Lessee's knowledge there are no defects in the
Land that would require the expenditure of more than a De Minimis Amount to
repair or correct. Lessee has received no written notice from any
governmental authority, any insurance company or any board of fire
underwriters, or other body exercising similar functions with respect to the
need for any material repairs or corrections to the Land.
(gg) NOTICE FROM INSURANCE CARRIERS. Lessee has not received any
written notice from any insurance carrier which has issued a policy of
insurance with respect to the Land of any defects or deficiencies or
requesting the performance of any repairs, alterations or other work with
respect to the Land.
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(hh) DISCLOSURE GENERALLY. The representations and statements made by
or on behalf of Lessee in connection with this Lease, including
representations and statements in each of the Lease Documents, do not contain
any untrue statement of a material fact or omit to state a material fact or
any fact necessary to make the representations made not materially
misleading. No written information, exhibit, report or financial statement
furnished by Lessee to Agent or any Lessor in connection with this Lease, or
any Lease Document, contains any material misstatement of fact or omits to
state a material fact or any fact necessary to make the statements contained
therein not materially misleading.
(ii) SOLVENCY. Lessee is, and after giving effect to the transactions
contemplated hereby, will be, Solvent. "Solvent" means that the aggregate
present fair saleable value of Lessee's assets is in excess of the total
amount of its probable liability on its existing debts as they become
absolute and matured, Lessee has not incurred debts beyond its foreseeable
ability to pay such debts as they mature, and Lessee has capital adequate to
conduct the business it is presently engaged in or is about to engage in.
SECTION 3. CONDITIONS TO CLOSING. The obligation of the Lessors to
acquire the Property to be purchased and leased on the Closing Date is
subject to: (I) receipt of a Closing Date Notice for the Closing Date at
least five Euro-Dollar Business Days prior to the Closing Date; (II)
performance by the Lessee of all of its obligations under this Lease required
to be performed on and as of the Closing Date; (III) the fact that no Event
of Loss has occurred with respect to any of the Property to be purchased and
leased on the Closing Date; and (IV) the satisfaction of the following
further conditions:
(a) receipt by the Agent on behalf of the Lessors of
the Assignment of Real Property Purchase and Sale Agreement duly
executed by the Lessee;
(b) receipt by the Agent on behalf of the Lessors of
the Deed and the Seller Ancillary Transfer Documents duly executed
(and notarized, where applicable) by the Seller;
(c) on and as of the Closing Date no Event of Default
or Unmatured Event of Default shall have occurred and be continuing;
(d) the representations and warranties contained in
this Lease and the other Lease Documents which have then been
executed and delivered by the Lessee shall be true on and as of the
Closing Date as though made on and as of the Closing Date, the
Lessors shall have good and marketable title to the Property to be
purchased and leased on the Closing Date, free and clear of any and
all Liens other than Permitted Liens;
(e) receipt by the Agent on behalf of the Lessors of
certified copies of all corporate action taken by the Lessee to
authorize the execution, delivery and performance of this Lease and
the other Lease Documents delivered on the Closing Date, good
standing certificates of the Lessee in its state of incorporation
and in states where Lessee is required to qualify to do business,
together with a certificate of the Secretary or Assistant Secretary
of Lessee as to the charter, by-laws of Lessee and such other
corporate documents and other papers as the Agent may reasonably
request;
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(f) on the Closing Date the filing for recording of the
Memorandum of Lease in the office of the county recorder of the
county in which the Land is located shall have duly occurred, or
the same shall have been delivered to Title Company with recording
instructions satisfactory to the Agent;
(g) on the Closing Date the filing for recording of the
Deed of Trust in the office of the county recorder of the county in
which the Land is located shall have duly occurred, or the same
shall have been delivered to Title Company with recording
instructions satisfactory to the Agent;
(h) on the Closing Date all filings or recordings
necessary or advisable, in the opinion of the Agent (including, but
not limited to, filings of UCC-1 financing statements in the office
of the California Secretary of State) to perfect the right, title
and interest of the Agent on behalf of the Lessors in and to the
Personal Property purchased and leased on the Closing Date shall
have been duly made (or duly executed and appropriately completed
UCC-1 financing statements shall have been delivered to a filing
service satisfactory to the Agent with filing instructions
satisfactory to the Agent);
(i) receipt by the Agent on behalf of the Lessors of
opinion of Morrison & Foerster LLP, special counsel for the Lessee,
dated the Closing Date, and substantially in the form included in
Exhibit F hereto (the Lessee hereby instructing such counsel so to
deliver such opinion to the Agent);
(j) receipt by the Agent on behalf of the Lessors of
the evidence of insurance referred to in Section 11(e) hereof;
(k) receipt by the Agent on behalf of the Lessors of a
certificate, dated the Closing Date, of a duly Authorized Officer
of Lessee as to the incumbency, and setting forth a specimen
signature, of each of the persons (i) who has signed this Lease on
behalf of Lessee; (ii) who will sign the other applicable Lease
Documents on behalf of Lessee; and (iii) who will, until replaced
by other persons duly authorized for that purpose, act as the
representatives of Lessee for the purpose of signing documents in
connection with the Lease Documents and the transactions
contemplated hereby;
(l) receipt by the Agent on behalf of the Lessors of a
certificate, dated the Closing Date, of an Authorized Officer of
Lessee stating that the representations and warranties contained in
Section 2 hereof are true and correct on and as of the Closing Date
as though made on and as of the Closing Date;
(m) receipt by the Agent on behalf of the Lessors of
such other documents and information with respect to the matters
contemplated hereby as the Agent or any Lessor may reasonably
request;
(n) on the Closing Date, the Lessee shall have paid to
the Agent for the account of the Lessors (pro rata according to
their respective Commitment Percentages) a fee equal to 0.45% of
the Commitment on the Closing Date;
(o) on the Closing Date, the Lessee shall have paid, or
reimbursed the Agent, for all costs and expenses (including without
limitation the fees of counsel in the
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amount of $50,000, and disbursements of counsel) incurred by it in
connection with the negotiation, execution and delivery hereof and of the
other Lease Documents on the transactions occurring on the Closing Date;
provided, however, at Lessee's option (to be elected in writing prior to
the Closing Date), the same may be capitalized and added to the Lease
Investment Balance;
(p) Agent shall have received on behalf of the Lessors
an Appraisal in form and substance satisfactory to Agent, as to the
Fair Market Sales Value of the Property as of the Closing Date and
as of the end of the Lease Term;
(q) Agent shall have received on behalf of the Lessors
an Environmental Audit of the Real Property in form and substance
acceptable to Agent in its sole and absolute discretion; Agent
acknowledges receipt and approval of both the Phase I Environmental
Site Assessment Report dated July 23, 1996, the Environmental Audit
titled Limited Site Assessment and dated August 22, 1996, both
prepared by SECOR International, Inc., and based thereon, Agent
acknowledges that this condition 3(q) has been satisfied;
(r) Agent shall have received a Signing Certificate
from Lessee;
(s) Lessee shall be satisfied in its sole and absolute
discretion as to the accounting treatment that will be applied to
the transaction contemplated by this Agreement and the other Lease
Documents; and
(t) No occurrence, failure, act or omission of any
nature shall have occurred that results in a Material Adverse
Effect.
SECTION 4. PURCHASE AND LEASE OF PROPERTY.
(a) PURCHASE BY LESSOR AND LEASE BY LESSEE. On the Closing Date,
upon satisfaction or waiver of each of the conditions set forth in Section 3
hereof:
(i) pursuant to the Deed and Assignment, the
Seller Ancillary Transfer Documents and the Real Property Purchase
and Sale Agreement, Lessee shall cause the Seller to transfer to
the Agent on behalf and for the benefit of the Lessors, and the
Agent shall purchase the Property on behalf and for the benefit of
the Lessors;
(ii) in consideration therefor, the Agent, on
behalf and for the benefit of the Lessors, shall pay to the Seller
the amount provided for in Section 4(d) hereof; and
(iii) the Agent, on behalf of the Lessors, shall
lease to Lessee the Property so purchased by the Agent (on behalf
of the Lessors) from Seller on such Closing Date, and Lessee shall
accept delivery of, and lease from the Lessors such Property
pursuant to this Lease.
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(b) EACH LESSOR TO HAVE AN UNDIVIDED INTEREST. Each
Lessor shall hold an undivided interest in the Property purchased
from Seller and leased to Lessee such interest being equal to such
Lessor's Commitment Percentage of the Property Cost.
(c) FUNDING TO AGENT. On the Closing Date, subject to
the terms and conditions hereof, and in reliance on the
representations and warranties contained herein or made pursuant
hereto, each Lessor agrees severally to transfer to the Agent on
such Closing Date an amount equal to the product of (i) Property
Cost specified in the Closing Date Notice with respect thereto,
MULTIPLIED by (ii) such Lessor's Commitment Percentage (each such
transfer being referred to herein as a "FUNDING"). Remittances
pursuant to this Section 4 shall be made in immediately available
federal funds by wire transfer to the account of the Agent set
forth below (or as otherwise specified by the Agent to each Lessor
from time to time not less than three calendar days prior to the
date of the requested Funding) and must be received by the Agent by
11:00 a.m., New York time on the Closing Date:
Morgan Guaranty Trust Company of New York
ABA Routing No. 021 000 238
For credit to: The Sumitomo Bank Limited, New York Branch
Acct. No.: 631-28-256
Further Credit to: Sumitomo Bank Leasing and Finance, Inc.
Acct. No.: 283 572
In no event shall any Lessor be required to provide funds under
this Agreement in an aggregate amount exceeding such Lessor's
Commitment. In no event shall the Lessors be obligated to acquire
Property hereunder in excess of an Property Cost that is greater
than the Total Commitment.
(d) FUNDING BY AGENT. On the Closing Date, upon
satisfaction or waiver of each of the conditions set forth in
Section 3 hereof, in consideration of the acquisition of Property
by the Agent on behalf of the Lessors, the Agent, on behalf and for
the benefit of the Lessors, shall pay to the escrow holder under
the Real Property Purchase and Sale Agreement, in accordance with
the instructions set forth below, an amount equal to the Property
Cost. Such payment shall be in immediately available federal funds
remitted by wire transfer to the account of Lessee specified below
or to such other account (at a commercial bank in the continental
United States) of Lessee as may be specified by it in the Closing
Date Notice with respect to the Closing Date.
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ESCROW HOLDER ACCOUNT:
Bank: Union Bank -- Los Angeles
for Office No. 715
1800 Harrison Street
Oakland, California 94612
ABA Routing #: 1220 00 496
Account #: 715 00 820 26
Payee: First American Title Guaranty Company
Reference: Office No. 282-05
Escrow No. 510875
Escrow Officer: Susan Melton
(e) ACKNOWLEDGMENT BY LESSEE OF ACCEPTANCE AND
SUITABILITY OF PROPERTY. On the Closing Date, execution and
delivery by Lessee of the Lease Supplement shall constitute: (i)
acknowledgment by Lessee that the Property has been delivered to
Lessee in good condition and has been accepted for lease hereunder
by Lessee as of such Closing Date and (ii) acknowledgement by
Lessee that the Property is subject to all of the covenants, terms
and conditions of this Lease, such Lease Supplement and any other
applicable Lease Documents.
(f) TRANSFER TO LESSEE UPON FAILURE TO FUND. If on the
Closing Date Seller shall have failed to receive the Property Cost
for the Property to be paid for on the Closing Date pursuant to
Section 4(d) hereof, then upon request of Lessee, the Agent, on
behalf of the Lessors, shall transfer to Lessee, on an "as-is"
"where-is" basis and without any representation or warranty of any
kind, express or implied, whatever title to the Property it may
have by quitclaim deed (except that the Agent shall make the
Agent's Representations outside of the delivery of such deed) and
the Agent shall execute and deliver such UCC termination statements
and other documents with respect to the Property reasonably
requested by Lessee to terminate the liens and security interests
in the Property granted pursuant to this Lease. Concurrently with
such transfer, Lessee shall refund to the Agent any amounts of
Property Cost actually paid to Lessee for the Property.
SECTION 5. PAYMENT ABSOLUTE, NO WARRANTIES.
(a) Each payment of Base Rent, Additional Base Rent,
Additional Rent and any other amount due hereunder or under any
other Lease Document made by Lessee shall be final (absent manifest
error).
(b) LESSEE HAS SELECTED OR SHALL SELECT THE PROPERTY
LEASED HEREUNDER ON THE BASIS OF ITS OWN JUDGMENT. NEITHER THE
AGENT NOR ANY LESSOR NOR ANY AFFILIATE OF EITHER MAKES ANY
REPRESENTATION OR WARRANTY OF ANY KIND WHATSOEVER, EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION, AS TO THE SAFETY, TITLE,
CONDITION, QUALITY, QUANTITY, FITNESS FOR USE, MERCHANTABILITY,
CONFORMITY TO SPECIFICATION, OR ANY OTHER CHARACTERISTIC, OF ANY
ITEM OF THE PROPERTY, OR AS TO WHETHER THE PROPERTY OR THE
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OWNERSHIP, USE OR POSSESSION THEREOF COMPLIES WITH ANY LAWS, RULES,
REGULATIONS OR REQUIREMENTS OF ANY KIND. AS BETWEEN THE LESSEE ON THE
ONE HAND, AND THE LESSORS, THE AGENT OR ANY INDEMNIFIED PERSON ON THE
OTHER HAND, LESSEE ASSUMES ALL RISKS ARISING FROM THE PROPERTY.
(c) This Lease is a net lease and the obligations of
the Lessee to pay all amounts payable (including specifically and
without limitation amounts payable pursuant to this Lease under
Sections 7, 8, 12 and 13 hereof) shall be absolute and
unconditional under any and all circumstances of any kind or
description, and such amounts shall be paid without, and Lessee
hereby waives, any notice, demand, defense, set-off, deduction or
counterclaim and without abatement, suspension, deferment,
diminution or reduction arising from any matter whatsoever, and any
present or future law to the contrary notwithstanding, this Lease
shall not terminate, nor shall the obligations of the Lessee
hereunder be affected by reason of, including without limitation:
(i) ANY DEFECT IN THE CONDITION, MERCHANTABILITY,
DESIGN, CONSTRUCTION, QUALITY OR FITNESS FOR USE OF THE PROPERTY OR
ANY PART THEREOF, OR THE FAILURE OF THE PROPERTY TO COMPLY WITH ALL
REQUIREMENTS OF LAW, INCLUDING ANY INABILITY TO OCCUPY OR USE THE
PROPERTY BY REASON OF SUCH NON-COMPLIANCE;
(ii) ANY DAMAGE TO OR DESTRUCTION OF, REMOVAL,
ABANDONMENT, SALVAGE, LOSS, FAILURE OR DELAY IN DELIVERY, THEFT,
CESSATION OF THE USE OR POSSESSION OF ANY ITEM OF PROPERTY BY
LESSEE FOR ANY REASON WHATSOEVER AND OF WHATEVER DURATION, OR ANY
CONDEMNATION, CONFISCATION, REQUISITION, SEIZURE, PURCHASE, TAKING
OR FORFEITURE OF ANY ITEM OF PROPERTY, IN WHOLE OR IN PART, OR ANY
CONTAMINATION OF OR RELEASE FROM, THE PROPERTY OR ANY PART THEREOF;
(iii) ANY RESTRICTION, PREVENTION OR CURTAILMENT OF
OR INTERFERENCE WITH ANY USE OF THE PROPERTY OR ANY PART THEREOF
INCLUDING EVICTION;
(iv) ANY DEFECT IN TITLE TO OR RIGHTS TO THE
PROPERTY OR ANY LIEN ON SUCH TITLE OR RIGHTS OR ON THE PROPERTY
(OTHER THAN LESSOR LIENS);
(v) ANY CHANGE, WAIVER, EXTENSION, INDULGENCE OR
OTHER ACTION OR OMISSION OR BREACH IN RESPECT OF ANY OBLIGATION OR
LIABILITY OF OR BY THE LESSOR;
(vi) ANY BANKRUPTCY, INSOLVENCY, REORGANIZATION,
COMPOSITION, ADJUSTMENT, DISSOLUTION, LIQUIDATION OR OTHER LIKE
PROCEEDINGS RELATING TO THE LESSEE OR ANY OTHER PERSON, OR ANY
ACTION TAKEN WITH RESPECT TO THIS LEASE BY ANY TRUSTEE OR RECEIVER
OF THE LESSEE OR ANY OTHER PERSON, OR BY ANY COURT, IN ANY SUCH
PROCEEDING;
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(vii) ANY CLAIM THAT THE LESSEE HAS OR MIGHT HAVE
AGAINST ANY PERSON, INCLUDING WITHOUT LIMITATION THE LESSOR AND ANY
VENDOR, MANUFACTURER, CONTRACTOR OR ARCHITECT OF OR FOR ANY PORTION
OF THE PROPERTY;
(viii) ANY FAILURE ON THE PART OF THE LESSOR TO
PERFORM OR COMPLY WITH ANY OF THE TERMS OF THIS LEASE (OTHER THAN
PERFORMANCE BY LESSOR OF ITS OBLIGATIONS SET FORTH IN SECTION 4(d)
HEREOF), OF ANY OTHER LEASE DOCUMENT OR OF ANY OTHER AGREEMENT;
(ix) ANY INVALIDITY OR UNENFORCEABILITY OR
ILLEGALITY OR DISAFFIRMANCE OF THIS LEASE AGAINST OR BY THE LESSEE
OR ANY PROVISION HEREOF OR ANY OF THE OTHER LEASE DOCUMENTS OR ANY
PROVISION THEREOF;
(x) THE IMPOSSIBILITY OR ILLEGALITY OF
PERFORMANCE BY THE LESSEE, THE LESSOR OR BOTH, OR ANY FAILURE TO
OBTAIN, OR THE EXPIRATION, SUSPENSION OR OTHER TERMINATION OF, OR
INTERRUPTION TO, ANY REQUIRED LICENSES, PERMITS, CONSENTS,
AUTHORIZATIONS, APPROVALS OR OTHER LEGAL REQUIREMENTS;
(xi) ANY ACTION BY ANY COURT, ADMINISTRATIVE
AGENCY OR OTHER GOVERNMENTAL AUTHORITY;
(xii) THE INVALIDITY OR UNENFORCEABILITY OF THIS
LEASE OR ANY OTHER LEASE DOCUMENT AS AGAINST THE AGENT OR ANY
LESSOR OR ANY LACK OF POWER OR AUTHORITY OF LESSEE TO ENTER INTO
THIS AGREEMENT OR ANY OTHER LEASE DOCUMENT;
(xiii) THE FAILURE OF LESSOR TO DISCLOSE TO LESSEE
THE PRESENCE OF HAZARDOUS MATERIALS ON, ABOUT OR UNDER THE
PROPERTY, IT BEING ACKNOWLEDGED THAT LESSOR HAS NOT EVER BEEN IN
POSSESSION OF THE PROPERTY AND IS RELYING ENTIRELY UPON THE
REPRESENTATIONS OF LESSEE AS TO THE PRESENCE OF HAZARDOUS MATERIALS
ON, ABOUT OR UNDER THE PROPERTY;
(xiv) ANY RESTRICTION, PREVENTION OR CURTAILMENT OF
OR INTERFERENCE WITH ANY CONSTRUCTION ON OR ANY USE OF THE PROPERTY
OR ANY PART THEREOF; OR
(xv) ANY OTHER CIRCUMSTANCES OR HAPPENING
WHATSOEVER, WHETHER OR NOT SIMILAR TO ANY OF THE FOREGOING, WHETHER
OR NOT THE LESSEE SHALL HAVE NOTICE OR KNOWLEDGE OF ANY OF THE
FOREGOING.
The parties intend that the obligations of the Lessee hereunder
shall be covenants and agreements that are separate and independent from any
obligations of the Lessor hereunder or under any other Lease Documents and
the obligations of the Lessee shall continue unaffected
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unless such obligations shall have been modified or terminated in accordance
with an express provision of this Lease.
THE LESSEE HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY
AND ALL RIGHTS WHICH IT MAY NOW HAVE OR WHICH AT ANY TIME HEREAFTER MAY BE
CONFERRED UPON IT, BY STATUTE OR OTHERWISE, TO TERMINATE, CANCEL, QUIT,
RESCIND OR SURRENDER THIS LEASE EXCEPT IN ACCORDANCE WITH THE EXPRESS TERMS
HEREOF.
WITHOUT LIMITING THE GENERALITY OF THE PRECEDING PARAGRAPH, LESSEE
SPECIFICALLY WAIVES:
(xvi) ANY RIGHT IT MAY HAVE TO TERMINATE THIS LEASE AS A
RESULT OF ANY STATUTORY PROVISION NOW OR HEREAFTER IN EFFECT PERTAINING TO
THE DAMAGE AND DESTRUCTION OF THE PROPERTY, AND LESSEE EXPRESSLY WAIVES THE
PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1932(2), CALIFORNIA CIVIL CODE
SECTION 1933(4), AND CALIFORNIA UNIFORM COMMERCIAL CODE SECTION 10221 WITH
RESPECT TO ANY DESTRUCTION OF THE PROPERTY; AND
(xvii) ANY RIGHT IT MAY HAVE TO MAKE REPAIRS AT LESSOR'S
EXPENSE UNDER SECTIONS 1941 AND 1942 OF THE CALIFORNIA CIVIL CODE OR UNDER
ANY SIMILAR LAW, STATUTE, OR ORDINANCE NOW OR HEREAFTER IN EFFECT.
(d) Notwithstanding any other provision contained in this Lease
or any other Lease Document, it is specifically understood and agreed that,
except as set forth in Sections 24 and 25 of this Lease, none of the Agent,
nor any Lessor nor any other Indemnified Person, nor anyone acting on behalf
of any of them makes any warranties or representations or has any
responsibility to disclose any relevant information or has any other
responsibility or duty regarding, nor has any of the Agent, any Lessor or any
other Indemnified Person, or anyone acting on behalf of any of them, made any
covenants or undertakings as to, the accounting treatment to be accorded the
Lessee or the U.S. Federal or any state income or any other tax consequences,
if any, to the Lessee as a result of or by virtue of the transactions
contemplated by this Lease and the other Lease Documents.
(e) Without in any way limiting (or otherwise affecting) the
Lessee's agreements in this Section 5, the Lessors hereby agree that payments
hereunder by Lessee shall not be deemed a waiver of Lessee's right to assert
(by separate suit) a claim for damages by reason of the breach by any Lessor
of any of its obligations hereunder.
SECTION 6. LEASE TERM. The "LEASE TERM" shall commence on the Closing
Date, and shall continue until October 24, 2006, unless sooner terminated in
accordance with the provisions of this Lease.
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SECTION 7. RENT.
(a) Lessee hereby agrees to pay the Agent for the account of the
Lessors (pro rata in accordance with their respective Outstanding
Investments) rent as follows:
(i) on each Rent Payment Date:
(x) unless the provisions of Section
7(b) or Section 7(c) hereof are applicable, for each day
during such Rent Period an amount equal to the product of (A)
the Lease Investment Balance MULTIPLIED by (B) the sum of the
Euro-Dollar Rate for the Rent Period PLUS the Margin,
MULTIPLIED by(C) 1/360;
PROVIDED, HOWEVER, that
(y) to the extent that for any portion
of a Rent Period the provisions of Section 7(b) or 7(c) become
applicable then (I) for each day during the Base Rate Portion
of such Rent Period, rent pursuant to this Section 7(a)(i)
shall be determined as an amount equal to the product of (A)
the Lease Investment Balance, MULTIPLIED by (B) the Base Rate
then in effect, MULTIPLIED by (C) 1/365 (or 1/366 as
applicable), and (II) for each day during the Euro-Dollar
Portion of such Rent Period, rent pursuant to this Section
7(a)(i) shall be determined as an amount equal to the product
of (A) the Lease Investment Balance, MULTIPLIED by (B) the sum
of the Euro-Dollar Rate for such Euro-Dollar Portion plus the
Margin, MULTIPLIED by (C) 1/360; and
(z) as to each Rent Period, the amount
payable under this Section 7(a)(i) shall in each case be
reduced by any amount of Base Rent previously paid in respect
of such Rent Period pursuant to Section 14, 17 or 29 hereof.
(ii) on each Rent Payment Date set forth on Schedule 3
to the Lease Supplement, the amounts of Additional Base Rent set forth
opposite such date; and
(iii) on each Rent Payment Date an amount equal to the
amount of lease or use Taxes payable by the Agent in respect of the Rent
Period ending on such Rent Payment Date.
(b) If, with respect to any Rent Period, any Lessor determines
that: (i) deposits in Dollars (in the applicable amount) are not being
offered to such Lessor in the relevant market for such Rent Period; or (ii)
the Euro-Dollar Rate will not adequately and fairly reflect the cost to such
Lessor of maintaining or funding its Outstanding Investment for such Rent
Period; or (iii) by reason of circumstances affecting the London interbank
eurodollar market, adequate and reasonable means do not exist for
ascertaining the applicable Euro-Dollar Rate; then such Lessor shall
forthwith give notice thereof to the Agent, and Agent shall forthwith give
notice thereof to Lessee, whereupon Base Rent of Lessee payable to Agent on
behalf of such Lessor shall be determined pursuant to Section 7(a)(i)(y)
hereof, until such Lessor notifies the Agent (who shall notify Lessee) that
the circumstances giving rise to such previous notification have ceased.
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(c) If, after the date of this Agreement, the adoption of any
Applicable Law, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Lessor with
any request or directive (whether or not having the force of law) of any such
Governmental Authority shall (i) make it unlawful or impossible for any
Lessor to make, maintain or fund its Outstanding Investment in the
euro-dollar market or (ii) make the continued ownership and leasing of the
Property by such Lessor otherwise impracticable and, in either case, such
Lessor shall so notify the Lessee (with a copy to the Agent), whereupon Base
Rent of Lessee payable to Agent on behalf of such Lessor shall be determined
pursuant to Section 7(a)(i)(y) hereof, until Lessor notifies Lessee (with a
copy to the Agent) that the circumstances giving rise to such previous
notification have ceased.
(d) If (i) Lessee makes, or the Agent or any Lessor otherwise
receives, any payment (as purchase price, insurance proceeds, sales proceeds
or in any other manner whatsoever) of or with respect to Lease Investment
Balance or the provisions of Section 7(b) or Section 7(c) hereof become
applicable on any day other than the last day of a Rent Period or (ii) the
Closing Date fails for any reason to occur on the date notified by the Lessee
to the Agent, the Lessee shall reimburse each Lessor (other than, in the case
of clause (ii) only, any defaulting Lessor) on demand for any resulting loss
or expense incurred by it including (without limitation) any net loss (or
expense) incurred in obtaining, liquidating or employing deposits or swaps or
comparable instruments from third parties.
(e) Base Rent shall accrue from and including the first day of
each Rent Period to, but excluding the last day of such Rent Period.
(f) The Agent shall determine the Base Rent payable from time to
time under Sections 7(a), 7(b) and 7(c) hereof, and the affected Lessor(s)
shall determine amounts payable under Section 7(d) hereof, each of which
determinations shall be conclusive and binding in the absence of manifest
error. Agent shall supply Lessee with such bank account information as Lessee
shall require to enable payment of Base Rent and Additional Rent by wire
transfer of Federal funds to the account described in Section 4(c). Payment
of Base Rent and Additional Rent shall be payable monthly in arrears on the
fifteenth (15th) day of each calendar month (the "INVOICE DUE DATE"), except
that the last installment of Base Rent and Additional Rent hereunder shall be
due and payable on the last day of the Lease Term. No sooner than ten (10)
days prior to the due date for any installment of Base Rent or Additional
Rent under this Lease, Agent shall deliver to Lessee a written notice
containing the exact dollar amount of the Base Rent and the Additional Base
Rent that is due on such Invoice Due Date (the "Invoice"). If Agent fails to
send the Invoice, Lessee shall pay the amount shown on the previous month's
Invoice, and any shortfall or overpayment shall be charged or credited to
Lessee on the following month's Invoice. All payments by Lessee to Agent
shall be made as follows:
Sumitomo Bank of California
For credit to: The Sumitomo Bank, Limited,
San Francisco Branch
ABA Routing No. 121 002 042
Reference: Novellus Systems, Inc.
Notify: Mr. David Kubiak (415) 616-3008
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(g) Provided that no Event of Default has occurred and is
continuing, the undersigned may elect the Base Rate or a Euro-Dollar Rate by
giving Agent telephonic notice (contact: Lease Administrator at (212)
224-5219) of such election not later than 12:00 noon New York time three
Business Days prior to the commencement of the Rent Period to which the Base
Rate or such Euro-Dollar Rate shall apply, followed by written confirmation
of such notice received by Agent on the same day, it being understood,
however, that failure of Agent to receive or the undersigned to give such
written confirmation shall in no way affect the effectiveness of any action
taken by Agent pursuant to such telephonic notice or the effectiveness of the
Base Rate or any Euro-Dollar Rate placed in effect as a result thereof.
Agent shall have the absolute right to rely upon any such telephonic notice
purporting to come from the Lessee, whether or not such telephonic notice is
actually from the Lessee. Such election shall remain in effect for all
subsequent Rent Periods until a new election is made in accordance with this
Section 7(g).
SECTION 8. OTHER PAYMENTS.
(a) If, as a result of changes in Regulation D occurring after
the Closing Date, Regulation D shall require reserves actually to be
maintained in connection with any Outstanding Investment or any Eurocurrency
Liabilities with respect thereto of any Lessor, such Lessor may require
Lessee to pay (and Lessee hereby agrees to pay) to the Agent for the account
of such Lessor an amount in addition to Base Rent with respect to such
Outstanding Investment equal to the amount by which the maintenance of such
reserves reduces the return which would otherwise be realized by such Lessor
on its Outstanding Investment in respect of the current Rent Period. Any
Lessor wishing to require such payment with respect to its Outstanding
Investment or any Eurocurrency Liabilities with respect thereto shall give
notice thereof to Lessee (with a copy to the Agent) at least five (5)
Business Days prior to the last day of the Rent Period in respect of which
such payment is sought and the Lessee shall pay the additional amount as so
notified on the last day of such Rent Period. Once given, each such notice
by a Lessor shall be deemed automatically to continue in effect and apply to
the full amount of such Lessor's Outstanding Investment until such Lessor
revokes such notice. At such time, if any, as such Lessor shall not be
required so to maintain reserves, such Lessor agrees so to notify Lessee
(with a copy to the Agent).
(b) If after the date hereof, the adoption of any Applicable Law,
or any change therein, or any change in the interpretation or administration
thereof by any Governmental Authority charged with the interpretation or
administration thereof or compliance by any Lessor or its Funding Office with
any request or directive, whether or not having the force of law, of any such
Governmental Authority:
(1) shall subject such Lessor to any Tax with respect to its
Outstanding Investment, or shall change the basis of taxation of
payments to such Lessor in respect of any portion of its Outstanding
Investment or in respect of any other amounts due under this Lease
(except for changes in the rate of Tax on the overall net income of such
Lessor imposed by the jurisdiction in which such Lessor's principal
executive office or its Funding Office is located); or
(2) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors of
the Federal Reserve System, but excluding any included in an applicable
Reserve Percentage), special deposit or similar
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requirement against assets of, deposits with or for the account of, or
credit extended by, such Lessor or such Lessor's Funding Office or shall
impose on such Lessor or its Funding Office or on the London interbank
market any other condition affecting its Outstanding Investment;
and the result of any of the foregoing is to increase the cost to such Lessor
of making or maintaining Outstanding Investment, or to reduce the amount of
any sum received or receivable by such Lessor under this Lease, then, within
15 days after written demand (which demand shall be accompanied by a
statement setting forth the basis for such demand) delivered to the Lessee by
such Lessor (with a copy to the Agent), the Lessee agrees to pay to the Agent
for the account of such Lessor, on an After-Tax Basis, such additional amount
or amounts as will compensate such Lessor for such increased cost or
reduction.
(c) If, after the date hereof, any Lessor shall have reasonably
determined that the adoption after the date hereof of any Applicable Law
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof, or any request or
directive regarding capital adequacy, whether or not having the force of law,
of any such Governmental Authority, has or would have the effect of reducing
the rate of return on the capital of such Lessor (or its parent) as a
consequence of its obligations hereunder to a level below that which such
Lessor (or its parent) could have achieved but for such adoption, change or
compliance (taking into consideration such Lessor's (or its parent's)
policies with respect to capital adequacy), then from time to time, within 15
days after written demand (which demand shall be accompanied by a statement
setting forth the basis for such demand) delivered to the Lessee by such
Lessor (with a copy to the Agent) by such Lessor (with a copy to the Agent),
the Lessee will pay to the Agent for the account of such Lessor such
additional amount or amounts as will compensate such Lessor (or its parent)
for such reduction.
(d) Each Lessor promptly shall notify Lessee of any event of which
it has actual knowledge, occurring after the date of this Agreement which
will entitle such Lessor to compensation pursuant to Section 8(a), 8(b) or
8(c) and will designate a different Funding Office if such designation will
avoid the need for, or reduce the amount of such compensation and will not,
in such Lessor's sole judgment, be otherwise disadvantageous to such Lessor;
provided, however, that each Lessor shall be barred from claiming
compensation under Sections 8(a), 8(b) or 8(c) for such matters arising as a
result of actions or omissions of such Lessor occurring prior to the
forty-five (45) day period preceding the date of the notice if such Lessor
failed to previously claim such compensation when such Lessor had actual
written notice of the action or omission entitling it to compensation, the
amount of the compensation was computed and undisputed, and the Lessor
nevertheless failed to previously claim it. A certificate of any Lessor
claiming compensation under Section 8(a), 8(b) or 8(c) hereof and setting
forth the additional amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error. In determining such amount,
such Lessor may use any averaging and attribution methods deemed reasonable
by such Lessor.
(e) [intentionally omitted]
(f) Without prejudice to the full exercise by the Agent and the
Lessors of rights under Sections 20 and 21 hereof and other remedies of the
Agent and the Lessors, the Lessee shall pay to the Agent for the account of
the Lessors (pro rata in accordance with their
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respective Outstanding Investments or, in the case of amounts payable for the
account of a particular Lessor, for the account of such Lessor) from time to
time, on demand, an amount equal to (i) any amount not paid by the Lessee to
the Agent or the Lessors as provided in the Lease Documents on or before the
date such payments are due, MULTIPLIED by (ii) the Overdue Rate, and by (iii)
a fraction having a numerator equal to the number of days in the period from
and including such due date to but excluding the date of payment thereof and
a denominator of 365. The Lessee shall also pay to the Agent and the Lessors
an amount equal to any costs or expenses incurred by any and all of them in
collecting such unpaid sums or any other amounts due and unpaid under the
Lease Documents; such payment shall be made on demand after written notice by
the Agent or the applicable Lessor to the Lessee of such costs or expenses.
(g) Base Rent, Additional Base Rent, Additional Rent and any other
amount payable by the Lessee to the Agent or the Lessors shall be paid in
immediately available funds by 1:00 p.m. New York time, on the date due, to
the Agent to the account specified in Section 4(c) hereof or to such other
account as may be specified in writing by the Agent. For all purposes of
this Agreement any payment received by the Agent after 1:00 p.m. New York
time on a Business Day shall be deemed received on the next Business Day.
(h) The Lessee's obligations under Sections 8, 12 and 13 hereof
are independent, but are not intended to result in duplicative payments being
made by the Lessee.
SECTION 9. RESTRICTED USE; COMPLIANCE WITH LAWS.
(a) So long as no Event of Default shall have occurred and be
continuing, Lessee may use the Property in any manner which is in compliance
with Applicable Law and is consistent with the purpose for which it was
designed. Lessee shall comply and shall cause all Persons operating or using
Property to comply with all Insurance Requirements and Applicable Law
regarding the Property. Lessee will not do or permit any act or thing which
is contrary to any Applicable Law or Insurance Requirement or which is
reasonably likely to materially impair the value, residual value, utility or
condition of the Property; provided, however that the foregoing clause shall
not be construed to limit Lessee's right to maintain a Permitted Contest.
Lessee shall cause to be obtained and maintained all licenses, consents,
approvals and authorizations of, and filings and registrations with, any
Governmental Authority or other Person necessary for the performance by the
Lessee of its obligations under the Lease Documents or any agreement or
instrument required thereunder. During the Lease Term and so long as no
Event of Default or Unmatured Event of Default shall have occurred and be
continuing, the Lessors each covenant and agree that the Lessee shall have
the right to peaceful, quiet and uninterrupted use and enjoyment of the
Property subject to the other terms and conditions provided in the Lease
Documents without any interference, hindrance, ejection or molestation by or
from the Agent or the Lessors.
(b) Lessee shall, at its own sole cost and expense, promptly and
duly execute, deliver, file and record all such documents, statements,
filings and registrations, and take such further actions as the Agent or any
Lessor shall from time to time reasonably request in order to establish,
perfect and maintain the Agent's title to and interest in this Lease and in
the Property (on the behalf of the Lessors) as against Lessee or any third
party in any applicable jurisdiction. Lessee shall not, without the prior
written consent of the Agent, which shall not be unreasonably withheld,
remove any item of Personal Property or any Fixture from the Real Property;
provided, that Lessee shall have the right to remove any property which (i)
ceases to be Personal Property
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or Fixtures leased hereunder pursuant to the provisions of Section 14, 15, 17
or 29 hereof or (ii) has been removed temporarily so that Lessee may perform
its obligations under Section 10 hereof. Notwithstanding the foregoing,
Lessee may not: (I) change its name or the location of its principal place of
business or chief executive office (as specified in Section 2(i) hereof) or
(II) change the location of any item of Personal Property or Fixtures (as so
specified), in the case of clause (I) or (II), without first taking
appropriate measures to maintain the perfection and priority of the security
interest therein granted pursuant to Section 29 hereof.
(c) Lessee shall use reasonable precautions to prevent loss or
damage to the Property and to prevent injury to third Persons (and, in any
event, at least (i) in accordance with manufacturers' recommendations and
industry standards; and (ii) in a manner consistent with the stricter of
Insurance Requirements or Applicable Laws). Lessee shall cooperate fully
with the reasonable requests of the Agent and the Lessors and all insurance
companies providing insurance pursuant to Section 11 hereof in the
investigation and defense of any claims or suits arising from the use,
occupancy, construction, installation, repair, maintenance or replacement of
Property, PROVIDED that nothing contained in this Section 9(c) shall be
construed as imposing on the Agent or any Lessor any duty to investigate or
defend any such claims or suits or as a waiver of any of the Lessee's rights
with respect thereto.
(d) Lessee shall keep according to its customary practice accurate
and current records of the ownership and operation of the Property. The
Agent and the Lessors or any of their authorized representatives, upon
reasonable advance written notice to the Lessee, may inspect the Property and
Lessee's records applicable thereto during reasonable business hours from
time to time, any such inspection to be at the expense of the Lessee if it is
conducted at a time when an Event of Default has occurred and is continuing.
(e) The Lessee shall not without prior written consent of the
Agent permit, or suffer to exist, any Lien on the Property other than
Permitted Liens.
(f) The Lessee shall not suffer to exist any judgment, decree or
order of any court or other Governmental Authority (including, without
limitation, any Federal, state or local Tax Lien, other than a Permitted
Lien), (i) on any Property or (ii) which is reasonably likely to interfere
with the due and timely payment by Lessee of any sum payable or the exercise
of any of its rights or the performance of any of its duties or
responsibilities (including without limitation under Section 17 hereof) under
this Lease or the other Lease Documents unless such judgment, decree or order
(I) is not reasonably likely to result in a Material Adverse Effect or (II)
is the subject of a Permitted Contest. The Lessee shall, on receipt of
notice from the Agent or any Lessor to the effect that any such judgment,
decree or order exists, promptly take such action as may be reasonably
necessary to prevent or terminate such judgment, decree or order.
SECTION 10. MAINTENANCE, IMPROVEMENT AND REPAIR OF THE PROPERTY.
(a) The Lessee shall pay all costs, expenses, fees and charges
incurred in connection with the use, occupancy, construction, installation,
repair, maintenance or replacement of Property during the Lease Term. The
Lessee, at its sole cost and expense, shall maintain the Property in good
condition (ordinary wear and tear excepted) 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 Applicable Law and Insurance
Requirements and on a basis consistent with the operation and
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maintenance of properties comparable in type and location to the Property and
in no event less than the standards applied by the Lessee in the operation
and maintenance of other comparable properties owned or leased by the Lessee
or its Affiliates.
(b) The Lessor shall under no circumstances be required to build
any improvements on the Land, make any repairs, replacements, alterations or
renewals of any nature or description to the Property, make any expenditure
whatsoever in connection with this Lease or maintain the Property in any way.
The Lessor shall not be required to maintain, repair or rebuild all or any
part of the Property, and the Lessee waives any right to (i) require the
Lessor to maintain, repair, or rebuild all or any part of the Property, or
(ii) make repairs at the expense of the Lessor pursuant to any Applicable
Law, Insurance Requirement, contract, agreement, or covenant, condition or
restriction in effect at any time during the Lease Term.
(c) The Lessee shall, upon the expiration or earlier termination
of this Lease, vacate and surrender such Property, to the Lessor in the
condition in which Lessee is required to maintain the Property pursuant to
this Lease, unless the Lessee has purchased the Property from the Lessor as
provided herein.
(d) The Lessee, at its sole cost and expense, may at any time and
from time to time make alterations, renovations, improvements and additions
to the Property or any part thereof and substitutions and replacements
therefor (collectively, "MODIFICATIONS"); PROVIDED, HOWEVER, that: (i)
except for any Modification required to be made pursuant to Applicable Law (a
"REQUIRED MODIFICATION"), no Modification shall impair the value or residual
value (other than to a De Minimis Amount), utility, or useful life of the
Property or any part thereof from that which existed immediately prior to
such Modification; (ii) the Modification shall be completed expeditiously and
in a good and workmanlike manner; (iii) the Lessee shall comply with all
Applicable Laws (including all Environmental Laws) and Insurance Requirements
applicable to the Modification, including the obtaining of all permits and
certificates of occupancy, and the structural integrity of the Property shall
not be adversely affected; (iv) subject to Permitted Contests, the Lessee
shall pay all costs and expenses and shall discharge (or cause to be insured
or bonded over) within sixty (60) days after the same shall be filed (or
otherwise become effective) any Liens arising with respect to the
Modification; (v) such Modifications shall comply with Sections 9(a) and
10(a); and (vi) the Lessee shall be required to obtain the prior written
approval of the Agent, which approval shall not be unreasonably withheld,
with respect to any alterations (other than Required Modifications) that
shall (A) Materially affect any structural element of the Improvements or
major building system therein, or (B) cost in excess of $250,000 or (C)
materially change the nature of the Improvements or the amount of usable area
therein or the utility or residual value thereof as of the date hereof. All
Modifications shall remain part of the Real Property and shall be subject to
this Lease and title thereto shall immediately vest in the Lessor; PROVIDED,
HOWEVER, that Modifications that meet each of the following conditions shall
not be subject to this Lease: (x) such Modifications are not Required
Modifications, (y) such Modifications were not financed by the Lessors and
(z) such Modifications are readily removable without impairing the value, or
residual value (other than to a De Minimis Amount) or remaining useful life
of the Property. So long as no Unmatured Event of Default has occurred and
is continuing, the Lessee may place upon the Property any trade fixtures,
machinery, equipment or other property belonging to the Lessee or third
parties and may remove the same at any time during the Lease Term, subject,
however, to the terms of Section 10(a), provided that the removal of such
trade fixtures, machinery, equipment or other property does not damage or
materially impair the value or residual value (other than to a De Minimis
Amount), utility, or remaining
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useful life of the Property. Any Modification not complying with the
foregoing clauses (x), (y) or (z) shall (i) be free and clear of all Liens
(other than Permitted Liens) and, without necessity of further act, shall be
owned by Agent (on behalf of the Lessors) and become Property for all
purposes of this Lease, and (ii) be reported to Agent upon the completion
thereof by the delivery of a Lease Supplement to Agent.
SECTION 11. INSURANCE.
(a) LIABILITY INSURANCE. The Lessee shall, at its own cost and
expense, procure or cause to be procured and maintain or cause to be
maintained comprehensive general liability insurance with respect to the
Property covering both bodily injury (as to all Persons, including employees
of the Lessee, the Agent or the Lessors) and damage to property. Policies
covering bodily injury and property damage shall provide for coverage in
scope and amount consistent with both industry standards applicable to
similarly situated companies and the insurance Lessee carries for similar
property owned by Lessee or any of its Affiliates. If liability insurance is
carried on a claims-made basis at any time during the last three years before
the termination of this Lease, Lessee shall deliver to Lessor a "tail"
insurance policy covering claims made or to be made within a period of not
less than three years after the termination of this Lease; this covenant
shall survive the termination of this Lease. The Lessee shall cause the
Agent, the Lessors and their respective affiliates, officers, directors,
employees and agents (the "ADDITIONAL INSUREDS") to be named as Additional
Insureds in all insurance policies described in this Section 11(a) with
respect to the Property.
(b) PROPERTY INSURANCE. At such time as Lessee commences the
construction of any Improvements on the Real Property, the Lessee shall, at
its own cost and expense, procure or cause to be procured and maintain or
cause to be maintained all-risk physical damage insurance on the Property
(including flood coverage); PROVIDED, that, the amount of such insurance at
any time shall be no less than the greater of (i) the then Lease Investment
Balance plus the amount of one Base Rent Payment and (ii) 100% of the
replacement cost of the Property. The policy shall contain an agreed value
endorsement in an amount acceptable to Agent in its sole and absolute
discretion. The Agent (on behalf of the Lessors) shall be named as an
additional insured, as its interests may appear, and shall be the sole loss
payee in all insurance policies covering physical damage carried with respect
to the Property.
(c) APPROVED POLICIES. All insurance required by Sections 11(a)
and 11(b) hereof shall either be approved by Agent or shall be with companies
as to which A.M. Best Company (or any nationally recognized successor
thereto) has a current general policyholder rating of at least "A" and a
financial rating of at least XIII. All such policies (A) shall provide for
at least 30 days' prior written notice to the Agent of any cancellation,
lapse for non-payment of premium, non-renewal or material adverse alteration
of such policies, (B) shall provide that in respect of the respective
interests of the Additional Insureds in such policies the insurance shall not
be invalidated by any action or inaction of the Lessee, any Person having
possession with permission of the Lessee or any other Additional Insured
(other than the Additional Insured claiming coverage) and shall insure the
Additional Insured's interests, as they appear, regardless of any breach or
violation of any warranty, declaration or condition contained in such
policies by the Lessee, any such Person having possession or any other
Additional Insured (other than the Additional Insured claiming coverage), (C)
shall provide that there shall be no recourse against any Additional Insured
for the payment of premiums, commissions, assessments or advances, (D)
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shall be primary without right of contribution from any other insurance that
is carried by any Additional Insured or any other Person, (E) shall, in the
case of liability policies, expressly provide that all the provisions
thereof, except the limits of liability, shall operate in the same manner as
if there were a separate policy covering each insured and Additional Insured,
(F) shall waive any right of the insurers to any setoff, counterclaim or
other deduction, whether by attachment or otherwise, in respect of any
liability of any Additional Insured to the extent of any moneys due such
Person and (G) shall waive any rights of the insurers to subrogation against
any Additional Insured.
(d) USE OF INSURANCE PROCEEDS. As between the Agent and the
Lessee, all insurance payments under Section 11(b) shall be paid to, or
retained by, the Agent, as security for the Lessee's obligations hereunder
and shall be applied as follows: so much of such payments remaining after
reimbursement of the Agent for costs and expenses incurred in connection with
the damage or loss of the Property shall be applied against the amounts
required to be paid by the Lessee pursuant to Section 17 hereof (plus any
other amounts then due and payable under the Lease Documents), if not already
paid by the Lessee, or, if already paid by the Lessee, shall be applied to
reimburse the Lessee for its payment of such amounts and the balance, if any,
of such payment remaining thereafter shall be paid over to, or retained by,
the Lessee. Any amount referred to in the preceding sentence that is payable
to the Lessee shall not be paid to the Lessee if at the time of such payment
an Unmatured Event of Default or an Event of Default shall have occurred and
be continuing, but shall be held by the Agent as security for the obligations
of the Lessee under this Lease and, at such time as there shall not be
continuing any Unmatured Event of Default or any Event of Default, such
amount shall, to the extent not applied to satisfy the obligations of the
Lessee, be paid to the Lessee.
The insurance required by this Section 11 may be subject to such
reasonable deductible amounts, and the Lessee may self-insure such portions
of the required coverage, as is customary for companies similarly situated so
to self-insure provided that the aggregate self-insurance and deductibles for
the insurance required by Section 11(a) or 11(b) shall be not greater than
ten percent (10%) of the face amount of the respective policy.
(e) The Lessee shall furnish to the Agent ACORD evidences of
insurance for property insurance (to the extent Lessee is required by Section
11(b) to obtain such insurance), and a certificate of insurance for liability
insurance, evidencing compliance by the Lessee with the provisions of
Sections 11(a)-(c) hereof as of the Closing Date and, thereafter, annually
prior to each anniversary of the Closing Date, but the Agent shall be under
no duty to examine such certificates or to advise Lessee in the event its
insurance is not in compliance herewith.
(f) The Lessee covenants that it will not use, occupy or permit
others to use or occupy the Property at any time when the insurance required
by this Section 11 is not in force with respect to the Property.
(g) If Lessee shall fail to acquire and maintain any insurance
required hereby or if any required insurance shall for any cause become void,
the Agent may (but without any obligation so to do and without prejudice to
the Agent's or the Lessors' other rights and remedies hereunder) acquire and
maintain such insurance at the cost of Lessee and Lessee will forthwith upon
demand repay to the Agent all premiums and other reasonable moneys from time
to time paid or payable by the Agent and the Lessors in respect of such
insurance (which amount shall be
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certified in writing by the Agent), together with interest thereon accrued
daily at the Overdue Rate.
(h) Pro forma copies of the insurance policies, as amended and
endorsed, required under this Section 11 with respect to the insurance
required under this Section 11 shall be made available to Agent for
inspection, upon reasonable prior notice to the Lessee.
SECTION 12. GENERAL INDEMNITY.
(a) The Lessee shall indemnify, defend, protect and hold harmless,
on an After Tax Basis, each Indemnified Person (whether or not such
Indemnified Person is a party to any legal proceeding) from and against all
liabilities, losses, obligations, claims, damages, penalties, causes of
action, suits or other legal proceedings (actual or threatened, judicial,
administrative or arbitral), reasonable costs and expenses (including,
without limitation, reasonable attorneys' and accountants' fees and expenses)
or judgments (including, without limitation, strict liability in tort)
(collectively "LOSSES") of any nature, directly or indirectly, arising out
of, or relating to:
(i) this Lease or any of the other Lease
Documents; or any of the transactions contemplated hereby or
thereby;
(ii) the use, occupancy, construction,
installation, repair, maintenance, replacement, sale or other
disposition of Property or any interest therein;
(iii) the invalidation of any of Lessee's insurance
policies required to be maintained under this Lease;
(iv) any accident, injury or death of any person or
loss of or damage to any property related to the Property;
(v) the assertion of any claim or demand based
upon any infringement or alleged infringement of any patent,
trademark, license or other right, by or in respect of any item of
Property;
(vi) the inaccuracy, or alleged inaccuracy, as at
any time made or in any of the Lease Documents deemed made, of any
representation or warranty of Lessee contained herein; or any
violation, or alleged violation, of any provision of this Lease or
any other Lease Document by Lessee or of any contract or agreement
to which Lessee is bound or of any Applicable Laws of any
Governmental Authority or of any Insurance Requirements;
(vii) any breach of environmental representations
and warranties set forth herein, any Environmental Claim relating
to the Property, or any existing or future Release of Hazardous
Materials at, on, in, under, about, to or from the Property or any
off-site location to which Hazardous Materials generated by Lessee
or its Subsidiaries were sent for handling, treatment, storage, or
disposal; or
(viii)any breach of the covenants of Lessee with
respect to obligations under the Existing Service Contract
Obligations.
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(b) Notwithstanding any provisions of this Section 12 to the
contrary, the Lessee shall not indemnify and hold harmless any Indemnified
Person under this Section 12 against any Loss: (i) to the extent arising from
the Active Negligence, gross negligence or willful misconduct of such
Indemnified Person; (ii) for any Tax whatsoever whether or not covered by the
indemnity in Section 13 hereof (which Section 13 shall exclusively govern the
availability of any indemnification for Taxes), except to the extent
necessary to make payments on an After-Tax Basis; or (iii) for Losses arising
from acts or conditions arising after the end of the term of this Lease
except while an Event of Default is continuing, or (iv) for Losses arising in
connection with any Lessor Liens. Except as set forth in the immediately
preceding sentence, the indemnification provided in this Section 12 shall
apply to Losses whenever arising, including without limitation, Losses
arising from events or conditions occurring prior to the date hereof.
(c) Any Indemnified Person shall notify the Lessee, promptly
after such Indemnified Person's receipt of notice, or such Indemnified Person
otherwise becoming aware, of any third party claim with respect to which
indemnification may be sought under this Section 12 but the failure to so
notify shall not, except to the extent such failure prejudices the ability of
the Lessee to defend such third party claim, relieve the Lessee from any of
its obligations under this Section 12 or otherwise. The Indemnified Person
shall proceed to resist and dispose of such claim as it deems appropriate;
PROVIDED, that, so long as no Event of Default is continuing, the Lessee may,
by sending written notice to the Indemnified Person acknowledging the
Lessee's indemnification obligations hereunder with respect to such claim in
full, have the right to assume the defense thereof, with counsel reasonably
satisfactory to such Indemnified Person. If the Lessee so elects to assume
the defense of such claim, any one or more of the Indemnified Persons shall
have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Person or Indemnified Persons,
unless (i) the employment of such counsel has been specifically authorized in
writing by the Lessee or (ii) the representation of both the Lessee and such
Indemnified Person or Indemnified Persons by the same counsel would be
inappropriate due to actual or potential differing interests between them.
Unless an Event of Default is continuing, the Lessee shall not be liable for
any settlement of any such action effected without its written consent, but
if settled with such consent or if there be a final judgment for the
plaintiff in any such action with or without consent, the Lessee agrees to
indemnify and hold harmless the Indemnified Persons from and against any loss
or liability by reason of such settlement or final judgment. If the Lessee
elects not to participate in a third party claim, all legal and other
expenses incurred by the Indemnified Person with respect to such third party
claim shall be for the account of the Lessee.
(d) The parties hereto agree that the provisions of this Section
shall not be applied to indemnify any Indemnified Person for any Loss which
the Lessee proves arose solely, immediately and directly from the application
(in strict compliance with the provisions therefor) of the Risk Amount
limitations contained in clause (y) or (z) of Section 14(b)(iii) hereof in
connection with the exercise by the Lessee of the Termination Option, which
exercise is permitted by, and has been consummated in strict conformity with,
all limitations specified in Section 14 hereof or elsewhere herein or in any
other Lease Document.
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SECTION 13. TAXES.
(a) The Lessee agrees promptly to pay when due, and to indemnify,
defend, protect and hold each Indemnified Person, harmless from, all license
and registration fees and all income, gross receipts, rental, franchise,
excise, occupational, capital, value added, sales, use, ad valorem (real and
personal), property (real and personal) and excise taxes, fees, levies,
imposts, charges or withholdings of any nature whatsoever, together with any
assessments, penalties, fines, additions to tax and interest thereon
(individually, a "TAX," and collectively called "TAXES"), howsoever imposed
(whether imposed upon any Indemnified Person, all or any part of the Property
or otherwise), by any federal, state or local government or taxing authority
in the United States or by any foreign government, foreign governmental
subdivision or other foreign or international taxing authority, upon or with
respect to, based upon or measured by:
(i) the Property or any item thereof or the
receipts, earnings, gains or revenues arising therefrom or from any
application or disposition thereof or any item thereof or interest
therein;
(ii) the construction, acquisition, purchase,
financing, mortgaging, ownership, acceptance, rejection, delivery,
leasing, subleasing, insuring, inspection, registration,
possession, use, operation, presence, repair, transfer of title,
modification, rebuilding, imposition of any Lien, sale or other
disposition of the Property or any item thereof or interest therein;
(iii) the payment of Base Rent, Additional Base
Rent, Additional Rent, Lease Investment Balance and other sums
payable under the Lease Documents, the rentals, receipts or
earnings arising from the purchase, financing, ownership, delivery,
leasing, possession, use, operation, return, storage, transfer of
title, sale or other disposition of the Property or any item
thereof or any other interest therein;
(iv) the Lease Documents, and any other documents
or agreements executed and delivered in connection with the
purchase, leasing, sale or other disposition of the Property or any
item thereof or interest therein; or
(v) otherwise in connection with any transaction
contemplated by the Lease Documents.
Notwithstanding anything to the contrary contained in this Section 13(a), the
application of the indemnity set forth in this Section 13(a) with respect to
Taxes imposed by a state shall apply only if the state imposing the Taxes
asserts jurisdiction to impose such Taxes solely by reason of the parties'
having entered into this Lease. Notwithstanding the provisions of Section 12
or 13, the Lessee shall not be required to indemnify any Indemnified Person
in respect of any Excluded Taxes.
(b) The indemnity amounts payable under Subsection (a) above
shall be computed on an After-Tax Basis.
(c) Each Lessor which is a non-United States person for U.S.
federal tax purposes (a "NON-UNITED STATES PERSON") agrees (to the extent it
is permitted to do so under the laws and any applicable double taxation
treaty of the jurisdiction of its incorporation and the
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jurisdiction in which its Funding Office is located) to execute and deliver
to the Agent for delivery to the Lessee, before the first scheduled payment
date hereunder in each calendar year, either (i) two United States Internal
Revenue Service Forms 1001 or (ii) two United States Internal Revenue Service
Forms 4224 together with two United States Internal Revenue Service Forms
W-9, or any successor forms, or certificates or identifications, as
appropriate, properly completed and claiming complete or partial, as the case
may be, exemption from withholding and deduction of United States Federal
Taxes. Each Lessor which is a Non-United States Person represents and
warrants to the Lessee that, at the date it first became a Lessor hereunder,
(x) its Funding Office is entitled to receive payments of interest hereunder
without deduction or withholding for or on account of any Taxes imposed by
the United States or any political subdivision thereof and (y) it is
permitted to take the actions described in the preceding sentence under the
laws and any applicable double taxation treaties of the jurisdictions
specified in the preceding sentence.
(d) With respect to all Taxes with respect to which
indemnification may be sought above, where legally permissible, the Lessee
shall prepare and timely file all reports and returns under each relevant
taxing authority (and to send a copy thereof to the Agent). In all other
cases, the Lessee shall notify the Agent at least 60 days prior to the due
date for such reports or returns and shall prepare them on behalf of, and in
a manner satisfactory to, the Agent. The Lessee shall pay all such Taxes
reflected as being due on such reports or returns directly to the relevant
taxing authority. The provisions of this Section 13(d) shall not limit the
Lessee's obligations under Section 13(a).
(e) Each Lessor promptly shall notify Lessee, in accordance with
Section 13(h) hereof, of any event of which it has knowledge, occurring after
the date of this Agreement which will entitle such Lessor to compensation
pursuant to this Section 13 and will designate a different Funding Office if
such designation will avoid the need for, or reduce the amount of such
compensation and will not, in such Lessor's sole judgment, be otherwise
disadvantageous to such Lessor.
(f) Lessee shall not be obligated under this Agreement to make any
greater payment to any Lessor which changes any Funding Office than such
Lessor would have been entitled to receive if such Funding Office had not
been changed, unless such Funding Office was changed (i) with Lessee's prior
written consent, (ii) at Lessee's request, (iii) to mitigate or avoid the
suspension of such Lessor's obligations or the requirement of payment of
increased costs in the circumstances contemplated by Section 8(a), 8(b), 8(c)
or 13 hereof, but in such event only to the extent of such increase, and in
no event in an amount greater than if the Funding Office had not been
changed, or (iv) at a time when the circumstances giving rise to such greater
payment did not exist.
(g) The Agent agrees that it will from time to time file with the
appropriate authorities all tax returns required to be filed in connection
with the lease to or use by the Lessee of the Property hereunder, it being
understood, however, that the Agent may from time to time demand in writing
that the Lessee pay to the Agent such amounts as the Agent shall require to
indemnify the Agent and the Lessors from any Taxes payable by the Agent or
the Lessors in connection with such returns. In no event shall Lessee be
responsible for the payment of any interest or penalties (other than
Additional Rent pursuant to Section 8(f) hereof or any such payment of
interest or penalty primarily due to the direct fault of Lessee) with respect
to any amounts payable under any such tax returns required to be filed by the
Agent. Agent will consult
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with Lessee prior to filing any business property return required to be filed
by the tax assessor in which the Property is located.
(h) Any demand by the Agent or the Lessors for indemnification
pursuant to this Section 13 shall be accompanied by a statement setting forth
the basis of such demand and a calculation of the amounts payable by the
Lessee in connection with such demand, and no such amount shall be payable by
the Lessee until 30 days after receipt by the Lessee of the demand for such
amount. Each of the Agent and each Lessor agrees that within 30 days of first
obtaining knowledge by it of any amounts owing by the Lessee under this
Section 13 it will notify the Lessee thereof and of the amount so owed. If
any amount paid by either Lessee to the Agent pursuant to this Section 13
exceeds the amount actually owed by Lessee under this Section 13, then upon
learning of such excess the Agent shall promptly advise such Lessee thereof
and remit such amount to Lessee upon demand by such Lessee.
SECTION 14. PURCHASE OPTION AND TERMINATION OPTION.
(a) PURCHASE OPTION OF LESSEE. During the term of this Lease,
the Lessee may, on a Rent Payment Date and upon 30 days' prior written notice
substantially in the form included in Exhibit H hereto appropriately
completed (a "LESSEE PURCHASE NOTICE") to the Agent by an Authorized Officer
of Lessee, elect to purchase all (but not less than all) of the Property
leased hereunder. Any such purchase shall be effected pursuant to the
provisions of Section 14(d) hereof; PROVIDED that the Lessee Purchase Notice
may be delivered as little as one day in advance if the purchase is to take
place on the last day of the Lease Term and the Lessee had previously elected
the Termination Option. Any election by the Lessee made pursuant to this
Section 14(a) shall be irrevocable; except that Lessee shall have a one-time
right to extend the closing date for the purchase of the Property, provided
that (i) Lessee so notifies Agent in writing not fewer than ten (10) days
prior to the date completed by Lessee in paragraph 3 of Exhibit "H" and (ii)
the extended date is a specific date not later than one (1) Business Day
prior to the expiration of the Term. The option of the Lessee provided in
this Section 14(a) may be assigned without the prior consent of Lessors;
provided that no assignment shall be binding upon Lessors unless Lessee shall
have notified Lessors in writing of the name, address and telephone number of
the assignee, and the effective date of the assignment.
(b) TERMINATION OPTION OF LESSEE. (i)The Lessee shall have the
right, upon 180 days' prior written notice in substantially the form of
Exhibit J hereto appropriately completed and executed by an Authorized
Officer of Lessee (the "SALE NOTICE") to the Agent, to terminate the Lease at
the end of the Lease Term, so long as no Event of Default or Unmatured Event
of Default has occurred and is continuing, by electing (and thereafter Lessee
shall be obligated to consummate) an all-cash sale to one or more Persons not
Affiliates of Lessee of all (but not less than all) of the Property (the
"TERMINATION OPTION") as provided in Section 14(b)(ii) hereof; PROVIDED that
Lessee shall not be obligated to consummate such sale if it elects and
consummates a purchase of the Property pursuant to Section 14(a) hereof.
Upon receipt by the Agent on behalf of the Lessors of all Proceeds to be paid
to it in connection with the Termination Option and the Base Rent and
Additional Base Rent due on such date and all other amounts then due and
owing under the Lease Documents (including, without limitation, (A) any
indemnity payments and (B) any Taxes (other than Excluded Taxes) resulting
from the exercise of the Termination Option, provided that the Agent shall
have furnished to the Lessee the information necessary to compute the Taxes
resulting from the exercise of the Termination Option and the
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Lessee shall have not furnished the Agent (for the benefit of the Lessors) a
certificate evidencing an exemption available to the Agent from such Taxes),
the Agent on behalf of the Lessors shall transfer to such Person or Persons
on an as-is, where-is basis, without any representation or warranty of any
kind, express or implied, whatever title to the Property it may have (except
that the Agent shall warrant the Agent Representations); and the Agent (on
behalf of the Lessors) shall at Lessee's expense execute and deliver such
quitclaim deeds, requests for full reconveyance and UCC termination
statements and other documents reasonably requested by the Lessee to
terminate the lien and security interests granted pursuant to this Lease.
(ii) In the event the Lessee elects the Termination Option,
Lessee shall use its best efforts to obtain the highest all cash purchase
price for the Property. Neither the Agent nor any Lessor shall have any
responsibility for procuring any purchaser. If, nevertheless, the Agent or a
Lessor undertakes any sales efforts, the Lessee shall promptly reimburse the
Agent or such Lessor for any charges, costs and expenses incurred in such
effort, including any allocated time charges, reasonable costs and expenses
of internal counsel or other reasonable attorneys' fees and expenses. The
Lessee must accept the highest such offer received by it (which may be
composed of a combination of offers from several buyers of different items of
Property) if such offer is in excess of the Lease Investment Balance at the
end of the Lease Term. The Agent shall determine whether to accept the
highest all cash offer for the Property if not in excess of the Lease
Investment Balance and in the case of such an all cash offer which was
obtained, and is otherwise, in strict compliance with the provisions of this
Section 14, if the offer is rejected by the Agent, the Lessee shall (subject
to Lessee's rights under Section 14(a), and assuming no Event of Default or
Unmatured Event of Default has occurred) surrender the Property (in strict
compliance with Section 18 hereof) and pay the Agent the sum of (I) the
Guaranteed Residual Value plus (II) all then accrued and unpaid Base Rent and
Additional Base Rent PLUS (III) all other amounts then due under the Lease
Documents.
(iii) In the event Lessee elects the Termination Option and
Agent accepts such offer:
(x) if the net proceeds of sale received by
Agent (which shall mean the gross proceeds received by Agent less
all costs paid to non-Affiliates of Lessee and related to such sale
and delivery (which Agent hereby agrees to pay, but only out of
such proceeds), including, without limitation (to the extent not
previously paid pursuant to Section 14(b)(ii)), the cost of
brokerage commissions, advertising costs, appraisal fees,
preparation of the Property for marketing, delivery of documents
and Property, certification and testing of the Property in any
location chosen by the buyer or prospective buyer, legal costs,
costs of notices, or other information and any repairs or
modifications desired by a buyer or prospective buyer, without
regard to whether such costs were initially incurred by the Agent,
the Lessors, the Lessee or any potentially qualified buyer (the
"PROCEEDS")) are greater than the Gross Lease Investment Balance,
the Agent, for the account of the Lessors, shall pay to the Lessee
the amount by which such Proceeds exceed the Gross Lease Investment
Balance;
(y) if the Proceeds are less than the
Gross Lease Investment Balance, the Lessee shall pay to the Agent
for the account of the Lessors an amount equal to the sum of (A)
the lesser of (I) Lease Investment Balance less the Proceeds and
(II) the Guaranteed Residual Value, plus (B) all then accrued and
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unpaid Base Rent and Additional Base Rent and all other amounts
then due under the Lease Documents; and
(z) if the Proceeds are less than the
excess of (I) the Gross Lease Investment Balance over (II) the
Guaranteed Residual Value on such date, the Lessee shall pay to the
Agent for the account of the Lessors, in addition to the amounts
required to be paid by the Lessee pursuant to clause (y) above, an
amount (which, together with the other amounts referred to in this
clause (z), shall not exceed the Gross Lease Investment Balance)
equal to the amount (as determined if requested in the sole
discretion of the Agent, at the sole expense of the Lessee, by an
Appraiser) by which the residual value of the Property has been
reduced by waste, extraordinary use, failure to maintain or
replace, failure to use, improper workmanship or any other cause or
condition within the power of Lessee to control or affect.
All payments referred to in this clause (iii) shall be made on the date the
Proceeds are due and payable to the Agent. The Agent shall have no obligation
to make any payment required of it under Section 14(b)(iii)(x) hereof until the
Agent on behalf of the Lessors shall have received the Proceeds, Base Rent,
Additional Base Rent and all other amounts then due and owing under the Lease
Documents (including, without limitation, any indemnity payments).
(c) FAILURE OF SALE. If the Termination Option is elected and a
sale of the Property is not effected prior to the end of the Lease Term other
than as a result of Agent's failure to accept an offer as provided in Section
14(b)(ii), the Lessee shall (x) pay on the last day of the Lease Term the
amounts described in the last sentence of Section 14(b)(ii), and (y)
immediately quit possession of the Property and tender the same to Agent in
compliance with Lessee's obligations under this Lease.
(d) PROCEDURES FOR PURCHASES. The following procedures shall
apply to any purchase by Lessee of the Property subject to this Lease
pursuant to any provision of this Lease:
(i) the Lessee shall pay to the Agent for the
account of the Lessors by wire transfer of immediately available
funds an amount equal to (I) the Lease Investment Balance and all
other amounts then due under the Lease Documents (including,
without limitation, any Taxes resulting from such purchase,
provided that the Lessee shall have not first furnished the Agent
(for the benefit of the Lessors) a certificate evidencing an
exemption available to the Agent from such Taxes), plus (II) any
Base Rent and Additional Base Rent accrued and unpaid, plus (III)
any other amounts due under the Lease Documents, MINUS (IV) if, at
such time any insurance proceeds are being held by the Agent with
respect to any Property pursuant to Section 17 hereof, the amount
of such insurance proceeds then held by the Agent (including the
net earnings thereon), which insurance proceeds (and net earnings)
a) shall (but not in excess of the total of the amounts referred to
in clauses (I) and (II) of this paragraph) no longer be subject to
the provisions of Section 17 hereof and shall be deemed to be part
of the purchase price paid by the Lessee, and b) to the extent any
such insurance proceeds remain in the possession of Agent after
being applied to part of the purchase price as described in the
preceding clause "a)", the excess shall be forthwith delivered to
Lessee; and MINUS (V) any Taxes that Lessee has paid to the Agent
that Agent has not duly delivered to the Governmental Authority
entitled thereto in accordance with Section 13(g),
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(ii) the Agent, on behalf of the Lessors, shall
transfer to Lessee, on an as-is, where-is basis, without any
representation or warranty of any kind, express or implied,
whatever title to the Property it may have (except that the Agent
shall warrant the Agent's Representations) and
(iii) Lessee shall be subrogated to the Agent's and
the Lessors' rights with respect to the Property and the Agent (on
behalf of the Lessors) shall, at Lessee's expense, execute and
deliver (I) such assignments and instruments of further assurance
as may be reasonably necessary to enable Lessee to collect any
unpaid insurance proceeds relating to the Property and otherwise to
receive the benefits of such rights and (II) such quitclaim deeds,
requests for full reconveyance, UCC termination statements and
other documents reasonably requested by the Lessee to terminate the
lien and security interests granted pursuant to this Lease. Upon
such transfer, the lease of the Property under this Agreement shall
terminate.
(e) RIGHT TO PURCHASE OR SELL AFTER EVENT OF DEFAULT. If an
Event of Default has occurred but Agent (on behalf of the Lessors) has not
previously terminated the Lease, Lessee may exercise the Purchase Option or
the Termination Option, and the 30 days advance notice requirement in Section
14(a), and the 180 days advance notice requirement in Section 14(b), shall be
reduced to five days in each case; provided that nothing in this Section
14(e) shall limit or impair any right or remedy of Agent (on behalf of the
Lessors) under this Lease, except that Agent (on behalf of the Lessors) shall
not exercise its right to terminate the Lease during the five day period
beginning on the date that Lessee delivers the written notice required by the
first sentences, respectively, of Sections 14(a) and 14(b).
SECTION 15. END OF TERM OPTIONS. In connection with the expiration of
the Lease Term, the Lessee shall be obligated to (i) exercise the Termination
Option or (ii) purchase the Property subject to this Lease pursuant to
Section 14(a) hereof (the "PURCHASE OPTION"). In the event that by the 74th
day prior to the expiration of the Lease Term the Lessee has not elected
either of the options in clauses (i) or (ii), the Lessee shall be required to
exercise the Purchase Option at the end of the Lease Term, except that the
notice described in the first sentence of Section 14(a) need not be given,
and Lessee shall not have the right to extend the closing date for the
purchase of the Property as described in Section 14(a). If Lessee fails to
consummate the Termination Option, then Lessee shall be deemed to have
elected the Purchase Option.
SECTION 16. AMENDMENTS.
(i) This Lease and each of the other Lease Documents shall be
changed, waived, discharged or terminated with respect to Lessee, the Agent
and each Lessor upon the ratification in writing of such change, waiver,
discharge or termination by Lessee, the Agent and the Required Lessors, in
which case such change, waiver, discharge or termination shall be effective
as to each Lessor, Lessee and the Agent; PROVIDED, that no such change,
waiver, discharge, or termination shall, without the written ratification of
each Lessor:
(A) modify, amend, waive or supplement any of the provisions
of this Section 16 or Section 3 hereof, change the definitions of "LEASE
INVESTMENT BALANCE", "LEASE
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INVESTMENT BALANCE", "CLOSING FEE", "COMMITMENT", "COMMITMENT PERCENTAGE",
"EXCLUDED TAXES" "INDEMNIFIED PERSON", "OUTSTANDING INVESTMENT", "PROPERTY
COST", "PROPERTY COST", "REQUIRED LESSORS", "GUARANTEED RESIDUAL VALUE", or
"TAXES", or release any Collateral (except as otherwise specifically provided
in any Lease Document);
(B) modify, amend, waive or supplement any of the provisions
of Section 4, 12 or 13 hereof (except as otherwise expressly provided in this
Section 16); PROVIDED that the Required Lessors may waive an Event of Default
other than an Event of Default under Section 20(a) hereof;
(C) reduce, modify, amend or waive any indemnities in favor
of the Agent or any Lessor pursuant to Section 12 or 13 hereof (except that
any Person may consent to any reduction, modification, amendment or waiver of
any indemnity payable to it);
(D) modify, postpone, reduce or forgive, in whole or in part,
any payment of Base Rent or Additional Base Rent (other than pursuant to the
terms of any Lease Document) or any other amount payable under this Lease or
any other Lease Document, or modify the definition or method of calculation
of any payment of Base Rent or Additional Base Rent (other than pursuant to
the terms of any Lease Document) or any other amount payable hereunder or
thereunder;
(E) consent to any assignment of this Lease releasing Lessee
from its obligations in respect of the payments due pursuant to the Lease
Documents or changing the absolute and unconditional character of such
obligations; or
(F) except as contemplated in the Lease Documents, permit the
creation of any Lien on the Collateral or any part thereof or deprive the
Agent or any Lessor of the benefit of the security interest in the Collateral
granted by Lessee.
(ii) Without the prior written consent of the Agent, no amendment
of, supplement to, or waiver or modification of, any Lease Document shall
adversely affect Agent's rights or immunities or modify or increase the
duties or obligations of Agent with respect to any Lease Document.
SECTION 17. LOSS OF OR DAMAGE TO PROPERTY.
(a) RISK OF LOSS. The Lessee hereby assumes all risk of loss of
or damage to the Property, however caused. No loss of or damage to the
Property or any item thereof shall impair any obligation of the Lessee under
this Lease, which shall continue in full force and effect with respect to any
lost or damaged Property.
(b) REPAIR OF DAMAGE; USE OF PROCEEDS. In the event of damage of
any kind whatsoever (other than ordinary wear and tear as contemplated by
Section 10 hereof) to any item or items of Property (unless such Property is,
as a consequence thereof, subject to an Event of Loss) the Lessee, at its own
cost and expense, shall (i) if the portion of the Lease Investment Balance
attributable to such item or items plus all other items previously so damaged
since the previous notice pursuant to this clause (i) shall exceed $50,000,
immediately notify the Agent in writing of the damage to such item or items
and the Lease Investment Balance thereof and of any
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material facts with respect thereto and (ii) take all necessary action to
place the same in good operating order, repair, condition and appearance.
If the insurance proceeds, if any, received by the Agent on behalf of the
Lessors for damage to such Property upon the occurrence of a single event or
series of related events of damage are not greater than $250,000, the Agent
shall pay said insurance proceeds to Lessee promptly upon receipt. Upon the
completion of the repairs, Lessee shall deliver a certificate to Agent
certifying that the Property has been repaired to the standards required
under this Lease. If the insurance proceeds, if any, received by the Agent
on behalf of the Lessors for damage to the Property upon the occurrence of a
single event or series of related events of damage are greater than $250,000,
the Agent shall deposit said proceeds in a separate interest bearing account
in the name of the Agent on behalf of the Lessors (and Lessee shall reimburse
the Agent upon demand for any bank charges and other expenses incurred by the
Agent with respect to such account). Upon the receipt of a certificate from
an Authorized Officer of Lessee (i) requesting and authorizing payment to a
contractor for the repair of such damaged Property, (ii) stating the payment
is due under the repair contract with such contractor, (iii) attaching a copy
of an invoice or other evidence showing that payment is due under such repair
contract and (iv) certifying the then estimated total cost to repair such
damaged Property and if such estimated cost is greater than said insurance
proceeds, certifying that Lessee has paid from its own funds an amount of
such repair costs at least equal to such excess, the Agent shall pay to
Lessee from such separate account (to the extent of funds therein, including
net earnings thereon) an amount equal to such requested payment. The balance
of such account, if any, shall be paid to Lessors (PRO RATA in accordance
with their respective Outstanding Investments), by the Agent to reduce the
Lease Investment Balance.
(c) EVENT OF LOSS; PROPERTY NOT REPAIRED. If an Event of Loss
occurs as to any item or items of Property and such Property is not repaired
or replaced pursuant to paragraph (d) below, then in any such event, (i)
Lessee shall promptly notify the Agent in writing of such event, (ii) Lessee
shall pay to the Agent (for the account of the Lessors PRO RATA in accordance
with their respective Outstanding Investments) within 10 calendar days an
amount equal to (x) the Lease Investment Balance of such Property, PLUS (y)
any Base Rent accrued and unpaid on such Property to and including the date
of such payment, PLUS (z) any other amounts owing under the Lease Documents
(including, without limitation, any Taxes resulting from such transfer and
any amounts due under Section 7(d) hereof) MINUS any insurance proceeds
received and retained by Agent on behalf of the Lessors, (iii) the Agent, on
behalf of the Lessors, shall transfer title to such Property to Lessee, on an
as-is, where-is, basis, without any warranty of any kind by, or any recourse
of any kind to, the Agent or any Lessor (except that the Agent shall make the
Agent's Representations), (iv) Lessee shall be subrogated to the Lessors'
rights in the affected transaction and (v) the Agent (on behalf of the
Lessors) shall at Lessee's expense execute and deliver (I) such assignments
and instruments of further assurance as may be reasonably necessary to enable
Lessee to collect any unpaid insurance proceeds and (II) such quitclaim
deeds, requests for full reconveyance, UCC termination statements and other
documents reasonably requested by the Lessee to terminate the security
interest in such Property created hereunder. Upon such transfer, the lease
of such Property under this Agreement shall terminate and such Property shall
cease to be Property hereunder.
(d) EVENT OF LOSS; PROPERTY REPAIRED. If an Event of Loss shall
have occurred with respect to one or more items of Property, the Lessee may
elect not more than 30 days after such event to replace such Property by
reconstructing or repairing it with labor and materials (in either case, the
"RECONSTRUCTED PROPERTY") that restore the Property to the condition required
to be maintained under this Lease such that the value, utility, Guaranteed
Residual Value or
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remaining useful life of the Reconstructed Property has not been impaired
(compared to the Property immediately before the Event of Loss) other than to
a De Minimis Amount, to have such Reconstructed Property constitute
"Property" for the purposes of this Lease and to have this Lease continue in
full force and effect by delivery to the Agent of a certificate of an
Authorized Officer stating (i) that Lessee will replace such item or items
with Reconstructed Property, (ii) specifying and describing in reasonable
detail such Reconstructed Property and (iii) stating that Lessee will comply
with the provisions of the second and third sentences of this paragraph (d).
Any such Reconstructed Property that is Personal Property or a Fixture shall
(i) have a fair market value (as determined by an Appraiser if such
Reconstructed Property is not new and has a claimed value in excess of
$100,000 or as determined by the invoice for such Reconstructed Property if
such Reconstructed Property is new) not less than the Lease Investment
Balance allocable by Agent to the item of Personal Property replaced, (ii)
have a useful life, utility and residual value at least as great as the
Personal Property or Fixture being replaced and (iii) be free of all Liens
(except Permitted Liens) as provided in Section 9 hereof. All other
Reconstructed Property shall (i) consist of new, first class quality
materials of like kind, quality and style as those damaged, shall cause the
item of Property so restored to have a useful life and residual value not
less than the Lease Investment Balance (as determined by and allocable by
Agent to the item of Property restored in Agent's sole and absolute
discretion), (ii) be free of all Liens (except Permitted Liens), and shall
result in the Property so restored to be free of Liens (except Permitted
Liens), as provided in Section 9 hereof, and (iii) be constructed using first
class workmanship. Lessee shall as soon as practicable transfer title to the
Reconstructed Property to the Agent on behalf of the Lessors and execute all
instruments reasonably requested by the Agent to so transfer title to the
Agent (and to subject the Reconstructed Property to this Lease and to the
security interest of the Agent on behalf of the Lessors), including, without
limitation, a Lease Supplement and appropriate UCC financing statements, if
any, with respect thereto. If the insurance proceeds, if any, received by
the Agent for Property to be replaced upon the occurrence of a single Event
of Loss are not greater than US $250,000, the Agent shall pay to such Lessee
said insurance proceeds promptly upon receipt. If the insurance proceeds
received by the Agent for Property to be replaced upon the occurrence of a
single Event of Loss are greater than $250,000, the Agent shall deposit said
proceeds in a separate interest bearing account in the name of the Agent on
behalf of the Lessors (Lessee shall reimburse the Agent for bank charges and
other expenses incurred by the Agent with respect to such account). Upon
receipt of a certificate of an Authorized Officer of Lessee (i) requesting
and authorizing payment to the vendor of an item of Reconstructed Property,
(ii) stating the payment is due under the purchase order or contract for such
item, (iii) attaching a copy of an invoice or other evidence showing that
payment is due under such purchase order or contract and (iv) certifying the
then estimated total cost of the Reconstructed Property and if such estimated
cost is greater than said insurance proceeds, certifying that Lessee has paid
from its own funds to vendors of Reconstructed Property an amount at least
equal to such excess, the Agent shall pay to Lessee from such separate
account (to the extent of funds therein including net earnings thereon) an
amount equal to such requested payment. The balance of such account, if any,
shall be paid to Lessors, PRO RATA in accordance with their respective
Outstanding Investments, by the Agent to reduce the Lease Investment Balance.
(e) For the purposes of this Agreement, all fees and expenses of
any Appraiser retained pursuant to the provisions hereof shall be paid by
Lessee.
(f) In the event that, with respect to any event or series of
related events referred to above in this Section 17, the Lessee shall, in
advance of receipt of insurance proceeds,
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pay (or apply) its own funds in the amounts and otherwise in the same manner
as such insurance proceeds are required to be paid and/or applied as provided
above, then the Agent shall, to the extent it subsequently receives such
insurance proceeds, pay the same to the Lessee.
SECTION 18. SURRENDER OF PROPERTY.
(a) SURRENDER UPON TERMINATION. Subject to the provisions of
Sections 13, 14, 15 and 19 hereof, upon termination of the Lease, the Lessee
shall, at its sole cost and expense, and subject further to the provisions of
this Section 18, quit and surrender possession of the Property to Agent (on
behalf of Lessors) in as good order and condition as when Lessee took
possession and as thereafter improved by Agent (on behalf of Lessors) and/or
Lessee, reasonable wear and tear excepted. Upon such surrender Lessee shall
deliver to the Agent (on behalf of the Lessors) and any and all keys to areas
within and outside of the Property. Lessee shall also deliver to Agent any
and all records and manuals pertaining to the operation, maintenance, repair,
use and occupancy of the Property.
(b) NO VOLUNTARY SURRENDER. No act or thing done by Agent or any
agent or employee of Agent during the Lease Term shall be deemed to
constitute an acceptance by Agent of a surrender of the Property unless such
intent is specifically acknowledged in a writing signed by Agent. The
delivery of keys to the Property to Agent shall not constitute a surrender of
the Property or effect a termination of this Lease, whether or not the keys
are thereafter retained by Agent, and notwithstanding such delivery Lessee
shall be entitled to the return of such keys at any reasonable time upon
request until this Lease shall have been properly terminated. The voluntary
or other surrender of this Lease by Lessee, whether accepted by Agent or not,
or a mutual termination hereof, shall not work a merger, and at the option of
Agent shall operate as an assignment to Agent of all subleases or
subtenancies affecting the Property.
(c) REMOVAL OF LESSEE PROPERTY BY LESSEE. Upon the expiration or
termination of the Lease, Lessee shall remove or cause to be removed, at its
sole expense, from the Property all debris and rubbish, and such items of
furniture, equipment, free-standing cabinet work, and other articles of
personal property owned by Lessee or installed or placed by Lessee at its
expense in the Property, and such similar articles of any other persons
claiming under Lessee, as Agent may, in its sole discretion, require to be
removed, and Lessee shall repair at its own expense all damage to the
Property resulting from such removal.
(d) REMOVAL OF LESSEE'S PROPERTY BY AGENT. Whenever Agent shall
re-enter the Property as provided in this Lease, any personal property of
Lessee not leased under this Lease and not removed by Lessee upon the
expiration of the Lease Term, or within forty-eight (48) hours after a
termination by reason of Lessee's default as provided in this Lease, shall be
deemed abandoned by Lessee and may be disposed of by Agent in accordance with
Sections 1980 through 1991 of the California Civil Code and Section 1174 of
the California Code of Civil Procedure, or in accordance with any laws or
judicial decisions which may supplement or supplant those provisions from
time to time.
(e) AGENT'S PROPERTY. All fixtures, alterations, additions,
repairs, improvements and/or appurtenances attached to or built into, on, or
about the Real Property prior to or during the Lease Term, whether by Agent
at its expense or whether at the expense of Lessee, or by Lessee at its
expense, or by previous occupants of the Property, shall be and remain part
of the
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Property and shall not be removed by Lessee at the end of the Lease Term
unless otherwise expressly provided for in this Lease. Such fixtures,
alterations, additions, repairs, improvements and/or appurtenances shall
include, without limitation, floor coverings, drapes, paneling, molding,
doors, kitchen and dishwashing fixtures and equipment, plumbing systems,
electrical systems, lighting systems, security systems, communication
systems, computer network cabling and appurtenances, all fixtures and outlets
for the systems mentioned above and for all telephone, television, radio,
telegraph, facsimile, electronic data, satellite transmission and reception,
cellular and microcellular telephony, and television purposes, and any
special flooring or ceiling installations.
(f) AGENT'S ACTIONS ON PROPERTY. Lessee hereby waives all claims
for damages or other liability in connection with Agent's reentering and
taking possession of the Property or removing, retaining, storing or selling
the property of Lessee not leased under this Lease, as herein provided, and
Lessee shall indemnify, defend, protect and hold Agent harmless from any such
claims, damages or other liability, and no such re-entry shall be considered
or construed to be a forcible entry, nor shall Agent be guilty of forcible
entry or forcible detainer.
(g) NO DUTY IF LIABILITIES PAID. Notwithstanding the foregoing,
the provisions of this Section 18 shall not apply if at the time that Lessee
would otherwise be required to surrender the Property each Lessor has
recovered the full amount of its Outstanding Investment and all of the
Liabilities have been paid.
SECTION 19. CERTAIN COVENANTS.
From the date hereof until the later of (I) the Termination Date
and (II) the payment in full of all amounts due or to become due under the
Lease Documents:
(a) REPORTS, CERTIFICATES AND OTHER INFORMATION. Lessee shall
furnish or cause to be furnished to the Agent and each Lessor:
(i) AUDIT REPORT. Within 90 days after each
Fiscal Year, a copy of an annual audit report of Lessee and its
respective Subsidiaries prepared on a consolidated basis and in
conformity with GAAP duly certified by independent certified public
accountants of recognized standing selected by Lessee, together
with a letter from such accountants stating that, based on the
results of their audit report, no Event of Default has occurred
under this Lease as of the date of the audit report.
(ii) INTERIM REPORTS. Within 45 days after each
Fiscal Quarter (except the last Fiscal Quarter in a Fiscal Year), a
copy of the unaudited consolidated financial statements of Lessee
and its respective Subsidiaries prepared in accordance with GAAP
(subject to normal recurring accruals and adjustments) consisting
of at least a balance sheet as at the close of such Fiscal Quarter,
statements of earnings for such Fiscal Quarter and for the period
from the beginning of such Fiscal Year to the close of such Fiscal
Quarter, and a statement of changes in cash flow from the beginning
of such Fiscal Year to the close of such Fiscal Quarter.
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(iii) OFFICER'S CERTIFICATE. Contemporaneously with the
furnishing of a copy of each annual audit report and of each set of
quarterly statements provided for in this Section 19(a), a certificate
in the form of Exhibit E hereto duly completed, dated the date of such
annual report or such quarterly statements and signed by an Authorized
Officer on behalf of Lessee and containing the computations and other
information provided for therein.
(iv) REPORTS TO SEC AND TO SHAREHOLDERS. Within 15 days of the
filing or making thereof, copies of each filing and report made by the
Lessee or its respective Subsidiaries with or to the SEC or any other
securities exchange, and, if Lessee shall have registered under the
Securities Exchange Act of 1934, as amended, as to any of Lessee's
equity securities, copies of each communication from Lessee to
shareholders generally.
(v) NOTICE OF DEFAULT. Forthwith upon learning of the occurrence
of an Event of Default or Unmatured Event of Default, written notice
thereof describing the same and the steps (if any) being taken by
Lessee and its Subsidiaries with respect thereto.
(vi) NOTICE OF CERTAIN LITIGATION. Written notice of the
institution of any Litigation or the occurrence of any development
with respect to any Litigation, together with a description thereof
and the steps being taken by Lessee and its Subsidiaries with respect
thereto, all to such extent and at such time as Lessee would be
required to make such disclosure if Lessee were a public reporting
company under the Securities Exchange Act of 1934, as amended (it
being understood that to the extent such disclosures are contained in
the reports filed by Lessee with the SEC, then the disclosure
hereunder required to be made by Lessee to the Lessor may be made by
furnishing to the Lessor a copy of such reports as filed with the
SEC).
(vii) ENVIRONMENTAL. Promptly upon becoming aware of any of the
following conditions or occurrences, Lessee shall provide Agent with
written notice thereof, including the details surrounding the
occurrence or condition and any action taken or proposed to be taken
by the Lessee in connection therewith: (a) any actual, pending or
threatened Environmental Claim against Lessee or its Subsidiaries and
(b) any Environmental Condition at the property where the Property is
located.
(viii) OTHER INFORMATION. From time to time such other
information concerning Lessee and its Subsidiaries as the Agent or any
Lessor may reasonably request.
(b) MERGERS, CONSOLIDATIONS, SALES. Lessee will not permit any
consolidation of Lessee with or merger of Lessee into any other corporation or
corporations or successive consolidations in which Lessee or its successor or
successors shall be a party or parties or any sale or conveyance of the property
of Lessee as an entirety or substantially as an entirety, to any other Person
authorized to acquire and operate the same (any such consolidation, merger, sale
or conveyance is referred to herein as a "CORPORATE TRANSACTION") unless each of
the following conditions is met:
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(i) upon the occurrence of any such Corporate Transaction all the
obligations of Lessee under this Agreement shall be expressly assumed
in writing by the corporation formed by such consolidation, or into
which Lessee shall have been merged, or by the corporation which shall
have acquired such property (in each such case, the "SURVIVING
ENTITY"), such assumption to be accompanied by an opinion of counsel
for the surviving entity to the effect that such assumption has been
duly authorized, executed and delivered by, and is the legal, valid
and binding obligation of, the surviving entity;
(ii) immediately after giving effect to such Corporate
Transaction and to the retirement of any Debt to be retired
substantially concurrently therewith, no Event of Default or Unmatured
Event of Default shall have occurred and be continuing, and Lessee
shall deliver a certificate signed by an Authorized Officer of Lessee
to such effect;
(iii) the surviving entity shall be domiciled in the United
States; and
(iv) Lessee shall have given at least 30 days' prior written
notice of such Corporate Transaction to the Agent.
Upon consummation of the Corporate Transaction with respect to Lessee and the
assumption of Lessee's obligations under this Agreement and the other Lease
Documents by the surviving entity, such surviving entity shall succeed to and be
substituted for Lessee, with the same effect as if it were an original party to
this Agreement and the other Lease Documents and, in the event of any such sale
or conveyance, Lessee shall be released from its obligations under this
Agreement and the other Lease Documents. Except for the merger of any
Subsidiary into Lessee or another Subsidiary, Lessee shall not permit any
Subsidiary to be a party to any Corporate Transaction if before or after giving
effect thereto an Event of Default or Unmatured Event of Default shall exist.
(c) COMPLIANCE WITH APPLICABLE LAWS. The Lessee will not, and will
not permit any of its Subsidiaries to, knowingly violate in any material respect
any of the requirements of Applicable Laws.
(d) ERISA. (i) The Lessee will give notice to Agent promptly after
it learns (other than by notice from all of such holders) that (A) any
Reportable Event has occurred;(B) any "accumulated funding deficiency" (within
the meaning of Section 412(a) of the Code) has been incurred with respect to any
Plan or that an application may be or has been made to the Secretary of the
Treasury of a waiver or modification of the minimum funding standard (including
any required installment payments) or an extension of any amortization period
under Section 412 of the Code, in each case with respect to any Plan;(C) any
Single Employer Plan or Multiemployer Plan has been terminated, reorganized,
petitioned or declared insolvent under Title IV of ERISA;(D) any Single Employer
Plan has a under current liability giving rise to a Lien under ERISA or the
Code;(E) any proceeding has been instituted pursuant to Section 515 of ERISA to
collect a delinquent contribution to any Plan;(F) the Lessee or any of its ERISA
Affiliates will or may incur any liability (including any contingent or
secondary liability) to or on account of the termination or withdrawal from any
Single Employer Plan under Section 4062, 4063, 4064 or 4975 of the Code or
Section 409 or 502(i) or ERISA;(G) any "prohibited transaction" (as such term is
defined in Section 406 of ERISA and Section 4975 of the Code) has
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occurred inconnection with any Plan;(H) Lessee or any ERISA Affiliate has
received any notice from the PBGC relating to the intention of the PBGC to
terminate one or more Single Employer Plans or to appoint a trustee to
administer any Single Employer Plan;(I) Lessee or any ERISA Affiliate has
received from the sponsor of a Multiemployer Plan of any notice concerning
(1) the imposition on the Lessee or an ERISA Affiliate of withdrawal
liability or (2) a determination that a Multiemployer Plan is, or is expected
to be, terminated or in reorganization, in each case within the meaning of
Title IV of ERISA;(J) Lessee or any ERISA Affiliate has received any notice
from the PBGC or the Internal Revenue Service which sets forth or proposes
any material adverse determination or action with respect to a Plan; or (K)
assessment of any excise taxes has been levied against the Lessee or any
ERISA Affiliate by the Internal Revenue Service with respect to a Plan.
(ii) The Lessee shall, and shall cause each ERISA Affiliate to,
comply in all material respects with ERISA. If any event occurs pursuant to
which the Lessee is required to give notice pursuant to Section 19(d)(i), the
Lessee shall furnish to Agent a written notice specifying what action the Lessee
or any of its ERISA Affiliates, the Internal Revenue Service, the Pension
Benefit Guaranty Corporation, or any other relevant party is taking or proposes
to take with respect thereto.
(e) CORPORATE EXISTENCE AND FRANCHISES. The Lessee will, and will
cause each Subsidiary to, except as otherwise expressly permitted in Section
19(b) hereof, maintain in full force and effect its separate existence and all
material rights, licenses, leases and franchises used in the conduct of its
business.
(f) PAYMENT OF TAXES. The Lessee will promptly pay, and cause each
Subsidiary to pay, when due all taxes, assessments or other charges owing by
Lessee and each Subsidiary except taxes, assessments and other charges which
shall be subject to a Permitted Contest.
(g) OTHER AGREEMENTS. The Lessee will not (a) enter into any
agreement containing any provision which would be violated or breached by the
performance of its obligations under any Lease Document or under any instrument
or document delivered or to be delivered by it under any Lease Document or in
connection therewith, or (b) permit any Subsidiary to enter into any agreement
which prohibits in any material respect such Subsidiary from declaring or paying
dividends or making advances to Lessee.
(h) REGULATIONS G, T, U AND X. The Lessee will not use or permit any
proceeds of the sale pursuant to this Agreement of the Property to the Lessors
to be used, either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying "margin stock" within the
meaning of Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System.
(i) MAINTENANCE OF TANGIBLE PROPERTY. Lessee will maintain, and
cause each of its Subsidiaries to maintain, in all material respects all of the
real property, inventory and equipment owned, leased or used by such entity in
good condition and repair, and prevent any waste or unusual or unreasonable
depreciation thereof.
(j) MAINTENANCE OF INTANGIBLE PROPERTY. Lessee will protect,
preserve and maintain, and cause each of its Subsidiaries to protect, preserve
and maintain, in all material
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respects all of its trademarks and trade names infull force and effect, by,
without limitation, defending against and/or prosecuting at its own expense any
and all suits claiming infringement or dilution of any thereof or injury to the
goodwill associated with any thereof and by filing any applications and doing
any and all other things which may from time to time be necessary or advisable
for the renewal or registration of each thereof.
(k) SALE OF STOCK OF SUBSIDIARIES. Lessee shall not sell, assign,
pledge or otherwise dispose of any shares of stock or other equity interests in
(or warrants, rights or options to acquire stock of or equity interests in) any
Subsidiary, PROVIDED that all of the equity securities and Debt of a Subsidiary
may be sold as an entirety if all the assets of such Subsidiary could be sold
pursuant to Section 19(l) and Lessee shall not permit any Subsidiary to issue or
sell any shares of its stock or other equity interests in itself (or warrants,
rights or options to acquire, or securities convertible into, such stock or
other equity interests) to any Person other than Lessee or another of its
Subsidiaries.
(l) TRANSFER OF ASSETS. Except as otherwise provided in this
Agreement, neither Lessee nor any Subsidiary shall sell, transfer, pledge,
assign or otherwise dispose of any assets of Lessee or any Subsidiary unless
such sale or disposition shall be in the ordinary course of Lessee's or such
Subsidiary's business; provided, however, that no such sale transfer, pledge,
assignment or disposition shall include any of the Property.
(m) DISCONTINUANCE OR CHANGE OF BUSINESS. Except as otherwise
provided in this Agreement, neither Lessee nor any Subsidiary shall discontinue
any substantial part of their existing businesses taken as a whole or change the
nature of their existing businesses or otherwise change the legal form of their
businesses.
(n) ACCOUNTING CHANGE. Lessee shall not make or permit any change in
financial accounting policies or financial reporting practices, except as
required by GAAP or regulations of the Securities and Exchange Commission.
(o) FINANCIAL RATIOS. Lessee shall not permit on a consolidated
basis, at the end of any fiscal quarter:
(1) Lessee's Quick Ratio to be less than 1.5;
(2) Lessee's Tangible Net Worth to be less than $220,000,000.
The calculation required by the preceding sentence shall be
determined in accordance with GAAP without deduction for any
losses;
(3) Lessee's Debt divided by Tangible Net Worth to exceed 0.50;
(4) Lessee to permit working capital to be in an aggregate
amount less than $50,000,000.
(p) FINANCIAL COVENANTS IN FINANCINGS. Lessee shall not agree with
any holder of any of Lessee's Debt (whether such Debt exists now or in the
future) (i) that entering into this Lease or any of Lessee's, Agent's or any
Lessor's actions taken hereunder or pursuant hereto, or in respect of any
Liabilities, shall constitute a default, event of default (without reference to
any cross-default condition under such Debt), material adverse change or
occurrences of similar
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meaning or result, under the terms of such Debt, nor (ii)to maintain financial
ratios or undertake any obligation imposing stricter limitations upon the
business operations or financial obligations of Lessee than contained in this
Lease.
(q) ENVIRONMENTAL COMPLIANCE. Lessee shall:
(i) not use, handle, store, transport, generate, release, or
dispose of any Hazardous Materials on, under, or about the Property, except that
Lessee may use (i) small quantities of common chemicals such as adhesives,
lubricants, and cleaning fluids in order to conduct business at the Leased
Premises, (ii) other Hazardous Materials that are necessary for the operation of
Lessee's business and (iii) the Hazardous Materials set forth on Exhibit R.
Lessee shall on the first day of each calendar quarter disclose in writing to
Agent all Hazardous Materials that are being used by Lessee on the Property, the
nature of the use, and the manner of storage and disposal. At any time during
the term of this Lease, Lessee shall, within ten (10) days after written request
from Lessor, disclose in writing all Hazardous Materials that are being used by
Lessee on the Property, the nature of the use, and the manner of storage and
disposal;
(ii) Cause any and all handling, transportation, storage,
treatment, disposal, or use of Hazardous Materials by Lessee in or about the
Property to strictly comply with all applicable Environmental Laws;
(iii)If the presence of Hazardous Materials on the Property
caused or permitted by Lessee results in the contamination or deterioration of
the Property or any water or soil beneath the Property, promptly take all action
necessary to investigate and remedy that contamination; at any time and upon
prior written notice to Lessee, Agent may require testing wells to be drilled on
the Property and may require the ground water to be tested to detect the
presence of Hazardous Materials by the use of any tests that are then
customarily used for those purposes; Lessor shall supply Lessee with copies of
the test results; the cost of these tests and of the installation, maintenance,
repair, and replacement of the wells shall be paid by Lessee if the tests
disclose the existence of facts that may give rise to liability of Lessee
pursuant to this Section 19;
(iv) Promptly notify Lessor of any communication received from
any Governmental Authority concerning Hazardous Materials or the violation of
Environmental Laws that relate to the Property; without limiting the generality
of the foregoing, Lessee shall comply with its disclosure obligations to Lessor
under California Health and Safety Code Section 25359.7(b);
(v) Take all actions as are appropriate to ensure that its and
its Subsidiaries' property, equipment, facility, and operations are and remain
in compliance in all material respects with applicable Environmental Laws and
Environmental Permits, including but not limited to, employing engineering
practices and technology to maintain such compliance;
(vi) Take all actions as are appropriate to ensure that there are
no Releases of Hazardous Materials at, on, in, under, about, to, or from its and
its Subsidiaries' property, facility, or the Property;
(vii) Promptly respond in accordance with applicable
Environmental Laws to any Release or threatened Release of any Hazardous
Material at, on, in, under, about, to, or from its and its Subsidiaries'
property, facility, or the Property;
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(viii) In connection with the off-site treatment, storage,
handling, transportation, or disposal of Hazardous Materials or materials
containing Hazardous Materials: (i) conduct such activities only at facilities
and with carriers maintaining valid Environmental Permits and otherwise
operating in accordance with Environmental Law, and (ii) obtain certificates of
destruction or disposal from all off-site disposal facilities to which Hazardous
Materials are sent for treatment, storage, handling or disposal; and
(ix) If the Improvements were initially completed prior to 1979,
disclose in writing to all employees working in the Improvements the presence of
asbestos or asbestos-containing materials, if the presence of such materials is
known to Lessee.
(r) COLLATERALIZATION. As used in this Agreement, the term
"COLLATERALIZATION" means the pledge of Government Securities in accordance
with the terms of this Section 19(r). Lessee shall pledge, and shall cause to
be pledged at all times during the Lease Term (for the benefit of the Agent
on behalf of the Lessors), debt securities issued by the U.S. government with
a maturity of three years or less (the "GOVERNMENT SECURITIES") in an amount
equal to 102% of the Guaranteed Residual Value, to Agent as security for
Lessee's obligations under this Lease in accordance with the terms of this
Lease, the Security Agreement and the Custodian Agreement. The Government
Securities shall be held by a third-party agent (the "Custodian") acceptable
to Agent and Lessee. The Custodian shall review the value of the Government
Securities daily, and shall report the aggregate value thereof to Agent daily
by facsimile notice. In the event that the aggregate value (as determined by
Custodian pursuant to the Security Agreement) of the Government Securities
decreases below 102% of the Guaranteed Residual Value, then Lessee shall,
within two Business Days after notice by Custodian or Agent, deposit
sufficient Government Securities with Custodian to cause the aggregate value
(as determined by Custodian pursuant to the Security Agreement) of the
Government Securities to equal 102% of the Guaranteed Residual Value. In the
event that the aggregate value (as determined by Custodian pursuant to the
Security Agreement) of the Government Securities increases above 102% of the
Guaranteed Residual Value, Agent or Custodian shall notify Lessee of such
event, and upon Lessee's written request, Agent shall, within two Business
Days thereafter, instruct the Custodian to release sufficient accrued
interest (first) and Government Securities (next) to Lessee to cause the
aggregate value (as determined by Agent in its sole and absolute discretion)
of the Government Securities to equal 102% of the Guaranteed Residual Value.
SECTION 20. EVENTS OF DEFAULT
Any of the following shall constitute an "Event of Default" (whether
any such event shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any Governmental
Authority):
(a)(i) Default, and continuance thereof, for five Business Days in the
payment when due of any amount of Base Rent or Additional Base Rent or (ii)
default, and continuance thereof, for ten Business Days after notice thereof to
Lessee by the Agent, in the payment when due of any Additional Rent; or
(b) Failure to comply with any covenant contained in Section 19(d) or
19(o); or
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(c) Failure in the performance of any other obligation or covenant of
Lessee pursuant to any Lease Document (excluding any obligation or covenant of
Lessee contained in or referred to in Sections 20(l), 20(n) and 20(o) of this
Lease) and the continuance of such default (i) for 30 days after written notice
to the Lessee by the Agent if such failure can be cured with diligence within
such 30-day period or can be cured by the payment of money or (ii) for 60 days
after written notice to the Lessee by the Agent if such failure cannot be cured
within such 30-day period and cannot be cured by the payment of money; or
(d) Any representation or warranty made (or deemed made) by Lessee
herein or in any other Lease Document or any document contemplated thereby
proves to be false or inaccurate in any material respect as of the date when
made (or deemed made); or
(e) Default in the payment when due (subject to any applicable grace
period), whether by acceleration or otherwise, of any Indebtedness for Borrowed
Money of Lessee or any Subsidiary or default in the performance or observance of
any obligation or condition (subject to any applicable grace period) with
respect to any such Indebtedness for Borrowed Money if (i) the effect of such
default is to accelerate, or permit the acceleration of, the maturity of any
such Indebtedness for Borrowed Money or cause any such Indebtedness for Borrowed
Money to be prepaid, purchased or redeemed or (ii) the holder or holders
thereof, or any trustee or agent for such holders, (x) causes, or have the right
to cause, such Indebtedness for Borrowed Money to become due and payable prior
to its expressed maturity or to be prepaid, purchased or redeemed or (y)
receives any payment (other than any payment which was scheduled to be made
prior to the occurrence of such default), guarantee or security or other
concession from or on behalf of any Lessee or any Subsidiary; PROVIDED, HOWEVER,
that no such default under this clause (e) shall constitute an Event of Default
unless the amount of Indebtedness for Borrowed Money so affected is at least
$5,000,000; or
(f) The occurrence of any of the following events: (i) Lessee or any
Subsidiary becomes insolvent or generally fails to pay, or admits in writing its
inability or refusal to pay, debts as they become due; or (ii) Lessee or any
Subsidiary applies for, consents to, or acquiesces in the appointment of a
trustee, receiver or other custodian for Lessee or such Subsidiary or any
property thereof, or makes a general assignment for the benefit of creditors; or
(iii) in the absence of such application, consent or acquiescence, a trustee,
receiver or other custodian is appointed for Lessee or any Subsidiary or for a
substantial part of the property of any thereof and is not discharged within 60
days; or (iv) any bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding (except the voluntary dissolution, not under any
bankruptcy or insolvency law, of a Subsidiary) is commenced in respect of Lessee
or any Subsidiary, and if such case or proceeding is not commenced by Lessee or
such Subsidiary, it is consented to or acquiesced in by Lessee or such
Subsidiary or remains for 60 days undismissed; or (v) Lessee or any Subsidiary
takes any corporate action to authorize, or in furtherance of, any of the
foregoing; or
(g) Final judgment or judgments (after the expiration of all times to
appeal therefrom) for the payment of money in excess of $1,000,000 in the
aggregate shall be rendered against Lessee or any of its Subsidiaries and the
same shall not be (i) fully covered by insurance or (ii) vacated, stayed,
bonded, paid or discharged for a period of 30 days; or
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(h) Any Lease Document or the security interest granted pursuant to
this Lease shall (except in accordance with its terms), in whole or in part,
terminate, cease to be effective (or, in the case of such security interest,
shall, for any reason except solely as a result of the failure by the Agent (as
a result of circumstances entirely within the Agent's control) to file a
continuation statement, cease to constitute a first and prior perfected Lien on
the Collateral) or cease to be the legally valid, binding and enforceable
obligation of Lessee, or Lessee or any Affiliate of Lessee shall, directly or
indirectly, contest in any manner in any court the effectiveness, validity,
binding nature or enforceability (or the first and prior perfected status)
thereof; or
(i) the Lessee or any ERISA Affiliate fails to make any contributions
required to be made to a Single Employer Plan or Multiemployer Plan, any
accumulated funding deficiency (within the meaning of Section 4971 of the Code)
occurs or exists with respect to any Single Employer Plan (whether or not
waived), the present value of all benefits under all Single Employer Plans
(based on those assumptions used to fund such Single Employer Plans) exceeds, in
the aggregate, as of the last annual valuation date applicable thereto, the
actuarial value of the assets of such Single Employer Plans allocable to such
benefits by more than $1,000,000, or a Termination Event occurs; or
(j) (A) the Lessee or any ERISA Affiliate shall have been notified by
the sponsor of a Multiemployer Plan that it has incurred withdrawal liability to
such Multiemployer Plan, (B) the Lessee or such ERISA Affiliate does not have
reasonable grounds for contesting such withdrawal liability or is not in fact
contesting such withdrawal liability in a timely and appropriate manner and (C)
the amount of the withdrawal liability specified in such notice, when aggregated
with all other amounts required to be paid to Multiemployer Plans in connection
with withdrawal liabilities (determined as of the date or dates of such
notification), exceeds $1,000,000 or requires payments exceeding $1,000,000 in
any year;
(k) the Lessee or any ERISA Affiliate shall have been notified by the
sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Title IV of ERISA,
if solely as a result of such reorganization or termination, the aggregate
annual contributions of the Lessee and its ERISA Affiliates to all Multiemployer
Plans that are then in reorganization or have been or are being terminated have
been or will be increased over the amounts required to be contributed to such
Multiemployer Plans for their most recently completed plan years by an amount
exceeding $250,000;
(l) failure of the Lessee to maintain any insurance required to be
maintained under this Lease;
(m) failure of Lessee to pay the cost of repair or replacement of any
of the Property following any damage thereto pursuant to this Lease;
(n) any breach of the Security Agreement that is not cured within any
applicable grace period; or
(o) failure of Lessee to maintain Collateralization when required to
be maintained under this Lease.
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IN CONNECTION WITH THE DECLARATION OF ANY EVENT OF DEFAULT UNDER THIS
LEASE, LESSEE HEREBY WAIVES ANY REQUIREMENT THAT A NOTICE FROM LESSOR NOT BECOME
EFFECTIVE UNTIL A PERIOD OF DAYS HAVE ELAPSED, AND LESSEE SPECIFICALLY WAIVES
ALL RIGHTS UNDER CALIFORNIA CIVIL CODE SECTION 1946.
SECTION 21. RIGHTS UPON DEFAULT.
Upon the occurrence and continuation of any Event of Default, the
Agent may in its discretion, and upon the direction of the Lessors shall, by
written notice to the Lessee, declare this Lease to be in default, and (except
in the case of an Event of Default under Section 20(f), in which case the
remedies in paragraphs (a), (e) and (f) below shall become available and
effective immediately and automatically, without notice, presentment, demand,
protest or other action of any kind all of which are hereby expressly waived by
Lessee) do any one or more of the following as the Agent in its sole discretion
shall determine, without limiting any other right or remedy the Agent may have
on account of such Event of Default:
(a) The Agent may, by notice to the Lessee, rescind or terminate
this Lease as of the date specified in such notice, at which time the Lease
Investment Balance (together with all accrued and unpaid Base Rent,
Additional Base Rent and Additional Rent and all other amounts to which
Agent (on behalf of the Lessors) is entitled at law, in equity or
otherwise) shall be immediately accelerated, due and payable; however, (i)
no reletting, reentry or taking of possession of the Property (or any
portion thereof) by the Agent will be construed as an election on the
Agent's part to terminate this Lease unless a written notice of such
intention is given to the Lessee, (ii) notwithstanding any reletting,
reentry or taking of possession, the Agent may at any time thereafter elect
to terminate this Lease for a continuing Event of Default and (iii) no act
or thing done by the Agent or any of its agents, representatives or
employees and no agreement accepting a surrender of the Property shall be
valid unless the same be made in writing and executed by the Agent.
(b) The Agent may (i) demand that the Lessee, and the Lessee
shall upon the written demand of the Agent, return possession of the
Property promptly to the Agent in the manner and condition required by, and
otherwise in accordance with all of the provisions of, Section 10 and
Section 18 hereof as if the Property were being returned at the end of the
Lease Term, and the Agent shall not be liable for the reimbursement of the
Lessee for any costs and expenses incurred by the Lessee in connection
therewith and (ii) without prejudice to any other remedy which the Agent
may have for possession of the Property, and to the extent and in the
manner permitted by Applicable Law, enter upon the Property and take
immediate possession of (to the exclusion of the Lessee) the Property or
any part thereof and expel or remove the Lessee and any other Person who
may be occupying the Property, by summary proceedings or otherwise, all
without liability to the Lessee for or by reason of such entry or taking of
possession, whether for the restoration of damage to property caused by
such taking or otherwise and, in addition to the Agent's other damages, the
Lessee shall be responsible for all costs and expenses incurred by the
Agent in connection with any reletting, including, without limitation,
reasonable brokers' fees and all costs of any alterations or repairs made
by the Agent.
(c) The Agent may
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(i) sell all or any part of the Property at public sale
free and clear of any rights of the Lessee and without any duty to account
to the Lessee with respect to such action or inaction with respect thereto
(except to the extent required by clause (ii) below if the Agent shall
elect to exercise its rights thereunder) in which event the Lessee's
obligation to pay Base Rent and Additional Base Rent hereunder for periods
commencing after the date of such sale shall be terminated or
proportionately reduced, as the case may be; and
(ii) if the Agent shall so elect, demand that the Lessee pay
to the Agent, and the Lessee shall pay to the Agent, on the date of such
sale, as liquidated damages for loss of a bargain and not as a penalty (THE
PARTIES AGREEING THAT THE AGENT'S ACTUAL DAMAGES WOULD BE DIFFICULT TO
PREDICT, BUT THE AFOREMENTIONED LIQUIDATED DAMAGES REPRESENT A REASONABLE
APPROXIMATION OF SUCH AMOUNT) (in lieu of Base Rent or Additional Base Rent
due for periods commencing on or after the Rent Payment Date coinciding
with such date of sale (or, if the sale date is not a Rent Payment Date,
the Rent Payment Date next preceding the date of such sale)), an amount
equal to (A) the excess, if any, of (1) the Lease Investment Balance
calculated as of such Rent Payment Date (together with all Base Rent and
Additional Rent due and unpaid to and including such Rent Payment Date),
over (2) the net proceeds of such sale (that is, after deducting all costs
and expenses incurred by the Agent incident to such conveyance, including,
without limitation, repossession costs, brokerage commissions, prorations,
transfer taxes, fees and expenses for counsel, title insurance fees, survey
costs, recording fees, and any repair costs); plus (B) interest at the
Overdue Rate on the foregoing amount from such Rent Payment Date until the
date of payment.
(d) The Agent may, at its option, elect not to terminate this
Lease and continue to collect all Base Rent, Additional Base Rent, and all
other amounts due the Agent and the Lessors (together with all costs of
collection) and enforce the Lessee's obligations under this Lease as and
when the same become due, or are to be performed, and at the option of the
Agent, upon any abandonment of the Property by the Lessee or re-entry of
same by the Agent, the Agent may, in its sole and absolute discretion,
elect not to terminate this Lease and may make the necessary repairs in
order to relet the Property, and relet the Property or any part thereof for
such term or terms (which may be for a long term extending beyond the Lease
Term) and at such rental or rentals and upon such other terms and
conditions as the Agent in its reasonable discretion may deem advisable;
and upon each such reletting all rentals actually received by the Agent
from such reletting shall be applied to the Lessee's obligations hereunder
and the other Lease Documents in such order, proportion and priority as the
Agent may elect in the Agent's sole and absolute discretion. If such
rentals received from such reletting during any period are less than the
Base Rent and Additional Base Rent with respect to such Property to be paid
during that period by the Lessee hereunder, the Lessee shall pay any
deficiency, as calculated by the Agent, to the Agent on the next Rent
Payment Date.
(e) Unless the Property has been sold, the Agent may, whether or
not the Agent shall have exercised or shall thereafter at any time exercise
any of its rights under paragraph (b), (c) or (d) of this Section 21 with
respect to the Property or portions thereof, demand, by written notice to
the Lessee specifying a date (a "TERMINATION DATE") not earlier than 10
Business Days after the date of such notice, that the Lessee purchase,
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on such Termination Date, the Property (or the remaining portion thereof)
in accordance with the provisions of Section 14(d); provided, however, that
no such written notice shall be required upon the occurrence of any Event
of Default in clause (f) of Section 20.
(f) Separate suits may be brought to collect any such damages
for any period(s), and such suits shall not in any manner prejudice the
Agent's right to collect any such damages for any subsequent period(s), or
the Agent may defer any such suit until after the expiration of the Lease
Term, in which event such suit shall be deemed not to have accrued until
the expiration of the Lease Term. In connection with the foregoing, the
Agent (on behalf of the Lessors) is hereby granted the remedy specified in
California Civil Code Section 1951.4 (Agent, on behalf of Lessors, may
continue Lease in effect after Lessee's breach and abandonment and recover
rent as it becomes due, if Lessee has the right to sublet or assign,
subject only to reasonable limitations).
(g) The Agent may retain and apply against the Agent's damages
all sums which the Agent would, absent such Event of Default, be required
to pay to, or turn over to, the Lessee pursuant to the terms of this Lease.
(h) The Agent, as a matter of right and without notice to the
Lessee, and without regard to the value of the Property or the solvency of
the Lessee, shall have the right to apply to any court having jurisdiction
to appoint a receiver or receivers of the Property, and the Lessee hereby
irrevocably consents to any such appointment. Any such receiver(s) shall
have all of the usual powers and duties of receivers in like or similar
cases and all of the powers and duties of the Agent in case of entry, and
shall continue as such and exercise such powers until the date of
confirmation of the sale of the Property unless such receivership is sooner
terminated.
To the maximum extent permitted by law, the Lessee hereby waives the
benefit of any appraisement, valuation, stay, extension, reinstatement and
redemption laws now or hereafter in force and all rights of marshalling in the
event of any sale of the Property or any interest therein.
The Agent shall be entitled to enforce payment of the indebtedness and
performance of the obligations secured hereby and to exercise all rights and
powers under this instrument or under any of the other Lease Documents or other
agreement or any laws now or hereafter in force, notwithstanding some or all of
the obligations secured hereby may now or hereafter be otherwise secured,
whether by mortgage, deed of trust, security agreement, pledge, lien, assignment
or otherwise. Neither the acceptance of this instrument nor its enforcement,
shall prejudice or in any manner affect the Agent's right to realize upon or
enforce any other security now or hereafter held by the Agent, it being agreed
that the Agent shall be entitled to enforce this instrument and any other
security now or hereafter held by the Agent in such order and manner as the
Agent may determine in its absolute discretion. No remedy herein conferred upon
or reserved to the Agent is intended to be exclusive of any other remedy herein
or by law provided or permitted, but each shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute. Every power or remedy given by any of the Lease
Documents to the Agent or to which it may otherwise be entitled, may be
exercised, concurrently or independently, from time to time and as often as may
be deemed expedient by the Agent and the exercise in whole or in part by the
Agent or any Lessor of any one or more of such remedies shall not preclude the
simultaneous or later exercise by the Agent or any
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Lessor of any or all suchother remedies. In no event shall the Agent, in the
exercise of the remedies provided in this instrument (including, without
limitation, in connection with the assignment of rents to Agent, or the
appointment of a receiver and the entry of such receiver on to all or any part
of the Property), be deemed a "mortgagee in possession," and the Agent shall not
in any way be made liable for any act, either of commission or omission, in
connection with the exercise of such remedies.
An action of mortgage foreclosure or trustee's sale as now provided or
hereafter prescribed by law, may forthwith be commenced and prosecuted to
judgment, execution and sale, for the collection of the whole amount of the
Lease Investment Balance, together with all fees, costs and expenses of such
proceedings, including a reasonable attorney's fees. And all errors in such
proceedings, together with any stays of or exemptions from execution, or
extensions of time of payment, which may be given by any Applicable Law now in
force, or which may be enacted hereafter, are hereby forever waived and
released.
If, pursuant to the exercise by the Lessor of its remedies pursuant to
this Section 21, the Lease Investment Balance and all other amounts due and
owing from the Lessee under this Lease and the other Lease Documents have been
paid in full, then the Agent shall (a) remit to the Lessee any excess amounts
received by the Agent; and (b) convey the Property by quitclaim deed to Lessee
on an "as-is, where is" basis, without any representation or warranty of any
kind, express or implied, whatever title to the Property it may have (except
that the Agent shall warrant the Agent Representations).
WAIVER OF CERTAIN RIGHTS. IF THIS LEASE SHALL BE TERMINATED PURSUANT TO
THIS SECTION 21, THE LESSEE WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, (A)
ANY NOTICE OF RE-ENTRY OR THE INSTITUTION OF LEGAL PROCEEDINGS TO OBTAIN
RE-ENTRY OR POSSESSION; (B) ANY RIGHT OF REDEMPTION, RE-ENTRY OR REPOSSESSION;
(C) THE BENEFIT OF ANY LAWS NOW OR HEREAFTER IN FORCE EXEMPTING PROPERTY FROM
LIABILITY FOR RENT OR FOR DEBT OR LIMITING THE AGENT WITH RESPECT TO THE
ELECTION OF REMEDIES; AND (D) ANY OTHER RIGHTS WHICH MIGHT OTHERWISE LIMIT OR
MODIFY ANY OF THE AGENT'S RIGHTS OR REMEDIES UNDER THIS SECTION 21.
IN CONNECTION WITH THE EXERCISE OF ANY REMEDY OF AGENT UNDER THIS LEASE,
LESSEE HEREBY WAIVES ANY REQUIREMENT THAT A NOTICE FROM AGENT NOT BECOME
EFFECTIVE UNTIL A PERIOD OF DAYS HAVE ELAPSED, AND LESSEE SPECIFICALLY WAIVES
ALL RIGHTS UNDER CALIFORNIA CIVIL CODE SECTION 1946.
No waiver of any Event of Default or Unmatured Event of Default hereunder
shall in any way be, or be construed to be, a waiver of any future or subsequent
Event of Default or Unmatured Event of Default.
If Agent shall become entitled to exercise a remedy under this Section 21
due solely to a breach of Lessee's obligations under Sections 19(o) or 19(p),
then Agent (on behalf of the Lessors) shall not be entitled to recover a
monetary amount from Lessee in excess of the Guaranteed Residual Value (as
determined at the time of recovery), plus all then accrued and unpaid Base Rent
and Additional Base Rent and other amounts then due under the Lease Documents
(excluding the Lease Investment Balance); except that nothing in this paragraph
shall
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limit the exercise of the remedies of nonjudicial and judicial foreclosure
of the Deed of Trust and the right of Agent (on behalf of the Lessors) to
recover a deficiency judgment from Lessee, although the monetary amount of such
deficiency judgment shall not exceed the Guaranteed Residual Value (as
determined at the time of recovery) plus all then accrued and unpaid Base Rent
and Additional Base Rent and other amounts then due under the Lease Documents
(excluding the Lease Investment Balance).
WITHOUT LIMITING THE GENERALITY AND AVAILABILITY OF ALL OF THE RIGHTS AND
REMEDIES AVAILABLE TO AGENT (ON BEHALF OF LESSORS) UNDER THIS AGREEMENT, IN THE
EVENT OF ANY INCONSISTENCY BETWEEN THE RIGHTS AND REMEDIES UNDER THIS AGREEMENT
AND THE DEED OF TRUST, THE DEED OF TRUST SHALL CONTROL.
SECTION 22. LEASE ASSIGNMENT AND SUBLETTING.
(a) Lessee may sublease all or any portion of the Property, or assign its
rights in this Lease, without Agent's or Lessor's approval; PROVIDED, that
nothing herein shall be construed to release or reduce Lessee's obligations
under this Lease, nor shall Lessee ever be deemed to be a guarantor of the
obligations of any sublessee or assignee, but instead shall remain primarily
liable for the obligations under this Lease. Lessee shall notify Agent in
writing of the date of such sublease or assignment, and the name, business
address and telephone number(s) of every sublessee or assignee within ten
Business Days after the date of such sublease or assignment.
(b) Without limiting Lessor's or Lessee's rights under Section 22(a)
hereof, Lessee hereby grants to Agent (on behalf of Lessors) a security interest
in and to all revenues, contract rights, claims, choses in action, and all other
rights of Lessee arising out of any sublease or assignment of Lessee's rights in
this Lease, as collateral for Lessee's obligations under this Lease. Lessee
shall, within ten Business Days after request by Agent, execute, acknowledge and
deliver to Agent (on behalf of the Lessors) such financing statements, deeds of
trust, mortgages and other security documents as Agent may deem necessary to
further perfect the grant of such security interest.
(c) During the continuation of any Event of Default, in addition to all of
Lessor's other rights and remedies under this Lease, at law, in equity or
otherwise, Agent (on behalf of the Lessors) may deal directly with any sublessee
or assignee of Lessee under this Lease as though such sublessee or assignee were
the Lessee under this Lease, and Agent (on behalf of the Lessors) may accept
rents and any other sums due pursuant to such sublease or assignment, and may
retain the same and apply the same to any obligations (accrued or thereafter
accruing) of Lessee under this Lease.
SECTION 23. SALE OF RENTS, ASSIGNMENTS, PERMITTED LESSOR LIENS.
(a) SALE OF RENTS. Subject to the provisions of this Section 23, any
Lessor may at any time without Lessee's consent or approval, but with prior
notice to Lessee, in accordance with applicable law, sell to one or more
Affiliates and/or major financial institutions (collectively, "RENT PURCHASERS")
rights in the interest of such Lessor to receive rents from the Property and/or
this Lease, pursuant to a Rent Purchase Agreement. In the event of any such
sale to a Rent Purchaser, upon request by Lessee the selling Lessor shall give
written notice to Lessee stating the Rent Purchaser's name and address and the
amount of the interest purchased, but Lessee and
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the Agent shall continue to deal solely and directly with such Lessor in
connection with such Lessor's rights and obligations under this Agreement. No
sale of rents contemplated in this Section 23 shall relieve any Lessor either
from its Commitment hereunder or from any of its other obligations hereunder and
such Lessor shall remain solely responsible for the performance thereof. Any
Rent Purchaser shall have the same rights under Sections 7(b), 7(c), 8, 12, 13
hereof as any Lessor.
(b) ASSIGNMENTS; LIENS. Subject to the provisions of this Section
23(b), any Lessor may, without Lessee's approval, execute an assignment and
acceptance substantially in the form of Exhibit D, with appropriate insertions
(herein individually called an "ASSIGNMENT" and collectively called the
"ASSIGNMENTS"), whereby such Lessor shall assign to one or more Persons (herein
individually called an "ASSIGNEE" and collectively called the "ASSIGNEES") all
or any part of such Lessor's rights and benefits, and delegate all or any part
of such Lessor's obligations, under this Agreement. No Lessor may make an
Assignment before the Closing Date.
Upon execution, delivery and acceptance of each Assignment, from and
after the effective date specified therein, which effective date shall be at
least five (5) Business Days after the execution thereof, Lessee, the Agent and
the Lessors agree that, to the extent of any such Assignment,
(x) the Assignee thereunder shall, in addition to any rights,
benefits and obligations hereunder held by it immediately prior to such
effective date, have the rights, benefits and obligations of a Lessor under
this Agreement as it would have if it were a Lessor hereunder to the extent
that the same have been assigned and delegated to it pursuant to such
Assignment, and
(y) the assignor Lessor shall, to the extent that rights, benefits
and obligations hereunder have been assigned and delegated by it pursuant
to such Assignment, relinquish its rights and benefits and be released from
its obligations under this Agreement (and, in the case of an Assignment
covering all or the remaining portion of an assignor Lessor's rights,
benefits and obligations under this Agreement, such Lessor shall cease to
be a party hereto or a Lessor hereunder), except that in all cases the
assignor Lessor shall remain entitled to the rights and benefits arising
under Sections 8, 12 and 13 hereof with respect to any period of time prior
to the effective date of any such Assignment;
PROVIDED, that:
(i) the Agent and each Lessor shall be entitled to continue to
deal solely and directly with the assignor Lessor in connection with
the interests so assigned and delegated to the Assignee until written
notice of such Assignment, together with addresses and related
information with respect to the Assignee, shall have been given to the
Agent and each Lessor by the assignor Lessor and the Assignee, and
(ii) if the Assignee is a non-United States Person for U.S.
federal income tax purposes, it shall deliver to Lessee and the
documentation referred to in Section 13(c) hereof.
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Upon its receipt of an Assignment executed by an assignor, Lessor and an
Assignee, together with a fixed charge (payable by the assigning and/or
transferee Lessor) of $2,500, the Agent shall, if such Assignment has been
completed and is in substantially the form of Exhibit D, accept such Assignment
and forward a copy thereof to the Lessee, and the Agent shall revise Schedule I
hereof to reflect such assignment.
(c) LESSOR LIENS. The Agent agrees that it will (i) not directly
create, incur, assume or suffer to exist any Lessor Liens other than Permitted
Lessor Liens, (ii) at its own cost and expense, as promptly as practicable, take
such action as reasonably may be necessary to discharge any Lessor Liens created
by it on the Property, other than Permitted Lessor Liens or (iii) not, except in
compliance with the Lease Documents, sell, transfer or otherwise dispose of all
or any part of the Property.
(d) PROHIBITED ASSIGNEES. In no event shall a Lessor transfer any
interest or rights under this Lease to any Person that constitutes a "special
purpose entity" (as defined in the Emerging Issues Task Force Bulletin No. 90-15
or in any subsequent publications of the Financial Accounting Standards Board).
SECTION 24. TAXES.
The Lessors and Lessee agree that, notwithstanding any provision of
any Lease Document purporting to transfer true ownership of any or all of the
Property, for all U.S. Federal, state and local tax purposes, the Lessee, and
not the Lessors, shall, to the extent permitted by Applicable Law, treat itself
as the owner of the Property; and this Lease shall be treated by the Lessors and
the Lessee as an evidence of indebtedness. The Agent and the Lessors each
severally agree that, to the extent permitted by Applicable Law, they will not
file any U.S. Federal, state or local income tax returns during the Lease Term
that are inconsistent with the treatment of the Lessee as owner of the Property
for U.S. Federal, state and local income tax purposes.
SECTION 25. OPERATING LEASE.
Notwithstanding the provisions of Section 29 hereof, each of the
Lessors and the Lessee severally hereby declare that it is their mutual intent
that for accounting purposes: (i) this Lease be an operating lease (for
purposes of Financial Accounting Standards Board Statement Number 13) and not an
instrument or evidence of indebtedness, and (ii) the relationship under this
Lease between the Agent and the Lessors on the one hand and the Lessee on the
other hand shall always be that of lessor and lessee only.
SECTION 26. NOTICES AND REQUESTS.
(a) Except as otherwise expressly provided in this Agreement, any
notice hereunder to Lessee, the Agent or any Lessor shall be in writing.
Notices given by telegram, telecopier or personal delivery shall be deemed to
have been given and received when sent and notices given by mail shall be deemed
to have been given and received four Business Days after the date when sent by
registered or certified mail, postage prepaid, and addressed to Lessee, the
Agent, or such Lessor at its address shown below its signature hereto, or at
such other address as any such Person may, by written notice received by such
other Persons, have designated as its address for such purpose. The Agent or
any Lessor giving any waiver, consent or notice to, or
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making any request upon, Lessee hereunder shall promptly notify each Lessor and
the Agent thereof.
(b) The Agent and each Lessor shall be entitled to rely upon all
telephonic notices without awaiting receipt of written versions of such notices
and Lessee shall hold the Agent, and each Lessor harmless from, and shall
indemnify, defend, protect and hold the Agent and each Lessor harmless against,
any loss, cost or expense ensuing from any such reliance. Any such notices
shall be directed as follows:
If to the Agent or a Lessor:
Sumitomo Bank Leasing and Finance, Inc.
277 Park Avenue
New York, New York 10172
Attn: Chief Credit Officer
If to the Lessee, to Lessee at:
Novellus Systems, Inc.
3950 North First Street
San Jose, California 95125
Attn: Mr. John Root
SECTION 27. RIGHT TO PERFORM FOR LESSEE.
If Lessee fails to perform or comply with any of its covenants or
agreements contained in this Lease or any Lease Document, the Agent may, upon
notice to Lessee but without waiving or releasing any obligations or default,
itself perform or comply with such covenant or agreement, and the amount of the
reasonable expenses of the Agent (including without limitation reasonable fees
and disbursements of counsel) incurred in connection with such performance or
compliance, shall be payable, or reimbursed by Lessee, on demand by Agent, plus
interest at the Overdue Rate from the date when incurred by Agent to the date
when reimbursed by Lessee.
SECTION 28. THE AGENT.
(a) APPOINTMENT AND AUTHORIZATION. Each Lessor irrevocably appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers under this Lease as are delegated to the Agent by the terms
hereof, and to determine whether and how to enforce any obligations of Lessee in
all cases together with all such powers as are reasonably incidental thereto
(including, without limitation, the execution and delivery of the various
documents, conveyances, terminations, assignments and instruments contemplated
herein to be delivered by the Agent on behalf of the Lessors). No Lessor shall
have any right to enforce any such obligations.
(b) AGENT AND AFFILIATES. Sumitomo Bank Leasing and Finance, Inc.
shall have the same rights and powers under this Agreement as any other Lessor
and may exercise or refrain
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from exercising the same as though it were not the Agent, and Sumitomo Bank
Leasing and Finance, Inc. and its Affiliates may accept deposits from, lend
money to, and generally engage in any kind of business with Lessee or any
Subsidiary or Affiliate of Lessee as if it were not the Agent hereunder.
(c) ACTION BY AGENT. The obligations of the Agent hereunder are only
those expressly set forth herein and therein. Without limiting the generality
of the foregoing, the Agent shall not be required to take any action with
respect to any Event of Default or Unmatured Event of Default, except as
expressly provided herein.
(d) CONSULTATION WITH EXPERTS. The Agent may consult with legal
counsel (who may be counsel for Lessee, a Lessor or Agent or any Affiliate of
any of them), independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken by it in
good faith in accordance with the advice of such counsel, accountants or
experts.
(e) LIABILITY OF AGENT. Neither the Agent nor any of its Affiliates
nor any of their respective directors, officers, agents, employees, counsel or
other representatives shall be liable for any action taken or not taken by it in
connection with the Lease Documents (i) with the consent or at the request of
the Required Lessors or (ii) in the absence of its own gross negligence or
willful misconduct. Neither the Agent nor any of its Affiliates, directors,
officers, agent or employees shall be responsible for or have any duty to
ascertain, inquire into or verify (a) any statement, warranty or representation
made in connection with the Lease Documents; (b) the performance or observance
of any of the covenants or agreements of Lessee; (c) the satisfaction of any
condition specified in Section 3 hereof; or (d) the validity, effectiveness or
genuineness of any of the Lease Documents or any other instrument or writing
furnished in connection herewith or therewith. The Agent shall not incur any
liability by acting in reliance upon any notice, consent, certificate,
statement, or other writing (which may be a bank wire, telex or similar writing)
believed by it to be genuine or to be signed by the proper party or parties. As
to any matters not expressly provided for by this Lease, the Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder in
accordance with instructions signed by the Required Lessors, and such
instructions of the Required Lessors and any action taken or failure to act
pursuant thereto shall be binding on all of the Lessors.
(f) INDEMNIFICATION. Each Lessor shall, ratably in proportion to the
amount of its Outstanding Investment, indemnify, defend, protect and hold the
Agent harmless (to the extent not reimbursed by the Lessee) against any cost,
expense (including counsel fees and disbursements), claim, demand, action, loss
or liability (except to the extent resulting from the Agent's gross negligence
or willful misconduct) that the Agent may suffer or incur in connection with the
Lease Documents or any action taken or omitted by the Agent hereunder.
(g) FAILURE TO ACT. Except for action expressly required of the
Agent hereunder, the Agent shall in all cases be fully justified in failing or
refusing to act hereunder unless it shall be indemnified to its satisfaction by
the Lessors against any and all liability and expense which may be incurred by
it by reason of taking or continuing to take any such action.
(h) CREDIT DECISION. Each Lessor acknowledges that it has,
independently and without reliance upon the Agent or any other Lessor, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into
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this Lease (pursuant to Section 23 hereof or otherwise). Each Lessor also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lessor, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Lease.
(i) RESIGNATION AND REMOVAL. The Agent may resign as such at any
time upon at least 30 days' prior notice to Lessee and the Lessors, and may be
removed as such at any time by vote of the Required Lessors and notice to the
retiring Agent and Lessee. In the event of any such resignation or removal, the
Required Lessors shall as promptly as practicable (but with five Business Days'
prior written notice being given to Lessee) appoint a successor Agent, provided
that such successor Agent shall, unless an Event of Default is continuing, be
approved by Lessee which approval shall not be unreasonably withheld and, if
Lessee has not responded within such five Business Day period, Lessee shall be
deemed to have approved such new Agent. If no successor Agent shall have been
so appointed and shall have accepted such appointment within 30 days after
either the retiring Agent's giving of notice of resignation or the Required
Lessors' vote to remove the retiring Agent, then the retiring Agent may, on
behalf of the Lessors, appoint a successor Agent, which shall be a commercial
bank organized under the laws of the United States of America or of any State
thereof or under the laws of another country that is doing business in the
United States and having a combined capital, surplus and undivided profits of at
least $100,000,000, or a wholly owned subsidiary of such bank. Upon its
acceptance of its appointment, 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 all further
duties and obligations as Agent under this Agreement. After any retiring
Agent's resignation or removal hereunder as Agent, the provisions of this
Agreement shall continue to inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement. No
resignation or renewal of the Agent may become effective until a successor Agent
has been appointed as provided above.
(j) DISTRIBUTIONS. The Agent shall, as promptly as practicable,
distribute to each Lessor its appropriate portion, if any, of payments received
(in good, collected funds) by the Agent from the Lessee for the account of the
Lessors or of any such payments so received for the account of such Lessor.
(k) LESSEE RIGHTS. Except where Lessee is expressly referenced in
this Section 28, (x) this Section 28 is for the benefit of the Agent and Lessors
only, (y) Lessee shall have no right to enforce any part of this Section 28 and
(z) this Section 28 may be amended by the approval of Agent and the Required
Lessors, without any need to obtain Lessee's approval. Agent shall send Lessee
a copy of any such amendments.
SECTION 29. SECURITY INTEREST; FURTHER ASSURANCES.
(a) SECURITY INTEREST. The Lessee hereby grants, as security for the
due payment and performance of all Liabilities of Lessee, to the Agent for the
benefit of the Lessors, a security interest in and to all its right, title and
interest, whether now or hereafter existing or acquired, in the Collateral. At
the expense of the Lessee, the Agent (on behalf of the Lessors) and the Lessee
each agree to cooperate and to execute, deliver and file such further documents,
instruments and certificates as may be deemed reasonably necessary to preserve,
perfect and protect the title and interests of the Agent on behalf of the
Lessors hereunder, including, but not
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limited to, the execution by the Agent (on behalf of the Lessors) and the Lessee
and the filing of financing statements pursuant to the UCC.
(b) FURTHER ASSURANCES. Lessee shall, at its expense, do any further
act and execute, acknowledge, deliver, file, register and record any further
documents which the Agent may reasonably request in order to protect its title
to and first priority perfected security interest in the Collateral, subject to
no Liens other than Permitted Liens, and Agent's rights and benefits under this
Lease and the other Lease Documents. Lessee shall promptly and duly execute and
deliver to Agent such documents and assurances and take such further action as
Agent may from time to time reasonably request in order to carry out more
effectively the intent and purpose of this Lease and the other Lease Documents,
to establish and protect the rights and remedies created or intended to be
created in favor of Agent hereunder and thereunder, and to establish, perfect
and maintain the right, title and interest of Agent, for the benefit of the
Lessors, in and to the Collateral, subject to no Lien other than Permitted
Liens.
SECTION 30. MISCELLANEOUS.
(a) All indemnities contained in this Lease shall survive the
expiration or other termination hereof.
(b) This Lease, the other Lease Documents and the instruments,
documents or agreements referred to herein constitute the entire agreement
between the parties and no representations, warranties, promises, guarantees or
agreements, oral or written, express or implied, have been made by any party
hereto with respect to the Lease Documents or the Property, except as provided
herein or therein.
(c) This Lease and each Lease Supplement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument. Only the counterpart of this Lease
and each Lease Supplement containing the receipt therefor executed by the Agent
at the foot thereof shall evidence the monetary obligations of the Lessee
hereunder and thereunder, and to the extent, if any, that this Lease constitutes
chattel paper (as such term is defined in the UCC), no security interest in this
Lease or the other Lease Documents may be created by the transfer or possession
of any counterpart hereof other than such counterpart.
(d) The captions in this Lease are for convenience of reference only
and shall not be deemed to affect the meaning or construction of any of the
provisions hereof. References to a "Section", "Schedule" or "Exhibit" are,
unless otherwise specified, to the appropriate Section, Schedule or Exhibit
annexed to this Agreement, each of which is deemed to be a part hereof. Any
provision of this Lease which is prohibited by Applicable Law or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and the parties hereto shall negotiate in good faith
appropriate modifications to reflect such changes as may be required by
Applicable Law, and, as nearly as possible, to produce the same economic effects
as the provision which is prohibited or unenforceable; and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by Applicable Law, the Lessee hereby waives any provision of Applicable Law
which renders any provision hereof prohibited or unenforceable in any respect.
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(e) THIS LEASE HAS BEEN DELIVERED IN THE STATE OF CALIFORNIA AND
SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF CALIFORNIA, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. LESSEE IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF
ANY STATE OR FEDERAL COURT HAVING A SITUS LOCATED WITHIN THE BOUNDARIES OF THE
NORTHERN JUDICIAL DISTRICT OF THE UNITED STATES DISTRICT COURT FOR STATE OF
CALIFORNIA OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF, OR RELATING TO,
THIS LEASE AND HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO THE VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING AS WELL AS ANY OBJECTION WITH RESPECT THERETO OF
INCONVENIENT FORUM.
LESSEE HEREBY FURTHER IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING IN CONNECTION WITH THIS LEASE OR ANY TRANSACTION RELATING
HERETO. THE FOREGOING WAIVER OF JURY TRIAL IS MADE KNOWINGLY AND INTENTIONALLY,
AFTER CONSULTATION WITH COUNSEL, OR AFTER HAVING HAD THE OPPORTUNITY TO CONSULT
WITH COUNSEL OF LESSEE'S OWN SELECTION.
(f) Lessee waives any rights or remedies provided to it by Sections
2A-508 through 522 of the UCC (except to the extent any of the foregoing relate
solely to a Lessor's or Agent's repudiation of this Lease or breach of an
express obligation under this Lease).
(g) Whether or not the Closing Date occurs hereunder, the Lessee
shall reimburse the Agent and the Lessors for all reasonable costs and expenses
(including fees and expenses of counsel), incurred by them in connection with
the preparation, negotiation, execution, completion and registration of this
Lease, each Lease Document and all agreements and instruments required hereunder
or thereunder. The Lessee shall bear the cost of all stamp duties (if any)
payable as a result of the execution and delivery hereof or thereof. The Lessee
shall reimburse the Agent and the Lessors for the reasonable costs and expenses
(other than costs and expenses referred to in the first sentence of this
paragraph (g)) incurred by the Agent in connection with the enforcement,
amendment, modification or supplement of this Lease, the Lease Supplements or
any of the documents defined or referred to herein (including, without
limitation, reasonable fees and disbursements of counsel).
(h) If any party hereto fails to perform any of its obligations under
this Agreement or if a dispute arises between or among the parties hereto
concerning the meaning or interpretation of any provision of this Agreement,
then the defaulting party or parties or the parties not prevailing in such
dispute shall pay any and all costs and expenses incurred by the other party on
account of such default and/or in enforcing or establishing its rights
hereunder, including, without limitation, court costs and attorneys' fees and
disbursements. Any such attorneys' fees and other expenses incurred by a party
in enforcing a judgment in its favor under this Agreement shall be recoverable
separately from and in addition to any other amount included in such judgment,
and such attorneys' fees obligation is intended to be severable from the other
provisions of this Agreement and to survive and not be merged into any such
judgment.
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IN WITNESS WHEREOF, the Agent, the Lessors and the Lessee have caused
this Lease to be executed and delivered by their duly authorized officers as of
the day and year first above written.
LESSOR: SUMITOMO BANK LEASING
AND FINANCE, INC.
By: /s/ William M. Ginn
---------------------------
Title: President
------------------------
277 Park Avenue
New York, New York 10172
LESSEE: NOVELLUS SYSTEMS, INC.,
a California corporation
By: /s/ Robert H. Smith
---------------------------
Title: Chief Financial Officer
------------------------
3950 North First Street
San Jose, California 95125
AGENT: SUMITOMO BANK LEASING
AND FINANCE, INC.
By: /s/ William M. Ginn
---------------------------
Title: President
------------------------
277 Park Avenue
New York, New York 10172
For purposes of Section 2A-208(2) of the UCC, this Lease may not be modified or
rescinded except by a writing signed by the parties required by Section 16
hereof.
AGENT (ON BEHALF OF
THE LESSORS): SUMITOMO BANK LEASING AND FINANCE, INC.
By: /s/ William M. Ginn
--------------------------------
Title: President
-----------------------------
-75-
<PAGE>
LESSEE: NOVELLUS SYSTEMS, INC.,
a California corporation
By: /s/ Robert H. Smith
--------------------------------
Title: Chief Financial Officer
-----------------------------
Receipt of this original counterpart of this Agreement is hereby
acknowledged this __________ day of ______, 199_:
SUMITOMO BANK LEASING
AND FINANCE, INC., as Agent
By:________________________________
Title:_____________________________
-76-
<PAGE>
SCHEDULE I - Commitments
The following Persons are collectively the "Lessors" under this Lease:
EQUITY LESSOR FUNDING OFFICE COMMITMENT
Sumitomo Bank Leasing New York 3%
and Finance, Inc.
================ ===============
Equity Lessor
Commitment = $165,000.00
DEBT LESSOR FUNDING OFFICE COMMITMENT
Sumitomo Bank Leasing New York 97%
and Finance, Inc.
================ ===============
Debt Lessor
Commitment = $5,335,000.00
______________
TOTAL COMMITMENT...................................................$5,500,000.00
<PAGE>
SCHEDULE II - Legal Description of Land
ALL OF PARCEL 4, AS SHOWN UPON THAT PARCEL MAP WHICH WAS FILED FOR
RECORD ON THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CLARA,
STATE OF CALIFORNIA, ON JULY 13, 1984, IN BOOK 531 OF MAPS, AT PAGES
41 AND 42.
<PAGE>
EXHIBIT A
TO
LEASE AGREEMENT
[FORM OF LEASE SUPPLEMENT]
LEASE SUPPLEMENT, dated as of October ____, 1996, to PURCHASE AND
MASTER LEASE AGREEMENT dated as of October ___, 1996 (the "Lease Agreement"),
among the lessors referred to therein (the "Lessors") and Novellus Systems,
Inc., a California corporation ("Lessee"), and Sumitomo Bank Leasing and
Finance, Inc., as agent for the Lessors (in its capacity as such, the "Agent").
In consideration of the mutual agreements herein contained and other
good and valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned thereto in the Lease Agreement.
2. The date of this Lease Supplement is October ____, 1996 (the
"Closing Date") and the Lessors hereby lease to Lessee under the Lease
Agreement, and the Lessee hereby leases from the Lessors under the Lease
Agreement, the Property described in Part I of Schedule 1 to this Lease
Supplement and said items of Property are subject to all of the covenants, terms
and conditions of the Lease Agreement and this Lease Supplement.
3. The Lease Term for the Property described in Part I of Schedule 1
to this Lease Supplement commences as of the date hereof and continues to and
including October ____, 2006, unless extended or earlier terminated as provided
in the Lease Agreement.
4. Lessee hereby acknowledges and confirms that it has inspected and
approved the Property set forth on Part I of Schedule 1 hereto for all purposes
of the Lease Agreement and the other Lease Documents and, as between the Lessors
and the Lessee, such Property is in first class condition and appearance, and
without defect therein with respect to grading, compaction, soils stability and
fitness for use or in any other respect, and all utilities available to or at
the boundaries thereof and other Personal Property located thereat is in good
working order, whether or not any of the foregoing is discoverable by Lessee as
of the date hereof and are accepted for lease under the Lease Agreement as of
the date specified above.
5. Lessee hereby represents and warrants that no event which would
constitute an Event of Loss under the Lease Agreement has occurred with respect
to the Property set forth on Part I of Schedule 1 hereto as of the date hereof.
Lessee hereby reaffirms each of the representations and warranties set forth in
Section 2 of the Lease Agreement as if made on the date hereof, including that
the Property set forth on Schedule 1 hereto is free and clear of all Liens other
than Permitted Liens.
6. The Property Cost for the Property described in Part I of
Schedule 1 to this Lease Supplement is $________.
A-1
<PAGE>
7. The respective percentages of the Property Cost for the Property
described in Part I of Schedule 1 to this Lease Supplement are correctly
indicated Part II of Schedule 1 of this Lease Supplement.
8. The Guaranteed Residual Value for the Property described in Part
I of Schedule 1 to this Lease Supplement is $_________.
9. The location(s) (address, county and state) for the Property
described in Schedule 1 to this Supplement is set forth on Schedule 1 to this
Lease Supplement.
10. Initially, and until changed pursuant to the Lease Agreement,
Base Rent will be based on the Euro-Dollar Rate.
11. The Memorandum of Lease and the Deed of Trust have been recorded
in the office of the county recorder, and the UCC-1 Filings have been made in
the office of the California Secretary of State, as shown on Schedule 2 to this
Supplement and Additional Base Rent for the Property described herein is as set
forth in Schedule 3 to this Supplement.
12. Any and all notices, requests, certificates and other instruments
executed and delivered concurrently with or after the execution and delivery of
the Lease Supplement may refer to the "Purchase and Master Lease Agreement,
dated as of October ___, 1996", or may identify the Lease Agreement in any other
respect without making specific reference to this Lease Supplement, but
nevertheless all such references shall be deemed to include this Lease
Supplement, unless the context shall otherwise require.
13. This Lease Supplement may be executed in any number of
counterparts, each executed counterpart constituting an original but all
together one and the same instrument. This Lease Supplement shall be construed
in connection with and as part of the Lease Agreement, and all terms, conditions
and covenants contained in the Lease Agreement, as supplemented by this Lease
Supplement, shall be and remain in full force and effect and shall govern the
Property described on Part I of Schedule 1 hereto.
14. This Lease Supplement has been delivered in the State of
California and shall in all respects be governed by, and construed in accordance
with, the laws of the State of California, including all matters of
construction, validity and performance.
IN WITNESS WHEREOF, Agent, on behalf of the Lessors, and the Lessee
have caused this Lease Supplement to be executed and delivered by their duly
authorized officers as of the day and year first above written.
AGENT (ON BEHALF OF
THE LESSORS): SUMITOMO BANK LEASING AND FINANCE, INC.
By:______________________________________
Title:___________________________________
A-2
<PAGE>
LESSEE: NOVELLUS SYSTEMS, INC.,
a California corporation
By:______________________________________
Title:___________________________________
Receipt of this original counterpart of this Lease Supplement is
hereby acknowledged this __________ day of ______, 199_:
SUMITOMO BANK LEASING
AND FINANCE, INC., as Agent
By:______________________________________
Title:___________________________________
A-3
<PAGE>
SCHEDULE 1
TO
LEASE SUPPLEMENT
PART I - DESCRIPTION AND LOCATION OF PROPERTY
ALL OF PARCEl 4, AS SHOWN UPON THAT PARCEL MAP WHICH WAS FILED FOR
RECORD ON THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CLARA,
STATE OF CALIFORNIA, ON JULY 13, 1984, IN BOOK 531 OF MAPS, AT PAGES
41 AND 42.
PART II - PROPERTY COST
$__________________
A-4
<PAGE>
SCHEDULE 2
TO
LEASE SUPPLEMENT
Recording and
UCC-1 Filing Schedule
(California)
MEMORANDUM OF LEASE
RECORDING DATE COUNTY INSTRUMENT NO.
Santa Clara
DEED OF TRUST
RECORDING DATE COUNTY INSTRUMENT NO.
Santa Clara
UCC-1 FILINGS
FILING DATE FILE NO.
A-5
<PAGE>
SCHEDULE 3
TO
LEASE SUPPLEMENT
Additional Base Rent
RENT PAYMENT DATE ADDITIONAL BASE RENT
A-6
<PAGE>
EXHIBIT B
TO
LEASE AGREEMENT
[Reserved]
B-1
<PAGE>
EXHIBIT C
TO
LEASE AGREEMENT
[FORM OF CLOSING DATE NOTICE]
CLOSING DATE NOTICE
DATE:
TO: Sumitomo Bank Leasing and Finance, Inc., not individually, but
solely as Agent (the "Agent"), under that certain Purchase and
Master Lease Agreement, dated as of October ____, 1996, (the
"Lease Agreement") among Novellus Systems, Inc., a California
corporation ("Lessee"), the Agent, and the Lessors identified
therein (all capitalized terms used herein and not otherwise
defined shall have the meaning assigned to them in the Lease
Agreement, unless the context otherwise requires).
FROM: The Lessee
REGARDING: Closing Date
1. The Closing Date under the Lease Agreement is scheduled for 10:00
a.m. local time on October ____, 1996 at the offices of First American Title
Insurance Company located at ________________________, San Jose, California.
2. The Property Information Package is complete, and there have been
no changes thereto [except as follows: ______________________________, true and
complete copies of which are attached hereto.]
3. The Property Cost of the Closing Date is $ to be funded
by each Lessor ratably in accordance with its Commitment Percentage.
4. The Property Cost as of the Closing Date shall be sent by wire
transfer of immediately available funds to Lessee at the following account:
Bank: Union Bank -- Los Angeles
for Office No. 715
1800 Harrison Street
Oakland, California 94612
B-2
<PAGE>
ABA Routing #: 1220 00 496
Account #: 715 00 820 26
Payee: First American Title Guaranty Company
Reference: Office No. 282-05
Escrow No._____________
Escrow Officer: Susan Melton
IN WITNESS WHEREOF, the Lessee has caused this Closing Date Notice to
be executed and delivered by its duly authorized officer as of the day and year
first above written.
NOVELLUS SYSTEMS, INC.,
a California corporation
By:_____________________
Title:__________________
B-3
<PAGE>
EXHIBIT D
TO
LEASE AGREEMENT
[FORM OF ASSIGNMENT AGREEMENT]
ASSIGNMENT AGREEMENT
Reference is made to the Purchase and Master Lease Agreement described in
Item 2 of Annex I annexed hereto (the "Lease Agreement"). Terms defined in the
Lease Agreement are used herein with the meanings assigned thereto in the Lease
Agreement.
________________(the "Assignor") and________________(the "Assignee")
hereby agree as follows:
1. The Assignor hereby sells and assigns and delegates to the Assignee,
without recourse, representation or warranty except as specifically set forth in
paragraph 2 below, and the Assignee hereby purchases and assumes from the
Assignor, that interest in and to all of the Assignor's rights, benefits and
obligations under the Lease Agreement as of the date hereof which represents the
percentage interest specified in Item 4 of Annex I of all outstanding Lessors'
rights and obligations under the Lease Agreement, including, without limitation,
such interest in the Assignor's Commitment (if applicable) and the Base Rent,
Additional Base Rent and Guaranteed Residual Value owing to the Assignor
relating to such Commitment. After giving effect to such sale and assignment,
the Assignee's Commitment will be as set forth in Item 4 of Annex I.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any lien or adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Lease Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Lease Agreement or any other instrument
or document furnished pursuant thereto; and (iii) makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of the Lessee or the performance or observance by the Lessee of any
of its obligations under the Lease Agreement or any other instrument or
document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of the Lease
Agreement, together with copies of the financial statements referred to therein
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;
(ii) agrees that it will, independently and without reliance on Assignor, as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Lease Agreement; (iii) appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under the Lease Agreement as are delegated to Agent by the terms
thereof, together with such powers as are reasonably incidental thereto; (iv)
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Lease Agreement are required to be
performed by it as a Lessor, [and (v) attaches the forms prescribed by the
Internal Revenue Service of the United
D-1
<PAGE>
States certifying as to the Assignee's status for purposes of determining
exemption from United States withholding taxes with respect to all payments
to be made to the Assignee under the Lease Agreement or such other documents
as are necessary to indicate that all such payments are subject to such rates
at a rate reduced by the applicable tax treaty].(1)
4. Following the execution of this Assignment Agreement by the Assignor
and Assignee, it will be delivered to the Agent for registration by the Agent.
The effective date of this Assignment Agreement shall be the date of execution
hereof by the Assignor and the Assignee, unless otherwise specified on Item 6 of
Annex I hereto (the "Settlement Date").
5. Upon such acceptance and registration by the Agent, as of the
Settlement Date, (i) the Assignee shall be a party to the Lease Agreement and,
to the extent provided in this Assignment Agreement, have the rights and
obligations of a Lessor thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment Agreement, relinquish its rights and be released
from its obligations under the Lease Agreement.
6. Upon such acceptance and registration by the Agent, from and after the
Settlement Date, the Agent shall make all payments under the Lease Agreement in
respect of the interest assigned hereby (including, without limitation, all
payments of Base Rent, Additional Base Rent and fees (if applicable) with
respect thereto) to the Assignee. [Upon the Settlement Date, the Assignee shall
pay to the Assignor outstanding Additional Base Rent under the Lease
Agreement](2) The Assignor and Assignee shall make all appropriate adjustments
in payments under the Lease Agreement for periods prior to the
Settlement Date directly between themselves on the Settlement Date.
7. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
[NAME OF ASSIGNOR]
as Assignor
By:
Title:
- --------------
(1) If the Assignee is organized under the laws of a jurisdiction outside the
United States.
(2) To be adjusted as is appropriate.
D-2
<PAGE>
[NAME OF ASSIGNEE]
as Assignee
By:____________________
Title:_________________
Accepted this ____ day
of___________, 19__
SUMITOMO BANK LEASING AND FINANCE, INC.
as Agent
By:_____________________
Title:__________________
D-3
<PAGE>
ANNEX I
1. Lessee: Novellus Systems, Inc.
2. Name and Date of Lease Agreement: Purchase and Master Lease Agreement dated
as of ________________, 1996 by and among the Lessors named therein (the
"Lessors"), Novellus Systems, Inc., a California corporation ("Lessee"),
and Sumitomo Bank Leasing and Finance, Inc., as agent for the Lessors (in
its capacity as such, the "Agent") (as such Lease Agreement may from time
to time be amended, supplemented or otherwise modified).
3. Date of Assignment Agreement: ________________, 19__.
4. Amounts (as of Date of Item #3 above):
- --------------------------------------------
a. Total Lease
Agreement
/Commitment $__________
b. Assigned
Commitment __________%
c. Amount of Assigned
Commitment $__________
- --------------------------------------------
5. Assignee's Funded
Commitment: $
6. Settlement Date(1):
7. Notice and Payment
Instructions: PAYMENT
ASSIGNEE: __________
__________
__________
Attention:
Reference:
Telecopier:
Reference:
- --------------
(1) This date should be no earlier than the date of acceptance by the
Agent.
D-4
<PAGE>
NOTICE
__________
__________
__________
Attention:
Reference:
8. Assignee's Funding
Office: ____________
D-5
<PAGE>
EXHIBIT E
TO
LEASE AGREEMENT
[FORM OF OFFICER'S CERTIFICATE]
OFFICER'S CERTIFICATE
(Pursuant to Section 19(a)(iii) of the
Lease Agreement referred to below)
This Certificate is furnished pursuant to SECTION 19(a)(III) of the
Purchase and Master Lease Agreement, dated as of ________, 199_ (the "Lease
Agreement") among the lessors named therein (the "Lessors"), Novellus Systems,
Inc., a California corporation ("Lessee"), and Sumitomo Bank Leasing and
Finance, Inc., as agent for the Lessors (in its capacity as such, the "Agent").
Capitalized terms used herein but not otherwise defined herein shall have the
same meanings as those assigned to them in the Lease Agreement.
The Lessee hereby certifies to Agent as follows:
1. Since ________________, 19__, the undersigned has been the
duly qualified and acting ____________of Lessee, and is familiar with the
financial statements and financial affairs of Lessee. The undersigned is
authorized to execute this Certificate on behalf of Lessee.
2. A true and correct copy of the [annual audit report] [quarterly
unaudited consolidated financial statement] of Lessee and its Subsidiaries for
the [Fiscal Year] [Fiscal Quarter] ended on _____________, 19__, is attached
hereto as ANNEX A.
3. As of the date of this Certificate, no Event of Default or
Unmatured Event of Default has occurred and is continuing (except as follows:
[include description of any such event and the steps being taken, if any, with
respect thereto]].
4. Attached hereto as Annex B is a true and correct computation as
of the dates referred to therein of the financial ratios and/or financial
restrictions contained in Section 19 of the Lease Agreement.
5. Attached hereto as Annex C is a complete description (to the
extent such disclosure would be required to be made by Lessee if Lessee were a
public reporting company under the Securities Exchange Act of 1934, as amended)
as of the date of this Certificate of any Material Litigation which has been
instituted or which has occurred since the date of the most recent Officer's
Certificate of Lessee [or, in the case of the first Officer's Certificate, since
the date of the Lease Agreement.]
E-1
<PAGE>
IN WITNESS WHEREOF, the Lessee has caused its duly authorized
officer(s) to set his hand this _____day of ____________, 19__ .(1)
NOVELLUS SYSTEMS, INC.,
a California corporation(2)
By:__________________
Name:________________
Title:_______________
- --------------
(1) Such date shall be the date of the annual report or the quarterly
statement that is attached as ANNEX A.
(2) To be executed by an Authorized Officer.
E-2
<PAGE>
ANNEX A TO
EXHIBIT E
TO OFFICER'S CERTIFICATE DATED AS OF _______________, 19__
[Attach copy of annual audit report or quarterly unaudited consolidated
financial statement, as appropriate]
E-3
<PAGE>
ANNEX B TO
EXHIBIT E
TO OFFICER'S CERTIFICATE DATED AS OF ______________, 19__
[Computation of financial ratios and/or financial restrictions]
E-4
<PAGE>
ANNEX C TO
EXHIBIT E
TO OFFICER'S CERTIFICATE DATED AS OF _______________,19__
[Description of any Material Litigation to the extent such disclosure
would be required to be made by Lessee if Lessee were a reporting company under
the Securities Exchange Act of 1934.]
E-5
<PAGE>
EXHIBIT F
TO
LEASE AGREEMENT
[FORM OF OPINION OF LESSEE COUNSEL]
[Follows this page]
F-1
<PAGE>
EXHIBIT G
TO LEASE
FORM OF
MEMORANDUM
OF LEASE
Recording requested by:
When recorded, mail to:
MORGAN, LEWIS & BOCKIUS LLP
801 South Grand Avenue
Twenty-Second Floor
Los Angeles, California 90017
Attn: William D. Ellis, Esq.
DOCUMENTARY TRANSFER TAX:
The undersigned declares that the
Documentary Transfer Tax is $-0-,
and that the term of the Lease, including
any and all unexercised extension options
is less than 35 years.
MEMORANDUM OF LEASE
By this Memorandum of Lease, made October ____, 1996, concurrently with
that certain PURCHASE AND MASTER LEASE AGREEMENT (the "Lease") dated as of
October ____, 1996, between the same parties covering the same property (the
"Lease"), Sumitomo Bank Leasing and Finance, Inc., as agent for the Lessors
named in the Lease ("Lessor") and Novellus Systems, Inc., a California
corporation ("Lessee") agree as follows:
Lessor leases the property described in Exhibit "A" attached hereto and
incorporated herein by this reference (the "Property") to Lessee upon the terms
and conditions set forth in the Lease.
AGENT FOR LESSORS: SUMITOMO BANK LEASING AND FINANCE, INC.
By:___________
Title:________
LESSEE: NOVELLUS SYSTEMS, INC.,
a California corporation
By:___________
Title:________
G-1
<PAGE>
Exhibit "A" to Memorandum of Lease
LEGAL DESCRIPTION
All of Parcel 4, as shown upon that Parcel Map which was filed for
record on the Office of the Recorder of the County of Santa Clara,
State of California, on July 13, 1984, in Book 531 of Maps, at pages
41 and 42.
G-2
<PAGE>
STATE OF ______________ )
) ss.
COUNTY OF _____________ )
On ________________, 19__, before me, a notary public, personally
appeared _______________________________, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that ___he executed
the same in his/her authorized capacity, and that by his/her signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal. (seal)
_________________________________
Notary public
STATE OF ______________ )
) ss.
COUNTY OF _____________ )
On ________________, 19__, before me, a notary public, personally
appeared _______________________________, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that ___he executed
the same in his/her authorized capacity, and that by his/her signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal. (seal)
_________________________________
Notary public
G-3
<PAGE>
EXHIBIT H
TO LEASE
[FORM OF NOTICE OF PURCHASE]
_____________, 19__(1)
Sumitomo Bank Leasing and Finance, Inc.
277 Park Avenue
New York, New York 10172
Attn: Chief Financial Officer
1. Reference is made to that certain Purchase and Master Lease
Agreement dated as of October ____, 1996 (the "LEASE AGREEMENT"), among the
lessors referred to therein (the "LESSORS"), Novellus Systems, Inc., a
California corporation ("LESSEE"), and Sumitomo Bank Leasing and Finance, Inc.,
as Agent for the Lessors ("AGENT"). Capitalized terms used herein but not
otherwise defined herein shall have the same meanings as those assigned to them
in the Lease Agreement.
2. Pursuant to Section 14(a) of the Lease Agreement, notice is
hereby given that Lessee elects to purchase the Property currently leased
pursuant to the terms of the Lease Agreement. Such purchase shall be effected
pursuant to the provisions of Section 14(d) of the Lease Agreement.
3. The date on which the Property will be purchased is
_________________.
- --------------
(1) 30 days' prior written notice
H-1
<PAGE>
IN WITNESS WHEREOF, Lessee has executed this Notice of Purchase on the
date set forth above.
NOVELLUS SYSTEMS, INC.,
a California corporation
By______________________________
Name:_________________________
Title: Authorized Officer
H-2
<PAGE>
EXHIBIT I
TO LEASE
FORM OF ASSIGNMENT OF SERVICE CONTRACTS
[Reserved]
I-1
<PAGE>
EXHIBIT J
TO LEASE
[FORM OF SALE NOTICE]
_______________, 19__
Sumitomo Bank Leasing and Finance, Inc.
277 Park Avenue
New York, New York 10172
Attn: Chief Financial Officer
1. Reference is made to that certain Purchase and Master Lease
Agreement dated as of October ____, 1996 (the "LEASE AGREEMENT"), among the
lessors referred to therein (the "LESSORS"), Novellus Systems, Inc., a
California corporation ("LESSEE"), and Sumitomo Bank Leasing and Finance, Inc.,
as Agent for the Lessors ("AGENT"). Capitalized terms used herein but not
otherwise defined herein shall have the same meanings as those assigned to them
in the Lease Agreement.
2. Pursuant to Section 14(b)(i) of the Lease Agreement, notice is
hereby given that Lessee shall terminate the lease of all of the Property at the
end of the Lease Term by electing and thereafter consummating a sale to third
parties of all but not less than all of the Property as provided in Section
14(b) of the Lease Agreement.
IN WITNESS WHEREOF, Lessee has executed this Sale Notice on the date
set forth above.
NOVELLUS SYSTEMS, INC.,
a California corporation
By:_____________________________
Name:________________________
Title: Authorized Officer
- --------------
(1) At least 180 days prior to the end of the Lease Term
I-2
<PAGE>
EXHIBIT K
TO LEASE
[Reserved]
K-1
<PAGE>
EXHIBIT M
TO LEASE
[Form of Signing Certificate]
SIGNING CERTIFICATE
Novellus Systems, Inc., a California corporation ("Lessee"), does hereby
certify to Sumitomo Bank Leasing and Finance, Inc., as Agent (the "Agent") for
certain Lessors under the Purchase and Master Lease Agreement (the "Lease"),
dated as of __________ , 199____ that the following persons are authorized to
execute and deliver to the Agent Closing Date Notices referenced in the Lease
and that any such Notices shall bind Lessee to the contents thereof and the
Agent may rely thereon without further inquiry of the Lessee as to the
authorization or capacity of such persons. Also set forth below is a sample of
the signatures of such persons.
Name Title Signature
_____________ _____________ __________________
IN WITNESS WHEREOF the Lessee has caused this Certificate to have been
duly executed by its duly authorized officer as of this ___ day of
_____________, 199___.
NOVELLUS SYSTEMS, INC.,
a California corporation
By:_______________________
Title: Authorized Officer
M-1
<PAGE>
EXHIBIT N
TO LEASE
CONTENTS OF PROPERTY INFORMATION PACKAGE
(1) TITLE MATTERS
(A) Legal description of the Land.
(B) Preliminary title report regarding the Land.
(C) Legible and reproducible copies of all recorded
documents relating to the Land.
(D) Survey of the Real Property prepared in compliance
ALTA/ACSM Minimum Standard Detail Requirements (1992),
and dated not earlier than six (6) months prior to the
date of this Agreement.
(E) Certified search of UCC records at California Secretary
of State's office and certified copies of all filed
financing statements, amendment and releases relating
to Lessee, dated not earlier than one month prior to
the date of this Agreement.
(2) PROPERTY USE.
(A) Evidence of
(i) compliance of the Land with the California
Subdivision Map Act;
(ii) whether the Real Property is located within a
special flood zone area as indicated on any Flood
Hazard Boundary Maps published by the Federal Emergency
Management Agency; and
(iii) whether the Real Property is located in an
earthquake fault zone (as defined in the California
Alquist-Priolo Earthquake Fault Zone Act), or in a
seismic hazard zone (as defined in California Public
Resources Code Section 2694).
(B) Copy of any Environmental Impact Report or Negative
Declaration pertaining to the Land.
(C) Evidence that all necessary approvals, licenses and
permits relating to the use and occupancy of the Real
Property are in full force and effect and copies
thereof.
(D) Site plan and soils report.
(E) A report of the physical condition of the Land.
(F) The Environmental Audit.
(G) If any portion of the Property is leased or rented to
third parties or Affiliates: a rent roll, copies of all
existing leases and an estoppel certificate from each
tenant thereunder in form satisfactory to Lessor
N-1
<PAGE>
EXHIBIT O
TO LEASE
FORM OF DEED
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
MORGAN, LEWIS & BOCKIUS LLP
801 South Grand Avenue
Twenty-Second Floor
Los Angeles, California 90017
Attention: William D. Ellis, Esq.
MAIL TAX STATEMENTS TO:
Novellus Systems, Inc.
3950 North First Street
San Jose, California 95125
Attention:_____________________
Documentary Transfer Tax is not of public record and is shown on a separate
sheet attached to this deed.
_______________________________________________
GRANT DEED
FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
ZUKEN-REDAC, INC., a California corporation, hereby grants to SUMITOMO BANK
LEASING AND FINANCE, INC., as agent, the real property located in the City of
San Jose, County of Santa Clara, State of California, described on EXHIBIT A
attached hereto and made a part hereof.
Executed as of this _______ day of_____________________, 1996.
Zuken-Redac, Inc., a California corporation
By:_________________________
Name:______________________
Title:_______________________
MAIL TAX STATEMENTS AS DIRECTED ABOVE
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<PAGE>
EXHIBIT A TO GRANT DEED
Legal Description
All of Parcel 4, as shown upon that Parcel Map which was filed for
record on the Office of the Recorder of the County of Santa Clara,
State of California, on July 13, 1984, in Book 531 of Maps, at pages
41 and 42.
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<PAGE>
State of California
County of____________
On ___________________, 1996, before me,___________________________,
personally appeared ___________________, personally known to me (or
proved to me on the basis of satisfactory evidence) to the person whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his authorized capacity, and that by his signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
Signature:_______________________________(Seal)
Notary Public
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<PAGE>
_______________, 1996
Santa Clara County Recorder
County Government Center
70 West Hedding Street, East Wing
San Jose, California 95110
Re: Request That Statement of
Documentary Transfer Tax Not be
Recorded
--------------------------------
Dear Sir or Madam:
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 in the deed.
The attached deed names ZUKEN-REDAC, INC., a California corporation,
as grantor, and SUMITOMO BANK LEASING AND FINANCE, INC., as agent, as grantee.
The Property being transferred and described in the attached deed is
located in the City of San Jose, County of Santa Clara, State of California.
The amount of Documentary Transfer Tax due on the attached deed is
$__________computed on full value of the property conveyed.
Zuken-Redac, Inc., a California corporation
By:________________________
Name:______________________
Title:_____________________
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<PAGE>
EXHIBIT P
TO LEASE
FORM OF DEED OF TRUST
Recording requested by:
When recorded, mail to:
MORGAN, LEWIS & BOCKIUS LLP
801 South Grand Avenue
Twenty-Second Floor
Los Angeles, California 90017
Attn: William D. Ellis, Esq.
DEED OF TRUST AND ASSIGNMENT OF RENTS
THIS DEED OF TRUST AND ASSIGNMENT OF RENTS, dated as of _________________,
199__ (this "Deed of Trust"), between SUMITOMO BANK LEASING AND FINANCE, INC.,
as the beneficiary (the "Beneficiary") as agent for the "Lessors" as defined
below, having address at 277 Park Avenue, New York, New York 10172 and NOVELLUS
SYSTEMS, INC., a California corporation, as the trustor (the "Trustor"), having
an address at 3950 First Street, San Jose, California 95125, and First American
Title Insurance Company, a California corporation, as trustee ("Trustee"), is
made, executed and delivered with reference to the following recitals of fact:
WHEREAS, the Beneficiary is the owner in fee simple of the land described
on Exhibit "A" hereto (the "Land") and the improvements, buildings and other
structures now or hereafter located thereon (collective, the "Improvements"; the
Land and the Improvements being collectively called the "Property");
WHEREAS, the Beneficiary has leased the Property to the Trustor pursuant to
that certain Purchase and Master Lease Agreement dated as of October ___, 1996
between Beneficiary as Agent for certain lessors named therein, and as the same
may change from time to time (the "Lessors") and Trustor as "Lessee" (the
"Lease"); and
WHEREAS, the Trustor desires to encumber the Property, and all of Trustor's
right, title and interest therein, to Beneficiary, to secure, among other
things, Trustor's obligations to Beneficiary under the Lease.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS; INTERPRETATION. For purposes of this Deed of
Trust, capitalized terms used herein and not otherwise defined herein shall have
the respective meanings ascribed to in the Lease (as the same may be amended,
restated, supplemented or otherwise modified from
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time to time), and the rules of interpretation set forth in the Lease shall
apply to this Deed of Trust.
SECTION 2. THE PROPERTY. Attached hereto as Exhibit "A" is description of
the Land.
SECTION 3. OWNERSHIP OF THE PROPERTY; CONVEYANCE OF DEED OF TRUST LIEN AND
GRANT OF SECURITY AGREEMENT; REMEDIES.
(a) It is intent of the parties hereto that for financial accounting uses
the Lease constitutes an "operating lease" pursuant to Statement of Financial
Accounting Standards No. 13, as amended, and that for purposes of commercial,
real estate, bankruptcy and federal, state and local income tax law, the
transaction contemplated by the Lease and hereby is a financing arrangement and
preserves ownership of the Property in the Trustor.
(b) It is the intent of the parties hereto that (i) the obligations of the
Trustor under the Lease to pay Base Rent, Additional Rent, and the Lease
Investment Balance in connection with the purchase of the Property pursuant to
the Lease shall be treated as payments of interest on and principal of,
respectively, loans from the Beneficiary to the Trustor, and (ii) the Lease
grants to the Beneficiary a security interest in and lien upon, and hereby
grants to the Trustee, in trust, with power of sale, the portions of the
Property which constitute interests in real property, and a security interest
and lien on the portions of the Property which do not constitute interests in
real property, in each case to secure the Trustor's performance hereunder, and
under and payment of all amounts under the Lease and the other Lease Documents.
(c) Specifically, without limiting the generality of SUBSECTION (b), the
Beneficiary and the Trustor intend and agree that with respect to the nature of
the transactions evidenced by the Lease in the context of the exercise of
remedies under the Lease Documents, including, without limitation, in the case
of any insolvency or receivership proceedings or a petition under the United
States bankruptcy laws or any other applicable insolvency laws or statute of the
United States of America or any State or Commonwealth thereof affecting the
Trustor and the Beneficiary, or any enforcement or collection actions, the
transactions evidenced by the Lease are loans made by the Beneficiary as
unrelated third party lender to the Trustor secured by the Property (it being
understood that the Trustor hereby mortgages, grants, bargains, sells, releases,
confirms, conveys, assigns, transfers and sets over to the Beneficiary, and
grants a security interest in, the Property which is not real property, and
Trustor hereby grants to Trustee, in trust with power of sale, all right title
and interest of the Trustor in and to the Property that constitutes real
property (consisting of a fee deed of trust with respect to all right, title and
interest of the Trustor in and to the fee title to, and reversionary interest
in, the Land and Improvements) and a leasehold deed of trust on the Trustor's
leasehold estate under the Lease, all to secure such loans, effective on the
date hereof, to have and to hold such interests in the Property unto the
Beneficiary and its successors and assigns, forever.
(d) As additional security for the Base Rent, Additional Rent and the
Lease Investment Balance and all other sums owed to the Beneficiary by the
Trustor under the Lease, the Trustor does hereby grant, bargain, sell, transfer
and convey unto Trustee, in trust with power of sale, all of the Trustor's
right, title interest in and to the Property and the Fixtures, including,
without limitation, all buildings, structures and other improvements, and all
fixtures and other property now or hereafter attached to or affixed to any such
buildings, structures or other improvements, and any additions and alterations
thereto or replacements thereof, now or hereafter built,
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constructed or located upon the Property, and immediately, irrevocably and
absolutely, all rents, additional rents, issues, income, revenues,
distributions, royalties and profits now or in the future payable in respect
of the Property, together with all of the right, power and authority of the
Trustor to alter, modify or change the terms, conditions and provisions of
the Lease and any other lease pertaining to the Property, to consent to any
request made by a tenant or landlord pursuant thereto, or to surrender,
cancel or terminate the same or to accept any surrender, cancellation or
termination of the same, together with all of the options, rights, powers and
privileges of the Trustor under any lease or sublease pertaining to the
Property, whether heretofore or hereafter existing, including, without
limitation, the rights and options to purchase the Property contained in the
Lease, and all present and future right, title and interest of the Trustor in
and to (i) all refunds, tax abatement agreements, rebates, reserves, deferred
payments, deposits, cost savings, awards and payments of any kind due from or
payable by (a) any Governmental Authority, or (b) any insurance or utility
company, in each case under clause (a) or (b) above in respect of the
Property, and (ii) all refunds, rebates and payments of any kind due from or
payable by any Governmental Authority for any taxes, assessments, or
governmental or quasi-governmental charges or levies imposed upon the Trustor
in respect of the Property, and all plans and specifications, designs,
drawings and other information, materials and matters heretofore or hereafter
prepared relating to the Property or any construction on the Property, all
proceeds (including claims and demands therefor) of the conversion, voluntary
or involuntary, of any of the foregoing into cash or liquidated claims,
including without limitations the proceeds of insurance and condemnation
awards in respect of the Property or any portion thereof, all additional
estates, rights and interests hereafter acquired by the Trustor in the
Property, or any portion thereof, together with all proceeds of the
conversion, whether voluntary or involuntary, of any of the Property into
cash or other liquid claims, including without limitation, all awards,
payments or proceeds, including interest thereof, and the right to receive
the same, which may be made as a result of any casualty, any exercise of the
right of eminent domain or deed in lieu thereof, any injury to the Property
and any defect in title in the Property or other matter insured under any
policy of title insurance, together with attorney's fees, costs and
disbursements incurred by the Beneficiary in connection with the collection
of such awards, payments and proceeds, and the Trustor further grants to the
Beneficiary, pursuant to the California Uniform Commercial Code (the "UCC"),
a security interest in all present and future right, title and interest of
the Trustor in and to any portion of the foregoing property for which a
security interest may be created under the UCC.
(e) Specifically, but without limiting the generality of SUBSECTION (b),
the Beneficiary and the Trustor further intend and agree that, with respect to
that portion of the Property constituting personal property, for the purpose of
securing the Trustor's obligations for the repayment of the above-described
obligations from the Trustor to the Beneficiary, (i) the Lease shall also be
deemed to be a security agreement and financing statement within the meaning of
Article 9 of the UCC; (ii) the conveyance provided for hereby shall be deemed to
be a grant by the Trustor to the Beneficiary of a lien and security interest in
all of the Trustor's present and future right, title and interest in and to such
portion of the Property, including but not limited to the Trustor's leasehold
estate therein and all proceeds of the conversion, voluntary or involuntary, of
the foregoing into cash, investments, securities or other property, whether in
the form of cash, investments, securities or other property to secure such
obligations, effective on the date hereof, to have and to hold such interests in
the Property unto the Beneficiary and its successors and assigns, forever,
provided always that these presents are upon the express condition that, if all
amounts due under the Lease shall have been paid and satisfied in full, then, as
to such personal property, this instrument and the estate hereby granted shall
cease; (iii) the possession by the
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Beneficiary of notes and such other items of property as constitute
instruments, money, negotiable documents or chattel paper shall be deemed to
be "possession by the secured party" for purposes of perfecting the security
interest pursuant to Section 9-305 of the UCC; and (iv) notifications to
Persons holding such personal property, and acknowledgments, receipts or
confirmations from financial intermediaries, bankers or agents (as
applicable) of the Trustor shall be deemed to have been given for the purpose
of perfecting such security interest under Applicable Law. The Beneficiary
and the Trustor shall, to the extent consistent with this Deed of Trust, take
such actions and execute, deliver, file and record such other documents,
financing statements, mortgages and deeds of trust as may be necessary to
ensure that, if the Lease were deemed to create a security interest in the
Property, such security interest would be deemed to be a perfected security
interest with priority over all Liens other than Permitted Liens, under
Applicable Law and will be maintained as such throughout the Lease Term.
TO HAVE AND TO HOLD the same whether now owned or held or hereafter
acquired unto the Trustee, forever, in trust, however, to secure to the
Beneficiary the payment of the Base Rent, Additional Rent, the Lease Investment
Balance and all other sums owing to the Beneficiary under the Lease and the
performance and observance of the terms, covenants, warranties, conditions,
agreements and obligations under the Lease. If the Trustor shall pay all sums
due under the Lease when due according to the terms thereof and shall otherwise
fully and properly perform and comply with all of the obligations, agreements,
terms and conditions of the Lease, then Beneficiary shall instruct the Trustee
to reconvey this Deed of Trust to the party entitled thereto, without
representation or warranty.
Upon the occurrence of any Event of Default, the Beneficiary may, in
addition to any other remedies set forth in the Lease or the other Lease
Documents, exercise any one or more of the following rights and remedies as it,
in its sole discretion, may deem necessary or appropriate:
(1) collect the Lease Investment Balance, together with all unpaid
Base Rent, Additional Base Rent and Additional Rent, all at the Overdue Rate;
(2) either in person or by agent, with or without bringing any
action or proceeding, or by a receiver appointed by a court, and without
regard to the adequacy of security, enter upon and take possession of the
Property, or any part thereof, in its own name or in the name of Trustor, and
do any acts which it deems necessary or desirable to preserve the value,
marketability or rentability of the Property, or any part thereof or interest
therein, to increase the income therefrom or to protect the security hereof
and, with or without taking possession of the Property, to sue for or
otherwise to collect the rents, issues and profits thereof, including,
without limitation, those past due and unpaid, and to apply the same, less
costs and expenses of operation and collection, including, without
limitation, attorneys' fees, upon any obligations secured hereby, all in such
order as the Beneficiary may determine. The entering upon and taking
possession of the Property, and the collection of such rents, issues and
profits and the application thereof as aforesaid, shall not cure or waive any
Event of Default or notice of default hereunder or invalidate any act done in
response to such Event of Default or pursuant to such notice of default and,
notwithstanding the continuance in possession of the Beneficiary or the
collection, receipt and application of rents, issues or profits by the
Beneficiary, Trustee or the Beneficiary shall be entitled to exercise every
right provided for in any of the Lease Documents or by law upon occurrence of
any Event of Default, including, without limitation, the right to exercise
the power of sale;
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<PAGE>
(3) should the Event of Default include the failure of Trustor
to perform any of Trustor's obligations under the Lease Documents, including,
without limitation, the obligation to pay any amount due to any person,
corporation, partnership or other entity or any governmental agency when
required, either the Beneficiary or Trustee may, but shall not be obligated to,
perform the same without notice to or demand upon Trustor, without regard to the
adequacy of its security and without prejudice to its right to declare a default
hereunder. Any amounts so paid and all costs and expenses incurred by the
Beneficiary or Trustee in connection with such payment or performance,
including, without limitation, attorneys' fees, and any other amounts for which
Trustor is specifically obligated to reimburse the Beneficiary or Trustee, or
which Trustee or the Beneficiary is authorized to advance, pursuant to
provisions hereof, shall be payable by Trustor to the Beneficiary or Trustee on
demand with interest at the Overdue Rate from the date paid by the Beneficiary
or Trustee, and shall be secured by this Lease. The payment by the Beneficiary
or Trustee of any tax, assessment or governmental charge for which no receipt is
provided by Trustor as required hereunder, or any lien or encumbrance which the
Beneficiary believes has not been paid, shall be conclusive between the parties
as to the legality and amount of the payment. The Beneficiary or Trustee, as
the case may be, shall be subrogated to all rights, equities and liens
discharged by any such expenditure;
(4) exercise the power of sale described above;
(5) in lieu of sale pursuant to the power of sale conferred
hereby, foreclose upon the lien created herein and hereby in the manner provided
by law for the foreclosure of mortgages on real property, except that nothing
herein shall preclude the commencement of such an action prior to the
consummation of the Trustee's sale of the Property under said power of sale;
(6) declare immediately due and payable without notice or
demand, all monies advanced under the Lease Documents which are then unpaid,
with all interest and sums accrued, and all other obligations of Trustor to
Beneficiary, and accelerate payment thereof notwithstanding contrary terms of
payment stated therein, and exercise all rights and remedies available under any
Lease Document, at law, in equity or otherwise;
(7) as a matter of right, and without notice to Trustor or
anyone claiming under Trustor and without regard to the adequacy of its security
or the then value of the Property or the interest of Trustor therein, apply to
any court having jurisdiction to appoint a receiver or receivers of the Property
and Trustor hereby irrevocably consents to such appointment and waives notice of
any application therefor. Any such receiver or receivers shall have all the
usual powers and duties of receivers in like or similar cases and all the powers
of the Beneficiary provided for hereinabove, and shall continue as a receiver
and exercise all such powers until the date of confirmation of sale of the
Property unless such receivership is sooner terminated by the Beneficiary in its
sole discretion.
Trustee and the Beneficiary shall be entitled to enforce payment and
performance of any obligations secured hereby and to exercise all rights and
powers under any Lease Document or any laws now or hereafter in force,
notwithstanding that some or all of said obligations secured hereby may now or
hereafter be otherwise secured, whether by mortgage, deed of trust, pledge,
lien, assignment or otherwise. Neither the acceptance of this Lease nor the
enforcement of any remedy hereunder, whether by court action or pursuant to the
power of sale or other powers herein contained, shall prejudice or in any manner
affect Trustee's or the
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Beneficiary's right to realize upon or enforce any other security interests
now or hereafter held by Trustee or the Beneficiary, it being agreed that
Trustee and the Beneficiary, and each of them, shall be entitled to enforce
this Lease and any other security interests now or hereafter held by the
Beneficiary or Trustee in such order and manner as they or either of them may
in their absolute discretion determine. No remedy conferred upon or reserved
to Trustee or the Beneficiary by this Lease or any other Lease Document is
intended to be exclusive of any other remedy, but each shall be cumulative
and shall be in addition to every other remedy given by this Lease or any
other Lease Document or now or hereafter existing at law or in equity or by
statute. Every power or remedy given by any of the Lease Documents to
Trustee or the Beneficiary or to which either of them may be otherwise
entitled, may be exercised, concurrently or independently, from time to time
and as often as may be deemed expedient by Trustee or the Beneficiary, and
either or both of them may pursue inconsistent remedies.
SECTION 4. GOVERNING LAW. THIS DEED OF TRUST SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
SECTION 5. COUNTERPART EXECUTION. This Deed of Trust may be executed in
any number of counterparts and by each of the parties hereto in separate
counterparts, all such counterparts together constituting but one and the same
instrument.
SECTION 6. FUTURE ADVANCES; REVOLVING CREDIT. In the event a court of
competent jurisdiction rules that the Lease constitutes a mortgage, deed of
trust or other secured financing, then this instrument will be deemed given to
secure not only existing financing, but also future advances made pursuant to or
as provided in the Lease, whether such advances are obligatory or to be made at
the option of the Beneficiary, or otherwise, to the same extent as if such
future advances were made on the date of execution of this instrument, although
there may be no advance made at the time of execution hereof, and although there
may be no financing outstanding at the time any advance is made. To the fullest
extent permitted by law, the lien of this instrument shall be valid as to all
such amounts, including all future advances, from the time this instrument is
recorded. Notwithstanding anything in this instrument to the contrary, although
the amount of the financing secured by this instrument may increase or decrease
from time to time, the maximum principal amount of the financing secured by this
instrument at any one time shall not exceed Five Million Five Hundred Thousand
Dollars ($5,500,000) , which amount shall be payable as set forth in the Lease,
plus all costs of enforcement and collection of this instrument, the Lease and
the other Lease Documents, plus the total amount of any advances made pursuant
thereto to protect the collateral and the security interest and lien created
hereby, together with interest and other sums accruing on all of the foregoing
as provided in the Lease Documents.
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IN WITNESS WHEREOF, the undersigned Trustor has caused this Deed of Trust
to be duly executed by an officer thereunto duly authorized as of the date and
year first above written.
NOVELLUS SYSTEMS, INC.,
a California corporation
as the Trustor
By:__________________________
Name:__________________
Title:_________________
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<PAGE>
Exhibit "A" to Deed of Trust
LEGAL DESCRIPTION
All of Parcel 4, as shown upon that Parcel Map which was filed for
record on the Office of the Recorder of the County of Santa Clara,
State of California, on July 13, 1984, in Book 531 of Maps, at pages
41 and 42.
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<PAGE>
STATE OF ______________ )
) ss.
COUNTY OF _____________ )
On ________________, 19__, before me, a notary public, personally
appeared _______________________________, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that ___he executed
the same in his/her authorized capacity, and that by his/her signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal. (seal)
_________________________________
Notary public
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EXHIBIT Q
TO LEASE
FORM OF ASSIGNMENT
OF REAL PROPERTY
PURCHASE AND SALE AGREEMENT
ASSIGNMENT
OF
OF REAL PROPERTY
PURCHASE AND SALE AGREEMENT
THIS ASSIGNMENT is made as of _________________, 1996, by and between
NOVELLUS SYSTEMS, INC., a California corporation ("Assignor"), and SUMITOMO BANK
LEASING AND FINANCE, INC., as agent for the Lessors ("Assignee").
A. Assignor (as lessee) and Assignee (as lessor) have concurrently
herewith entered into the Purchase and Master Lease Agreement (the "Lease").
B. Assignor has agreed to assign Assignor's rights under the Purchase
Agreement to Assignee, and Assignee has agreed to accept the assignment of
Assignee's entire interest in the Purchase Agreement.
C. The undersigned Seller has consented to the assignment of the Purchase
Agreement to Assignee, and acknowledges that Assignee shall have all of the
rights of Assignor under the Purchase Agreement.
IN CONSIDERATION OF the mutual covenants and conditions set forth
hereinbelow, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Assignor and Assignee (together,
the "Parties" and each sometimes a "Party") do hereby act and agree as follows:
1. ASSIGNMENT OF PURCHASE AGREEMENT. Assignor hereby sells, assigns,
sets over and transfers to Assignee, all of Assignor's right, title and interest
as the Purchaser under, in and to the Real Property Purchase and Sale Agreement
dated June 7, 1996, as amended, between Zuken-Redac, Inc., a California
corporation ("Seller"), and Assignor (the "Purchase Agreement").
2. WARRANTIES AND REPRESENTATIONS. Assignor hereby warrants and
represents to Assignee that:
(a) Assignor has made no other assignment, pledge, hypothecation
or other transfer of any of its rights, title and interest as the Purchaser
under the Purchase Agreement.
(b) Assignor is fully empowered and duly authorized to make the
assignment set forth herein and such assignment does not breach or conflict
with any of the articles of incorporation, bylaws, resolutions, agreements,
indentures, judgments, orders or decrees to which Assignor is a party or
otherwise subject.
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<PAGE>
(c) Assignor is not in default of any of its obligations under
the Purchase Agreement and no event or condition exists which, by notice or
passage of time, will become such a default.
3. INDEMNIFICATION. Assignor shall hold harmless, indemnify and
defend Assignee against any claim, liability, loss or damages, and all expenses
related thereto, which such Assignee incurs by reason of any of Assignor's
warranties and representations herein proving to be untrue in any material
respect.
4. ASSIGNMENT OF DEPOSIT. Assignor represents and warrants to
Assignee that (a) pursuant to paragraph 4.1 of the Purchase Agreement, Assignor
has deposited $50,000 (together, with interest earned in escrow, the "Deposit")
with First American Title Company, a California corporation, as escrow holder;
and (b) the Deposit is to be applied to payment of the purchase price under the
Purchase Agreement at the Closing (as defined in the Purchase Agreement) or, if
the Purchaser in breach of its obligations under the Purchase Agreement fails to
close, the Deposit is due to the Seller as liquidated damages for such default.
Assignor hereby assigns to Assignee all of its rights to and interest in the
Deposit.
5. DEFINITIONS. Terms defined in any other part of this Assignment
shall have the defined meanings wherever capitalized herein. Capitalized terms
not otherwise defined in this Assignment shall have the meaning ascribed to them
in the Lease. As used in this Assignment, the terms "herein," "hereof" and
"hereunder" refer to this Assignment in its entirety and are not limited to any
specific sections; and the term "person" means any natural person, other legal
entity or combination of natural persons and/or other legal entities. Wherever
appropriate in this Assignment, the singular shall be deemed to refer to the
plural and the plural to the singular, and pronouns of certain genders shall be
deemed to comprehend either or both of the other genders.
6. CAPTIONS. Paragraph headings used herein are for convenience of
reference only and shall not affect the construction of any provision of this
Assignment.
7. COUNTERPARTS. This Assignment, and any amendment hereto, may be
executed in any number of counterparts and by each Party on separate
counterparts, each of which when so executed and delivered shall be deemed an
original and all of which taken together shall constitute but one and the same
instrument.
8. GOVERNING LAW. This Assignment shall be deemed to be an agreement
made under the laws of the State of California and for all purposes shall be
governed by and construed in accordance with such laws.
9. NOTICE OF ASSIGNMENT. A copy of this Assignment shall be
sufficient notice to all persons of the assignments contained herein and may be
relied upon by any third party.
IN WITNESS WHEREOF, the Parties have each caused this Assignment to be
duly executed and delivered, by their representative(s) authorized thereunto, as
of the date first above-written.
ASSIGNOR:
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NOVELLUS SYSTEMS, INC.,
a California corporation
By:___________________________
Title:________________________
ASSIGNEE:
SUMITOMO BANK LEASING AND FINANCE, INC.
By:___________________________
Title:________________________
THE UNDERSIGNED SELLER CONSENTS AND AGREES TO THE FOREGOING.
Zuken-Redac, Inc., a California corporation
By:___________________________
Name:_________________________
Title:________________________
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EXHIBIT R
TO LEASE
HAZARDOUS MATERIALS
PERMITTED BY LESSOR
[To be completed]
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<PAGE>
EXHIBIT S
TO LEASE
RENT PURCHASE AGREEMENT
[RENT PURCHASE AGREEMENT]
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<PAGE>
RENT PURCHASE AGREEMENT
Rent Purchase Agreement, dated as of October 24, 1996 (the
"Agreement") between SUMITOMO BANK LEASING AND FINANCE, INC. (the "Seller") and
THE SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH (the "Purchaser").
WHEREAS, Seller as "Lessor" has entered into a Purchase and Master
Lease Agreement, dated as of October 24, 1996 (the "Lease"), with Novellus
Systems, Inc. (the "Lessee");
WHEREAS, capitalized terms used herein and not otherwise defined
herein shall have the meanings set forth in the Lease;
WHEREAS, pursuant to the Lease (i) Seller has agreed to purchase one
or more parcels of Land and one or more Improvements on the Land and to lease
such Land and such Improvements to Lessee and (ii) Lessee has agreed to lease
such Land and such Improvements from Seller; and
WHEREAS, the Seller desires to sell certain interests in the rents and
certain other proceeds received under the Lease, and the Purchaser is willing to
purchase such interests under the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged and confessed, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
meanings set forth in this Section 1:
"Acquisition Price" for a Funding with respect to the Property shall
mean an amount equal to the Acquisition Percentage of the Property Cost of the
Property being purchased on the related Closing Date.
"Applicable Percentage" with respect to the Property shall have the
meaning set forth in the Supplement hereto for such Property.
"Acquisition Percentage" with respect to the Property shall have the
meaning set forth in the Supplement hereto for such Property.
"Base Rent Interest" with respect to the Property means the Seller's
right to receive, in the order of priority set forth in Section 3 hereof, the
sum of (A) so much of (x) each installment of Base Rent with respect to such
Property payable by the Lessee under the Lease that does not exceed (1) the
Acquisition Price paid by Purchaser with respect to such Property,
<PAGE>
times (2) the LIBOR Rate plus the number of basis points set forth in the
related Supplement (or, to the extent Section 7(a)(y)(I) of the Lease is
applicable, the Base Rate) times (3) a fraction, the numerator of which is
the number of days elapsed in the period for which such Base Rent was paid
and the denominator of which is 360 plus (y) the same portion of each payment
of interest paid by Lessee at the Overdue Rate on Base Rent with respect to
such Property plus (B) so much of (x) each installment of Additional Base
Rent with respect to such Property payable by Lessee under the Lease that
does not exceed the Applicable Percentage thereof plus (y) the same portion
of each payment of interest paid by Lessee at the Overdue Rate on Additional
Base Rent with respect to such Property.
"Default Amounts" with respect to the Property shall mean all amounts
received by Seller in respect of such Property as a result of the exercise of
remedies under Section 21 of the Lease or otherwise during the continuance of an
Event of Default under the Lease.
"Interests" with respect to the Property means the Base Rent Interest,
the Purchase Price Interest and the Termination Option Interest with respect to
such Property.
"Other Base Rent Interests" with respect to the Property means the
rights to receive amounts with respect to such Property, comparable to the Base
Rent Interest, which have been sold by the Seller pursuant to Other Rent
Purchase Agreements.
"Other Interests" with respect to the Property means the Other Base
Rent Interests, the Other Purchase Price Interests and the Other Termination
Option Interests.
"Other Purchase Price Interests" with respect to the Property, or an
item thereof, means the rights to receive amounts with respect to such Property,
or item, comparable to the Purchase Price Interest, which have been sold by the
Seller pursuant to Other Rent Purchase Agreements.
"Other Rent Purchase Agreements" shall mean one or more Master Rent
Purchase Agreements substantially in the form of this Agreement, providing for
the sale of interests (other than the Interests) in the payments due under the
Lease as provided for herein.
"Other Termination Option Interests" with respect to the Property
means the rights to receive amounts with respect to such Property comparable to
the Termination Option Interest, which have been sold by the Seller pursuant to
Other Rent Purchase Agreements.
"Property" means the parcel of Land and/or one the Improvements, plus
related Fixtures and Personal Property, described in a single Lease Supplement
or, if the context indicates otherwise, described in all Lease Supplements.
"Purchase Price Interest" with respect to the Property (or, in the
case of a payment pursuant to Section 17(c) of the Lease, an item of Property)
means the Seller's right to receive, in
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the order of priority set forth in Section 3 hereof, so much of (x) the Lease
Investment Balance with respect to such Property (or item) payable by the
Lessee to Landlord pursuant to an election under Section 14(a) of the Lease,
or pursuant to Section 17(c) of the Lease, that does not exceed the
Purchaser's Applicable Percentage of the Guaranteed Residual Value with
respect to such Property (or item) plus (y) the same portion of each payment
of interest paid by Lessee at the Overdue Rate on the amounts described in
the preceding clause (x).
"Retained Base Rent Interest" means all rights to receive and retain,
in the order of priority set forth in Section 3 hereof, so much of the Base Rent
and interest due thereon at the Overdue Rate payable by the Lessee under the
Lease that exceeds the Base Rent Interest and the Other Base Rent Interests.
"Retained Interests" means the Retained Base Rent Interest, the
Retained Purchase Price Interest, the Seller's rights to receive and retain the
Risk Amount (and interest due thereon at the Overdue Rate payable by the Lessee
under the Lease) and the Retained Termination Option Interest.
"Retained Purchase Price Interest" means all rights to receive and
retain, in the order of priority set forth in Section 3 hereof, so much of the
Lease Investment Balance payable by the Lessee under the Section 14(a) or 17(c)
of the Lease that exceeds the Purchase Price Interest and the Other Purchase
Price Interests.
"Retained Residual Interests" means all of the Seller's rights, title
and interest in and to the Lease that are not included in the Interests, the
Other Interests or the Retained Interests, including, without limitation, the
rights of Seller under Section 12 and 13 of the Lease and all costs and expenses
(including counsel fees) incurred by Seller in connection with an Event of
Default.
"Retained Termination Option Interest" means all rights to receive and
retain, in the order of priority set forth in Section 3 hereof, so much of the
Termination Amount that exceeds the Termination Option Interest and the Other
Termination Option Interests.
"Security" means the Collateral and the "Collateral" as defined in the
Security Agreement.
"Termination Amount" with respect to the Property means the amount
payable by Lessee under the Lease upon exercise of the Termination Option, being
either the Proceeds with respect to such Property or amounts paid by the Lessee
under the Lease pursuant to Sections 14(c)(iii)(y)(A) and 14(c)(iii)(z), or
Section 14(d), of the Lease with respect to such Property.
"Termination Option Interest" with respect to the Property means the
Seller's right to receive with respect to such Property, in the order of
priority set forth in Section 3 hereof, so much of (x) the Termination Amount
that does not exceed the Applicable Percentage of the
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Guaranteed Residual Value for such Property plus (y) the same portion of each
payment of interest paid by Lessee at the Overdue Rate on the Termination Amount
with respect to such Property.
SECTION 2. PURCHASE AND SALE OF INTERESTS
2.1. AGREEMENT TO PURCHASE AND SELL
Subject to the satisfaction or waiver by the Purchaser of the
conditions set forth in Section 2.2, the Purchaser agrees hereby to purchase the
Interests with respect to the Property by paying the Acquisition Price for each
Funding for such Property on the terms and conditions set forth herein;
PROVIDED, HOWEVER, that in no event shall the Acquisition Price exceed
$5,199,094.31.
Subject to the payment of the Acquisition Price, Seller does hereby
ABSOLUTELY SELL, ASSIGN, TRANSFER and CONVEY unto the Purchaser all Seller's
right, title and interest in and to the Interests with respect to the Property;
provided that this sale is without recourse to Seller (except to the extent of
the representations expressly set forth herein).
The sale of the Interests herein is a presently effective, absolute
and unconditional assignment and transfer of the Interests.
As a further inducement to the Purchaser, Seller covenants and agrees
not to assert any claim or cause of action against the Purchaser or seek to
recover the Interests on the grounds that this Agreement is a collateral
assignment or is given as security for indebtedness rather than as an absolute
present assignment.
2.2. CONDITIONS PRECEDENT TO SALE
The obligations of the Purchaser to purchase the Interests with
respect to the Property on a Closing Date and the Seller to sell the Interests
with respect to such Property on such Closing Date are subject to the prior
fulfillment to the satisfaction of, or the waiver by, the Seller and the
Purchaser, of the following conditions precedent:
(i) this Agreement and the Lease Documents with respect to such
Property shall have been duly authorized, executed and delivered by the
respective party or parties thereto, and executed counterparts or certified
copies thereof shall have been delivered to the Purchaser.
(ii) The Purchaser shall have received from the Seller copies of the
following, in each case in form and substance satisfactory to it:
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(1) a copy of the charter documents and by-laws of Lessee and
of resolutions of the board of directors of Lessee (or other evidence of
authorization), certified by the Secretary or an Assistant Secretary of Lessee,
duly authorizing the lease by Lessee of such Property under the Lease and the
execution, delivery and performance by Lessee of the Lease Documents; and
(2) an incumbency certificate of Lessee regarding the persons
who executed the Lease Documents with respect to such Property on behalf of
Lessee.
(iii) No action or proceeding shall have been instituted nor shall
governmental action be threatened before any court or governmental agency, nor
shall any order, judgment or decree have been issued or proposed to be issued by
any court or governmental agency to set aside, restrain, enjoin or prevent the
completion and consummation of this Agreement or the transactions contemplated
hereby.
(iv) The Purchaser shall have received the notice referred to in
Section 2.3 hereof with respect to such Property and Closing Date.
(v) Each representation and warranty of Lessee contained in the Lease
or in any other Lease Document shall be true and correct as of such Closing
Date.
(vi) No change shall have occurred after the Business Day immediately
prior to the date of execution of this Agreement in any applicable laws or
regulations that, in the opinion of the Purchaser, the Seller or their
respective counsel, would make it illegal for the Purchaser or Seller to
participate in the transactions contemplated by this Agreement with respect to
such Property.
(vii) The Purchaser shall have received a copy of the appraisal
obtained by the Seller with respect to such Property.
2.3. PROCEDURES FOR PURCHASE AND SALE
The Seller agrees to give the Purchaser three Business Days' notice of
each proposed Closing Date. Any such notice shall specify (i) the Property to
be financed on such date, (ii) the Closing Date and (iii) the Acquisition Price
for the related Funding.
On the Closing Date, the Purchaser shall make a payment in respect of
its purchase of the Interests being funded on such Closing Date by making the
Acquisition Price for such Closing available to the Seller prior to 12:00 noon
New York time by wire transfer in immediately available funds at the account of
the Seller at The Sumitomo Bank, Limited, New York Branch, or at such other
account that Seller shall notify Purchaser in writing. In the event that
Purchaser shall fail to make available to the Seller the full amount of such
Acquisition Price by 12:00 noon New York time, the Seller may, but shall have no
obligation to, fund such
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Acquisition Price, and the amount of the Acquisition Price so funded shall be
for the account of the Purchaser. In the event that the Seller shall advance
any such amount, the Purchaser shall pay to the Seller on demand the amount
of such advance with interest thereon at a rate equal to the average federal
funds rate for the period from the Closing Date to the date on which the
Purchaser makes such advance available to the Seller in immediately available
funds at the account referenced above. If the Purchaser does not make such
advance available to the Seller within three Business Days after the Closing
Date, the Seller shall be entitled to recover such advance with interest
thereon at the Overdue Rate, on demand, from the Purchaser.
2.4. UCC FILING
Upon request of Purchaser, Seller agrees that it will cause a Uniform
Commercial Code financing statement or statements covering all the Interests
sold pursuant to this Agreement to be executed and delivered by the Seller, as
debtor, and by the Purchaser, as secured party, and such financing statement or
statements will be duly filed in all places necessary to perfect the sale of the
Interests pursuant to this Agreement, and any additional Uniform Commercial Code
financing statements deemed advisable by the Purchaser, and all filing and
recordation fees payable in connection therewith will be paid by Purchaser.
Such financing statements shall state that they are being filed to perfect a
sale of the Interests, and that no inference that a security interest has been
granted to the Purchaser shall be made as a result of such filing.
SECTION 3. DISTRIBUTIONS
3.1 GENERAL
The Seller shall promptly upon the receipt in collected funds of any
amount constituting a part of the Interests, the Other Interests or the Retained
Interests distribute the same in the order of priority set forth in this Section
3. Distributions to the Purchaser shall be made by wire transfer in immediately
available funds to the Purchaser's account at Sumitomo Bank of California, ABA
No. 121002042, or such other account in the United States as the Purchaser shall
notify the Seller in writing at least five Business Days before the date of such
distribution. The Seller shall in no event be held accountable for any amount
in excess of the amounts actually collected by the Seller under the Lease and
the Lease Documents.
If the Seller receives any amount to be distributed pursuant to this
Section 3 prior to 11:00 a.m. New York time, it shall distribute any amount
distributable to the Purchaser by 2:00 p.m. New York time. If the Seller
receives any such amount after 11:00 a.m. New York time it shall distribute such
amount to the Purchaser on the next Business day. In the event that the Seller
shall fail to make any such distribution by the time specified, the Seller shall
pay to Purchaser on demand the amount of such distribution with interest thereon
at a rate equal to the average federal funds rate for the period from the
required date of distribution to the date on which the Seller makes such
distribution available to the Purchaser in immediately available
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<PAGE>
funds at the account referenced above. If the Seller does not make such
distribution available to the Purchaser within three Business Days after the
required date of distribution, the Purchaser shall be entitled to recover
such distribution with interest thereon at the Overdue Rate, on demand, from
the Seller.
3.2. PRIORITY
3.2.1. RETAINED RESIDUAL INTERESTS
All amounts received by the Seller constituting a part of the
Interests, the Other Interests or the Retained Interests shall be distributed
FIRST, to the Seller for application by the Seller to any unpaid amounts due to
the Seller in respect of the Retained Residual Interests, and SECOND, as
provided in Sections 3.2.2 to 3.2.5 below; PROVIDED, that if the Seller shall
receive from the Lessee at any time after the Seller shall have made a
distribution in respect of clause FIRST of this Section 3.2.1 an amount (a
"Reimbursed Amount") in respect of the amount so distributed, the Seller shall
distribute such Reimbursed Amount as provided in clause SECOND of this Section
3.2.1.
3.2.2. BASE RENT
So much of the amount of any payment of Base Rent with respect
to the Property or interest on any overdue installment of such Base Rent
remaining after application of clause FIRST of Section 3.2.1 shall be
distributed by the Seller pro rata among the Purchaser, the Other Purchasers,
if any, and the Seller, in proportion to their respective Base Rent Interest,
Retained Base Rent Interest and Other Base Rent Interests with respect to such
Property.
3.2.3. PURCHASE PRICE
So much of the amount of any payment of Purchase Price with
respect to the Property remaining after the application of clause FIRST of
Section 3.2.1 shall be distributed by the Seller in the following order of
priority:
FIRST: so much of such amount remaining that does not
exceed the Risk Amount with respect to such Property shall be paid to the
Seller;
SECOND: so much of such amount remaining after
application pursuant to clause FIRST, that does not exceed the Guaranteed
Residual Value, shall be paid pro rata to the Seller, the Purchaser and the
Other Purchasers in proportion to their respective Retained Purchase Price
Interest, Purchase Price Interest and Other Purchase Price Interests; and
THIRD: the balance, if any, shall be retained by
the Seller.
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<PAGE>
3.2 TERMINATION OPTION
So much of the Termination Amount payable by the Lessee with respect
to the Property remaining after application of clause FIRST of Section 3.2.1
shall be distributed by the Seller in the following order of priority:
FIRST: so much of such amount remaining that does
not exceed the Guaranteed Residual Value for such Property shall be paid
pro rata to the Seller, the Purchaser and the Other Purchasers in
proportion to their respective Retained Termination Option Interest,
Termination Option Interest and Other Termination Option Interests; and
SECOND: the balance, if any, shall be retained by the
Seller.
3.2.5 DEFAULT
So much of the amount of any payment of Default Amounts with respect
to the Property remaining after application of clause FIRST of Section 3.2.1
shall be distributed by the Seller in the following order of priority in the
case of Default Amounts arising from the exercise by Seller of remedies against
the Collateral:
FIRST: so much of such amount remaining that does
not exceed an amount equal to the Risk Amount for such Property shall be
paid to the Seller;
SECOND: so much of such amount remaining after
application of clause FIRST that does not exceed the amount of accrued and
unpaid Base Rent for such Property and interest on any overdue Base Rent
for such Property shall be distributed as provided in Section 3.2.2;
THIRD: so much of such amount remaining after
application pursuant to clause SECOND, that does not exceed the Guaranteed
Residual Value for such Property shall be paid pro rata to the Seller, the
Purchaser and the Other Purchasers in proportion to their respective
Retained Purchase Price Interest, Purchase Price Interest and Other
Purchase Price Interests; and
FOURTH: the balance, if any, shall be retained by
the Seller.
In the event more than one Property is sold as a unit as a result of
the exercise of remedies under the Lease, the portion of the proceeds from such
sale allocable to each Property shall be finally determined by mutual agreement
of the Seller and the Purchaser and, failing such agreement within 10 days after
either requests agreement of the other, by an independent appraiser selected by
Seller and reasonably acceptable to Purchaser.
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<PAGE>
So much of the amount of any payment of Default Amounts with respect
to the Property remaining after application of clause FIRST of Section 3.2.1
shall be distributed by the Seller in the following order of priority in the
case of Default Amounts arising from the collection by Seller of amounts from
the Lessee or from the Collateral (as defined in the Security Agreement):
FIRST: so much of such amount remaining that does
not exceed the Guaranteed Residual Value for such Property shall be paid
pro rata to the Seller, the Purchaser and the Other Purchasers in
proportion to their respective Retained Purchase Price Interest, Purchase
Price Interest and Other Purchase Price Interests; and
SECOND: so much of such amount remaining after
application of clause FIRST that does not exceed the amount of accrued and
unpaid Base Rent for such Property and interest on any overdue Base Rent
for such Property shall be distributed to the Purchaser and the Other
Purchasers in proportion to the Base Rent Interest and the Other Base Rent
Interests;
THIRD: the balance, if any, shall be retained by
the Seller.
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1. REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller represents and warrants to the Purchaser on the date hereof
and on each Closing Date as follows:
(i) the Seller is organized and validly existing in good standing
under the laws of its jurisdiction of incorporation, and has the corporate
power and authority to enter into and perform its obligations under this
Agreement;
(ii) this Agreement has been duly authorized by all necessary
corporate action on the part of the Seller and the execution, delivery and
performance hereof by the Seller do not require the consent or approval of,
the giving of notice to, the registration with, or the taking of any other
action in respect of, any Federal, state or foreign governmental authority
or agency by Seller, except as contemplated by Section 2.4 and such as have
been duly obtained and are in full force and effect and do not require any
approval of stockholders of the Seller or any approval or consent of any
trustee or holders of any indebtedness or obligations of the Seller, and
has been duly executed and delivered by the Seller, and neither the
execution and delivery hereof, nor the consummation of the transactions
contemplated hereby, nor compliance by the Seller with any of the terms and
provisions hereof will contravene any law of the country and state of
incorporation of the Seller or any judgment, governmental rule, regulation
or order applicable to or binding on
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the Seller or contravene or result in any breach of or constitute any
default under, or result in the creation of any Lien upon any property
of the Seller under, any indenture, mortgage, chattel mortgage, deed of
trust, conditional sales contract, bank loan or credit agreement, charter,
by-law or other agreement or instrument to which the Seller is a party or
by which it or its properties may be bound or affected;
(iii) this Agreement constitutes a legal, valid and binding
obligation of the Seller enforceable against the Seller in accordance with
the terms hereof; and
(iv) there are no suits or proceedings pending, or, to the best
knowledge of the Seller, threatened, against or affecting the Seller before
any court, governmental agency or arbitrator, which in the good faith
opinion of the Seller after consultation with counsel, would if adversely
determined have a material adverse effect on the Interests or the financial
condition of the Seller or which would purport to affect the legality,
validity or enforceability of this Agreement; and
(v) Seller acknowledges receiving a copy of the Lease Documents.
The Seller shall, by accepting each Acquisition Price as provided in
this Agreement on any Closing Date, be deemed to have reaffirmed the
representations and warranties made by it in this Agreement on such Closing
Date.
4.2. REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser represents and warrants to the Seller on the date hereof
and on each Closing Date as follows:
(i) the Purchaser is organized and validly existing in good standing
under the laws of the its jurisdiction of incorporation, and has the
corporate power and authority to enter into and perform its obligations
under this Agreement;
(ii) this Agreement has been duly authorized by all necessary
corporate action on the part of the Purchaser and the execution, delivery
and performance hereof by the Purchaser do not require the consent or
approval of, the giving of notice to, the registration with, or the taking
of any other action in respect of, any Federal, state or foreign
governmental authority or agency by Purchaser, except such as have been
duly obtained and are in full force and effect and do not require any
approval of stockholders of the Purchaser or any approval or consent of any
trustee or holders of any indebtedness or obligations of the Purchaser, and
has been duly executed and delivered by the Purchaser, and neither the
execution and delivery hereof, nor the consummation of the transactions
contemplated hereby, nor compliance by the Purchaser with any of the terms
and provisions hereof will contravene any law of the country and state of
incorporation of the Purchaser or any judgment, governmental rule,
regulation or order applicable to or
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binding on the Purchaser or contravene or result in any breach of or
constitute any default under, or result in the creation of any Lien upon
any property of the Purchaser under, any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, bank loan or credit
agreement, charter, by-law or other agreement or instrument to which the
Purchaser is a party or by which it or its properties may be bound or
affected;
(iii) this Agreement constitutes a legal, valid and binding
obligation of the Purchaser enforceable against the Purchaser in accordance
with the terms hereof; and
(iv) there are no suits or proceedings pending, or, to the best
knowledge of the Purchaser, threatened, against or affecting the Purchaser
before any court, governmental agency or arbitrator, which in the good
faith opinion of the Purchaser after consultation with counsel, would if
adversely determined have a material adverse effect on or the financial
condition of the Purchaser or which would purport to affect the legality,
validity or enforceability of this Agreement.
The Purchaser shall, by making the Acquisition Price available as
provided in this Agreement on any Closing Date, be deemed to have reaffirmed the
representations and warranties made by it in this Agreement on such Closing
Date.
4.3. COVENANTS
4.3.1 PERFORMANCE OF LESSOR'S OBLIGATIONS
Purchaser is not hereby obligated to perform or discharge any
obligation or duty of the Seller or the Agent under the Lease, and this
Agreement shall not be deemed to impose upon Purchaser or Seller any liability
or responsibility of any nature for, or pertaining to, the control, maintenance,
management, or repair of any Property.
4.3.2. EXERCISE OF RIGHTS UNDER LEASE
The Purchaser acknowledges and agrees that (i) all rights of the
Seller to exercise any remedy (including remedies against the Security),
election or option, or make any decision or determination, or give any notice,
consent, waiver or approval under or in respect of, the Lease or any other Lease
Document, (ii) all rights of the Seller to receive and to enforce the payment of
the full amount of any damages (whether or not an Event of Default under the
Lease has occurred), each installment of Base Rent, Additional Base Rent and all
other amounts payable under the Lease and any other Lease Documents, all amounts
payable on account of any actual or constructive loss or damage to any Property
or any part thereof, all payments of or on account of Termination Amount or
purchase price and all insurance proceeds, condemnation or requisition payments
or other payments of any kind for or with respect to any Property or any part
thereof have been expressly retained by the Seller as part of the Retained
Residual Interests and that the Seller may exercise such rights in its sole
discretion. Notwithstanding the foregoing,
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the Seller agrees that, so long as no Event of Default under the Lease
exists, it will not amend or modify the Lease Documents or grant any waiver
or exercise any election or option, if the effect thereof would be to change
the amount or timing of payment of any amount comprising a part of the
Interests (other than Default Amounts) or to discharge Agent's Lien on the
Security.
Without limiting the foregoing, the Purchaser agrees that, if an Event
of Default under the Lease occurs and is continuing, the Seller shall have the
sole right to enforce the payment of all amounts (including amounts comprising
the Interests) due under the Lease Documents and that in enforcing such payment
(including by realizing against the Security), the Seller may enter into any
compromise or settlement with the Lessee or may exercise any remedy available to
the Seller under the Lease Documents and as a result of such compromise,
settlement or exercise of remedies, the Lessee's obligation to pay any amount
comprising a part of the Interests may be satisfied or waived. The Seller may
enter into any compromise or settlement (whether or not by satisfaction and
accord) or exercise any remedy in its sole discretion, without regard to any
consequences to the Purchaser and the Seller shall have no duty (fiduciary or
other) to consider such consequences in dealing with the Lessee.
Seller can take any of the actions described in the preceding two
paragraphs directly, or indirectly through the Agent.
For avoidance of doubt and without limiting the foregoing, the Seller
may exercise any of its rights with respect to the sale or reletting of any
Property in its own self interest without regard to the interests of the
Purchaser and the Seller shall have no obligation to seek any amount in excess
of the amounts distributable to Seller pursuant to Section 3.2.5 hereof or to
increase or maximize such excess by any means whatsoever.
4.3.3. SALE OF OTHER INTERESTS
The Purchaser acknowledges that the Seller has sold or may sell a
part, but not all, of the Retained Interests to Other Purchasers pursuant to
Other Rent Purchase Agreements. The Purchaser agrees that the rights of such
Other Purchasers in each element comprising the Other Interests shall rank PARI
PASSU with the rights of the Purchaser in the corresponding elements of the
Interests. In the event that the Purchaser shall receive any amount pursuant to
a distribution under Section 3 hereof that is greater than its pro rata share
(based on the relative percentage interests comprising the Interests and the
Other Interests with respect to a particular Property) of such amount, the
Purchaser shall pay over to the Other Purchasers of which it has received notice
so much of such distribution as is necessary to make the distribution (after
such payment) pro rata. The Seller agrees that it will not enter into an Other
Rent Purchase Agreement unless such Other Rent Purchase Agreement contains a
provision identical of this Section 4.3.3.
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4.3.4. RETURN OF DISTRIBUTION
In the event that the Seller shall be required, as the result of any
bankruptcy or insolvency proceeding of the Lessee or otherwise, to return to the
Lessee or pay over to any court or other entity an amount (a "Returned Amount")
that was distributed pursuant to Section 3 hereof, the Purchaser shall on demand
from the Seller pay to the Seller so much of the Returned Amount that was
distributed to the Purchaser. On such payment, the Purchaser's right to receive
such payment shall be reinstated as if no distribution of the Returned Amount
has been made.
4.3.5. THIRD PARTY BENEFICIARY
Seller acknowledges that Purchaser is a third party beneficiary of
certain of Lessee's obligations as provided in the last sentence of Section
23(a) of the Lease and that Purchaser may enforce directly against Lessee (but
not the Security) any obligations of Lessee to Purchaser under Sections 8, 12 or
13 of the Lease.
SECTION 5. MISCELLANEOUS
5.1 COUNTERPARTS
This Agreement may be executed by the parties hereto in multiple
counterparts and each counterpart, when so executed, shall be deemed an
original, but all of which shall be considered as one agreement. Further, in
making proof of this Agreement, it shall not be necessary to produce or account
for more than one such counterpart.
5.2 SURVIVAL
The representations, warranties, indemnities and agreements of the
Seller and Purchaser provided for in this Agreement, shall survive the purchase
of the Interests by the Purchaser.
5.3 MODIFICATION, BINDING EFFECT, ETC.
Neither this Agreement nor any of the terms hereof may be terminated,
amended, supplemented, waived or modified, except by an instrument in writing
signed by the party against which the enforcement of the termination, amendment,
supplement, waiver or modification is sought. The terms of this Agreement shall
be binding upon, and inure to the benefit of, the Purchaser and its successors
and permitted assigns and the Seller and its successors and the permitted
assigns. This Agreement shall in all respects be governed by, and construed in
accordance with, the laws of the State of New York, including all matters of
construction, validity and performance.
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<PAGE>
5.4. ASSIGNMENT
Purchaser may not assign any of its rights or obligations hereto (by
participation or otherwise) without the prior written consent of Seller. Seller
may assign its rights and obligations hereunder to any successor "Lessor" under
the Lease without consent from Purchaser.
5.5. LIABILITY
Neither the Seller nor any of its Affiliates, directors, officers,
agents or employees shall be responsible for or have any duty to ascertain,
inquire into or verify (a) any statement, warranty or representation made in
connection with the Lease Documents; (b) the performance or observance of any of
the covenants or agreements of Lessee; (c) the satisfaction of any condition
specified in Section 3 of the Lease; or (d) the validity, effectiveness or
genuineness of any of the Lease Documents or any other instrument or writing
furnished in connection herewith or therewith.
Purchaser acknowledges that it has, independently and without reliance
upon the Seller, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Purchaser also acknowledges that it will, independently and without
reliance upon the Seller, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking any action under this Agreement.
5.6. AGENT
The parties agree that Seller is not a party hereto in its capacity as
Agent under the Lease and Seller is not assigning, and Purchaser is not
obtaining, any of the rights or obligations whatsoever of Agent under the Lease
Documents.
5.7. NOTICES
Any notice hereunder shall be in writing. Notices given by telegram,
telecopier or personal delivery shall be deemed to have been given and received
when sent and notices given by mail shall be deemed to have been given and
received four Business Days after the date when sent by registered or certified
mail, postage prepaid, and addressed to Seller or Purchaser at its address shown
below its signature hereto, or at such other address as Seller or Purchaser may,
by written notice received by the other, have designated as its address for such
purpose.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
SUMITOMO BANK LEASING AND FINANCE, INC.
277 Park Avenue
New York, New York 10172
Attention: Chief Credit Officer
By:_______________________________
Name:
Title:
THE SUMITOMO BANK, LIMITED, San Francisco Branch
555 California Street
Suite 3350
San Francisco, California 94104
By:_______________________________
Name:
Title:
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<PAGE>
EXHIBIT A
Supplement No. 1 to Rent Purchase Agreement
1. The parties hereto agree that this is Supplement No. 1 to Rent
Purchase Agreement, dated as of October ____, 1996, between the parties hereto.
2. The Supplement relates to the following Property:
all of the Property referenced in the Purchase and Master Lease Agreement, dated
as of October ____, 1996 between Novellus Systems, Inc. and Sumitomo Bank
Leasing and Finance, Inc.
3. The Acquisition Percentage is ______________.
4. The number of basis points applicable to the definition of Base
Rent is ____ basis points.
5. The Applicable Percentage is ____%.
IN WITNESS WHEREOF the parties have caused this Supplement to be duly
executed and delivered this _____ day of October, 1996.
SUMITOMO BANK LEASING
AND FINANCE, INC.
By:_______________________________
Title:
THE SUMITOMO BANK, LIMITED, San
Francisco Branch
By:_______________________________
Title:
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of October 24, 1996, from Novellus
Systems, Inc., a California corporation ("Lessee"), to Sumitomo Bank Leasing and
Finance, Inc., as Agent under the Lease referenced below ("Secured Party"),
recites and provides as follows:
W I T N E S S E T H:
WHEREAS, Lessee and Secured Party have entered into a Purchase and
Master Lease Agreement dated as of October 24, 1996 (the "Lease"), pursuant to
which Lessee has leased from Secured Party certain Property;
WHEREAS, as a material inducement for Secured Party to enter into the
Lease and the Lease Documents, Lessee has agreed to execute and deliver this
Agreement for the purpose of securing the Secured Obligations and for the
purpose of subjecting the Collateral to the Lien of this Agreement as security
for the payment and performance of the Secured Obligations.
IT IS HEREBY COVENANTED AND DECLARED by and between the parties hereto
and their respective successors and assigns that the terms upon which the
Collateral shall be held and used are as follows:
ARTICLE 1
DEFINITIONS; INTERPRETATION
Section 1.1 CERTAIN DEFINITIONS. In this Agreement the following
capitalized terms have the respective following meanings:
"COLLATERAL" means the Receiving Account, the U.S. Government
Obligations, any proceeds thereof and any cash or other property now or
hereafter standing to the credit of the Receiving Account.
"CUSTODIAN" shall mean Hambrecht & Quist LLC, a limited liability
company, and any successor custodian selected by Lessee and acceptable to the
Secured Party in its sole discretion.
"CUSTODIAN ACCOUNT AGREEMENT" means the letter agreement dated as of
October ____, 1996, among the Lessee, the Custodian and the Secured Party, in
the form of EXHIBIT A hereto.
<PAGE>
"DEPOSIT DATE" means each date on which Lessee is required to provide
to Secured Party Government Securities pursuant to Section 4(g) of the Lease.
"DEPOSITARY INSTITUTION" means a financial institution that has a
book-entry account in its name at the Fed and that regularly accepts in the
course of its business U.S. Government obligations as a custodial service for
customers and maintains accounts in the names of such customers reflecting
ownership of or an interest in such securities.
"DESIGNATED DEPOSITARY INSTITUTION" means a Depositary Institution
selected by the Custodian and satisfactory to the Secured Party.
"ELIGIBLE U.S. GOVERNMENT OBLIGATIONS" means direct obligations of the
Treasury Department of the United States of America, fully guaranteed by the
full faith and credit of the United States of America, in book-entry form, with
maturities of three years or less.
"FED" means the Federal Reserve Bank of New York.
"NOTICE" means notice to the Custodian of the Secured Party's security
interest in U.S. Government Obligations recorded on the books of such Custodian,
substantially in the form of the letter of notification attached hereto as
EXHIBIT B and all schedules and annexes thereto.
"RECEIVING ACCOUNT" means the account established by the Lessee with
the Custodian having the account information set forth on EXHIBIT B hereto.
"SECURED OBLIGATIONS" means, collectively (i) the obligation of the
Lessee to perform when due any obligation, or pay when due any amount, under the
Lease Documents and (ii) the obligations of the Lessee now or hereafter existing
under this Agreement.
"U.S. GOVERNMENT OBLIGATIONS" means Eligible U.S. Government
Obligations subjected to the Lien of this Agreement pursuant to Section
2.1(A)(i) or 3.4 hereof.
Section 1.2 DEFINITIONS NOT DEFINED HEREIN. Capitalized terms used
herein and not otherwise defined herein shall have the meanings specified in the
Lease.
ARTICLE 2
PURCHASE, PLEDGE AND ASSIGNMENT
2.1 PURCHASE, PLEDGE AND ASSIGNMENT
(A) On the Closing and each Deposit Date, Lessee shall instruct
Custodian to:
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<PAGE>
(i) purchase Eligible U.S. Government Obligations with a value
at least equal to 102% of the Guaranteed Residual Value of
the related Property;
(ii) hold such Eligible U.S. Government Obligations in and pay,
or cause to be paid, all proceeds of such Eligible U.S.
Government Obligations at maturity or otherwise to the
Receiving Account, subject to this Agreement and the
Custodian Account Agreement;
(iii) ensure that the Designated Depositary Institution
causes the Fed to record by book entry the transfer of
such Eligible U.S. Government Obligations to the
Designated Depositary Institution;
(iv) ensure that the Designated Depositary Institution
identifies, by book entry, such Eligible U.S. Government
Obligations as belonging to the Custodian and provides
written confirmation thereof to the Custodian each in
accordance with Section 8313(1)(d) of the California Uniform
Commercial Code; and
(v) identify, by book entry, such Eligible U.S. Government
Obligations as belonging to the Lessee and provide written
confirmation thereof to the Lessee, each in accordance with
Section 8313(1)(d) of the California Uniform Commercial
Code.
(B) As security for the prompt payment and performance when due of
all the Secured Obligations, Lessee hereby pledges to Secured Party and grants a
first priority security interest in, and a Lien upon and right of set-off
against, the Collateral.
(C) To effect the pledge and perfect the security interest granted by
Lessee hereunder, on the Closing and each Deposit Date, Lessee shall give Notice
to the Custodian of the Secured Party's security interest in the Collateral, and
at such time instruct the Custodian to (i) identify by book entry the U.S.
Government Obligations of Lessee that are being held in the Receiving Account as
being subject to the security interest created hereunder in favor of the Secured
Party, and (ii) execute and deliver a confirmation substantially in the form
annexed to the Notice, in the case of (i) and (ii) above each in accordance with
Section 8313(1)(d) of the California Uniform Commercial Code.
(D) Lessee agrees not to withdraw, liquidate, sell, convey, endorse,
negotiate, or in any way dispose of, or create, incur or permit to exist any
Lien whatsoever, or cause any of the foregoing to occur in or with respect to,
any of the Collateral without the prior written consent of Secured Party, other
than pursuant to Section 3.4 hereof.
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<PAGE>
(E) Lessee agrees, at no expense to Secured Party, to defend Secured
Party's security interest in and to the Collateral against the claims of any
Person (other than claims arising as a result of an act or omission of the
Secured Party) and to ensure that Secured Party has at all times pursuant to
this Agreement a valid and perfected first priority perfected Lien on and
security interest in the Collateral, subject to no prior or equal Lien or
security interest whatsoever (other than claims arising as a result of an act or
omission of the Secured Party).
(F) All rights of the Secured Party hereunder, and all obligations of
Lessee hereunder, shall be absolute and unconditional irrespective of (i) any
lack of validity or enforceability of this Agreement or any Lease Document; (ii)
any change in the time, manner or place of payment of, or any other term of, all
or any of the Secured Obligations, or any amendment or waiver of or any consent
to any departure from this Agreement or the Lease Documents; (iii) any taking,
exchange, release or non-perfection of any other collateral or any taking,
release or amendment or waiver of or consent to departure from any guaranty or
indemnity for all or any of the Secured Obligations; (iv) any manner of
application of collateral, or proceeds thereof, to all or any of the Secured
Obligations, or any manner of sale or disposition of any collateral for all or
any of the Secured Obligations or any other assets of Lessee; and (v) any
change, restructuring or termination of the corporate existence of the Lessee.
ARTICLE 3
COVENANTS OF LESSEE
3.1 WAIVER OF DILIGENCE, PROTEST, ETC. Lessee hereby expressly
waives (i) any requirement that any right or power be exhausted or any action be
taken against Lessee, or any other Person with respect to the Secured
Obligations, (ii) except as otherwise set forth in the Lease, all notices
(whether of non-payment or non-performance by any Person, dishonor, protest or
otherwise) with respect to any of the Secured Obligations and (iii) notice of
acceptance of this Agreement by the Secured Party or any other Persons.
3.2 NO SET-OFF.
(A) Lessee and Secured Party acknowledge that the Custodian may from
time to time have other banking relationships with the Lessee or Secured Party
that are not related to the transactions contemplated by the Lease.
(B) No set-off, counterclaim, reduction or diminution of any
obligation, or any defense of any kind or nature (other than complete
performance by Lessee of its obligations hereunder) which Lessee may have or
assert against Secured Party or any other Lessor, shall be available hereunder
to, or shall be asserted by, Lessee in any action arising out of the
transactions contemplated hereby or out of any of the documents or instruments
referred to herein or otherwise.
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<PAGE>
3.3 MAINTAINING THE RECEIVING ACCOUNT.
(A) So long as the Lease remains in full force and effect or any of
the Secured Obligations remain outstanding, Lessee shall maintain the Receiving
Account with the Custodian subject at all times to this Agreement and the
Custodian Account Agreement.
(B) Except as set forth in Section 3.5, it shall be a term and
condition of the Custodian Account Agreement that, notwithstanding any term or
condition to the contrary in any other agreement relating to the Receiving
Account, no U.S. Government Obligation held in the Receiving Account and no
proceeds thereof whether through liquidation, maturity or otherwise, shall be
transferred or delivered to any Person (other than the Secured Party) from the
Receiving Account without the prior written consent of the Secured Party.
3.4 SUBSTITUTION. At any time Lessee (or its designee, which
designee has been approved by Secured Party) may instruct the Custodian to sell
a U.S. Government Obligation and immediately use the proceeds of sale to
purchase other Eligible U.S. Government Obligation(s) which the Custodian shall
immediately treat as a U.S. Government Obligation, including without limitation
for purposes of Section 2.1(A)(ii)-(v). Lessee shall not request such sale,
however, unless after the related purchase Lessee remains in compliance with
Section 2.1(A)(i).
3.5 RELEASE OF CERTAIN ACCRUED INTEREST. Subject to and in
accordance with Section 4(g)(vi) of the Lease, Secured Party shall cause the
Custodian to release to Lessee certain Government Securities, cash and interest
that accrues with respect to the Government Securities that is held by or in the
control of Custodian.
ARTICLE 4
REMEDIES
Section 4.1 REPOSSESSION. Lessee agrees that (a) Secured Party
shall have all of the rights and remedies with respect to the Collateral of a
secured party under the California Uniform Commercial Code (whether or not in
effect in the jurisdiction where the rights and remedies are asserted) and all
of the rights and powers provided in this Agreement and (b) upon the occurrence
of an Event of Default, and during the continuation thereof, Secured Party, by
agent or representative, shall have the right and power to take possession of
all or any part of the Collateral, and to exclude Lessee and all Persons
claiming under Lessee wholly or partly therefrom, and thereafter to hold, use,
manage and control the same (it being understood and agreed that Secured Party
may instruct the Designated Depositary Institution in writing to take any of the
actions expressed as being permitted to be taken by Secured Party under this
Article 4), including, without limitation, applying the Collateral to payment of
the Secured Obligations.
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<PAGE>
4.2 POWER OF SALE, SUITS FOR ENFORCEMENT. Subject to the limitations
of Section 4.3, if there exists an Event of Default, Secured Party, personally
or by agents, with or without possession of the Collateral, may take any one or
more of the following actions.
(a) (i) Secured Party may, without being required to give any notice
except as hereinafter provided, apply the cash or other property in the
Receiving Account to the payment of any Secured Obligations then due and,
if there shall be no such cash or other property or the cash or other
property so applied shall be insufficient to pay in full all such Secured
Obligations, sell or cause to be sold an amount of the U.S. Government
Obligations sufficient to discharge any Secured Obligations then due at
public or private sale or at any broker's board or on any securities
exchange, for cash, upon credit or for future delivery, and in the case of
a public sale to the highest bidder and in the case of a private sale, or
at any broker's board or on any securities exchange, in a commercially
reasonable manner in accordance with Applicable Law of the United Sates of
America and the State of California.
(ii) Secured Party is authorized, at any such sale, if it deems it
advisable so to do, to restrict the prospective bidders or purchasers to
persons who will represent and agree that they are purchasing for their own
account, for investment, and not with a view to the distribution or sale of
any of the U.S. Government Obligations;
(iii) upon any such sale Secured Party shall have the right to
deliver, assign and transfer to the purchaser thereof the U.S. Government
Obligations so sold. Each purchaser (including Secured Party and any other
holder of any of the U.S. Government Obligations) at any such sale shall
hold the property sold absolutely, free from any claim or right of
whatsoever kind, including any equity or rights of redemption, of Lessee,
who hereby specifically waives as against any such purchaser all rights of
redemption, stay or appraisal which it has or may have under any rule of
law or statute now existing or hereafter adopted;
(iv) any such public sale shall be held at such time or times within
the ordinary business hours and at such place or places in the City of San
Francisco, or elsewhere, as Secured Party may fix in the notice of such
sale. At any such sale the U.S. Government Obligations, or that portion
thereof so being sold, may be sold in one lot as an entirety or in separate
portions, as Secured Party may determine.
(v) Secured Party shall not be obligated to make any sale pursuant to
any such notice. Secured Party may, without notice or publication, adjourn
any public or private sale or cause the same to be adjourned from time to
time by announcement at the time and place fixed for the sale, and such
sale may be made at any time or place to which the same may be so
adjourned;
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<PAGE>
(vi) in case of any sale of all or any part of the U.S. Government
Obligations on credit or for future delivery, the U.S. Government
Obligations so sold must be retained by Secured Party until the selling
price is paid by the purchaser thereof, but Secured Party shall not incur
any liability in case of the failure of such purchaser to take up and pay
for the U.S. Government Obligations so sold and, in case of any such
failure, such U.S. Government Obligations may again be sold upon like
notice; or
(b) proceed to protect and enforce the rights of Secured Party under
this Agreement by suit, whether for specific performance of any covenant
herein contained, or in aid of the execution of any power herein granted,
or for the foreclosure of this Agreement and the sale of the Collateral
under the judgment or decree of a court of competent jurisdiction, or for
the enforcement of any other right, as Secured Party shall determine, and
Secured Party shall be entitled, as a matter of right, to the appointment
of a receiver of all or any part of the Collateral.
4.3 NOTICE OF SALE. Secured Party shall give Lessee written notice
of any sale under this Article 4 (except that notice shall not be required as to
a Person if such action is then stayed by operation of law), which notice shall
state the time when and the place where the same is to be made, and shall
contain a brief description of the property to be sold, and shall be
sufficiently given if mailed to Lessee by registered mail, postage prepaid, at
least ten (10) days prior to the sale, and shall otherwise comply with all
Applicable Law of the United States of America and the State of California and
with any order of a court, if any, having jurisdiction over such sale.
Every such sale shall operate to divest all right, title, claim and
demand whatsoever of Lessee of, in and to the Collateral so sold, and shall be a
perpetual bar, both at law and in equity, against Lessee, all persons claiming
the Collateral sold, or any part thereof, through Lessee and its successors or
assigns.
Lessee hereby waives any claims against Secured Party arising by
reason of the fact that the price at which any of the U.S. Government
Obligations may have been sold at a private sale in accordance with this
Agreement was less than the price which might have been obtained at a private
sale or was less than the aggregate amount of the Secured Obligations.
4.4 APPLICATION OF PROCEEDS. The proceeds of any sale of the
Collateral, or any part thereof, under this Article 4, together with any other
sums then held by Secured Party, as part of the Collateral, shall be applied as
follows:
FIRST. To the payment of the costs and expenses of obtaining
possession or control of the Collateral and of such sale, and a reasonable
compensation to Secured Party's agents, attorneys and counsel, and to all
other charges, expenses, liabilities and advances incurred or made by
Secured Party;
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<PAGE>
SECOND. To the payment or satisfaction of the Secured Obligations;
THIRD. The surplus, if any, shall be paid to the Lessee, its
successors or assigns, or to whoever may be lawfully entitled to receive
the same or as a court of competent jurisdiction may direct.
As used in this Agreement, "proceeds" of the U.S. Government
Obligations shall mean cash, securities and other property realized in respect
of, and distributions in kind of, the U.S. Government Obligations, including any
thereof received under any adjustment of debt of the United States of America or
any agency or corporate instrumentality thereof.
Section 4.5 SECURED PARTY MAY PURCHASE. At any sale under this
Article 4, to the extent permitted by Applicable Law of the United States of
America and the State of California, Secured Party may bid for and purchase the
property offered for sale, and, upon compliance with the terms of sale, may
hold, retain and dispose of such property without further accountability
thereof.
Section 4.6 REMEDIES CUMULATIVE. No remedy herein is intended to
be exclusive of any other remedy, but every such remedy shall be cumulative and
shall be in addition to every other remedy herein conferred or now or hereafter
existing at law or in equity or by statute. No delay or omission of Secured
Party to exercise any right or remedy arising hereunder shall impair any right
or remedy or shall be construed to be a waiver of the Secured Obligations or any
acquiescence in the failure or omission to pay or perform the Secured
Obligations; and every right and remedy given by this Agreement to Secured Party
may be exercised from time to time and as often as may be deemed expedient by
Secured Party.
Section 4.7 WAIVER OF APPRAISEMENT AND SIMILAR LAWS. Lessee
agrees, to the full extent that it may lawfully so agree, that neither it nor
any Person claiming through or under it will set up, claim or seek to take
advantage of any appraisement, valuation, stay, extension or redemption law now
or hereafter in force, in order to prevent, hinder or delay the enforcement or
foreclosure of this Agreement, or the absolute sale of the Collateral or any
part thereof, or the final and absolute putting into possession thereof,
immediately after such sale, of the purchaser thereof; and Lessee, for itself
and all who may at any time claim through or under it, hereby waives, to the
full extent that it may be lawful so to do, the benefit of all such laws, and
any and all right to have any of the properties or assets comprising the
Collateral marshalled upon any such sale, and agrees that Secured Party or any
court having jurisdiction to foreclose the Lien hereof may sell the Collateral
as an entirety or in such portions as Secured Party may determine.
Section 4.8 POWER OF ATTORNEY. Lessee hereby irrevocably appoints
Secured Party the true and lawful attorney of Lessee (with full power of
substitution) in the name, place and stead of, and at the expense of, Lessee
solely in connection with the enforcement of the rights and remedies provided
for in this Section 4: (a) to give any necessary receipts or acquittances for
amounts collected or received thereunder, (b) to make all necessary transfers of
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<PAGE>
any of the Collateral in connection with any sale or other disposition made
pursuant hereto, (c) to execute and deliver for value all necessary or
appropriate bills of sale, assignments and other instruments and agreements in
connection with any such sale or other disposition, Lessee hereby ratifying and
confirming all that such attorney (or any substitute) shall lawfully do
hereunder and pursuant hereto and (d) to sign any agreements, orders or other
documents in connection with or pursuant to this Agreement (to the extent the
same relate to the Collateral). Nevertheless, if so requested by Secured Party
or a purchaser, Lessee shall ratify and confirm, to the extent it has the power
to do so, any such sale or other disposition by executing and delivering to
Secured Party or such purchaser all proper bills of sale, assignments, releases
and other instruments as may be designated in any such request.
ARTICLE 5
RELEASES
If all of the Secured Obligations shall have been paid or satisfied in
full, then, upon the written request of Lessee, Secured Party shall execute such
releases as may be necessary to discharge the Lien and security interest of this
Agreement and this Agreement shall terminate.
ARTICLE 6
THIRD PARTIES
No person dealing with the Secured Party shall be concerned to inquire
whether an Event of Default shall have occurred or whether the power that
Secured Party is purporting to exercise has become exercisable or whether any
Secured Obligations remain unpaid or unperformed or otherwise as to the
propriety or regularity of any sale or other dealing by Secured Party with any
Collateral and all the protections to purchasers conferred by Applicable Law
shall apply to such Persons dealing with Secured Party. The receipt by Secured
Party of the purchase moneys shall effectively discharge the purchaser who shall
not be concerned with the manner of application thereof.
ARTICLE 7
MISCELLANEOUS
Section 7.1 NOTICES. Notices and other communications required or
permitted to be given or made under the terms of this Agreement shall be given
in the manner set forth in Section 26 of the Lease.
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<PAGE>
Section 7.2 COUNTERPARTS. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 7.3 CONTINUING SECURITY. Except as provided in Article 5,
the security constituted by this Agreement shall not be considered as satisfied
by payment or satisfaction of any part of the Secured Obligations but shall be a
continuing security and extend to cover any and all sums of money or other
obligations which shall for the time being constitute Secured Obligations and
shall not be discharged or prejudiced or affected in any way by time being given
to Lessee or any other Person or by any other indulgence or concession to Lessee
or any other Person granted by Secured Party, by the taking, holding, varying,
nonenforcement or release by Secured Party of any other security for all or any
of the Secured Obligations, by any other thing done or omitted or neglected to
be done by Secured Party or by any other dealing or thing including any
variation of or amendment to any of the Lease Documents and any circumstances
whatsoever that but for this provision might operate to discharge any of the
Secured Obligations or to exonerate or discharge Lessee from its obligations
hereunder or otherwise affect the security hereby constituted.
Section 7.4 AMENDMENTS. This Agreement may be amended only by a
consent in writing signed by Secured Party and Lessee specifically identified as
an amendment hereto.
Section 7.5 SEVERABILITY. Any provision of this Agreement which is
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without invalidating, prohibiting the observance of or
rendering unenforceable the remaining provisions hereof, and any such
invalidity, illegality or unenforceability in any jurisdiction shall not
invalidate, prohibit the observance of or render unenforceable such provision in
any other jurisdiction.
Section 7.6 GOVERNING LAW.
THE TERMS OF THIS AGREEMENT AND ALL RIGHTS AND OBLIGATIONS HEREUNDER
SHALL BE GOVERNED BY THE LAW OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS
EXECUTED DELIVERED, AND TO BE FULLY PERFORMED, IN THE STATE OF CALIFORNIA,
WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.
[Signatures Appear on Next Page]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
NOVELLUS SYSTEMS, INC.
By:_________________________
Name:
Title:
SUMITOMO BANK LEASING AND
FINANCE, INC., as Agent
By:_________________________
Name:
Title:
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EXHIBIT B
[NOVELLUS SYSTEMS, INC. LETTERHEAD]
______________, 1996
To: Hambrecht & Quist LLC
One Bush Street
San Francisco, California 94104
Attn: ______________________
Re: Account No. ________ (the "Receiving Account") of Novellus Systems,
Inc. (the "Lessee") pledged to Sumitomo Bank Leasing and Finance,
Inc., as agent ("Secured Party") pursuant to Security Agreement,
dated as of October___, 1996 BETWEEN LESSEE AND SECURED PARTY
(THE "AGREEMENT")
PLEASE BE ADVISED THAT the securities set forth on Schedule I annexed
hereto (the "U.S. GOVERNMENT OBLIGATIONS") to be held and maintained in or
credited to the Receiving Account, the proceeds thereof and any other property
held and maintained in or credited to the Receiving Account, are pledged to
Secured Party pursuant to the Agreement to secure all obligations of the Lessee
to the Secured Party under the Purchase and Master Lease Agreement dated as of
____________, 1996, between Lessee and the Secured Party, and certain other
agreements. You should reflect the pledge and security interest (and its first
priority status) described in this Notice on your books and records accordingly.
Upon receipt of this Notice, and upon each receipt by you of the U.S.
Government Obligations, please acknowledge and confirm that such pledge is
reflected on your books and records by delivering a confirmation substantially
in the form annexed hereto, with a copy to our attention.
You are hereby further instructed to, upon maturity of the U.S.
Government Obligations, transfer the proceeds thereof to the Receiving Account
subject in all respects to the letter agreement, dated as of ____________, 1996,
among you, the Lessee and the Secured Party.
Thank you for your kind cooperation.
Very truly yours,
NOVELLUS SYSTEMS, INC.
By:___________________________
Name:
Title:
<PAGE>
Schedule 1 to Security Agreement Notice
Schedule of U.S. Government Obligations
Pledged to Secured Party under the Security Agreement
Designation by Name, Series, Maturity Date and CUSIP Number
Owned by Lessee as follows:
CUSIP AMOUNT MATURITY
NAME NUMBER (AT MATURITY) DATE
<PAGE>
CONFIRMATION
To: Sumitomo Bank Leasing and Finance, Inc., as Agent
Novellus Systems, Inc.
The undersigned hereby confirms that it has received the securities
described on Schedule I annexed hereto and, in accordance with Section
8313(1)(d) of the California Uniform Commercial Code, the undersigned confirms
that our books and records reflect the pledge of such securities in favor of
Sumitomo Bank Leasing and Finance, Inc., as Agent (and no other security
interest or pledge).
HAMBRECHT & QUIST LLC
By:__________________________
Title:
<PAGE>
October ____, 1996
Hambrecht & Quist LLC
One Bush Street
San Francisco, California 94104
Attn: Mr. Steven N. Machtinger
Re: ACCOUNT NO.
Gentlemen:
In consideration of Sumitomo Bank Leasing and Finance, Inc. ("Secured Party")
entering into the Purchase and Master Lease Agreement dated as of October 24,
1996 (the "Lease") with Novellus Systems, Inc. (the "Lessee"), the Lessee has
executed a Security Agreement ("Security Agreement"), dated October 24, 1996,
with Secured Party, and Lessee has, in addition to other collateral, thereby
granted to Secured Party a security interest in various securities and proceeds
therefrom to be held by you on Secured Party's behalf and for Secured Party's
sole and exclusive benefit in account no. _________________ maintained with you
and known as "Novellus Systems, Inc., in favor of Sumitomo Bank Leasing and
Finance, Inc., as pledgee for the benefit of certain Lessors" ("Receiving
Account") and in all property of every kind now or hereafter held in or held for
the credit of the Receiving Account (collectively the "Collateral"), to secure
Lessee's indebtedness to Secured Party, whether now existing or hereafter
incurred. A copy of the Security Agreement is attached as EXHIBIT A.
The purpose of this letter is to obtain the agreement of you and the Lessee as
to certain matters necessary to protect our interests in the Collateral and the
Receiving Account. By signing and returning the enclosed copy of this letter
you hereby acknowledge and confirm that, unless Secured Party otherwise agrees
in writing:
1. The Collateral will be held in the above-entitled Receiving
Account. As long as the Collateral is pledged to Secured Party,
you will not invade the account to cover margin debits or calls
in any other accounts of Lessee, or to satisfy any other
obligations owed by Lessee or any of its affiliates to you or any
of your affiliates.
<PAGE>
Page 2
2. You shall transfer or sell the Collateral from the Receiving
Account only upon receipt of prior written instructions from
Secured Party, provided, however, that so long as (i) no Default
Notice described by paragraph 6 hereof has been delivered to you
which notice has not been rescinded, (ii) all proceeds are
reinvested in Collateral, (iii) all investments are "Eligible
U.S. Government Securities" as defined in the Security Agreement,
and (iv) after such reinvestment the Lessee will remain in
compliance with the requirement of the second sentence of
paragraph 3 hereof, you are authorized to sell or transfer any
portion of the Collateral on deposit in the Receiving Account
upon the written instruction received from Lessee and reinvest
the proceeds in Eligible U.S. Government Securities on deposit in
the Receiving Account. Such instructions may instead be provided
to you by a third party designated by Lessee and approved by
Secured Party. Notwithstanding anything contained herein, you
shall not release any Collateral from the Receiving Account to
Lessee except pursuant to, and then only to the extent of, the
specific written instruction of Secured Party. You acknowledge
that we may instruct you to disburse to the Lessee from time to
time interest that shall have accrued with respect to the
Government Securities; provided, however, no such disbursement
shall be made without the prior written instruction from us.
Secured Party and Lessee acknowledge that Custodian is empowered
to act pursuant to this Custodian Agreement upon unilateral
notice from Secured Party and may disregard any instructions
hereafter given by Lessee to Custodian which conflict in any
manner with any such notice from Secured Party.
3. You agree to provide to us a monthly statement of assets together
with a copy to the Lessee (or to any other person authorized to
receive statements) with respect to the Receiving Account. You
further agree to provide us daily with a statement of the fair
market value of the Collateral. If we do not receive such daily
statement, we will advise Lessee by telephone. It is understood
and agreed that nothing contained herein or in any other document
given in connection herewith imposes any responsibility or
liability on Custodian for maintaining any specified net asset
value for the Receiving Account or for any diminution in the
value of the Receiving Account, except for willful misconduct and
bad faith on the part of Custodian.
<PAGE>
Page 3
4. You have marked, and agree in the future to mark, your records to
indicate that the Receiving Account and all Collateral now or
hereafter held by you in or for the credit of the Receiving
Account are or will be held in our name as collateral pledgee as
described in the first paragraph hereof.
5. You acknowledge that except for this Agreement, you have not
received from any other party notice that any party claims a
security interest or other interest in the Receiving Account or
the Collateral.
6. You agree to transfer to us the Collateral in the Receiving
Account immediately upon your receipt of written notice from us
in the form of the letter attached hereto as EXHIBIT B that an
Event of Default as defined in the Lease has occurred ("Default
Notice"). Until your receipt of a Default Notice, Lessee shall
be entitled to control the trading in securities and the right to
exercise voting power over securities held in the Receiving
Account, subject to the terms and limitations of this Agreement.
7. All notices, consents, requests, instructions, approvals or other
communications ("notices") shall be addressed to the person and
address shown below, or to such other person or address as may be
specified in writing. Such notices shall be deemed to have been
received as of the date hand delivered or telecopied, or if sent
by private overnight courier on the day following the day sent,
or if by mail on the day five days from and including the day
sent.
To Secured Party:
Sumitomo Bank Leasing and Finance, Inc.
277 Park Avenue
New York, New York 10172
Attn: Mr. Carl Morales
Fax: (212) 224-5222
or (212) 224-5221
<PAGE>
Page 4
To Lessee:
Novellus Systems, Inc.
3950 North First Street
San Jose, California 95125
Attn: Mr. John Root
Fax: (408) 943-3422
To Custodian:
Hambrecht & Quist LLC
One Bush Street
San Francisco, California 94104
Attn: Mr. Steven N. Machtinger
Fax: (415) 576-3638
We agree to provide prompt written notice to each other if there should be
a change in the designated person or address.
8. The Secured Party shall have the right to require Lessee to
appoint a successor custodian to serve as Custodian under this
Agreement at any time that Custodian shall become in breach of
its obligations hereunder. In addition, Custodian may resign
upon 21 days prior written notice to the Secured Party and
Lessee, with such resignation to become effective upon the
earlier of (a) appointment of a successor custodian in accordance
with this Section 8 or (b) the 21st day after receipt of such
resignation notice from Custodian. If Custodian or any successor
custodian is replaced or has resigned, the Secured Party and the
Lessee will cooperate to effect a transfer of the Collateral to
the successor custodian and cause such successor custodian to
take the actions required to be taken by Custodian under Section
2 of the Security Agreement to continue the effectiveness of the
pledge to and the perfection of the security interest of the
Secured Party in the Collateral.
9. Lessee agrees to pay you the following fees for your services
hereunder:
<PAGE>
Page 5
10. This agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be an
original, but all such counterparts together constitute one and
the same Agreement.
11. Lessee agrees to indemnify and hold harmless Custodian (and its
officers, directors, employees and affiliates) from all losses,
claims, damages or liabilities to which it may be come subject
and to reimburse it for any legal or other expenses incurred in
connection with defending against any such loss, claim, damage or
liability or in connection with any investigation or inquiry of
Custodian arising out of, and covenants not to sue Custodian in
connection with, the performance of its duties hereunder, or in
connection with the Security Agreement or the Receiving Account,
except for willful misconduct and bad faith on the part of
Custodian, including without limitation any action taken or
omitted in good faith relating to the duties and responsibilities
of Custodian under this Custodian Agreement or any action taken
or omitted in reliance upon any instrument, or notices from
Secured Party provided for herein, not only as to its due
execution and the validity and effectiveness of its provisions,
but also as to the truth and accuracy of any information
contained therein.
12. This letter agreement shall be governed by and construed in
accordance with the laws of the State of California, without
regard to the provisions thereof relating to conflict of laws.
13. This Agreement may only be modified by a written agreement
executed by Custodian, Secured Party and Lessee.
Very truly yours,
SUMITOMO BANK LEASING AND FINANCE, INC.
By:_____________________________________
Its:_________________________________
<PAGE>
Page 6
Accepted and Agreed to the
______ day of October, 1996
HAMBRECHT & QUIST LLC
By:_____________________________
Title:_______________________
NOVELLUS SYSTEMS, INC.
By:_____________________________
Title:_______________________
<PAGE>
EXHIBIT A
SECURITY AGREEMENT
<PAGE>
EXHIBIT B
DEFAULT NOTICE
[DATE]
Hambrecht & Quist LLC
One Bush Street
San Francisco, California 94104
Attn: Mr. Steven N. Machtinger
Re: Security Agreement dated October ____, 1996 (the "Security Agreement")
between Novellus Systems, Inc. ("Lessee"), and Sumitomo Bank Leasing and
Finance, Inc. ("Secured Party")
Ladies and Gentlemen:
The undersigned, as Secured Party under the Security Agreement, hereby gives you
notice that an Event of Default as defined in the Lease (as defined in the
Security Agreement) has occurred, and pursuant to Section 6 of the Letter
Agreement among Lessee, Secured Party and you dated October _____, 1996, the
Secured Party directs you to deliver the Collateral and other property listed on
SCHEDULE A affixed hereto to the following address:
[The undersigned must provide good delivery instructions
to Custodian in appropriate detail.]
The undersigned certifies that the Collateral and other property are withdrawn
from the Receiving Account in accordance with the terms and conditions of the
Security Agreement to pay obligations due by the Lessee in connection with the
Security Agreement.
Very truly yours,
SUMITOMO BANK LEASING AND FINANCE, INC.
By:_____________________________________
Title:_______________________________
<PAGE>
EXHIBIT T
TO LEASE
SECURITY AGREEMENT
[SECURITY AGREEMENT]
<PAGE>
EXHIBIT U
TO LEASE
LIST OF
REPORTS RECEIVED
6. ALTA Survey dated July 24, 1996, prepared by Kier & Wright Civil Engineers
and Surveyors
7. Phase I Environmental Site Assessment Report dated July 23, 1996, prepared
by SECOR International Incorporated
8. Phase II Site Investigation Report dated August 22, 1996, prepared by SECOR
International Incorporated
<PAGE>
Exhibit 10.48
NOVELLUS SYSTEMS, INC.
ENGLISH SUMMARY OF EXHIBIT WRITTEN IN JAPANESE
Mizonokuchi (Kawasaki) Office
1. Document type: lease
2. Name of tenant--
Novellus Systems Japan
3. Name of landlords --
KSP Community, K.K., an agent for KSP K.K., Nihon Mutual Life
Insurance Company, Meiji Mutual Life Insurance Company,
Nihon Landic Co., Ltd.
4. Location of property --
C-10F R&D KSP-Bldg.
3-2-1 Sakado, Takatsu-ku, Kawasaki-shi
Kanagawa 213
Japan
5. Date lease was entered into -- March 22, 1996
Contract period -- From May 1, 1996 to April 30, 2001
6. Effective Period: From May 1, 1996 to April 30, 2001
7. Rental Fee: JPY 5,493,715 per month
JPY 3,331,877 per month (Common Area)
8. Security Deposit: JPY 61,804,296
9. Square Footage (Area): 20,533 square feet
= 1,907.54 square meters
<PAGE>
Exhibit 10.49
NOVELLUS SYSTEMS, INC.
ENGLISH SUMMARY OF EXHIBIT WRITTEN IN JAPANESE
Yokkaichi Office
1. Document type: lease
2. Name of tenant--
Novellus Systems Japan
3. Name of landlords --
Tatsunaga Kogawa
4. Location of property --
9-12 Nishihamada, Yokkaichi-shi
Mie 510
Japan
5. Date lease was entered into --
Contract period -- From March 1, 1996 to February 29, 1998
6. Effective Period: From March 1, 1996 to February 29, 1998
7. Rental Fee: JPY 115,000
8. Security Deposit: JPY 250,000
9. Square Footage (Area): 523 square feet
= 48.57 square meters
<PAGE>
BUSINESS LEASE
11/13/96
<PAGE>
BUSINESS LEASE
THIS AGREEMENT, entered into this 13th day of November, 1996
between R. K. ASSOCIATES-MARLBORO, INC., hereinafter called the
Lessor, party of the first part, and NOVELLUS SYSTEMS, INC., a California
Corporation, hereinafter called the Lessee or Tenant, party of the second part:
WITNESSETH, That the said Lessor does this day lease unto said Lessee,
and said Lessee does hereby hire and take as Tenant under said Lessor Room or
Space No. 400; 201 Boston Post Road West; Marlboro, Massachusetts, also known as
R.K. Executive Centre, consisting of approximately 2,112 rentable square feet of
office space located on the Southwest corner of the fourth floor of the building
as depicted on Exhibit "A" attached hereto.
for the term of Three (3) years and One (1) month beginning the 1st
day of December, 1996, and ending the 31st day of December, 1999
at and for the agreed base rental, payable as follows:
IN ADVANCE ON THE FIRST DAY OF EACH AND EVERY MONTH WITHOUT DEMAND,
DEDUCTION OR SETOFF AT: TWO THOUSAND SEVEN HUNDRED SEVENTY TWO ($2,772.00)
DOLLARS PER MONTH; EQUALING THIRTY THREE THOUSAND TWO HUNDRED SIXTY FOUR
($33,264.00) DOLLARS ANNUAL BASE RENT
And additional rent as hereinafter set forth in this lease; plus all
taxes in the nature of sales, use or similar taxes now or hereafter assessed or
levied by any taxing authority upon the payment of fixed rent or additional rent
as hereinafter defined.
Lessee, upon the execution of this lease, agrees to pay the amount of
$2,772.00 which shall be held as security for the Lessee's performance as herein
provided and refunded to the Lessee at the end of this lease subject to the
Lessee's satisfactory compliance with the conditions hereof, as stipulated in
paragraph 17 of this lease. In the event a portion of Lessee's security deposit
is applied by Lessor toward any of Lessee's accounts for rent or expenses,
Lessee shall have one (1) month to replenish the entire sum applied and return
the balance held by Lessor to a full security deposit. Any violation of this
provision will be a material default under this lease agreement.
All payments to be made to the Lessor on the first day of each and
every month in advance without demand at the office OF R.K. ASSOCIATES 181 WELLS
AVENUE; NEWTON, MASSACHUSETTS 02159 or at such other place and to such other
person, as the Lessor may from time to time designate in writing.
FIRST: USE: It is hereby understood and agreed that the use of the
leased premises is limited to a general office use consistent with a first class
office building and for no other purposes whatsoever. Any violation of the
agreed use will be a violation of this lease agreement. Nothing contained in
this lease shall give the Lessee any right to demand performance by or from any
other Lessee or from the Lessor.
SECOND: ASSIGNMENT-SUBLEASING: The Lessee shall not assign this
lease, nor sub-let the premises, or any part thereof, without Lessor's written
permission.
THIRD: PERSONAL PROPERTY-LESSEE'S RESPONSIBILITY: All personal
property placed or moved in the premises above described shall be at the risk of
the Lessee or owner thereof. Lessor, any agent of the Lessor, and/or any
principal of the Lessor shall not be liable for any and all damage to said
personal property, to the Lessee arising from the bursting or leaking of water
pipes, from any act of negligence of any co-Tenant or occupant of the building
or of any other person whomsoever.
FOURTH: COMPLIANCE WITH LAWS: The Lessee shall promptly execute and
comply with all statutes, ordinances, rules, orders, regulations and
requirements of any applicable Federal, State and City Government and of any and
all their Departments and Bureaus including any Taxing Authority or Utility; and
Lessee shall also promptly comply with all rules, orders and regulations of the
applicable fire prevention codes for the prevention of fires. Lessee is fully
responsible to procure all necessary licenses, permits, approvals and
inspections in order to legally open the leased premises for business under all
applicable guidelines. Any violation of this provision will be grounds for a
default of this lease agreement.
FIFTH: FIRE-CASUALTY: In the event the premises shall be destroyed or
so damaged or injured by fire or other casualty during the life of this
agreement, whereby the same shall be rendered untenantable, then the Lessor
shall have the right to render said premises tenantable by repairs within ninety
(90) days therefrom. If Lessor has commenced repairs to the leased premises,
but has been delayed for any reason whatsoever, this period shall be extended
for an additional sixty (60) day period. If said premises are not rendered
tenantable within said time, it shall be optional with either party hereto to
cancel this lease, and in the event of such cancellation the rent shall be paid
only to the date of such fire or casualty. The cancellation herein mentioned
shall be evidenced in writing. Notwithstanding anything to the contrary
contained herein, Lessee shall be required to pay all rent and operating
expenses during any period in which the premises are rendered untenantable,
either from their own source of funds or through their business interruption
coverage which Lessee is required to carry under clause 24 of this lease
agreement.
<PAGE>
SIXTH: DEFAULT: The prompt payment of the rent for said promises upon
the dates named, and the faithful observance of the rules and regulations
printed upon this lease, and which are hereby made a part of this covenant, and
of such other and further rules or regulations as may be hereafter made by the
Lessor, are the conditions upon which the lease is made and accepted and any
failure on the part of the Lessee to comply with the terms of said lease, or any
of said rules and regulations now in existence, or which may be hereafter
prescribed by the Lessor, shall at the option of Lessor, constitute a default
under this lease.
SEVENTH: ABANDONMENT: If the Lessee shall abandon or vacate said premises
before the end of the term of this lease, or shall suffer the rent to be in
arrears, the Lessor may, at its option, forthwith cancel this lease or enter
said premises as the agent of the Lessee, without being liable in any way
therefor, and relet the premises with or without any furniture that may be
therein, as the agent of the Lessee, at such price and upon such terms and for
such duration of time as the Lessor may determine, and receive the rent
therefor, applying the same to the payment of rent due by these presents, and if
the full rental herein provided shall not be realized by Lessor over and above
the expenses to Lessor in such re-letting, the sold Lessee shall pay any
deficiency, Lessor shall not be liable to Lessee in the event of any excess.
Notwithstanding Lessee's abandonment or Lessor's acceptance thereof, Lessee
shall be responsible to satisfy any and all obligations due to Lessor under the
terms of this lease.
EIGHTH: COLLECTION: Lessee agrees to pay all costs of collections and
attorney's fees incurred by Lessor in the event of any breach of this lease by
Lessee. This provision shall apply to all trial and appellate proceedings.
Lessee also waives all rights to reciprocal attorney's fees under Law.
NINTH: UTILITIES: The Lessee agrees that he will pay all charges for
rent, electricity, heat and air conditioning or other illumination, used on said
premises, as well as any and all tax liabilities, and should said charges for
rent, utilities, or taxes herein provided for at any time remain due and unpaid
for the space of five days after same shall have become due, the Lessor may, at
its option, consider the said Lessee at sufferance and the entire rent shall at
once be due and payable and may forthwith be collected by distress or otherwise.
TENTH: SECURITY INTEREST: The said Lessee hereby pledges and assigns
to the Lessor all the furniture, fixtures, goods and chattels of said Lessee,
which shall or may be brought or put on said premises as security for the
payment of the rent herein reserved, and the Lessee agrees that the sold lien
may be enforced by distress (and Lessee waives all rights to require Lessor to
post bond), foreclosure or otherwise at the election of the said Lessor.
ELEVENTH: LESSOR'S ACCESS: The Lessor, or any of his agents, shall
have the right to enter said premises during all reasonable hours, to examine
the same to make such repairs, additions or alterations as may be deemed
necessary for the safety, comfort, or preservation thereat or of said building,
or to exhibit said premises, and to put or keep upon the doors or windows
thereof a notice "FOR RENT" at any time within thirty (30) days before the
expiration of this lease. The right of entry shall likewise exist for the
purpose of removing placards, signs, fixtures, alterations, or additions, which
do not conform to this agreement, or to the rules and regulations of the
building.
TWELFTH: ACCEPTANCE OF PREMISES AND REPAIR: Lessee hereby accepts the
premises in the condition they are in at the beginning of this lease and agrees
to maintain said premises in the same condition, order and repair as they are at
the commencement of said term, excepting only reasonable wear and tear arising
from the use thereof under this agreement, and to make good to said Lessor
immediately upon demand, any damage to water apparatus, or electric lights or
any fixture, appliances or appurtenances of said premises, or of the building,
caused by any act or neglect of Lessee, or of any person or persons in the
employ, under the control of the Lessee, or a business invites of the Lessee.
THIRTEENTH: INSTALLATION BY TENANT: All personalty installed by
Tenant shall be new or completely reconditioned. Tenant shall not make, or
cause to be made, any interior alterations, additions or improvements or
install, or cause to be installed, any exterior signs, exterior lighting,
plumbing fixtures, shades or awnings or make any changes to the store front
without first obtaining Lessor's written approval and consent which shall not be
unreasonably withheld. Tenant shall present to the Lessor plan and
specifications for work at the time approval is sought.
FOURTEENTH: HOLD HARMLESS: It is expressly agreed and understood by
and between the parties to this agreement, that the Lessor, its principals,
employees, agents and all affiliated or related ownership entities shall not be
liable to Lessee for any damage or injury by water, or water seepage, any damage
or injury resulting from the carelessness, negligence, or improper conduct on
the part of any other Tenant or agents, or employees, any damage by reason of
the breakage, leakage, or obstruction of the water, sewer or soil pipes, or
other leakage in or about the said building. Neither the Lessor nor Lassoes
agents shall be responsible for any damages caused by, or growing out of, any
breakage, leakage, or defective condition of the electrical wiring, air
conditioning or heating pipes and equipment, plumbing, appliances, sprinklers,
other facilities or other equipment, serving the leased premises. Neither
Lessor nor Lessor's agents shall be liable for any damages caused by, or growing
out of, any defect in the Office Building, Shopping Center, or any part thereof,
or in said Leased Promises or any part thereof of fire, rain, wind or other
cause. Lessor, its principals, employees, agents and all affiliated or related
ownership entities shall not be liable to Tenant and shall be held harmless from
any and all liability to Tenant, except for their intentional and/or willful
acts.
FIFTEENTH: BANKRUPTCY: If the Lessee shall become insolvent or if
bankruptcy proceedings shall be begun by or against the Lessee, before the end
of said term the Lessor is hereby irrevocably authorized at its option, to
forthwith cancel this lease, as for a default. Lessor may elect to accept rent
from such receiver, trustee, or other judicial officer during the term of their
occupancy in their fiduciary capacity without affecting Lessor's rights as
contained in this contract, but no receiver, trustee or other judicial officer
shall ever have any right, title or interest in or to the above described
property by virtue of this contract. Lessor shall also be granted immediate
relief from any applicable automatic stay to seek eviction or other remedies or
shall likewise be entitled to an obtain order authorizing a rejection of the
lease at the Lessor's option which may limit the Tenant from maintaining
possession of the premises, notwithstanding the institution of bankruptcy. In
the event Lessor is required to exercise any rights under this paragraph, Lessee
agrees to immediately consent to any and all of the relief requested by Lessor.
SIXTEENTH: ACCORD AND SATISFACTION: No payment by Lessee, or receipt
by Lessor, of a lesser amount than the monthly rent herein stipulated shall be
deemed to be other than on account of the earliest stipulated rent, nor shall
any endorsement or statement or any check or any letter accompanying any check
or payment
2
<PAGE>
as rent be deemed an accord and satisfaction, and Lessor may accept such check
or payment without prejudice to Lessors right to recover the balance of such
rent or pursue any other remedy provided herein or by law.
SEVENTEENTH: USE AND RETURN OF SECURITY DEPOSIT: In the event of the
failure of Lessee to keep and perform any of the terms, covenants and conditions
of this lease to be kept and performed by Lessee, then the Lessor at its option
may, appropriate and apply said entire deposit, or so much thereof as may be
necessary, to compensate the Lessor for all loss or damage sustained or suffered
by Lessor due to such breach on the part of Lessee. Should Lessee comply with
all of said terms, covenants and conditions and promptly pay all of the rental
herein provided for as it falls due, and all other sums payable by Lessee to
Lessor hereunder, the said deposit shall be returned in full, without interest,
to Lessee at the end of the term of this lease, provided the leased premises are
returned to the Lessor in good condition, with all fixtures remaining,
reasonable wear excepted.
EIGHTEENTH: BINDING TERMS: This contract shall bind the Lessor and
its assigns or successors, and the heirs, assigns, personal representatives, or
successors as the case may be, of the Lessee.
NINETEENTH: TIME OF ESSENCE: It Is understood and agreed between the
parties hereto that time is of the essence of this contract and this applies to
all terms and conditions contained herein.
TWENTIETH: NOTICE: It is understood and agreed between the parties
hereto that written notice mailed, faxed or delivered to the premises leased
hereunder shall constitute sufficient notice to the Lessee upon mailing,
transmission or delivery. Written notice mailed via certified mall, return
receipt requested, or delivered to the office of the Lessor shall constitute
sufficient notice to the Lessor upon receipt, to comply with the terms of this
contract.
TWENTY-FIRST: NUISANCE: Tenant shall not commit any waste upon the
leased premises or any nuisance or other act or thing which may disturb the
quiet enjoyment of any other tenant at R.K. Centre, or which may adversely
affect Lessor's fee interest in the Leased Premises or at R.K. Centre. No
loudspeakers, phonographs, machinery, mechanical apparatus, or other devices
shall be used or allowed to operate in a manner so as to be heard or seen
outside of the leased premises without the prior written consent of the Lessor.
TWENTY-SECOND: LESSOR'S RIGHTS: The rights of the Lessor under this
lease shall be cumulative, and failure on the part of the Lessor to exercise
promptly any rights given hereunder shall not operate as a waiver of any of
Lessor's rights.
TWENTY-THIRD: OPERATING EXPENSES: Lessee shall pay to the Lessor as
additional rent its pro-rata share of operating expenses incurred during the
term of this lease. Operating expenses include, but are not limited to: real
estate taxes, all common area maintenance, Lessor's fire and extended coverage
and public liability insurance, special assessments, applicable charges for all
utilities, water and sewer, and management of the property. Payments for said
additional rent shall be made monthly, based on the previous year's total
operating expenses, which amount will be adjusted annually.
TWENTY-FOURTH: INSURANCE: The Lessee shall maintain with respect to
the leased premises and the property of which the leased promises are a part,
commercial general liability insurance in amounts of not less than the following
limits:
General aggregate limit (other than products-completed operations)
- $500,000,
Products-completed operations aggregate limit - $500,000,
Personal and advertising injury limit - $500,000, Each occurrence limit
- $500,000
Fire damage limit - $100,000 any one fire,
Medical expense limit - $5,000 any one person,
Plate glass coverage - In amounts sufficient to cover replacement of any
and all plate glass in the leased premises;
With responsible companies qualified to do business in the Commonwealth of
Massachusetts who are well rated by a recognized national rating organization
of not less then AAA therein insuring the Lessor as well as Lessee against
injury to persons or damage to property as provided. In addition to the
above referenced insurance coverage, Lessee shall be required to maintain
properly coverage in the amount of $250,000 (which must include business
interruption coverage) or a sufficient amount to provide for the replacement
of all furniture, fixtures, and equipment in the lease promises, plus all
improvements completed in the leased premises, including Lessor's tenant
improvement work.
The Lessee shall deposit with the Lessor certificates for such
insurance at or prior to the commencement of the term, and thereafter within
thirty (30) days prior to the expiration of any such policies. All such
insurance certificates shall provide that such policies shall not be canceled
without at least ten (10) days prior written notice to each insured name therein
including Lessor. The Lessor must be named as additional insured on any
insurance policy. Insurance must be in force at the commencement of the term of
this lease, Failure to comply with this provision will be considered a violation
of this lease and Lessor may, at its sole option, terminate this lease agreement
immediately. The Lessee shall not permit any use of the leased premises which
will make voidable any insurance on the property of which the leased premises
are a part, or on the contents of said property. The Lessee shall on demand
reimburse the Lessor, and other Tenants, all extra insurance premiums caused by
the Lessee's use of the premises.
TWENTY-FIFTH: ADDITIONAL RENT: It is understood and agreed between
the parties hereto that any charges against the Lessee by the Lessor for
services or for work done on the premises by order of the Lessee or otherwise
accruing under this contract shall be considered as rent due and shall be
included in any lien for rent due and unpaid.
TWENTY-SIXTH: HAZARDOUS MATERIALS: Hazardous materials shall not be
used, generated, handled, disposed of, discharged or stored on the Leased
Promises. The requirements of this section may be enforced preliminary and
permanent, prohibitory and mandatory injunctions as well as otherwise provided
by law or ordinance. Lessee hereby indemnities and holds harmless the Lessor
against all claims, causes of action, liability or loss, including reasonable
attorneys fees and costs on the trial and appellate level, arising out of a
violation by the Lessee of this provision.
3
<PAGE>
TWENTY-SEVENTH: CORPORATE STATUS: Lessee represents that any business
organization status that it may purport to have, either at the time of the
execution of this lease or thereafter, shall be maintained in any and all lawful
form. In the event Lessee possesses corporate status, Lessee shall maintain
such corporate status as active and current with the appropriate state
authorities and in the event Lessee fails to maintain such status, Lessor shall
have the express authorization, at its sole option, to declare this lease in
default or cancel this lease.
TWENTY EIGHTH: REPRESENTATIONS/WARRANTIES: If Lessee is a business
organization or operates under any other business form, other then an individual
sole proprietor, Lessee's authorized representatives represent and warrant, and
it is acknowledged that Lessor is relying thereon, that the business form used
by Lessee, whether corporate or otherwise, is a duly registered and bona fide
business form, that all necessary filing of documents have been filed with all
appropriate governmental agencies, that its business form shall be properly and
duly maintained throughout the entire leasehold relationship, and that Lessee
has sufficient working capital to meet any and all rental obligations that are
expected and/or anticipated under the terms of this lease for a period of not
less than twelve months. Each of Lessee's authorized representatives, by and
through any agent executing this lease, further acknowledge that in the event
the above-stated warranties shall fall to be true for any reason whatsoever,
Lessor shall be entitled to seek any and all rental obligations that are not
timely fulfilled by the Lessee from each of Lessee's authorized representatives,
which shall be the joint and several obligation of each and every individual
that is or serves as an agent, partner, director, officer or otherwise, whether
or not a separate and individual personal guaranty is executed by each and every
individual. It is also expressly agreed and understood that in the event of a
breach of warranty, Lessors remedies against each and every authorized
representative so warranting shall include, but shall not be limited to, all
rental obligations, operating expenses and damages arising therefrom. Moreover,
if Lessee fails to deliver to Lessor proof or evidence that the above-stated
warranties are true at the time of the signing of this lease, then every
individual who serves as an agent, partner, director, officer or otherwise shall
be personally liable throughout the entire leasehold relationship. Lessee is
required to submit written documentation confirming that the entity that has
signed this lease agreement is a valid corporation or sole proprietorship in the
Commonwealth of Massachusetts. In the event Lessee does not provide this
written documentation upon execution of this lease agreement, the individual
signing this lease will remain personally responsible to Lessor for all
obligations for the entire lease period until proper written documentation has
been delivered to Lessor.
TWENTY-NINTH: WAIVER OF JURY TRIAL: Lessor and Lessee hereunder
hereby knowingly, voluntarily and intentionally waive any right that any party
may have to a trial by jury in respect to any litigation based hereon, arising
out of, or related hereto, whether under or in connection with this lease or any
agreement contemplated to be executed in conjunction herewith, or any course of
conduct, course of dealing, statements (whether verbal or written) or actions of
either party.
THIRTIETH: SUBORDINATION: Lessor and Lessee hereby agree that this
lease shall be subject and subordinate to any and all mortgages, deeds of trust
and other instruments in the nature of a mortgage, now or at any time hereafter,
a lien or liens placed on the property of which the leased premises are a part
and the Lessee shall, when requested, promptly execute and deliver such written
instruments that shall be necessary to show the subordination of this lease to
sold mortgages, deeds of trust or such other instruments in the nature of a
mortgage.
THIRTY-FIRST: FINANCING AGREEMENTS: Lessee shall not enter into,
execute or deliver any financing agreement that can be considered as a priority
to any mortgage or deed of trust that Lessor may have placed, or places in the
future, upon the leased premises.
THIRTY-SECOND: MECHANIC'S LIENS: Lessee shall not permit any
mechanic's liens, or similar liens, to remain upon the leased promises for labor
and materials furnished to Lessee or claimed to have been furnished to Lessee in
connection with work of any character performed or claimed to have been
performed at the direction of Lessee and shall cause such lien to be released of
record forthwith without cost to Lessor. Lessor may, at its option, demand that
Lessee put up a payment and/or performance bond to protect the interest of the
Lessor. Lessee will indemnify and hold harmless Lessor from any or all claims
arising out of a mechanic's lien or similar liens due to Lessee.
THIRTY-THIRD: EMINENT DOMAIN AND NATURAL DISASTER: In the event the
premises, or a substantial portion thereof is taken by any condemnation or
eminent domain proceeding where by the same is rendered untenantable the parties
hereto shall have the right to cancel this lease agreement without further
liability on the part of the Lessor or Lessee. However, Lessee shall to assign
to Lessor the totality of any award or payment on account of any taking by
condemnation. If the leased property is totally or partially destroyed or
damaged as a result of a casualty, disaster or hazard, Lessor may, at its sole
option, terminate this lease by giving Lessee 30 days' written notice to this
effect and Lessor shall have no obligation to rebuild. Except as otherwise
provided herein, this lease shall not terminate or be affected in any manner,
and Lessee shall pay the rental provided for in this lease.
THIRTY-FOURTH: LATE CHARGES: Lessor shall have the right to collect
one percent (1%) of the current monthly base rent per day for each day rent is
delinquent beyond the 7th day of the month, Any money due under this section
shall be considered as additional rent.
THIRTY-FIFTH: LEASEHOLD IMPROVEMENTS: The Lessee shall at the
expiration or other termination of this Lease Agreement remove all Lessee's
goods and effects from the leased premises, (including without hereby limiting
to the generality the foregoing, all signs and lettering affixed or painted by
the Lessee, either inside or outside the leased premises). Lessee's right to
remove any personal property from the leased premises is conditioned upon
Lessee's full and complete discharge of any and all obligations under this lease
agreement. In the event any obligations are due and owing to Lessor at the time
Lessee seeks to vacate the premises, Lessee shall take no action to remove any
of the personalty located on, in or attached to the leased premises, and Lessor
shall be entitled to exercise any and all rights as either secured creditor or
Lessor against such property in order to satisfy all such obligations. Lessee
also agrees to repair any damage caused to the Leased Premises by the removal of
Lessee's personal goods and effects. Anything attached to the property
including anything attached to the ceilings, walls and floors (including any
carpeting) will remain the property of the Lessor and shall not be removed from
the premises by the Lessee, unless Lessor notifies Lessee, in writing, within
ten days following Lessor's receipt of Lessee's intention to vacate (or, if
Lessee fails to notify Lessor of its intention to vacate, 20 days prior to the
expiration of the lease term) of Lessor's desire for Lessee to remove all or a
portion of the improvements, whereupon Lessee shall do so prior to the
expiration of the lease term, and shall repair all damage caused by such
removal, and otherwise restore the Premises to its original condition less
normal wear and tear, "Original condition" shall mean the condition of the
Premises existing as of the lease commencement date.
4
<PAGE>
THIRTY-SIXTH: RETURN OF PREMISES: Lessee shall deliver to the Lessor
the Leased Premises, all keys, locks thereto, and other fixtures connected
therewith and all alterations and additions made to or upon the leased premises,
in good condition, damage by fire or other casualty only excepted. In the event
of the Lessee's failure to remove any of Lessee's property from the premises,
Lessor is hereby authorized without liability to Lessee for loss or damage
thereto, and at the sole risk and cost of Lessee, to remove and store any of the
property at Lessee's expense or to retain same under Lessor's control or to sell
at public or private sale, without notice, any or all of the property not so
removed and to apply the net proceeds of such sale to the payment of any sum due
hereunder Lessor, at its sole option, may require Lessee, at Lessee's sole cost
and expense, to place the Leased Premises back to the original condition as
delivered to Lessee at the inception of this Lease.
THIRTY-SEVENTH: MODIFICATION: This Lease contains the entire
agreement between the parties hereto and all prior negotiations. The terms of
this Lease may only be modified by a subsequent written agreement signed and
sealed by both Lessor and Lessee. The parties to this Lease agree that the
terms of this Lease shall not be more strictly construed against Lessor, or more
favorably for Lessee, notwithstanding Lessor's presentation of this Lease.
THIRTY-EIGHTH: NOTICE OF TERMINATION: Lessee agrees to notify Lessor
in writing by certified mall, return receipt requested, at least six (6) full
calendar months prior to the expiration of the term of this Lease of its
intention to vacate the promises on the Lease termination date. In the event
that the Lessee falls to give such notice, then and in that event, at Lessor's
sole option, this Lease shall be automatically continued and extended at the
same rental and upon the same terms and conditions contained herein. In the
event this Lease Agreement contains no renewal option provisions, then, at
Lessors sole option, this Lease will be extended automatically for one (1) full
year.
THIRTY-NINTH: MISCELLANEOUS: Lessee, its employees, or agents shall
not mark, paint, drill or in any way deface any walls, ceilings, partitions,
floors, or ironwork without Lessor's written consent.
Lessee will be responsible for the immediate replacement of its plate
glass windows should said windows become damaged or cracked due to the
negligence of Lessee or its invitees.
Lessee will not install any equipment which exceeds the capacity of
the utility lines leading into the leased premises or the building of which the
leased premises constitutes a portion.
Lessee shall give Lessor prompt written notice of any accident, fire
or damage occurring on or to the Leased Premises.
Lessee shall not erect signs of any type on any of the exterior
windows of the building.
If any provision of this Lease shall be declared invalid or
unenforceable, the remainder of this Lease shall continue in full force and
effect.
FORTIETH: ACCELERATION CLAUSE: In addition to all other rights
granted to Lessor in this Lease and not as a limitation of said rights, in the
event of a termination of this Lease as a result of a default by Lessee, Lessor
shall have the right and option to accelerate all rental and/or additional rent
due hereunder. In the event of a default, all rights and remedies available to
Lessor shall be cumulative and non-exclusive.
FORTY-FIRST: INDEPENDENT COVENANT: Each and every rental obligation
Lessee is obligated for under the terms of this Lease agreement shall be deemed
to be independent covenants to Lessor and shall remain independent covenants
notwithstanding any other obligation Lessor may have to Lessee under the Lease
agreement.
FORTY-SECOND: CLEANLINESS: Tenant shall maintain its leased premises
in a neat and clean condition, and shall store all trash and garbage within the
demised premises and shall arrange for the regular pick up of trash and garbage.
Tenant shall not bum any trash of any kind in or about the building, nor shall
Tenant permit rubbish, refuse, or garbage to accumulate or fire hazards to exist
at the demised premises. Tenant shall pay the cost of removal of any of
Tenant's garbage, refuse and rubbish.
FORTY-THIRD: DELIVERIES: All loading of goods and deliveries of goods
shall be done only at such times, in the areas, and through the entrances,
designated for such purposes by the Lessor. The delivery or shipping of
merchandise, supplies and fixtures to and from the Leased Premises shall be
subject to such rules and regulations as in the judgment of the Lessor are
necessary for the proper operation of the Leased Premises or R.K. Centre in its
entirety. Trailers or trucks shall not be permitted to remain parked overnight
in any area of R.K. Centre, whether loaded, unloaded or partially loaded or
unloaded.
FORTY-FOURTH: LESSEE'S BREACH: It is agreed and understood by the
Lessor and the Lessee that any breach of any conditions or terms contained in
this Lease by the Lessee or any of his employees or agents shall make this
Lease, at Lessor's sole option, null and void and shall excuse Lessor from any
further performance.
FORTY-FIFTH: USE OF ADDITIONAL AREAS: The use and occupation of the
Leased Premises shall include the non-exclusive use, in common with others
entitled thereto, of the common areas, employees' parking areas, service roads,
malls, loading facilities, sidewalks and customer car parking areas as such
common areas now exist or as such common areas may hereafter be constructed, and
other facilities as may be designated from time to time by the Lessor, subject
however to the terms and conditions of this agreement and the Lease agreement
and to the rules and regulations for the use thereof as prescribed from time to
time by the Lessor. Notwithstanding the foregoing, the Lessor, at his option,
reserves the right to relocate Lessee into another space of similar square
footage in the Office Building. The Lessee shall be advised of said relocation
on or before sixty (60) days prior to said relocation. In the event the Lessee
shall not agree to the relocation as provided herein, at Lessor's option, this
Lease shall be canceled and of no further force or effect and the Lessor shall
not be liable to Lessee for any damages of any kind whatsoever.
FORTY-SIXTH: TENANT IMPROVEMENTS: As part and parcel to this Lease
agreement, Lessee is accepting the Leased premises in "as-is" condition. All
work in the leased premises will be performed by a licensed general contractor
under the guidelines of the applicable building codes.
FORTY-SEVENTH: FORCE MAJEURE: In any case where either party hereto
is required to do any act, delays caused by or resulting from acts of God, war,
civil commotion, fire or other casualty, labor difficulties, shortages of labor
materials or equipment, governmental regulations, other causes beyond such
party's reasonable control shall not be counted in determining the time during
which such act shall be completed.
5
<PAGE>
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE HEREUNTO EXECUTED THIS
INSTRUMENT FOR THE PURPOSE HEREIN EXPRESSED, THE DAY AND YEAR ABOVE WRITTEN,
SIGNED, SEALED AND DELIVERED IN THE PRESENCE OF:
R.K. ASSOCIATES-MARLBORO, INC.
/s/ unknown BY: /s/ David Katz
- ----------------------- -------------------------------
As to Lessor David Katz, Vice President
Lessor
NOVELLUS SYSTEMS, INC.
/s/ Ciska Perry By /s/ John P. Root
- ----------------------- -------------------------------
As to Lessee John Root, Treasurer
Lessee
6
<PAGE>
- -------------------------------------------------------------------------------
ADDENDUM TO LEASE AGREEMENT BETWEEN
R.K. ASSOCIATES-MARLBORO, INC. (LESSOR)
AND
NOVELLUS SYSTEMS, INC. (LESSEE)
- -------------------------------------------------------------------------------
This addendum shall supersede and control the attached Lease Agreement.
Lessor agrees to waive all operating expense requirements as outlined in Clause
23 of the attached Business Lease Agreement through December 31, 1999.
The above concession shall only be in force and effect if Lessee pays its rent
in a timely manner and observes all other terms and conditions of the attached
Business Lease Agreement.
The parties acknowledge that Lessor shall execute a termination agreement with
the existing tenant (New England Internet Company, Inc.) which provides for
Lessor to obtain possession of the Premises on Monday; November 11, 1996.
Subject to Lessor obtaining such possession, Lessor shall deliver the Premises
to Lessee on or before December 1, 1996, and shall perform the following
improvements at its sole expense:
1. Demising of Premises
2. Steam-clean carpets
3. Touch-up paint where necessary
R.K. ASSOCIATES-MARLBORO, INC. (LESSOR)
BY: /s/ David Katz
------------------------------
David Katz, Vice President
DATE: 11/13/96
----------------------------
NOVELLUS SYSTEMS, INC. (LESSEE)
BY: /s/ John P. Root
------------------------------
John Root, Treasurer
DATE: 11/12/96
----------------------------
<PAGE>
Exhibit 10.62
NOVELLUS SYSTEMS, INC.
ENGLISH SUMMARY OF EXHIBIT WRITTEN IN FRENCH
1. Document type: lease
2. Name of tenant--
Novellus Systems SaRL (France)
3. Name of landlords --
Sebail S.A.
4. Location of property --
Building D, 1st Floor, Parc de la Julienne, Coudray Montceaux
5. Date lease was entered into --August 22, 1996
Contract period -- From September 15, 1996 to September 14, 2005
6. Cancellation Provision --Lease can be cancelled by tenant at the end of
every three year period. If tenant cancels lease
after first three year period, a FF 40,000 penalty
is due to the landlord
7. Rental Fee: FF 105,000 per year (for the first year)
8. Security Deposit: FF 45,000
<PAGE>
LEASE AGREEMENT
5/3/96
<PAGE>
[Net Lease]
LEASE AGREEMENT
THIS LEASE AGREEMENT is made this 3 day of May, 1996, between SECURITY CAPITAL
INDUSTRIAL TRUST a Maryland real estate investment trust ("Landlord"), and the
Tenant named below.
Tenant: Novellus Systems, Inc., a California corporation
Tenant's representative, 81 Vista Montana
address, and phone no.: San Jose, California 95134
(408) 943-9700
Premises: That portion of the Building, containing
approximately 16,644 rentable square feet, as
determined by Landlord, as shown on Exhibit A.
Project: Wilsonville Corporate Center Phase II
Building: D: Building more commonly known as 26277 SW 95th
Avenue, Suites 402-403, Wilsonville, OR 97070
Tenant's Proportionate Share
of Project: 9.4%
Tenant's Proportionate Share
of Building: 46.23%
Lease Term: Beginning on the Commencement Date and ending on
the last day of the 61st full calendar month
thereafter.
Commencement Date: July 1,1996
Initial Monthly Base Rent $7,260.00
Initial Estimated Monthly 1. Utilities: $ 0.00
Operating Expense Payments:
(estimates only and subject 2. Common Area Charges: $441.00
to adjustment to actual
costs and expenses
according to the 3. Taxes: $922.00
provisions of this Lease)
4. Insurance: $ 70.00
5. Others: $ 0.00
Initial Estimated Monthly Operating
Expense Payments: $1,433.00
Initial Monthly Base Rent and
Operating Expense Payments: $8,693.00
Security Deposit: None
Broker: Hume Myers
Addenda: A,B,C,D,E,F,G,H,I,J,K
1. GRANTING CLAUSE. In consideration of the obligation of Tenant to pay
rent as herein provided and in consideration of the other terms, covenants, and
conditions hereof, Landlord leases to Tenant, and Tenant takes from Landlord,
the Premises, to have and to hold for the Lease Term, subject to the terms,
covenants and conditions of this Lease
2. ACCEPTED OF PREMISES. Tenant shall accept the Premises in its
condition as of the Commencement Date, subject to all applicable laws,
ordinances, regulations, covenants and restrictions. Landlord has made no
representation or warranty as to the suitability of the Premises for the conduct
of Tenant's business, and Tenant waives any implied warranty that the Premises
are suitable for Tenant's intended purposes. Except as
<PAGE>
provided in Paragraph 10, in no event shall Landlord have any obligation for any
defects in the Premises or any limitation on its use. Landlord shall construct
the Building in a good and workmanlike manner, and in material compliance with
all zoning and building codes which are applicable to the construction thereof.
The taking of possession of the Premises shall be conclusive evidence that
Tenant accepts the Premises and that the Premises were in good condition at the
time possession was taken except for items that are Landlord's responsibility
under Paragraph 10 and any punchlist items agreed to in writing by Landlord and
Tenant.
3. Use. The Premises shall be used only for the purpose of: (i)
receiving, storing, shipping and selling (but limited to wholesale sales)
products, materials and merchandise made and/or distributed by Tenant and for
such other lawful purposes as may be incidental thereto; and (ii) technical
research, development and light manufacturing of products for the semi-conductor
industry, including but not limited to, chemical vapor deposition systems used
in the fabrication of integrated circuits but the use provided for in this
subparagraph (ii) shall be in complete conformance with every provision of this
Lease and be limited to the extent permitted by applicable Legal Requirements
(defined below). Tenant shall not conduct or give notice of any auction,
liquidation, or going out of business sale on the Premises. Tenant will use the
Premises in a careful, safe and proper manner and will not commit waste,
overload the floor or structure of the Premises or subject the Premises to use
that would damage the Premises. Tenant shall not permit any objectionable or
unpleasant odors, smoke, dust, gas, noise, or vibrations to emanate from the
Premises, or take any other action that would constitute a nuisance or would
disturb, unreasonably interfere with, or endanger Landlord or any tenants of the
Project. Outside storage, including without limitation, storage of trucks and
other vehicles, is prohibited without Landlord's prior written consent. Tenant,
at its sole expense, shall use and occupy the Premises in compliance with all
laws, including, without limitation, the Americans With Disabilities Act,
orders, judgments, ordinances, regulations, codes, directives, permits,
licenses, covenants and restrictions now or hereafter applicable to the Premises
(collectively, "Legal Requirements"). The Premises shall not be used as a place
of public accommodation under the Americans With Disabilities Act or similar
state statutes or local ordinances or any regulations promulgated thereunder,
all as may be amended from time to time. Tenant shall, at its expense, make any
alterations or modifications, within or without the Premises, that are required
by Legal Requirements related to Tenant's use or occupation of the Premises,
provided that Tenant shall not be required to make any structural alterations to
the Premises to comply with laws unless such compliance is required because of
Tenant's specific use of the Premises. Tenant will not use or permit the
Premises to be used for any purpose or in any manner that would void Tenant's or
Landlord's insurance, increase the insurance risk, or cause the disallowance of
any sprinkler credits. If any increase in the cost of any insurance on the
Premises or the Project is caused by Tenant's use or occupation of the Premises,
or because Tenant vacates the Premises, then Tenant shall pay the amount of such
increase to Landlord. Any occupation of the Premises by Tenant prior to the
Commencement Data shall be subject to all obligations of Tenant under this
Lease.
4. BASE RENT. Tenant shall pay Base Rent in the amount set forth above.
The first month's Base Rent, the Security Deposit, and the first monthly
installment of estimated Operating Expenses (as hereafter defined) shall be due
and payable on the date hereof, and Tenant promises to pay to Landlord in
advance, without demand, deduction or set-off, monthly installments of Base Rent
on or before the first day of each calendar month succeeding the Commencement
Date. Payments of Base Rent for any fractional calendar month shall be
prorated. All payments required to be made by Tenant to Landlord hereunder
shall be payable at such address as Landlord may specify from time to time by
written notice delivered in accordance herewith. The obligation of Tenant to
pay Base Rent and other sums to Landlord and the obligations of Landlord under
this Lease are independent obligations. Tenant shall have no right at any time
to abate, reduce, or set-off any rent due hereunder except as may be expressly
provided in this Lease. If Tenant is delinquent in any monthly installment of
Base Rent or of estimated Operating Expenses for more than 5 days after the due
date thereof, and after notice as provided below, Tenant shall pay to Landlord
on demand a late charge equal to 5 percent of such delinquent sum. Tenant shall
not be obligated to pay the late charge until Landlord has given Tenant 5 days
written notice of the delinquent payment (which may be given at any time during
the delinquency); provided, however, that such notice shall not be required more
than twice in any 12-month period or four times over the Lease Term. The
provision for such late charge shall be in addition to all of Landlord's other
rights and remedies hereunder or at law and shall not be construed as a penalty.
5. INTENTIONALLY OMITTED.
6. OPERATING EXPENSE PAYMENTS. During each month of the Lease Term, on
the same date that Base Rent is due, Tenant shall pay Landlord an amount equal
to 1/12 of the annual cost, as estimated by Landlord from time to time, of
Tenant's Proportionate Share (hereinafter defined) of Operating Expenses for the
Project. Payments thereof for any fractional calendar month shall be prorated.
The term "Operating Expenses" means all costs and expenses incurred by Landlord
with respect to the ownership, maintenance and operation of the Project
including, but not limited to costs of: Taxes (hereinafter defined) and fees
payable to tax consultants and attorneys for consultation and contesting taxes;
insurance; utilities; maintenance, repair and replacement of all portions of the
Project, including without limitation, paving and parking areas, roads, roofs,
alleys, and driveways, mowing, landscaping, exterior painting, utility lines,
heating, ventilation and air conditioning systems, lighting, electrical systems
and other mechanical and building systems; amounts paid to contractors and
subcontractors for work or services performed in connection with any of the
foregoing; charges or assessments of any association to which the Project is
subject; property management fees payable to a property manager, including any
affiliate of Landlord, or if there is no property manager, an administration fee
of 15 percent of Operating Expenses payable to Landlord; security services, if
any; trash collection, sweeping and removal; and additions or alterations made
by Landlord to the Project or the Building in order to comply with Legal
Requirements (other than those expressly required herein to be made by Tenant)
or that are appropriate to the continued operation of the Project or the
Building as a bulk
- 2 -
<PAGE>
warehouse facility in the market area, provided that the cost of additions or
alterations that are required to be capitalized for federal income tax purposes
shall be amortized on a straight line basis over a period equal to the lesser of
the useful life thereof for federal income tax purposes or 10 years. Operating
Expenses do not include costs, expenses, depreciation or amortization for
capital repairs and capital replacements required to be made by Landlord under
Paragraph 10 of this Lease, debt service under mortgages or ground rent under
ground leases, costs of restoration to the extent of net insurance proceeds
received by Landlord with respect thereto, leasing commissions, or the costs of
renovating space for tenants.
If Tenant's total payments of Operating Expenses for any year are less
than Tenant's Proportionate Share of actual Operating Expenses for such year,
then Tenant shall pay the difference to Landlord within 30 days after demand,
and if more, then Landlord shall retain such excess and credit it against
Tenant's next payments. For purposes of calculating Tenant's Proportionate
Share of Operating Expenses, a year shall mean a calendar year except the first
year, which shall begin on the Commencement Date, and the last year, which shall
end on the expiration of this Lease. With respect to Operating Expenses which
Landlord allocates to the entire Project, Tenant's "Proportionate Share" shall
be the percentage set forth on the first page of this Lease as Tenant's
Proportionate Share of the Project as reasonably adjusted by Landlord in the
future for changes in the physical size of the Premises or the Project; and,
with respect to Operating Expenses which Landlord allocates only to the
Building, Tenant's "Proportionate Share" shall be the percentage set forth on
the first page of this Lease as Tenant's Proportionate Share of the Building as
reasonably adjusted by Landlord in the future for changes in the physical size
of the Premises or the Building. Landlord may equitably increase Tenant's
Proportionate Share for any item of expense or cost reimbursable by Tenant that
relates to a repair, replacement, or service that benefits only the Premises or
only a portion of the Project or Building that includes the Premises or that
varies with occupancy or use. The estimated Operating Expenses for the Premises
set forth on the first page of this Lease are only estimates, and Landlord makes
no guaranty or warranty that such estimates will be accurate.
7. UTILITIES. Tenant shall pay for all water, gas, electricity, heat,
light, power, telephone, sewer, sprinkler services, refuse and trash collection,
and other utilities and services used on the Premises, all maintenance charges
for utilities, and any storm sewer charges or other similar charges for
utilities imposed by any governmental entity or utility provider, together with
any taxes, penalties, surcharges or the like pertaining to Tenant's use of the
Premises. Landlord may cause at Tenant's expense any utilities to be separately
metered or charged directly to Tenant by the provider. Tenant shall pay its
share of all charges for jointly metered utilities based upon consumption, as
reasonably determined by Landlord. No interruption or failure of utilities
shall result in the termination of this Lease or the abatement of rent except
that, notwithstanding anything to the contrary contained in this Paragraph 7, if
an interruption or cessation of utilities, results from a cause within the
Landlord's reasonable control and the Premises are not usable by Tenant for the
conduct of Tenant's business as a result thereof, Base Rent and applicable
Operating Expenses not actually incurred by Tenant shall be abated for the
period which commences 48 hours after the date Tenant gives to Landlord notice
of such interruption until such utilities are restored. Tenant agrees to limit
use of water and sewer for normal restroom use.
8. TAXES. Landlord shall pay all taxes, assessments and governmental
charges (collectively referred to as "Taxes") that accrue against the Project
during the Lease Term, which shall be included as part of the Operating Expenses
charged to Tenant. Landlord may contest by appropriate legal proceedings the
amount, validity, or application of any Taxes or liens thereof. All capital
levies or other taxes assessed or imposed on Landlord upon the rents payable to
Landlord under this Lease and any franchise tax, any excise, transaction, sales
or privilege tax, assessment, levy or charge measured by or based, in whole or
in part, upon such rents from the Premises and/or the Project or any portion
thereof shall be paid by Tenant to Landlord monthly in estimated installments or
upon demand, at the option of Landlord, as additional rent; provided, however,
in no event shall Tenant be liable for any net income taxes imposed on Landlord
unless such net income taxes are in substitution for any Taxes, payable
hereunder. If any such tax or excise is levied or assessed directly against
Tenant, then Tenant shall be responsible for and shall pay the same at such
times and in such manner as the taxing authority shall require. Tenant shall be
liable for all taxes levied or assessed against any personal property or
fixtures placed in the Premises, whether levied or assessed against Landlord or
Tenant. Any special assessment for a local improvement district included in
Taxes shall be paid by Landlord in installments and Taxes shall only include
those installments payable by Landlord during the Lease Term.
9. INSURANCE. Landlord shall maintain all risk property insurance
covering the full replacement cost of the Building. Landlord may, but is not
obligated to, maintain such other insurance and additional coverages as it may
deem necessary, including, but not limited to, commercial liability insurance
and rent loss insurance. All such insurance shall be included as part of the
Operating Expenses charged to Tenant. The Project or Building may be included
in a blanket policy (in which case the cost of such insurance allocable to the
Project or Building will be determined by Landlord based upon the insurers cost
calculations). Tenant shall also reimburse Landlord for any increased premiums
or additional insurance which Landlord reasonably deems necessary as a result of
Tenant's use of the Premises.
Tenant, at its expense, shall maintain during the Lease Term: all risk
property insurance covering the full replacement cost of all property and
improvements installed or placed in the Premises by Tenant at Tenant's expense;
worker's compensation insurance with no less than the minimum limits required by
law; employer's liability insurance with such limits as required by law; and
commercial liability insurance, with a minimum limit of $1,000,000 per
occurrence and a minimum umbrella limit of $1,000,000, for a total minimum
combined general liability and umbrella limit of $2,000,000 (together with such
additional umbrella coverage as Landlord may
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reasonably require) for property damage, personal injuries, or deaths of persons
occurring in or about the Premises. Landlord may from time to time require
reasonable increases in any such limits. The commercial liability policies
shall name Landlord as an additional insured, insure on an occurrence and not a
claims-made basis, be issued by insurance companies which are reasonably
acceptable to Landlord, not be cancelable unless 30 days prior written notice
shall have been given to Landlord, contain a hostile fire endorsement and a
contractual liability endorsement and provide primary coverage to Landlord (any
policy issued to Landlord providing duplicate or similar coverage shall be
deemed excess over Tenant's policies). Such policies or certificates thereof
shall be delivered to Landlord by Tenant upon commencement of the Lease Term and
upon each renewal of said insurance.
The all risk property insurance obtained by Landlord and Tenant shall
include a waiver of subrogation by the insurers and all rights based upon an
assignment from its insured, against Landlord or Tenant, their officers,
directors, employees, managers, agents, invitees and contractors, in connection
with any loss or damage thereby insured against. Neither party nor its
officers, directors, employees, managers, agents, invitees or contractors shall
be liable to the other for loss or damage caused by any risk coverable by all
risk property insurance, and each party waives any claims against the other
party, and its officers, directors, employees, managers, agents, invitees and
contractors for such loss or damage. The failure of a party to insure its
property shall not void this waiver. Landlord and its agents, employees and
contractors shall not be liable for, and Tenant hereby waives all claims against
such parties for, business interruption and losses occasioned thereby sustained
by Tenant or any person claiming through Tenant resulting from any accident or
occurrence in or upon the Premises or the Project from any cause whatsoever,
including without limitation, damage caused in whole or in part, directly or
indirectly, by the negligence of Landlord or its agents, employees or
contractors.
10. LANDLORD'S REPAIRS. Landlord shall maintain, at its expense, the
structural soundness of the roof, foundation, floors, columns and exterior walls
of the Building in good repair, reasonable wear and tear and uninsured losses
and damages caused by Tenant, its agents and contractors excluded. The term
"walls" as used in this Paragraph 10 shall not include windows, glass or plate
glass, doors or overhead doors, special store fronts, dock bumpers, dock plates
or levelers, or office entries. Tenant shall promptly give Landlord written
notice of any repair required by Landlord pursuant to this Paragraph 10, after
which Landlord shall have a reasonable opportunity to repair. After Tenant
takes possession of the Premises, it shall within thirty (30) days thereafter
give notice to Landlord of items of construction that are Landlord's
responsibility that need repair or correction, and Landlord shall promptly
correct such "punchlist" items. Landlord shall also be responsible for
repairing any latent construction defects to the items which are Landlord's
responsibility to maintain at its expense under this Paragraph 10 and the Tenant
Improvements (as defined in Addendum B attacked hereto) which cannot reasonably
have been discovered by Tenant within such 30-day period. The cost of repairing
the construction defects referred to in the previous sentence shall not be
included in Operating Expenses for purposes of Tenant's Proportionate Share
thereof.
11. TENANT'S REPAIRS. Landlord, at Tenant's expense as provided in
Paragraph 6, shall maintain in good repair and condition the parking areas and
other common areas of the Building, including, but not, limited to driveways,
alleys, landscape and grounds surrounding the Premises. Subject to Landlord's
obligation in Paragraph 10 and subject to Paragraphs 9 and 15, Tenant, at its
expense, shall repair, replace and maintained in good condition all portions of
the Premises and all areas, improvements and systems exclusively serving the
Premises including, without limitation, dock and loading arm, truck doors,
plumbing, water and sewer lines up to points of common connection, fire
sprinklers and fire protection systems, entries, doors, ceilings and roof
membrane, windows, interior walls, and the interior side of demising walls,
and heating, ventilation and air conditioning systems. Such repair and
replacements include capital expenditures and repairs whose benefit may extend
beyond the Term. Heating, ventilation and air conditioning systems and other
mechanical and building systems serving the Premises shall be maintained at
Tenant's expense pursuant to maintenance service contracts entered into by
Tenant or, at Landlord's election, by Landlord. The scope of services and
contractors under such maintenance contracts shall be reasonably approved by
Landlord. At Landlord's request, Tenant shall enter into a joint maintenance
agreement with any railroad that services the Premises. If Tenant fails to
perform any repair or replacement for which it is responsible, Landlord may
perform such work and be reimbursed by Tenant within 10 days after demand
therefor. Subject to Paragraphs 9 and 15, Tenant shall bear the full cost of
any repair or replacement to any part of the Building or Project that results
from damage caused by Tenant, its agents, contractors, or invitees and any
repair that benefits only the Premises.
12. TENANT-MADE ALTERATIONS AND TRADE FIXTURES. Any alterations,
additions, or improvements made by or on behalf of Tenant to the Premises
("Tenant-Made Alterations"), other than Tenant's initial improvements (the
"Initial Tenant Improvements") to be made to the Premises as described in
Addendum C attached hereto) and modifications thereto which are not
structural in nature, shall be subject to Landlord's prior written consent.
Tenant shall cause, at its expense, all Tenant-Made Alterations to comply
with insurance requirements and with Legal Requirements and shall construct
at its expense any alteration or modification required by Legal Requirements
as a result of any Tenant-Made Alterations. All Tenant-Made Alterations
shall be constructed in a good and workmanlike manner by contractors
reasonably acceptable to Landlord and only good grades of materials shall be
used. All plans and specifications for any Tenant-Made Alterations shall be
submitted to Landlord for its approval. Landlord may monitor construction of
the Tenant-Made Alterations. Tenant shall reimburse Landlord for its costs
in reviewing plans and specifications and in monitoring construction.
Landlord's right to review plans and specifications and to monitor
construction shall be solely for its own benefit, and Landlord shall have no
duty to see that such plans and specifications or construction comply with
applicable laws, codes, rules and regulations. Tenant shall provide Landlord
with the identities and mailing addresses of all persons performing work or
supplying materials, prior to beginning such construction, and Landlord may
post on and about the Premises notices of
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non-responsibility pursuant to applicable law. Tenant shall furnish security or
make other arrangements satisfactory to Landlord to assure payment for the
completion of all work free and clear of liens and shall provide certificates of
insurance for worker's compensation and other coverage in amounts and from an
insurance company satisfactory to Landlord protecting Landlord against liability
for personal injury or property damage during construction. Upon completion of
any Tenant-Made Alterations, Tenant shall deliver to Landlord sworn statements
setting forth the names of all contractors and subcontractors who did work on
the Tenant-Made Alterations and final lien waivers from all such contractors and
subcontractors. Upon surrender of the Premises, all Tenant-Made Alterations and
any leasehold improvements constructed by Landlord or Tenant shall remain on the
Premises as Landlord's property, except for the following items which shall be
removed: (i) those Initial Tenant Improvements (as depicted on the Preliminary
Plans [as defined in Addendum C, Attachment 1 attached hereto]) constituting (a)
all improvements west of gridline C (except the restrooms, janitorial closet and
full height demising wall on gridline 3, all of which shall remain), (b) the
exterior equipment pad/tank farm (including the canopy and fence), (c) the HVAC
equipment related to the Tenant-Made Alterations to be removed (including
related screening), and (d) all roof equipment (except that supplying the office
area east of gridline C which shall remain); (ii) the Tenant-Made Alterations
which Landlord has specified for removal and which did not require Landlord's
consent; and (iii) the Tenant-Made Alterations which Landlord has specified for
removal in its consent to the same. Tenant shall repair any damage caused by
such removal and return the Premises to the condition required by Paragraph 21
below.
Tenant, at its own cost and expense and without Landlord's prior
approval, may erect such shelves, bins, machinery and trade fixtures
(collectively "Trade Fixtures") in the ordinary course of its business provided
that such items do not alter the basic character of the Premises, do not
overload or damage the Premises, and may be removed without injury to the
Premises, and the construction, erection, and installation thereof complies with
all Legal Requirements and with Landlord's requirements set forth above. Tenant
shall remove its Trade Fixtures and shall repair any damage caused by such
removal.
13. SIGNS. Tenant shall not make any changes to the exterior of the
Premises, install any exterior lights, decorations, balloons, flags, pennants,
banners, or painting, or erect or install any signs, windows or door
lettering, placards, decorations, or advertising media of any type which can be
viewed from the exterior of the Premises, without Landlord's prior written
consent. Upon surrender or vacation of the Premises, Tenant shall have removed
all signs and repair, paint, and/or replace the building face surface to which
its signs are attached. Tenant shall obtain all applicable governmental permits
and approvals for signs and exterior treatments. All signs, decorations,
advertising media, blinds, draperies and other window treatment or bars or other
security installations visible from outside the Premises shall be subject to
Landlord's approval and conform in all respects to Landlord's requirements.
14. PARKING. Tenant shall be entitled to park in common with other
tenants of the Project in those areas designated for nonreserved parking.
Landlord my allocate parking spaces among Tenant and other tenants in the
Project if Landlord determines that such parking facilities are becoming
crowded. Landlord shall not be responsible for enforcing Tenant's parking
rights against any third parties. Tenant shall be allotted a maximum of 35
parking spaces immediately adjacent to the Building. Tenant may also park in
the area directly adjacent to its loading doors provided such parking does
not interfere with the truck maneuvering or truck staging of other tenants in
the Project.
15. RESTORATION. If at any time during the Lease Term the Premises are
damaged by a fire or other casualty, Landlord shall notify Tenant within 30
days after such damage as to the amount of time Landlord reasonably estimates
it will take to restore the Premises. If the restoration time is estimated
to exceed 6 months from the date such casualty occurred, either Landlord or
Tenant may elect to terminate this Lease upon notice to the other party given
no later than 30 days after Landlord's notice. If neither party elects to
terminate this Lease or if Landlord estimates that restoration will take 6
months or less from the date such casualty occurred, then, subject to receipt
of sufficient insurance proceeds (or insurance proceeds which would have been
received had Landlord maintained the insurance it is required to maintain
under Paragraph 9 above), Landlord shall promptly restore the Premises
excluding the improvements installed by Tenant or by Landlord and paid by
Tenant, subject to delays arising from the collection of insurance proceeds
or from Force Majeure events. Tenant at Tenant's expense shall promptly
perform, subject to delays arising from the collection of insurance proceeds,
or from Force Mejeure events, all repairs or restoration not required to be
done by Landlord and shall promptly re-enter the Premises and commence doing
business in accordance with this Lease. Notwithstanding the foregoing, either
party may terminate this Lease if the Premises are damaged during the last
year of the Lease Term and Landlord reasonably estimates that it will take
more than one month to repair such damage. Tenant shall pay to Landlord with
respect to any damage to the Premises the amount of the commercially
reasonably deductible under Landlord's insurance policy (but in no event more
than $10,000) within 10 days after presentment of Landlord's invoice. If the
damage involves the premises of other tenants, Tenant shall pay the portion
of the deductible that the cost of the restoration of the Premises bears to
the total cost of restoration, as determined by Landlord. Base Rent and
Operating Expenses shall be abated for the period of repair and restoration
in the proportion which the area of the Premises, if any, which is not usable
by Tenant bears to the total area of the Premises. Such abatement shall be
the sole remedy of Tenant, and except as provided herein, Tenant waives any
right to terminate the Lease by reason of damage or casualty loss.
16. CONDEMNATION. If any part of the Premises or the Project should be
taken for any public or quasi-public use under governmental law, ordinance, or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof (a "Taking" or "Taken"), and the Taking would prevent or materially
interfere with
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Tenant's use of the Premises or in Landlord's judgment would materially
interfere with or impair its ownership or operation of the Project, then upon
written notice by Landlord this Lease shall terminate and Base Rent shall be
apportioned as of said date. If part of the Premises shall be Taken, and this
Lease is not terminated as provided above, the Base Rent payable hereunder
during the unexpired Lease Term shall be reduced to such extent as may be fair
and reasonable under the circumstances. Tenant shall have the right to share in
the condemnation award (but not to make a separate claim against Landlord) to
the extent of reasonable compensation for the loss of its leasehold interest.
17. ASSIGNMENT AND SUBLETTING. Without Landlord's prior written consent,
which consent will not be unreasonably withheld, Tenant shall not assign this
Lease or sublease the Premises or any part thereof or mortgage, pledge, or
hypothecate its leasehold interest or grant any concession or license within the
Premises and any attempt to do any of the foregoing shall be void and of no
effect. For purposes of this paragraph, a transfer of the ownership interests
controlling Tenant shall be deemed an assignment of this Lease unless such
ownership interests are publicly traded. Notwithstanding the above, Tenant may
assign or sublet the Premises, or any part thereof, to any entity controlling
Tenant, controlled by Tenant or under common control with Tenant (a "Tenant
Affiliate"), without the prior written consent of Landlord. Tenant shall
reimburse Landlord for all of Landlord's reasonable out-of-pocket expenses in
connection with any assignment or sublease. Upon Landlord's receipt of Tenant's
written notice of a desire to assign or sublet the Premises, or any part thereof
(other than to a Tenant Affiliate), Landlord may, by giving written notice to
Tenant within 30 days after receipt of Tenant's notice, terminate this Lease
with respect to the space described in Tenant's notice, as of the date specified
in Tenant's notice for the commencement of the proposed assignment or sublease.
See Addendum H.
Notwithstanding any assignment or subletting, Tenant and any guarantor
or surety of Tenant's obligations under this Lease shall at all times remain
fully responsible and liable for the payment of the rent and for compliance with
all of Tenant's other obligations under this Lease (regardless of whether
Landlord's approval has been obtained for any such assignments or sublettings).
In the event that the rent due and payable by a sublessee, or assignee (or a
combination of the rental payable under such sublease or assignment plus any
bonus or other consideration therefor or incident thereto) exceeds the rental
payable under this Lease, then Tenant shall be bound and obligated to pay
Landlord as additional rent hereunder 50% of such excess rental and other excess
consideration within 10 days following receipt thereof by Tenant.
If this Lease be assigned or if the Premises be subleased (whether in
whole or in part) or in the event of the mortgage, pledge, or hypothecation of
Tenant's leasehold interest or grant of any concession or license within the
Premises or if the Premises be occupied in whole or in part by anyone other than
Tenant, then upon a default by Tenant hereunder Landlord may collect rent from
the assignee, sublessee, mortgagee, pledgee, party to whom the leasehold
interest was hypothecated, concessionee or licensee or other occupant and,
except to the extent set forth in the preceding paragraph, apply the amount
collected to the next rent payable hereunder; and all such rentals collected by
Tenant shall be held in trust for Landlord and immediately forwarded to
Landlord. No such transaction or collection of rent or application thereof by
Landlord, however, shall be deemed a waiver of these provisions or a release of
Tenant from the further performance by Tenant of its covenants, duties, or
obligations hereunder.
18. INDEMNIFICATION. Except for the negligence of Landlord, its agents,
employees or contractors, and to the extent permitted by law, Tenant agrees to
indemnify, defend and hold harmless Landlord, and Landlord's agents, employees
and contractors, from and against any and all losses, liabilities, damages,
costs and expenses (including attorneys' fees) resulting from claims by third
parties for injuries to any person and damage to or theft or misappropriation or
loss of property occurring in or about the Project and arising from the use and
occupancy of the Premises or from any activity, work, or thing done, permitted
or suffered by Tenant in or about the Premises or due to any other act or
omission of Tenant, its subtenants, assignees, invitees, employees, contractors
and agents. The furnishing of insurance required hereunder shall not be deemed
to limit Tenant's obligations under this Paragraph 18. See Addendum 1.
19. INSPECTION AND ACCESS. Landlord and its agents, representatives,
and contractors may enter the Premises at any reasonable time to inspect the
Premises and to make such repairs as may be required or permitted pursuant to
this Lease and for any other business purpose. Landlord and Landlord's
representatives may enter the Premises during business hours for the purpose
of showing the Premises to prospective purchasers and, during the last year
of the Lease Term, to prospective tenants. Landlord may erect a suitable
sign on the Premises stating the Premises are available to let or that the
Project is available for sale. Landlord may grant easements, make public
dedications, designate common areas and create restrictions on or about the
Premises, provided that no such easement, dedication, designation or
restriction materially interferes with Tenant's use or occupancy of the
Premises. At Landlord's request, Tenant shall execute such instruments as may
be necessary for such easements, dedications or restrictions.
20. QUIET ENJOYMENT. If Tenant shall perform all of the covenants and
agreements herein required to be performed by Tenant, Tenant shall, subject to
the terms of this Lease, at all times during the Lease Term, have peaceful and
quiet enjoyment of the Premises against any person claiming by, through or under
Landlord.
21. SURRENDER. Upon termination of the Lease Term or earlier termination
of Tenant's right of possession, Tenant shall surrender the Premises to Landlord
in the same condition as received, broom clean, ordinary wear and tear and
casualty loss and condemnation covered by Paragraphs 15 and 16 excepted. Any
Trade
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Fixtures, Tenant-Made Alterations and property not so removed by Tenant as
permitted or required herein shall be deemed abandoned and may be stored,
removed, and disposed of by Landlord at Tenant's expense, and Tenant waives all
claims against Landlord for any damages resulting from Landlord's retention and
disposition of such property. All obligations of Tenant hereunder not fully
performed as of the termination of the Lease Term shall survive the termination
of the Lease Term, including without limitation, indemnity obligations, payment
obligations with respect to Operating Expenses and obligations concerning the
condition and repair of the Premises.
22. HOLDING OVER. If Tenant retains possession of the Premises after
the termination of the Lease Term, unless otherwise agreed in writing, such
possession shall be subject to immediate termination by Landlord at any time,
and all of the other terms and provisions of this Lease (excluding any
expansion or renewal option or other similar right or option) shall be
applicable during such holdover period, except that Tenant shall pay Landlord
from time to time, upon demand, as Base Rent for the holdover period, an
amount equal to 150% of the Base Rent in effect on the termination date,
computed on a monthly basis for each month or part thereof during such
holding over, provided that if Tenant notifies Landlord at least 180 days
prior to the expiration of the initial Lease Term or Renewal Term (defined
below), as applicable, that it will be holding over, Base Rent for the first
3 months of the holdover period shall be in an amount equal to 115% of the
Base Rent in effect on the termination date. All other payments shall
continue under the terms of this Lease. In addition, Tenant shall be liable
for all damages incurred by Landlord as a result of such holding over. No
holding over by Tenant, whether with or without consent of Landlord, shall
operate to extend this Lease except as otherwise expressly provided, and this
Paragraph 22 shall not be construed as consent for Tenant to retain
possession of the Premises.
23. EVENTS OF DEFAULT. Each of the following events shall be an event of
default ("Event of Default") by Tenant under this Lease:
(i) Tenant shall fail to pay any installment of Base Rent or any
other payment required herein when due, and such failure shall continue for
a period of 5 days from the date such payment was due, provided that such
failure to make any payment for a period of 5 days from the date such
payment was due shall not constitute an Event of Default until 5 days after
Landlord has given Tenant written notice of the delinquent payment (which
may be given at any time during the delinquency), provided further that
such notice shall not be required more than twice in any 12-month period or
four times over the Lease Term.
(ii) Tenant or any guarantor or surety of Tenant's obligations
hereunder shall (A) make a general assignment for the benefit of creditors;
(B) commence any case, proceeding or other action seeking to have an order
for relief entered on its behalf as a debtor or to adjudicate it a bankrupt
or insolvent, or seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts or seeking
appointment of a receiver, trustee, custodian or other similar official for
it or for all or of any substantial part of its property (collectively a
"proceeding for relief"); (C) become the subject of any proceeding for
relief which is not dismissed within 60 days of its filing or entry; or (D)
die or suffer a legal disability (if Tenant, guarantor, or surety is an
individual) or be dissolved or otherwise fail to maintain its legal
existence (if Tenant, guarantor or surety is a corporation, partnership or
other entity).
(iii) Any insurance required to be maintained by Tenant pursuant
to this Lease shall be canceled or terminated or shall expire or shall be
reduced or materially changed, except, in each case, as permitted in this
Lease, provided that Tenant shall have failed to renew or replace such
insurance within 24 hours after receipt of written notice from Landlord.
(iv) Tenant shall not occupy or shall vacate the Premises or
shall fail to continuously operate its business at the Premises for the
permitted use set forth herein, whether or not Tenant is in monetary or
other default under this Lease, provided that, Tenant's vacating of the
Premises shall not constitute an Event of Default if, prior to vacating the
Premises, Tenant has made arrangements reasonably acceptable to Landlord
to (a) insure that Tenant's insurance for the Premises will not be voided
or canceled with respect to the Premises as a result of such vacancy, (b)
insure that the Premises are secured and not subject to vandalism, and (c)
insure that the Premises will be properly maintained after such vacation.
Tenant shall inspect the Premises at last once each month and report
monthly in writing to Landlord on the condition of the Premises.
(v) Tenant shall attempt or there shall occur any assignment,
subleasing or other transfer of Tenant's interest in or with respect to
this Lease except as otherwise permitted in this Lease.
(vi) Tenant shall fail to discharge any lien placed upon the
Premises in violation of this Lease within 30 days after any such lien or
encumbrance is filed against the Premises.
(vii) Tenant shall fail to comply with any provision of this Lease
other than those specifically referred to in this Paragraph 23, and except
as otherwise expressly provided herein, such default shall continue for
more than 30 days after Landlord shall have given Tenant written notice of
such default (unless such performance will, due to the nature of the
obligation, require a period of time in excess of 30 days after Landlord
has given Tenant written notice of such default, then such default will
not be deemed to have occurred until after such period as is reasonably
necessary to cure such default provided Tenant is diligently pursuing the
cure of such default).
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24. LANDLORD'S REMEDIES. Upon each occurrence of an Event of Default and
so long as such Event of Default shall be continuing, Landlord may at any time
thereafter at its election: terminate this Lease or Tenant's right of
possession, (but Tenant shall remain liable as hereinafter provided) and/or
pursue any other remedies at law or in equity. Upon the termination of this
Lease or termination of Tenant's right of possession, it shall be lawful for
Landlord, without formal demand or notice of any kind, to re-enter the Premises
by summary dispossession proceedings or any other action or proceeding
authorized by law and to remove Tenant and all persons and property therefrom.
If Landlord re-enters the Premises, Landlord shall have the right to keep in
place and use, or remove and store, all of the furniture, fixtures and equipment
at the Premises.
If Landlord terminates this Lease, Landlord may recover from Tenant
the sum of: all Base Rent and all other amounts accrued hereunder to the date
of such termination; the cost of reletting the whole or any part of the
Premises, including without limitation brokerage fees and/or leasing
commissions incurred by Landlord, and costs of removing and storing Tenant's
or any other occupant's property, repairing, altering, remodeling, or
otherwise putting the Premises into condition acceptable to a new tenant or
tenants, and all reasonable expenses incurred by Landlord in pursuing its
remedies, including reasonable attorneys' fees and court costs; and the
excess of the then present value of the Base Rent and other amounts payable
by Tenant under this Lease as would otherwise have been required to be paid
by Tenant to Landlord during the period following the termination of this
Lease measured from the date of such termination to the expiration date
stated in this Lease, over the present value of any net amounts which Tenant
establishes Landlord can reasonably expect to recover by reletting the
Premises for such period, taking into consideration the availability of
acceptable tenants and other market conditions affecting leasing. Such
present values shall be calculated at a discount rate equal to the 90-day
U.S. Treasury bill rate at the date of such termination.
If Landlord terminates Tenant's right of possession (but not this
Lease), Landlord may, but shall be under no obligation to, relet the Premises
for the account of Tenant for such rent and upon such terms as shall be
satisfactory to Landlord without thereby releasing Tenant from any liability
hereunder and without demand or notice of any kind to Tenant. For the purpose
of such reletting Landlord is authorized to make any repairs, changes,
alterations, or additions in or to the Premises as Landlord deems reasonably
necessary or desirable. If the Premises are not relet, then Tenant shall pay to
Landlord as damages a sum equal to the amount of the rental reserved in this
Lease for such period or periods, plus the cost of recovering possession of the
Premises (including attorneys' fees and costs of suit), the unpaid Base Rent and
other amounts accrued hereunder at the time of repossession, and the costs
incurred in any attempt by Landlord to relet the Premises. If the Premises are
relet and a sufficient sum shall not be realized from such reletting [after
first deducting therefrom, for retention by Landlord, the unpaid Base Rent and
other amounts accrued hereunder at the time of reletting, the cost of recovering
possession (including attorneys' fees and costs of suit), all of the costs and
expense of repairs, changes, alterations, and additions, the expense of such
reletting (including without limitation brokerage fees and leasing commissions)
and the cost of collection of the rent accruing therefrom] to satisfy the rent
provided for in this Lease to be paid, then Tenant shall immediately satisfy
and pay any such deficiency. Any such payments due Landlord shall be made upon
demand therefor from time to time and Tenant agrees that Landlord may file suit
to recover any sums falling due from time to time. Notwithstanding any such
reletting without termination, Landlord may at any time thereafter elect in
writing to terminate this Lease for such previous breach.
Exercise by Landlord of any one or more remedies hereunder granted or
otherwise available shall not be deemed to be an acceptance of surrender of the
Premises and/or a termination of this Lease by Landlord, whether by agreement or
by operation of law, it being understood that such surrender and/or termination
can be effected only by the written agreement of Landlord and Tenant. Any law,
usage, or custom to the contrary notwithstanding, Landlord shall have the right
at all times to enforce the provisions of this Lease in strict accordance with
the terms hereof, and the failure of Landlord at any time to enforce its rights
under this Lease strictly in accordance with same shall not be construed as
having created a custom in any way or manner contrary to the specific terms,
provisions, and covenants of this Lease or as having modified the same. Tenant
and Landlord further agree that forbearance or waiver by Landlord to enforce its
rights pursuant to this Lease or at law or in equity, shall not be a waiver of
Landlord's right to enforce one or more of its rights in connection with any
subsequent default. A receipt by Landlord of rent or other payment with
knowledge of the breach of any covenant hereof shall not be deemed a waiver of
such breach, and no waiver by Landlord of any provision of this Lease shall be
deemed to have been made unless expressed in writing and signed by Landlord. To
the greatest extent permitted by law, Tenant waives the service of notice of
Landlord's intention to re-enter as provided for in any statute, or to institute
legal proceedings to that end, and also waives all right of redemption in case
Tenant shall be dispossessed by a judgment or by warrant of any court or judge.
The terms "enter," "re-enter," "entry" or "re-entry," as used in this Lease, are
not restricted to their technical legal meanings. Any reletting of the Premises
shall be on such terms and conditions as Landlord in its sole discretion may
determine (including without limitation a term different than the remaining
Lease Term, rental concessions, alterations and repair of the Premises, lease of
less than the entire Premises to any tenant and leasing any or all other
portions of the Project before reletting the Premises). Landlord shall not be
liable, not shall Tenant's obligations hereunder be diminished because of,
Landlord's failure to relet the Premises or collect rent due in respect of such
reletting.
25. TENANT'S REMEDIES/LIMITATION OF LIABILITY. Landlord shall not be in
default hereunder unless Landlord fails to perform any of its obligations
hereunder within 30 days after written notice from Tenant specifying such
failure (unless such performance will, due to the nature of the obligation,
require a period of time in excess of 30 days, then after such period of time as
is reasonably necessary). All obligations of Landlord hereunder shall be
construed as covenants, not conditions; and, except as may be otherwise
expressly provided in this Lease, Tenant
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may not terminate this Lease for breach of Landlord's obligations hereunder.
All obligations of Landlord under this Lease will be binding upon Landlord only
during the period of its ownership of the Premises and not thereafter. The term
"Landlord" in this Lease shall mean only the owner, for the time being of the
Premises, and in the event of the transfer by such owner of its interest in the
Premises, such owner shall thereupon be released and discharged from all
obligations of Landlord thereafter accruing, but such obligations shall be
binding during the Lease Term upon each new owner for the duration of such
owner's ownership. Any liability of Landlord under this Lease shall be limited
solely to its interest in the Project, and in no event shall any personal
liability be asserted against Landlord in connection with this Lease nor shall
any recourse be had to any other property or assets of Landlord.
26. WAIVER OF JURY TRIAL. TENANT AND LANDLORD WAIVE ANY RIGHT TO TRIAL BY
JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE, BETWEEN LANDLORD AND TENANT ARISING OUT OF THIS
LEASE OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.
27. SUBORDINATION. This Lease and Tenant's interest and rights
hereunder are and shall be subject and subordinate at all times to the lien
of any first mortgage, hereafter created on or against the Project or the
Premises, and all amendments, restatements, renewals, modifications,
consolidations, refinancing, assignments and extensions thereof, without the
necessity of any further instrument or act on the part of Tenant. Tenant
agrees, at the election of the holder of any such mortgage, to attorn to any
such holder, provided that, Tenant shall not be obligated to subordinate this
Lease or its interest herein to any future mortgage, deed of trust or ground
lease on the Project unless concurrently with such subordination the holder
of such mortgage or deed of trust or the ground lessor under such ground
lease agrees not to disturb Tenant's possession of the Premises under the
terms of this Lease in the event such holder or ground lessor acquires title
to the Premises through foreclosure, deed in lieu of foreclosure or
otherwise. Tenant agrees upon demand to execute, acknowledge and deliver
such instruments, confirming such subordination and such instruments of
attornment as shall be requested by any such holder. Tenant hereby appoints
Landlord attorney in fact for Tenant irrevocably (such power of attorney
being coupled with an interest) to execute, acknowledge and deliver any such
instrument and instruments for and in the name of the Tenant and to cause any
such instrument to be recorded. Notwithstanding the foregoing, any such
holder may at any time subordinate its mortgage to this Lease, without
Tenant's consent, by notice in writing to Tenant, and thereupon this Lease
shall be deemed prior to such mortgage without regard to their respective
dates of execution, delivery or recording and in that event such holder shall
have the same rights with respect to this Lease as though this Lease had been
executed prior to the execution, delivery and recording of such mortgage and
had been assigned to such holder. The term "mortgage" whenever used in this
Lease shall be deemed to include deeds of trust, security assignments and any
other encumbrances, and any reference to the "holder" of a mortgage shall be
deemed to include the beneficiary under a deed of trust.
28. MECHANIC'S LIENS. Tenant has no express or implied authority to
create or place any lien or encumbrance of any kind upon, or in any manner to
bind the interest of Landlord or Tenant in, the Premises or to charge the
rentals payable hereunder for any claim in favor of any person dealing with
Tenant, including those who may furnish materials or perform labor for any
construction or repairs. Tenant covenants and agrees that it will pay or cause
to be paid all sums legally due and payable by it on account of any labor
performed or materials furnished in connection with any work performed on the
Premises and that it will save and hold Landlord harmless from all loss, cost or
expense based on or arising out of asserted claims or liens against the
leasehold estate or against the interest of Landlord in the Premises or under
this Lease. Tenant shall give Landlord immediate written notice of the placing
of any lien or encumbrance against the Premises and cause such lien or
encumbrance to be discharged within 30 days of the filing or recording thereof,
provided, however, Tenant may contest such liens or encumbrances as long as such
contest prevents foreclosure of the lien or encumbrance and Tenant causes such
lien or encumbrance to be bonded or insured over in a manner satisfactory to
Landlord within such 30 day period.
29. ESTOPPEL CERTIFICATES. Tenant agrees, from time to time, within 10
days after request of Landlord, to execute and deliver to Landlord, or
Landlord's designee, any estoppel certificate requested by Landlord, stating
that this Lease is in full force and effect, the date in which rent has been
paid, that Landlord is not in default hereunder (or specifying in detail the
nature of Landlord's default), the termination date of this Lease and such other
matters pertaining to this Lease as may be requested by Landlord. Tenant's
obligation to furnish each estoppel certificate in a timely fashion is a
material inducement for Landlord's execution of this Lease. No cure or grace
period provided in this Lease shall apply to Tenant's obligations to timely
deliver an estoppel certificate. Tenant hereby irrevocably appoints Landlord as
its attorney in fact to execute on its behalf and in its name any such estoppel
certificate if Tenant fails to execute and deliver the estoppel certificate
within 10 days after Landlord's written request thereof.
30. ENVIRONMENTAL REQUIREMENTS. Except for Hazardous Material contained
in products used by Tenant in de minimis quantities for ordinary cleaning and
office purposes, Tenant shall not permit or cause any party to bring any
Hazardous Material upon the Premises or transport, store, use, generate,
manufacture or release any Hazardous Material in or about the premises
without Landlord's prior written consent. Tenant, at its sole cost and
expense, shall operate its business in the Premises in strict compliance with
all Environmental Requirements and shall remediate in a manner satisfactory
to Landlord any Hazardous Materials released on or from the Project by
Tenant, its agents, employees, contractors, subtenants or invitees. Tenant
shall complete and certify to disclosure statements as requested by Landlord
from time to time relating to Tenant's transportation, storage, use,
generation, manufacture or release of Hazardous Materials on the Premises.
The term "Environmental Requirements" means
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all applicable present and future statutes, regulations, ordinances, rules,
codes, judgments, orders or other similar enactments of any governmental
authority or agency regulating or relating to health, safety, or environmental
conditions on under or about the Premises or the environment, including without
limitation, the following: the Comprehensive Environmental Response,
Compensation and Liability Act; the Resource Conservation and Recovery Act; and
all state and local counterparts thereto, and any regulations or policies
promulgated or issued thereunder. The term "Hazardous Materials" means and
includes any substance, material, waste, pollutant, or contaminant listed or
defined as hazardous or toxic, under any Environmental Requirements, asbestos
and petroleum, including crude oil or any fraction thereof, natural gas liquids,
liquefied natural gas, or synthetic gas usable for fuel (or mixtures of natural
gas and such synthetic gas). As defined in Environmental Requirements, Tenant
is and shall be deemed to be the "operator" of Tenant's "facility" and the
"owner" of all Hazardous Materials brought on the Premises by Tenant, its
agents, employees, contractors or invitees, and the wastes, by-products, or
residues generated, resulting, or produced therefrom. See Addendum F.
Tenant shall indemnify, defend, and hold Landlord harmless from and
against any and all losses (including, without limitation, diminution in
value of the Premises or the Project and loss of rental income from the
Project), claims, demands, actions, suits, damages (including, without
limitation, punitive damages), expenses (including, without limitation,
remediation, removal, repair, corrective action, or cleanup expenses, and
costs (including, without limitation, actual attorneys' fees, consultant fees
or expert fees and including, without limitation, removal or management of
any asbestos brought into the property or disturbed in breach of the
requirements of this Paragraph 30, regardless of whether such removal or
management is required by law) which are brought or recoverable against, or
suffered or incurred by Landlord as a result of any release of Hazardous
Materials for which Tenant is obligated to remediate as provided above or any
other breach of the requirements under this Paragraph 30 by Tenant, its
agents, employees, contractors, subtenants, assignees or invitees, regardless
of whether Tenant had knowledge of such noncompliance. The obligations of
Tenant under this Paragraph 30 shall survive any termination of this Lease.
Landlord shall have access to, and a right to perform inspections and
tests of, the Premises to determine Tenant's compliance with Environmental
Requirements, its obligations under this Paragraph 30, or the environmental
condition of the Premises. Access shall be granted to Landlord upon Landlord's
prior notice to Tenant and at such times so as to minimize, so far as may be
reasonable under the circumstances, any disturbance to Tenant's operations.
Such inspections and tests shall be conducted at Landlord's expense, unless such
inspections or tests reveal that Tenant has not complied with any Environmental
Requirement, in which case Tenant shall reimburse Landlord for the reasonable
cost of such inspection and tests. Landlord's receipt of or satisfaction with
any environmental assessment in no way waives any rights that Landlord holds
against Tenant.
31. RULES AND REGULATIONS. Tenant shall, at all times during the Lease
Term and any extension thereof, comply with all reasonable rules and regulations
at any time or from time to time established by Landlord covering use of the
Premises and the Project. The current rules and regulations are attached
hereto. In the event of any conflict between said rules and regulations and
other provisions of this Lease, the other terms and provisions of this Lease
shall control. Landlord shall not have any liability or obligation for the
breach of any rules or regulations by other tenants in the Project.
32. SECURITY SERVICE. Tenant acknowledges and agrees that, while Landlord
may patrol the Project, Landlord is not providing any security services with
respect to the Premises and that Landlord shall not be liable to Tenant for, and
Tenant waives any claim against Landlord with respect to, any loss by theft or
any other damage suffered or incurred by Tenant in connection with any
unauthorized entry into the Premises or any other breach of security with
respect to the Premises.
33. FORCE MAJEURE. Landlord shall not be held responsible for delays in
the performance of its obligations hereunder when caused by strikes, lockouts,
labor disputes, acts of God, inability to obtain labor or materials or
reasonable substitutes therefor, governmental restrictions, governmental
regulations, governmental controls, delay in issuance of permits, enemy or
hostile governmental action, civil commotion, fire or other casualty, and other
causes beyond the reasonable control of Landlord ("Force Majeure").
34. ENTIRE AGREEMENT. This Lease constitutes the complete agreement of
Landlord and Tenant with respect to the subject matter hereof. No
representations, inducements, promises or agreements, oral or written, have
been made by Landlord or Tenant, or anyone acting on behalf of Landlord or
Tenant, which are not contained herein, and any prior agreements, promises,
negotiations, or representations are superseded by this Lease. This Lease
may not be amended except by an instrument in writing signed by both parties
hereto.
35. SEVERABILITY. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws, then and in that
event, it is the intention of the parties hereto that the remainder of this
Lease shall not be affected thereby. It is also the intention of the parties
to this Lease that in lieu of each clause or provision of this Lease that is
illegal, invalid or unenforceable, there be added, as a part of this Lease, a
clause or provision as similar in terms to such illegal, invalid or
unenforceable clause or provision as may be possible and be legal, valid and
enforceable.
36. BROKERS. Tenant represents and warrants that it has dealt with no
broker, agent or other person in connection with this transaction and that no
broker, agent or other person brought about this transaction, other than the
broker, if any, set forth on the first page of this Lease, and Tenant agrees to
indemnify and hold Landlord
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<PAGE>
harmless from and against any claims by any other broker, agent or other person
claiming a commission or other form of compensation by virtue of having dealt
with Tenant with regard to this leasing transaction.
37. MISCELLANEOUS. (a) Any payments or charges due from Tenant to Landlord
hereunder shall be considered rent for all purposes of this Lease.
(b) If and when included within the term "Tenant," as used in this
instrument, there is more than one person, firm or corporation, each shall be
jointly and severally liable for the obligations of Tenant.
(c) All notices required or permitted to be given under this Lease shall
be in writing and shall be sent by registered or certified mail, return receipt
requested, or by a reputable national overnight courier service, postage
prepaid, or by hand delivery addressed to the parties at their addresses below,
and with a copy sent to Landlord at 14100 EAST 35TH PLACE, AURORA, COLORADO
80011. Either party may by notice given aforesaid change its address for all
subsequent notices. Except where otherwise expressly provided to the contrary,
notice shall be deemed given upon delivery.
(d) Whenever Landlord's consent or approval is called for under this
Lease, such consent or approval shall not be unreasonably withheld or delayed
unless this Lease expressly provides to the contrary.
(e) At Landlord's request from time to time Tenant shall furnish Landlord
with true and complete copies of its most recent annual and quarterly financial
statements prepared by Tenant or Tenant's accountants and any other financial
information or summaries that Tenant typically provides to its lenders or
shareholders.
(f) Neither this Lease nor a memorandum of lease shall be filed by or on
behalf of Tenant in any public record. Landlord may prepare and file, and upon
request by Landlord Tenant will execute, a memorandum of lease.
(g) The normal rule of construction to the effect that any ambiguities are
to be resolved against the drafting party shall not be employed in the
interpretation of this Lease or any exhibits or amendments hereto.
(h) The submission by Landlord to Tenant of this Lease shall have no
binding force or effect, shall not constitute an option for the leasing of the
Premises, nor confer any right or impose any obligations upon either party until
execution of this Lease by both parties.
(i) Words of any gender used in this Lease shall be held and construed to
include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires. The captions
inserted in this Lease are for convenience only and in no way define, limit or
otherwise describe the scope or intent of this Lease, or any provision hereof,
or in any way affect the interpretation of this Lease.
(j) Any amount not paid by Tenant within 5 days after its due date in
accordance with the terms of this Lease shall bear interest from such due date
until paid in full at the lesser of the highest rate permitted by applicable law
or 15 percent per year. It is expressly the intent of Landlord and Tenant at
all times to comply with applicable law governing the maximum rate or amount of
any interest payable on or in connection with this Lease. If applicable law is
ever judicially interpreted so as to render usurious any interest called for
under this Lease, or contracted for, charged, taken, reserved, or received with
respect to this Lease, then it is Landlord's and Tenant's express intent that
all excess amounts theretofore collected by Landlord be credited on the
applicable obligation (or, if the obligation has been or would thereby be paid
in full, refunded to Tenant), and the provisions of this Lease immediately shall
be deemed reformed and the amounts thereafter collectible hereunder reduced,
without the necessity of the execution of any new document, so as to comply with
the applicable law, but so as to permit the recovery of the fullest amount
otherwise called for hereunder.
(k) Construction and interpretation of this Lease shall be governed by the
laws of the state in which the Project is located, excluding any principles of
conflicts of laws.
(l) Time is of the essence as to the performance of Tenant's obligations
under this Lease.
(m) All exhibits and addenda attached hereto are hereby incorporated into
this Lease and made a part hereof. In the event of any conflict between such
exhibits or addenda and the terms of this Lease, such exhibits or addenda shall
control.
38. INTENTIONALLY OMITTED.
39. LIMITATION OF LIABILITY OF TRUSTEES, SHAREHOLDERS, AND OFFICERS OF
SECURITY CAPITAL INDUSTRIAL TRUST. Any obligation or liability whatsoever of
Security Capital Industrial Trust, a Maryland real estate investment trust,
which may arise at any time under this Lease or any obligation or liability
which may be incurred by it pursuant to any other instrument, transaction, or
undertaking contemplated hereby shall not be personally binding upon, nor
shall resort for the enforcement thereof be had to the property of, its
trustees, directors, shareholders, officers, employees or agents, regardless
of whether such obligation or liability is in the nature of contract, tort,
or otherwise.
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<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
day and year first above written.
TENANT: LANDLORD:
NOVELLUS SYSTEMS, INC., a SECURITY CAPITAL INDUSTRIAL TRUST, a
California corporation Maryland real estate investment trust
By:/s/ [illegible] By:/s/ [illegible]
-------------------------------- ----------------------------------
Title: Treasurer Title: Managing Director
----------------------------
Address: Address:
81 Vista Montana 47775 Fremont Boulevard
San Jose, California 95134 Fremont, California 94538
12
<PAGE>
Rules and Regulations
---------------------
1. The sidewalk, entries, and driveways of the Project shall not be obstructed
by Tenant, or its agents, or used by them for any purpose other than
ingress and egress to and from the Premises.
2. Except as agreed to by Landlord, Tenant shall not place any objects,
including antennas, outdoor furniture, etc., in the parking areas,
landscaped areas, or other areas outside of its Premises, or on the roof of
the Project.
3. Except for seeing-eye dogs, no animals shall be allowed in the offices,
halls, or corridors in the Project.
4. Tenant shall not disturb the occupants of the Project or adjoining
buildings by the use of any radio or musical instrument or by the making of
loud or improper noises.
5. If Tenant desires telegraphic, telephonic or other electric connections in
the Premises, Landlord or its agent will direct the electrician as to where
and how the wires may be introduced; and, without such direction, no boring
or cutting of wires will be permitted. Any such installation or connection
shall be made at Tenant's expense.
6. Tenant shall not install or operate any steam or gas engine or boiler, or
other mechanical apparatus in the Premises, except as specifically approved
in the Lease. The use of oil, gas or inflammable liquids for heating,
lighting or any other purpose is expressly prohibited, except as
specifically provided for in Addendum F attached hereto. Explosives or
other articles deemed extra hazardous shall not be brought into the
Project.
7. Parking any type of recreational vehicles is specifically prohibited on or
about the Project. Except for the overnight parking of operative vehicles,
no vehicle of any type shall be stored in the parking areas at any time. In
the event that a vehicle is disabled, it shall be removed within 48 hours.
There shall be no "For Sale" or other advertising signs on or about any
parked vehicle. All vehicles shall be parked in the designated parking
areas in conformity with all signs and other markings. All parking will be
open parking, and no reserved parking, numbering or lettering of individual
spaces will be permitted except as specified by Landlord.
8. Tenant shall maintain the Premises free from rodents, insects and other
pests.
9. Landlord reserves the right to exclude or expel from the Project any person
who, in the judgment of Landlord, is intoxicated or under the influence of
liquor or drugs or who shall in any manner do any act in violation of the
Rules and Regulations of the Project.
10. Tenant shall not cause any unnecessary labor by reason of Tenant's
carelessness or indifference in the preservation of good order and
cleanliness. Landlord shall not be responsible to Tenant for any loss of
property on the Premises, however occurring, or for any damage done to the
effects of Tenant by the janitors or any other employee or person.
11. Tenant shall give Landlord prompt notice of any defects in the water, lawn
sprinkler, sewage, gas pipes, electrical lights and fixtures, heating
apparatus, or any other service equipment affecting the Premises.
12. Except as agreed to by Landlord, Tenant shall not permit storage outside
the Premises, including without limitation, outside storage of trucks and
other vehicles, or dumping of waste or refuse or permit any harmful
materials to be placed in any drainage system or sanitary system in or
about the Premises.
13. All moveable trash receptacles provided by the trash disposal firm for the
Premises must be kept in the trash enclosure areas, if any, provided for
that purpose.
14. No auction, public or private, will be permitted on the Premises or the
Project.
15. No awnings shall be placed over the windows in the Premises except with the
prior written consent of Landlord.
16. The Premises shall not be used for lodging, sleeping or cooking or for any
immoral or illegal purposes or for any purpose other than that specified in
the Lease. No gaming devices shall be operated in the Premises.
17. Tenant shall ascertain from Landlord the maximum amount of electrical
current which can safely be used in the Premises, taking into account the
capacity of the electrical wiring in the Project and the Premises and the
needs of other tenants, and shall not use more than such safe capacity.
Landlord's consent to the installation of electric equipment shall not
relieve Tenant from the obligation not to use more electricity than such
safe capacity.
18. Tenant assumes full responsibility for protecting the Premises from theft,
robbery and pilferage.
19. Tenant shall not install or operate on the Premises any machinery or
mechanical devices of a nature not directly related to Tenant's ordinary
use of the Premises and shall keep all such machinery free of vibration,
noise and air waves which may be transmitted beyond the Premises.
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ADDENDUM B
CONSTRUCTION
(TURNKEY)
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED May 3, 1996, BETWEEN
SECURITY CAPITAL INDUSTRIAL TRUST
and
NOVELLUS SYSTEMS, INC.
(a) Landlord agrees to furnish or perform at Landlord's sole cost and
expense those items of construction and those improvements (the "LANDLORD'S
IMPROVEMENTS") specified below:
* Full height sheet rock demising wall at the north and south ends
of the Premises
* Separate metering of natural gas and electrical and an 800 amp.
277/480 volt 3 phase electrical panel
(b) If Tenant shall desire any changes, Tenant shall so advise Landlord in
writing and Landlord shall determine whether such changes can be made in a
reasonable and feasible manner. Any and all costs of reviewing any requested
changes, and any and all costs of making any changes to the Landlord's
Improvements which Tenant may request and which Landlord may agree to shall be
at Tenant's sole cost and expense and shall be paid to Landlord upon demand and
before execution of the change order.
(c) Landlord shall proceed with and complete the construction of the
Landlord's Improvements. As soon as such improvements have been Substantially
Completed, Landlord shall notify Tenant in writing of the date that the
Landlord's Improvements were Substantially Completed. The Landlord's
Improvements shall be deemed substantially completed ("SUBSTANTIALLY COMPLETED")
when, in the opinion of the construction manager (whether an employee or agent
of Landlord or a third party construction manager), the Premises are
substantially completed except for punch list items which do not prevent in any
material way the use of the Premises for the purposes for which they were
intended.
(d) The failure of Tenant to take possession of or to occupy the Premises
shall not serve to relieve Tenant of obligations arising on the Commencement
Date or delay the payment of rent by Tenant. Subject to applicable ordinances
and building codes governing Tenant's right to occupy or perform in the
Premises, Tenant shall be allowed to install its tenant improvements, machinery,
equipment, fixtures, or other property, on the Premises during the final stages
of completion of construction provided that Tenant does not thereby interfere
with the completion of construction or cause any labor dispute as a result of
such installations, and provided further that Tenant does hereby agree to
indemnify, defend, and hold Landlord harmless from any loss or damage to such
property, and all liability, loss, or damage arising from any injury to the
Project or the property of Landlord, its contractors, subcontractors, or
materialmen, and any death or personal injury to any person or persons arising
out of such installations. Any such occupancy or performance in the Premises
shall be in accordance with the provisions governing Tenant-Made Alterations and
Trade Fixtures in the Lease, and shall be subject to Tenant providing to
Landlord satisfactory evidence of insurance for personal injury and property
damage related to such installations and satisfactory payment arrangements with
respect to installations permitted hereunder. Delay in putting Tenant in
possession of the Premises shall not serve to extend the term of this Lease or
to make Landlord liable for any damages arising therefrom.
(e) Except for incomplete punch list items, Tenant upon the Commencement
Date shall have and hold the Premises as the same shall then be without any
liability or obligation on the part of Landlord for making any further
alterations or improvements of any kind in or about the Premises.
<PAGE>
ADDENDUM C
CONSTRUCTION
(ALLOWANCE)
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED May 3, 1996, BETWEEN
SECURITY CAPITAL INDUSTRIAL TRUST
and
NOVELLUS SYSTEMS, INC.
a. INITIAL TENANT IMPROVEMENTS; ALLOWANCE. The leasehold improvements to be
constructed by Tenant (the "INITIAL TENANT IMPROVEMENTS"), at Tenant's sole
cost and expense (except for the hereinbelow described "ALLOWANCE"), are
generally described in the preliminary plans and specifications (the
"PRELIMINARY PLANS") identified on Attachment 1 to this Addendum and shall
be constructed in accordance with the Final Plans to be submitted by Tenant
and reviewed and approved by Landlord in accordance with the provisions of
Paragraph (b) of this Addendum.
Landlord shall have no obligation to construct or to pay for the
construction of the Initial Tenant Improvements. However, in addition to
Landlord's obligation to perform the Landlord's Improvements in accordance
with Addendum B above, Landlord agrees to contribute toward the cost of
construction of the Initial Tenant Improvements the cash sum of up to
$120,000.00 (the "ALLOWANCE"). The construction costs that may be
reimbursed from the Allowance shall include only the following: costs of
labor, equipment, supplies and materials furnished for construction of the
Initial Tenant Improvements; government fees and charges for required
permits, plan checks, and inspections for the Initial Tenant Improvements;
charges of Tenant's design professionals; and charges of Landlord's design
professionals for review of plans and monitoring of construction or
installation of the Initial Tenant Improvements. No other costs, fees or
expenses of the Initial Tenant Improvements shall be reimbursable out of
the Allowance.
Landlord's payment of the Allowance, or such portion thereof as Tenant may
be entitled to, shall be made within thirty (30) days after each and all of
the following conditions shall have been satisfied: (1) the Initial Tenant
Improvements shall have been substantially completed in accordance with the
Final Plans; (2) Tenant shall have delivered to Landlord satisfactory
evidence that all mechanics lien rights of all contractors, suppliers,
subcontractors, or materialmen furnishing labor, supplies or materials in
the construction or installation of the Initial Tenant Improvements have
been unconditionally waived, released, or extinguished; (3) Tenant shall
have delivered to Landlord paid receipts or other written evidence
satisfactorily substantiating the actual amount of the construction costs
of the Initial Tenant Improvements; (4) Tenant shall have delivered to
Landlord a temporary or final certificate of occupancy for the Premises; (5)
Tenant shall not then be in default of any of the provisions of the Lease;
(6) Tenant shall have occupied and opened for business at the Premises; and
(7) Tenant has submitted to Landlord the following: (i) original "jobsite
copy" of the permit drawings; (ii) permit cards signed off by the building
inspector; (iii) a recorded copy of the Notice of Completion issued by the
building inspector of the City of Wilsonville; (iv) "as-built" drawings of
the electrical, HVAC, plumbing and fire protection system; (v) one copy of
all warranties and maintenance and operating manuals; (vi) a letter from
Tenant's architect certifying that the Initial Tenant Improvements were
completed in accordance with the Final Plans (defined below); and (vii) a
copy of the Tenant's Contractor's (defined below) Application for Payment
(ALA Document G702), certified by Tenant's architect. If Landlord claims
any credits against the Allowance for any costs paid directly by Landlord
to third parties, Landlord shall provide Tenant with evidence of payment of
such costs.
b. PREPARATION AND REVIEW OF PLANS FOR INITIAL TENANT IMPROVEMENTS. The
Preliminary Plans identified on Attachment I to this Addendum C have been
approved by Landlord and signed by Landlord and Tenant for identification.
However, such Preliminary Plans shall not be used by Tenant for the
purposes of constructing or installing the Initial Tenant Improvements.
Tenant, using licensed architectural and engineering firms selected by
Tenant and approved by Landlord (which approval shall not be unreasonably
withheld or delayed), shall prepare or cause to be prepared and submitted,
concurrently, and in each case by receipted courier or delivery service, to
(i) Landlord's construction representative, (i) Kurt Fuller, 47775 Fremont
Blvd., Fremont, California 94538, and (ii) Landlord's offices at 14100 East
35th Place, Aurora, Colorado 80011, attn: Mr. Donald Madsen, for Landlord's
review, complete and final architectural and engineering drawings and
specifications (hereinafter collectively referred to as the "FINAL PLANS"),
consistent with the description of the Initial Tenant Improvements set
forth on the Preliminary Plans. Subject to the provisions of Paragraph (c)
of this Addendum C, Landlord agrees that Tenant may commence construction
of the Initial Tenant Improvements prior to finalization of the Final Plans
and Landlord agrees that it shall cooperate with Tenant to review and
approve portions of the Final Plans for different stages or elements of the
work, or proposed Final Plans submitted at less than 100% completion, so
that construction can proceed on a "fast track" basis. The approval
process for all such portions of the Final Plans shall be substantially as
set forth below, but any objection by Landlord to Final Plans submitted to
Landlord may not be inconsistent with previously approved portions of the
Final Plans. However, in no event shall any portion of the Initial Tenant
Improvements be constructed or installed unless and until Landlord has
approved (or is deemed to have approved) Final Plans at 100% completion for
such portion of the work.
Each set of proposed Final Plans furnished by Tenant shall include at least
two (2) sets of prints. The Final Plans shall be compatible with the
design, construction, and equipment of the Building, and shall be capable
of logical measurement and construction. Unless Landlord shall otherwise
agree in writing, the Final Plans shall be signed/stamped by Tenant's
architect or engineer, as applicable, and shall include (to the extent
relevant or applicable to the portion of the work for which Tenant is
seeking Final Plan approval) each and all of the following: (i) a Partition
(Floor) Plan, @ 1/8" = 1'-0" minimum scale, including partition types,
partition construction sections and details, and door/frame/hardware
schedules; (ii) a Reflected Ceiling Plan, @ 1/8" = 1'-0" minimum scale,
including ceiling construction and specifications for ceiling lighting
fixtures; (iii) a Telephone/Electrical/Communications Plan, @ 1/8" = 1'-0"
minimum scale, including a complete schedule, cross-referenced to said
plan, of Tenant's telephone/electrical/communications equipment and
providing said equipment's electrical power specifications,
<PAGE>
requirements and heat output; (iv) a Finish Plan, including all finish
specifications and U.L. and/or County "approval numbers" where required;
(v) Elevations, @ 1/2" - 1'-0" minimum scale; interior, of all walls, with
detail/section cross-references where appropriate; exterior, of Tenant's
portion of the perimeter Building-front wall, clearly indicating the
appearance of Tenant's space, including its signage, at/through Tenant's
perimeter Building window wall (if any); (vi) details and sections, scale
as required, for all partition types, structural elements and connections,
and custom installations where they occur (HVAC, lighting, etc.); (vii)
details and sections, scale as required, for all signage and graphics;
(viii) a Structural Engineering Plan, locating and detailing any
modifications to the Building required to attach and/or support the Initial
Tenant Improvements or Tenant's trade fixtures or equipment (this plan must
be signed/stamped by a structural engineer licensed in the State in which
the Premises are situated); (ix) Electrical Engineering Plans, for both
electrical power and for lighting, including but not limited to: circulating
diagrams; panel schedules; electrical equipment and lighting fixture
schedules and specifications; and electrical equipment and lighting fixture
electrical load tabulations (these plans and calculations must be
signed/stamped by an electrical engineer licensed in the State in which the
Premises are situated); (x) Mechanical Engineering Plans, for both plumbing
and for HVAC, including but not limited to: plumbing water and waste line
plans; HVAC supply, return and exhaust plans; and HVAC tabulations for
electrical equipment and lighting heat loads, cooling loads and air supply
(these plans and calculations must be signed/stamped by a mechanical
engineer licensed in the State in which the Premises are situated); (xi) a
Fire Protection Plan, locating and detailing any fire protection/fire
suppression system as may be required by code or other regulations
governing Tenant's operations in the Premises (this plan must be
signed/stamped by a fire protection engineer licensed in the State in which
the Premises are situated); and (xii) any other or additional plans as may
be related to Tenant's specific use of the Premises, such as plans for
rooms, enclosures, equipment or devices related to Tenant's permitted
storage or use of Hazardous Materials at the Premises (if any), or as may
be required by local city ordinance or building code.
Tenant shall submit all Final Plans (or portions thereof) concurrently to
Landlord's construction representative and offices, as designated above,
for Landlord review and approval. Landlord shall have five (5) business
days after Landlord's receipt of the proposed Final Plans (or each such
portion thereof) to review the same and notify Tenant in writing of any
comments or required changes, or to otherwise give its approval or
disapproval of such proposed Final Plans (or the portion thereof submitted
to Landlord). If Landlord fails to give written comments to or disapprove
the Final Plans (or the portion thereof submitted to Landlord) within such
five (5) business day period, then Landlord shall be deemed to have
approved the Final Plans (or portion thereof) as submitted. Tenant shall
have five (5) business days following its receipt of Landlord's comments
and objections to redraw the proposed Final Plans (or portion thereof
submitted to Landlord) in compliance with Landlord's request and to
resubmit the same for Landlord's final review and approval or comment
within three (3) business days of Landlord's receipt of such revised plans.
Such process shall be repeated as necessary until final approval or deemed
approval by Landlord of the proposed Final Plans (or each portion thereof),
at 100% completion, has been obtained. Landlord may at any time by written
notice given in accordance with the notice provisions of the Lease change
the name and/or address of the designated Landlord's construction
representative to receive plans delivered by Tenant to Landlord.
In the event that Tenant disagrees with any of the changes to the proposed
Final Plans (or portion thereof) required by Landlord, then Landlord and
Tenant shall consult with respect thereto and each party shall use all
reasonable efforts to promptly resolve any disputed elements of such
proposed Final Plans (or portion thereof). Landlord and Tenant agree that
if after consultation with each other and their respective architects they
are unable to resolve any disputed items with three (3) business days of
Landlord's written objection, then within three (3) business days thereafter
(i) Landlord's architect shall select an architect who is unaffiliated with
Landlord or Tenant to resolve the dispute (the "Arbitrator'), and (ii) each
party shall state to the Arbitrator its final position in writing as
respects the disputed matter(s). The Arbitrator shall decide on each
disputed matter within three (3) business days of submission of such
matter, based solely on such written submissions and the consistency of the
parties' submissions with the Preliminary Plans or previously approved
portions of the Final Plans, as applicable, the Tenant's permitted use of
the Premises; and the general nature and design of the Project and adjacent
properties. The parties consent to the jurisdiction of any appropriate
court to enforce and enter judgments upon the decision of the Arbitrator.
The losing party shall pay the cost of the Arbitrator, but each party shall
otherwise bear its own costs and expenses in connection with the dispute.
For purposes hereof, "business days" shall be all calendar days except
Sundays and holidays observed by national banks in Clackamas County,
Oregon, but Saturdays shall not constitute or be a business day for
purposes of delivery of documents by one party to the other.
Notwithstanding the preceding provisions of this Paragraph (b), under no
circumstances whatsoever shall (i) any combustible materials be utilized
above finished ceiling or in any concealed space, (ii) any structural load,
temporary or permanent, be exerted on any part of the Building without the
prior written approval of Landlord, or (iii) any holes be cut or drilled in
any part of the roof or other portion of the Building shall without the
prior written approval of Landlord.
In the event that Tenant proposes any changes to the Final Plans (or any
portion thereof) after the same have been approved by Landlord, Landlord
shall not unreasonably withhold its consent to any such changes, provided
the changes do not, in Landlord's reasonable opinion, adversely affect the
Building structure, systems, or equipment, or the external appearance of
the Premises.
As soon as the Final Plans (or a portion thereof sufficient to permit
commencement of construction or installation of the Initial Tenant
Improvements, if Tenant elects to proceed with a "fast track" construction)
are mutually agreed upon, Tenant shall use diligent efforts to obtain all
required permits, authorizations, and licenses from appropriate
governmental authorities for construction of the Initial Tenant
Improvements (or such portion thereof, as applicable). Tenant shall be
solely responsible for obtaining any business or other license or permit
required for the conduct of its business at the Premises.
c. CONSTRUCTION OF THE INITIAL TENANT IMPROVEMENTS. Construction or
installation of the Initial Tenant Improvements shall be performed by a
licensed general contractor or contractors selected by Tenant and approved
by Landlord, such approval not to be unreasonably withheld or delayed (the
"TENANT'S CONTRACTOR," whether one or more), pursuant to a written
construction contract negotiated and entered into by and between the
Tenant's Contractor and Tenant and approved by Landlord (such approval not
to be unreasonably withheld or delayed). Each such contract shall (i)
obligate Tenant's Contractor to work in harmony with the employees,
contractors and suppliers of Landlord involved
<PAGE>
in the construction work being performed by Landlord pursuant to Addendum B
to the Lease, and to comply with all rules and regulations of Landlord of
general applicability relating to construction activities in the Project,
(ii) name Landlord as an additional indemnitee under the provisions of the
contract whereby the Tenant's Contractor holds Tenant harmless from and
against any and all claims, damages, losses, liabilities and expenses
arising out of or resulting from the performance of such work, (iii) name
Landlord as a beneficiary of (and a party entitled to enforce) all of the
warranties of the Tenant's Contractor with respect to the work performed
thereunder and the obligation of the Tenant's Contractor to replace
defective materials and correct defective workmanship for a period of not
less than one (1) year following substantial completion of the work under
such contract, (iv) evidence the agreement of the Tenant's Contractor that
the provisions of the Lease shall control over the provisions of the
contract with respect to distribution or use of insurance proceed, in the
event of a casualty during construction, and (v) evidence the waiver and
release by the Tenant's Contractor of any lien or right to assert a lien on
all or any portion of the fee estate of Landlord in and to the Project as a
result of the work performed or to be performed thereunder (and obligating
the Tenant's Contractor to include a substantially similar release and
waiver provision in all subcontracts and purchase orders entered under or
pursuant to the contract).
Tenant acknowledges and understands that all roof penetrations involved in
the construction of the Initial Tenant Improvements must be performed by
the Building shell roofing contractor. All costs, fees and expenses
incurred with such contractor in performing such work shall be a cost of
the Initial Tenant Improvements, payable in accordance with the provisions
of this Addendum. Tenant or Tenant's Contractor shall be responsible for
all water, gas, electricity, sewer or other utilities used or consumed at
the Premises during the construction of the Initial Tenant Improvements.
Tenant specifically agrees to carry, or cause the Tenant's Contractor to
carry, during all such times as the Tenant's work is being performed, (a)
builder's risk completed value insurance on the Initial Tenant
Improvements, in an amount not less than Four Million Dollars
($4,000,000.00), (b) a policy of insurance covering commercial general
liability, in an amount not less than One Million Dollars ($1,000,000.00),
combined single limit for bodily injury and property damage per occurrence
(and combined single limit coverage of $2,000,000.00 in the aggregate), and
automobile liability coverage (including owned, non-owned and hired
vehicles) in an amount not less than One Million Dollars ($1,000,000.00)
combined single limit (each person, each accident), and endorsed to show
Landlord as an additional insured, and (c) workers' compensation insurance
as required by law, endorsed to show a waiver of subrogation by the insurer
to any claim the Tenant's Contractor may have against Landlord. Tenant shall
not commence construction of the Initial Tenant Improvements (or any
portion thereof) until Landlord has issued to Tenant a written
authorization to proceed with construction, which Landlord agrees to issue
to Tenant within one (1) business day after Tenant has delivered to
Landlord's construction representative (i) certificates of the insurance
policies described above, (ii) copies of all permits required for
construction of the Initial Tenant Improvements (or applicable portion
thereof, if Tenant elects to proceed with a "fast track" construction) and
a copy of the permitted Final Plans (or applicable portion thereof) as
approved by the appropriate governmental agency, (iii) a copy of each
signed construction contract for the Initial Tenant Improvements (a copy of
each subsequently signed contract shall be forwarded to Landlord's
construction representative without request or demand, promptly after
execution thereof and prior to the performance of any work thereunder), and
(iv) list of names, addresses and phone numbers of all subcontractors,
contractors and suppliers involved in performing the Initial Tenant
Improvements. All of the construction work shall be the responsibility of
and supervised by Tenant.
d. REQUIREMENTS FOR TENANT'S WORK. All of Tenant's construction with
respect to the Premises shall be performed in substantial compliance with
this Addendum and the Final Plans therefor previously approved in writing
by Landlord (and any changes thereto approved by Landlord as herein
provided), and in a good and workmanlike manner, utilizing only new
materials. All such work shall be performed by Tenant in strict compliance
with all applicable building codes, regulations and all other legal
requirements. All materials utilized in the construction of Tenant's work
must be confined to within the Premises. All trash and construction debris
not located wholly within the Premises must be removed each day from the
Project at the sole cost and expense of Tenant. Landlord shall have the
right at all times to monitor the work for compliance with the requirements
of this Addendum. If Landlord determines that any such requirements are
not being strictly complied with, Landlord may immediately require the
cessation of all work being performed in or around the Premises or the
Project until such time as Landlord is satisfied that the applicable
requirements will be observed. Any approval given by Landlord with respect
to Tenant's construction or the Preliminary Plans or Final Plans therefor,
and/or any monitoring of Tenant's work by Landlord, shall not make Landlord
liable or responsible in any way for the condition, quality or function of
such matters or constitute any undertaking, warranty or representation by
Landlord with respect to any of such matters. So long as Landlord reviews
and responds to the plan submission to Landlord as provided in this
Addendum, no delays in plan approval, and no delays in construction of the
Initial Tenant Improvements, shall delay the Commencement Date of the
Lease.
e. NO LIENS; INDEMNIFICATION. Tenant shall have no authority to place any
lien upon the Premises or the Project, or any portion thereof or interest
therein, nor shall Tenant have any authority in any way to bind Landlord,
and any attempt to do so shall be void and of no effect. If, because of
any actual or alleged act or omission of Tenant, or Tenant's Contractor, or
any subcontractors or materialmen, any lien, affidavit, charge or order for
the payment of money shall be filed against Landlord, the Premises, the
Project, or any portion thereof or interest therein, whether or not such
lien, affidavit, charge or order is valid or enforceable, Tenant shall, at
its sole cost and expense, cause the same to be discharged of record by
payment, bonding or otherwise no later than fifteen (15) days after notice
to Tenant of the filing thereof, but in any event prior to the foreclosure
thereof.
With respect to the contract for labor or materials for construction of the
Initial Tenant Improvements, Tenant acts as principal and not as the agent
of Landlord. Landlord expressly disclaims liability for the cost of labor
performed for or supplies or materials furnished to Tenant. Landlord may
post one or more "notices of non-responsibility" for Tenant's work on the
Project. No contractor of Tenant is intended to be a third-party
beneficiary with respect to the Allowance, or the agreement of Landlord to
make such Allowance available for payment of or reimbursement for the
costs of construction of the Initial Tenant Improvements. Tenant agrees to
indemnify, defend and hold Landlord, the Premises and the Project, harmless
from all claims (including all costs and expenses of defending against such
claims) arising or alleged to arise from any act or omission of Tenant or
Tenant's agents, employees, contractor, subcontractors, suppliers,
materialmen, architects, designers, surveyors, engineers, consultants,
laborers, or invitees, or arising from any bodily injury or property damage
occurring or alleged to have occurred incident to any of the work to be
performed by Tenant or its contractors or subcontractors with respect to
the Premises.
<PAGE>
Default by Tenant under this Addendum C shall constitute a default by
Tenant under the Lease for all purposes.
<PAGE>
Attachment 1
to
ADDENDUM C
IDENTIFICATION OF PRELIMINARY PLANS:
The "PRELIMINARY PLANS" for the Initial Tenant Improvements heretofore
approved by Landlord are identified as the plans prepared by Architectural/
Technologies; bearing Project No. 96208, dated April 11, 1996, and consisting of
5 sheets signed by Landlord and Tenant.
<PAGE>
ADDENDUM D
BASE RENT ADJUSTMENTS
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED MAY 3, 1996, BETWEEN
SECURITY CAPITAL INDUSTRIAL TRUST
and
NOVELLUS SYSTEMS, INC.
Base Rent shall equal the following amounts for the respective periods set
forth below:
Period Monthly Base Rent
------ -----------------
month 0 to month 1 $0.00 (Tenant to pay its Proportionate
Share of Operating Expenses,
however, for this time period)
month 2 to month 37 $7,260.00
month 38 to month 61 $8,085.00
<PAGE>
ADDENDUM E
RENEWAL OPTION
(BASEBALL ARBITRATION)
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED MAY 3, 1996, BETWEEN
SECURITY CAPITAL INDUSTRIAL TRUST
and
NOVELLUS SYSTEMS, INC.
(a) Provided that as of the time of the giving of the Extension Notice
and the Commencement Date of the Extension Term (as such terms are defined
below), (x) Tenant is any of the Tenant originally named herein, a Tenant
Affiliate, or an assignee of Tenant consented to by Landlord who will
maintain the same use as the Tenant at the Premises and has assumed all of
Tenant's obligations under the Lease, (y) Tenant actually occupies all of the
Premises initially demised under this Lease and any space added to the
Premises, and (z) no Event of Default exists, or would exist but for the
passage of time or the giving of notice, or both; then Tenant shall have the
right to extend the Lease Term for an additional term of 5 years (such
additional term is hereinafter called the "EXTENSION TERM") commencing on the
day following the expiration of the Lease Term (hereinafter referred to as
the "COMMENCEMENT DATE OF THE EXTENSION TERM"). Tenant must give Landlord
notice (hereinafter called the "EXTENSION NOTICE") of its election to extend
the term of the Lease Term at least 6 months, but not more than 9 months,
prior to the scheduled expiration date of the Lease Term.
(b) The Base Rent payable by Tenant to Landlord during the Extension Term
shall be the greater of:
(i) the Base Rent in effect on the expiration of the Lease Term (if
the Base Rent is stated as an annual or other periodic rate, adjusted for
the length of the Lease Term), and
(ii) the Fair Market Rent, as defined and determined pursuant to
Paragraphs (c), (d), and (e) below.
(c) The term "FAIR MARKET RENT" of the Premises shall mean the Base Rent,
expressed as an annual rent per square foot of floor area, which Landlord would
have received from leasing the Premises (which shall be valued for purposes of
this determination as warehouse shell space with power, light and heat and 3,000
square feet of office space) for the Extension Term to an unaffiliated person
which is not then a tenant in the Project, assuming that such space were to be
delivered in "as-is" condition, and taking into account the rental which such
other tenant would most likely have paid for such premises, including market
escalations, provided that Fair Market Rent shall not in any event be less than
the Base Rent for the Premise as of the expiration of the Lease Term. Fair
Market Rent shall not be reduced by reason of any costs or expenses saved by
Landlord by reason of Landlord's not having to find a new tenant for the
Premises (including without limitation brokerage commissions, cost of
improvements necessary to prepare the space for such tenant's occupancy, rent
concession, or lost rental income during any vacancy period). Fair Market Rent
means only the rent component defined as Base Rent in the Lease and does not
include reimbursements and payments by Tenant to Landlord with respect to
operating expenses and other items payable or reimbursable by Tenant under the
Lease. In addition to its obligation to pay Base Rent (as determined herein),
Tenant shall continue to pay and reimburse Landlord as set forth in the Lease
with respect to such operating expenses and other items with respect to the
Premises during the Extension Term. The arbitration process described below
shall be limited to the determination of the Base Rent and shall not affect or
otherwise reduce or modify the Tenant's obligation to pay or reimburse Landlord
for such operating expenses and other reimbursable items.
(d) Landlord shall notify Tenant of its determination of the Fair Market
Rent (which shall be made in Landlord's sole discretion and shall in any event
be not less than the Base Rent in effect as of the expiration of the Lease Term)
for the Extension Term, and Tenant shall advise Landlord of any objection within
10 days of receipt of Landlord's notice. Failure to respond within the 10-day
period shall constitute Tenant's acceptance of such Fair Market Rent. If Tenant
objects, Landlord and Tenant shall commence negotiations to attempt to agree
upon the Fair Market Rent within 30 days of Landlord's receipt of Tenant's
notice. If the parties cannot agree, each acting in good faith but without any
obligation to agree, then the Lease Term shall not be extended and shall
terminate on its scheduled termination date and Tenant shall have no further
right hereunder or any remedy by reason of the parties' failure to agree unless
Tenant or Landlord invokes the arbitration procedure provided below to determine
the Fair Market Rent.
(e) Arbitration to determine the Fair Market Rent shall be in accordance
with the Real Estate Valuation Arbitration Rules of the American Arbitration
Association. Unless otherwise required by state law, arbitration shall be
conducted in the metropolitan area where the Project is located by a single
arbitrator unaffiliated with either party. Either party may elect to arbitrate
by sending written notice to the other party and the Regional Office of the
American Arbitration Association within 5 days after the 30-day negotiating
period provided in paragraph (d), invoking the binding arbitration provisions of
this paragraph. Landlord and Tenant shall each submit to the arbitrator their
respective proposal of Fair Market Rent. The arbitrator must choose between the
Landlord's proposal and the Tenant's proposal and may not compromise between the
two or select some other amount. Notwithstanding any other provision herein,
the Fair Market Rent determined by the arbitrator shall not be less than, and
the arbitrator shall have no authority to determine a Fair Market Rent less
than, the Base Rent in effect as of the scheduled expiration of the Lease Term.
The cost of the arbitration shall be paid by Landlord if the Fair Market Rent is
that proposed by Landlord and by Tenant if the Fair Market Rent is that proposed
by Tenant; and shall be borne equally otherwise. If the arbitrator has not
determined the Fair Market Rent as of the end of the Lease Term, Tenant shall
pay 105 percent of the Base Rent in effect under the Lease as of the end of the
Lease Term until the Fair Market Rent is determined as provided herein. Upon
such determination, Landlord and Tenant shall make the appropriate adjustments
to the payments between them.
(f) The parties consent to the jurisdiction of any appropriate court to
enforce the arbitration provisions of this Addendum and to enter judgment upon
the decision of the arbitrator.
(g) Except for the Base Rent as determined above, Tenant's occupancy of
the Premises during the Extension Term shall be on the same terms and conditions
as are in effect immediately prior to the expiration of the initial Lease Term;
provided, however, Tenant shall have no further right to extend the Lease Term
pursuant to this addendum or to any allowances, credits or abatements or options
to expand, contract, renew or extend the Lease.
<PAGE>
(h) If Tenant does not send the Extension Notice within the period set
forth in Paragraph (a), Tenant's right to extend the Lease Term shall
automatically terminate. Time is of the essence as to the giving of the
Extension Notice and the notice of Tenant's objection under Paragraph (d).
(i) Landlord shall have no obligation to refurbish or otherwise improve
the Premises for the Extension Term. The Premises shall be tendered on the
Commencement Date of the Extension Term in "as-is" condition.
(j) If the Lease is extended for the Extension Term, then Landlord shall
prepare and Tenant shall execute an amendment to the Lease confirming the
extension of the Lease Term and the other provisions applicable thereto.
(k) If Tenant exercises its right to extend the term of the Lease for the
Extension Term pursuant to this Addendum, the term "Lease Term" as used in the
Lease, shall be construed to include, when practicable, the Extension Term
except as provided in (g) above.
- 2 -
<PAGE>
ADDENDUM F
STORAGE AND USE OF PERMITTED HAZARDOUS MATERIALS
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED May 3, 1996, BETWEEN
SECURITY CAPITAL INDUSTRIAL TRUST
and
NOVELLUS SYSTEMS, INC.
(a) PERMITTED HAZARDOUS MATERIALS AND USE.
Tenant has requested Landlord's consent to use the Hazardous Materials
listed below in its business at the Premises (the "PERMITTED HAZARDOUS
MATERIALS") . Subject to the conditions set forth herein, Landlord hereby
consents to the Use (hereinafter defined) of the Permitted Hazardous Materials.
Any Permitted Hazardous Materials on the Premises will be generated, used,
received, maintained, treated, stored, or disposed in a manner consistent with
good engineering practice and in compliance with all Environmental Requirements.
(b) PERMITTED HAZARDOUS MATERIALS (INCLUDING MAXIMUM QUANTITIES).
Typ. Quantity Max. Quantity Compound
- ------------- ------------- --------
20 gal 100 gal. CU200 Plating Solution
1.5 kg 3 kg. CupraSelect
1.5 kg 3 kg. (3-hexyne) Cu (hfac)
500 g 1 kg hfac
500 g 1 kg TDEAT
1 gal. 5 gal. IPA
1 gal. 5 gal. Acetone
17 gal. 30 gal. sulfuric acid
15 gal. 15 gal. sodium hydroxide
195 ft(3) 390 ft(3) hydrogen
10 lbs. 10 lbs. nitrogen tri-fluoride
50 lbs. 100 lbs. ammonia
232 ft(3) 464 ft(3) helium
337 ft(3) 674 ft(3) oxygen
1300 ft(3) 1700 ft(3) nitrogen
1 gal. 5 gal. hydrochloric acid (HCI)
250 gr. 500 gr. urea
250 gr. 500 gr. thlourea
(c) USE: All of the Permitted Hazardous Materials will be used for
research and development of thin film deposition equipment.
(d) NO CURRENT INVESTIGATION. Tenant represents and warrants that it is
not currently subject to an inquiry, regulatory investigation, enforcement
order, or any other proceeding regarding the generation, use, treatment,
storage, or disposal of a Hazardous Material.
(e) NOTICE AND REPORTING. Tenant immediately shall notify Landlord in
writing of any spill, release, discharge, or disposal of any Hazardous Material
in, on or under the Premises or the Project. All reporting obligations imposed
by Environmental Requirements are strictly the responsibility of Tenant. Tenant
shall supply to Landlord within 5 business days after Tenant first receives or
sends the same, copies of all claims, reports, complaints, notices, warnings or
asserted violations relating in any way to Tenant's use of the Premises.
(f) INDEMNIFICATION. Tenant's indemnity obligation under the Lease with
respect to Hazardous Materials shall include indemnification for the
liabilities, expenses and other losses described therein as a result of the Use
of the Hazardous Materials or the breach of Tenant's obligations or
representations set forth above. It is the intent of this provision that Tenant
be strictly liable to Landlord as a result of the Use of Hazardous Materials
without regard to the fault or negligence of Tenant, Landlord or any third
party.
(g) DISPOSAL UPON LEASE TERMINATIONS. At the expiration or earlier
termination of the Lease, Tenant, at it sole cost and expense, shall: (i) remove
and dispose off-site any drums, containers, receptacles, structures,
<PAGE>
or tanks storing or containing Hazardous Materials (or which have stored or
contained Hazardous Materials) and the contents thereof; (ii) remove, empty, and
purge all underground and above ground storage tank systems, including connected
piping, of all vapors, liquids, sludges and residues; and (iii) restore the
Premises to its original condition. Such activities shall be performed in
compliance with all Environmental Requirements and to the satisfaction of
Landlord. Landlord's satisfaction with such activities or the condition of the
Premises does not waive, or release Tenant from, any obligations hereunder.
- 2 -
<PAGE>
ADDENDUM G
SIGN CRITERIA
WILSONVILLE CORPORATE CENTER PHASE II
TENANT IDENTIFICATION SIGNS
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED May 3, 1996, BETWEEN
SECURITY CAPITAL INDUSTRIAL TRUST
and
NOVELLUS SYSTEMS, INC.
BASIC IDENTIFICATION SIGN:
Each Tenant is allowed a basic identification sign to display company name in
11" microgramma letters the color of which shall match the accent stripe on the
building (Sherwin Williams BC 8621 to match Fuller O'Brien D-120 "Ink"). Logos
or symbols of the same construction as letters are allowed a maximum of 20" in
any one dimension, color may be determined by Tenant and approved by ownership.
Letters and logos are to be non-illuminated and individually mounted with the
building facade providing the background. Corporate or company names will be
listed in capital letters only, no lower case letters are allowed. Letter
height will remain consistent at 11" with the length of the sign varying
according to the length of the name displayed. Logos or symbols are to be
centered from top to bottom in the sign area. Names will be mounted below the
accent stripe, and to the left or right side depending upon Tenant's front door
location. Logo placement is dependent upon sign location. This Tenant building
sign will be restricted to company or corporate name and logo or symbol only, no
division names, descriptions of services or slogans are allowed in this sign
area.
WINDOW SIGNS
Identity signs displaying trademarks or logos may be used on the glass panel to
the left or the right of the entrance door depending upon location of basic
identification sign (see above), i.e., if identification sign is mounted to the
RIGHT of the outside window frame, then window sign would be placed on glass
panel to the left of the entrance door (see Exhibit A). These signs may be
either painted or pressure sensitive vinyl or a combination of both. Company
names shall be listed in 3" white pressure sensitive capital letters in the
microgramma style. Logos and symbols may be in corporate colors as determined
by Tenant. Tenant is required to submit a layout to the ownership for final
approval.
REAR LOADING SIGNS:
Each Tenant will be allowed to identify its rear door for shipping and receiving
purposes. The company name shall be placed on a 36" x 24" aluminum panel
adjacent to the rear doors. The aluminum panel shall be painted to match the
building.
Copy shall consist of 3" dark blue vinyl capital letters only in Futura Bold
style. Company names and logos only are allowed.
MANAGEMENT RESERVES THE RIGHT TO DENY ANY COPY IT CONSIDERS UNSUITABLE. LAYOUT
IS TO BE APPROVED BY BUILDING MANAGEMENT. THE COST OF ALL LETTERING AND LOGOS
WILL BE THE RESPONSIBILITY OF THE TENANT. NO OTHER SIGNS ARE ALLOWED IN THE
WINDOWS OR DOORS.
<PAGE>
ADDENDUM H
ASSIGNMENT AND SUBLETTING (CONSENT)
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED May 3, 1996, BETWEEN
SECURITY CAPITAL INDUSTRIAL TRUST
and
NOVELLUS SYSTEMS, INC.
In the event any of the terms and conditions of this Addendum H conflict
with any of the terms and conditions of Paragraph 17 of the Lease, the
conflicting terms and conditions of this Addendum H shall supersede and control.
(a) Landlord shall not unreasonably withhold its consent to Tenant's
request for permission to assign the Lease or sublease all or part of the
Premises. It shall be reasonable for the Landlord to withhold its consent to
any assignment or sublease in any of the following instances:
(i) The assignee or subleases does not have a net worth calculated
according to generally accepted accounting principles at least equal to
$5,000,000; provided that the criterion contained in this subparagraph (i)
may not serve as a basis for Landlord to reasonably withhold its consent if
at the time of such assignment or subletting to an entity whose net worth
calculated according to generally accepted accounting principles is less
than $5,000,000, Tenant provides Landlord with an unconditional,
irrevocable $115,000 letter of credit in a form, from a bank, and
containing terms, satisfactory to Landlord, securing Tenant's, and such
assignee's or sublessee's, obligation to (a) demolish and remove from the
Premises all improvements Tenant is obligated to remove in accordance
with Paragraphs 12 and 21 of the Lease, and (b) after such demolition and
removal, restore the Premises to the condition required by such Paragraphs
12 and 21. Unless otherwise permitted by Landlord, such letter of credit
must stay in effect until after all of Tenant's, and such assignee's or
sublessee's, obligations under the Lease have been completely satisfied.
(ii) The intended use of the Premises by the assignee or
sublessee is not reasonably satisfactory to Landlord;
(iii) The intended use of the Premises by the assignee or
sublessee would materially increase the pedestrian or vehicular traffic to
the Premises or the Project;
(iv) Occupancy of the Premises by the assignee or sublessee
would, in Landlord's opinion, violate any agreement binding upon Landlord
or the Project with regard to the identity of tenants, usage in the
Project, or similar matters;
(v) The identity or business reputation of the assignee or
sublessee will, in the good faith judgment of Landlord, tend to damage the
goodwill or reputation of the Project;
(vi) The assignment or sublet is to another tenant in the Project
and is at rates which are below those charged by Landlord for comparable
space in the Project;
(vii) In the case of a sublease, the subtenant has not
acknowledged that the Lease controls over any inconsistent provision in the
sublease; or
(viii) The proposed assignee or sublessee is a government entity.
The foregoing criteria shall not exclude any other reasonable basis for
Landlord to refuse its consent to such assignment or sublease.
(b) Any approved assignment or sublease shall be expressly subject to the
terms and conditions of the Lease.
(c) Tenant shall provide to Landlord all information concerning the
assignee or sublessee as Landlord may request.
(d) Landlord may revoke its consent immediately and without notice if, as
of the effective date of the assignment or sublease, there has occurred and is
continuing any default under the Lease.
<PAGE>
ADDENDUM I
INDEMNIFICATION BY LANDLORD
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED May 3, 1996, BETWEEN
SECURITY CAPITAL INDUSTRIAL TRUST
and
NOVELLUS SYSTEMS, INC.
Landlord covenants and agrees to indemnify and save Tenant, its employees
and agents harmless of and from any and all claims, costs, expenses and
liabilities, including, without limitation, attorneys' fees, arising on
account of or by reason of claims by third parties for injuries or death to
persons or damages to property resulting from the negligence or willful
misconduct of Landlord or its agents, employees, or contractors, to the
extent not attributable to any negligence of Tenant, any assignee or
subtenant of Tenant, or their respective employees, agents, or contractors.
If a claim under the foregoing indemnity is made against the indemnitee which
the indemnitee believes to be covered by an indemnitor's indemnification
obligations hereunder, the indemnitee shall promptly notify the indemnitor of
the claim and, in such notice shall offer to the indemnitor the opportunity
to assume the defense of the claim within 10 business days after receipt of
the notice (with counsel reasonably acceptable to the indemnitee). If the
indemnitor timely elects to assume the defense of the claim, the indemnitor
shall have the right to settle the claim on any terms it considers reasonable
and without the indemnitee's prior written consent, as long as the settlement
shall not require the indemnitee to render any performance or pay any
consideration, and the indemnitee shall not have the right to settle any such
claim. If the indemnitor fails timely to elect to assume the defense of the
claim or fails to defend the claim with diligence, then the indemnitee shall
have the right to take over the defense of the claim and to settle the claim
on any terms the indemnitee considers reasonable. Any such settlement shall
be valid as against the indemnitor. If the indemnitor assumes the defense of
a claim, the indemnitee may employ its own counsel but such employment shall
be at the sole expense of the indemnitee. If any such claim arises out of
the negligence of both Landlord and Tenant, responsibility for such claim
shall be allocated between Landlord and Tenant based on their respective
degrees of negligence. This indemnity does not cover claims arising from the
presence or release of Hazardous Materials.
<PAGE>
TENANCY AGREEMENT
(OFFICE)
<PAGE>
DATED THIS 14 DAY OF MARCH 1996
-------------------------------
BETWEEN
UOL PROPERTY INVESTMENTS PTE LTD
...Landlord
AND
NOVELLUS SINGAPORE PTE LTD
...Tenant
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TENANCY AGREEMENT
(OFFICE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
C:\WPDOC\UOL-PROP.INV\OFFICE.LSE\NOVELLUS\NOVELLUS.LSE (8 January 1996)
HELEN YEO & PARTNERS
ADVOCATES & SOLICITORS
11 COLLYER QUAY
#12-01 THE ARCADE
SINGAPORE 049317
<PAGE>
CONTENTS
--------
CLAUSE HEADING PAGE
- ------ ------- ----
1. INTERPRETATION 1
2. DEMISE, COMMENCEMENT AND RENEWAL 3
3. TENANT'S COVENANTS 3
3.1 RENTS 3
3.2 PAYMENT OF INCREASED MAINTENANCE 4
AND SERVICE CHARGES
3.3 DEPOSIT 6
3.4 INCREASE IN PROPERTY TAX 7
3.5 UTILITY CHARGES 7
3.6 INSURANCE 8
3.7 PERMITTED USE OF DEMISED PREMISES 9
3.8 REPAIR AND USE OF DEMISED PREMISES 9
3.9 ALTERATIONS 10
3.10 DAMAGE TO DEMISED PREMISES 11
3.11 TO PERMIT LANDLORD TO INSPECT 11
3.12 TO PERMIT LANDLORD TO ENTER AND REPAIR 11
3.13 NO ASSIGNMENT 12
3.14 ACCESS TO DEMISED PREMISES 12
3.15 REQUIREMENTS OF PUBLIC AUTHORITIES 12
3.16 REPAIR OF CHATTELS 12
3.17 PROPERTY IN CHATTELS 13
3.18 REPAIR ON TERMINATION OF TENANCY 13
3.19 COSTS INCURRED BY LANDLORD 13
3.20 PAYMENT OF GOODS AND SERVICES TAX 14
<PAGE>
ii.
CLAUSE HEADING PAGE
- ------ ------- ----
3.21 INDEMNITIES BY TENANT 14
4. LANDLORD'S COVENANTS 15
4.1 QUIET POSSESSION 16
4.2 PROPERTY TAX 16
4.3 MANAGEMENT OF COMMON AREAS 16
5. LANDLORD NOT LIABLE 17
5.1 NO CLAIM BY TENANT 17
5.2 ACCIDENTS 18
6. PROVISOS 18
6.1 PROVISO FOR RE-ENTRY 19
6.2 LANDLORD'S RIGHT TO REMEDY 19
TENANT'S DEFAULT
6.3 INTEREST ON MONEY OVERDUE 20
6.4 LANDLORD'S RIGHTS AGAINST 20
TENANT'S GOODS
6.5 WAIVER 21
6.6 ALTERATIONS TO ADJOINING 21
PROPERTIES AND BUILDING
6.7 PARKING FACILITIES 21
6.8 NOTICES 21
6.9 COSTS OF TENANCY 22
6.10 INSPECTION BY PURCHASERS/TENANTS 22
6.11 EFFECT OF RULES AND REGULATIONS 23
<PAGE>
iii.
CLAUSE HEADING PAGE
- ------ ------- ----
6.12 RULES AND REGULATIONS 23
6.13 EXCLUSION OF IMPLIED TERMS ETC 23
6.14 EASEMENTS 24
6.15 LIMITATION OF LANDLORD'S OBLIGATIONS 24
6.16 PUBLIC ADDRESS SYSTEM 24
6.17 TERMINATION OR ABATEMENT ON DAMAGE 25
6.18 RIGHT TO DISTRAIN 26
7. GOVERNING LAW AND SUBMISSION TO JURISDICTION 26
SCHEDULE A 27
- CHATTELS AND FITTINGS IN DEMISED
PREMISES
SCHEDULE B 28
- RULES AND REGULATIONS OF THE BUILDING
ANNEXURE 36
- PLAN OF DEMISED PREMISES
<PAGE>
THIS AGREEMENT is made the 14 day of March 1996
BETWEEN
1. UOL PROPERTY INVESTMENTS PTE LTD, a company incorporated in the
Republic of Singapore and having its registered office at 101 Thomson
Road, #33-00 United Square, Singapore 307591 (hereinafter called the
"Landlord") of the one part;
AND
2. NOVELLUS SINGAPORE PTE LTD, a company incorporated in the Republic of
Singapore and having its registered office at 36 Robinson Road, #18-01
City House, Singapore 068877 (hereinafter called the "Tenant") of the
other part.
NOW THIS AGREEMENT WITNESSES AS FOLLOWS:-
1. INTERPRETATION
In this Agreement where the context admits or unless the contrary
intention appears:-
(a) "Building" means the building located at 101 Thomson Road,
Singapore 307591 and known as UNITED SQUARE in which the Demised
Premises are located and refers to each and every part of the
Building, and the car parks, service, loading and any other
areas the use and enjoyment of which are appurtenant to the
Building;
(b) "Business Day" means a day when banks in Singapore are open for
business (excluding Saturdays, Sundays and public holidays);
(c) "Business Hours" means the hours between 8:00 a.m. and 6:00 p.m.
on weekdays and 8:00 a.m. and 1:00 p.m. on Saturdays (Sundays and
gazetted public holidays excepted) or such hours as the Landlord
may prescribe at any time and from time to time;
(d) "Chattels" means the chattels and fittings an inventory of which
is annexed as Schedule A;
(e) "Common Area" means those parts areas premises and facilities of
and in the Building which are not demised or intended to be
demised to the Tenant or to any other tenant and which are now or
hereafter provided for the common or general use by or benefit of
tenants of premises in the Building and their respective employees
agents customers and invitees in common with the Landlord and all
other persons having the like right to use the same (including but
without limiting the generality of the foregoing all roads walls
walkways
<PAGE>
- 2 -
pavements passages entrances courts vestibules halls toilets
stairways elevators and gardens and such other areas amenities
ground and conveniences) but shall exclude all the car parks in
the Building.
(f) "Demised Premises" means all that premises known as 101 Thomson
Road, #21-01/02 United Square, Singapore 307591, and containing an
area of 273.04 square meters/2,939 square feet on the twenty-first
storey in the Building, the boundaries and location of which are
shown in the plan attached as the Annexure, excluding the exterior
faces of external walls, the exterior faces of boundary walls and
the roof;
(g) "Landlord" means and includes the Landlord and its successors and
assigns and all persons entitled to the reversion immediately
expectant upon the determination of this Agreement;
(h) "Outgoings of the Building" shall have the meaning ascribed in
Clause 3.2.2;
(i) "Rents" means the rent, hire charge and maintenance and service
charge payable by the Tenant in accordance with Clause 3;
(j) "Rent Payment Dates" means 1 January, 1 April, 1 July and 1
October of each year and "Rent Payment Date" refers to each such
date;
(k) "Tenant" means and includes the Tenant and its successors in title
and permitted assigns;
(l) words importing the singular number shall include the plural and
masculine gender the feminine or neuter and vice versa and words
importing persons shall include corporations, companies and firms
and vice versa;
(m) headings of clauses and marginal notes are for guidance only and
shall not be deemed to form any part of the context; and
(n) in any case where the Tenant is placed under a restriction by
reason of the covenants and conditions in this Agreement, the
restriction shall be deemed to include the obligation of the
Tenant not to permit or allow the infringement of the restriction
by any of the Tenant's servants agents sub-tenants customers
invitees licensees independent contractors or any other person
claiming through or under the Tenant.
<PAGE>
- 3 -
2. DEMISE, COMMENCEMENT AND RENEWAL
2.1 The Landlord hereby grants and the Tenant hereby takes a tenancy for
the term of three (3) years of the Demised Premises together with the
Chattels. The term of the said tenancy shall commence on the 1st day
of February 1996 and expire on the 31st day of January 1999.
2.2 The Tenant may renew the tenancy of the Demised Premises for a further
term of three (3) years after the expiration of the term hereby created
by giving the Landlord written notice of its intention to renew the
tenancy of the Demised Premises not later than six (6) months before
the expiration of the term hereby created. If there shall be at the
time of the service of such notice and at the expiry of the term hereby
created, no existing breach or non-observance of any of the Tenant's
obligations or covenants under this Agreement, the Landlord shall at
the cost of the Tenant grant to the Tenant a further term of the
Demised Premises for a period of three (3) years at the revised Rents
based on the prevailing market rate and containing the same covenants
and conditions as herein contained (this present covenant for renewal
excepted). In the event that the revised Rents as determined by the
Landlord are not accepted by the Tenant and/or if the Tenant shall fail
to sign the fresh agreement for the renewed term within one month of
the Tenant's receipt of the Landlord's proposed revised Rents, then
this option shall lapse and the Landlord shall be free of all
obligations whatsoever to grant to the Tenant a further tenancy and in
such an event, the Tenant shall at the expiration of the term hereby
created yield up and surrender the Demised Premises to the Landlord in
accordance with Clause 3.16 hereof.
3. TENANT'S COVENANTS
The Tenant hereby covenants with the Landlords as follows:-
3.1 RENTS
The Tenant shall pay to the Landlord the following Rents clear of all
deductions and without any demand and so that there shall be no
abatement thereof by reason of any claim by the Tenant against the
Landlord whether for non-performance or breach of the Landlord's
obligations hereunder or otherwise:-
(a) the quarterly rent of $55,547.10 in respect of the Demised
Premises;
(b) the quarterly hire charge of $ 3,526.80 for the Chattels in
respect of the Demised Premises; and
<PAGE>
- 4 -
(c) the quarterly maintenance and service charge of $7,053.60 in
respect of the Demised Premises
PAYABLE in advance on each Rent Payment Date in each year during the
term of this tenancy
TOGETHER with goods and services tax ("GST") charged at the rate of
three per cent (3%) on the Rents (as the same may be varied in
accordance with the provisions of this Agreement) or at such other rate
or rates as may be charged from time to time under the provisions of
the Goods and Services Tax Act (Cap. 117A)
PROVIDED THAT if the commencement date of the term of the tenancy does
not coincide with a Rent Payment Date the first payment of the Rents
together with GST shall be paid on the commencement date and
proportionately for the period from the commencement date to the day
immediately preceding the next Rent Payment Date and thereafter the
Rents together with GST shall be paid on each succeeding Rent Payment
Date.
3.2 PAYMENT OF INCREASED MAINTENANCE AND SERVICE CHARGES
3.2.1 If there is any increase in the Outgoings of the Building, the Tenant
shall be liable to pay an additional maintenance and service charge in
each and every month representing the apportioned extra costs as is
attributable to the Demised Premises. For the purpose of ascertaining
the additional maintenance and service charge payable all increases in
the Outgoings of the Building shall be apportioned in the proportion by
which the floor area of the Demised Premises bears to the total area
of the rentable floor space in the Building including any floor space
occupied by the Landlord and a statement (hereinafter called "the said
Certificate") by the Landlord certifying the amount of the increase in
Outgoings of the Building on a per square metre basis and the effective
date of such increase shall be accepted by the Tenant as conclusive and
binding of the matters so certified save for manifest error. The
increase in maintenance and service charge shall be chargeable and
payable with effect from the date specified in the said Certificate as
the effective date of the increase in Outgoings of the Building. If
there shall be any additional maintenance and service charge payable
from a date prior to the issuance of the said Certificate the aggregate
amount of such additional maintenance and service charge shall be
payable by the Tenant forthwith upon the issuance of the said
Certificate. Additional maintenance and service charge for the period
after the issuance of the said Certificate shall be added to the
prevailing maintenance and service charge and such aggregate sum shall
be and remain the maintenance and service charge
<PAGE>
- 5 -
payable under this Agreement until any further increase from time to
time by the Landlord under this Clause.
3.2.2 OUTGOINGS OF THE BUILDING
Without limiting the generality of the foregoing the term "Outgoings of
the Building" where used in this Agreement shall include the total sum
of all outgoings, costs and expenses of the Landlord properly or
reasonably assessed or assessable, charged or chargeable, paid or
payable or otherwise incurred in respect of the Building (including in
such term for the purposes of this Clause the curtilage of the Building
and all levels thereof including, but without limiting the generality
of the foregoing, those levels below ground level whether used for the
parking of motor vehicles or otherwise) and in the control, management,
maintenance of the Building and in particular but without limiting the
generality of the foregoing shall include:-
(a) all charges for and costs in relation to the supply of water and
removal of all sewerage waste and other garbage from the Building
and the land on which the Building is erected;
(b) all amounts payable in respect of insurances relating to the
Building and the equipment and appliances therein including but
without limiting the generality of the foregoing fire and public
liability insurance, theft/burglary insurance of contents in the
Building, and the workmen's compensation/common law liability
insurance for the personnel engaged in the operation and
maintenance of the Building;
(c) all reasonable costs in relation to management, control and
administration of the Building including the employment or
engagement of security staff and attendants;
(d) the costs of uniforms, salaries, wages, bonuses, allowances and
other emoluments, remuneration and benefits of all personnel
engaged exclusively in the operation and maintenance of the
Building as well as payroll tax and Central Provident Fund and
other statutory contributions or charges in respect thereof;
(e) the costs of operating and maintaining the Building and supplying
all services from time to time provided for tenants and occupiers
of the Building including but without limiting the generality of
the foregoing repairs and replacements, repainting and
redecoration of the Building and the maintenance, repair,
renovation and amortization of all lifts, air-conditioning plants,
escalators, fire and security alarm systems, fire-fighting
equipment and other plant and equipment required in connection
with any of such services;
<PAGE>
- 6 -
(f) all charges (including taxes thereon) for lighting, power,
air-conditioning, escalators and ventilation incurred in
connection with the Building;
(g) all charges for the cost of the cleaning of the exterior of the
Building (including all windows) and the Common Area;
(h) the expenses of the Landlord in supplying paper, soap and other
toilet supplies in the Building;
(i) all costs and charges for landscaping and other environmental
improvements or maintenance of the Building;
(j) all fees and charges of managing agents employed for the carrying
out and provision of services for the Building;
(k) all fees and charges of auditors, accountants and other
professional consultants engaged exclusively in connection with
the provision of services for the Building;
(l) all sums in each year as may be set aside as a fund to cover
repairs, renovations, painting, replacements and maintenance of a
substantial but infrequent or irregular nature of the Building and
the plant machinery and electrical and other apparatus therein
including lifts, air-conditioning plant, fire fighting, security
and alarm equipment and depreciation of the same and any
replacements thereof; and
(m) all items of expenditure incurred in carrying out all other works,
acts, matters or things or in providing all such other services or
amenities of any kind whatsoever in relation to any Common Area.
3.3 DEPOSIT
The Tenant shall on or before the execution of this Agreement pay to
the Landlord the sum of $68,111.33 representing three (3) months' Rents
together with GST thereon as mentioned in Clause 3.1 which shall be
held by the Landlord as a deposit for the due observance and
performance by the Tenant of the Tenant's covenants and conditions
herein contained and the Landlord shall at the end or sooner
determination of the term hereby created refund to the Tenant the said
deposit free of interest less all costs and expenses payable by the
Tenant hereunder PROVIDED ALWAYS that if the Tenant fails to observe
and perform any of the agreements and stipulations herein contained and
on the Tenant's part to be observed and performed and shall not have
remedied the same within seven (7) days from the date of the Landlord's
notice specifying the breach complained of and requiring remedy of the
<PAGE>
- 7 -
same it shall be lawful for the Landlord to deduct from the said
deposit such sum or sums as may be necessary and reasonable to make
good and satisfy such damages and losses arising from the Tenant's
failure but without prejudice to the right of action of the Landlord
against the Tenant in respect of any antecedent breach of any of the
agreements or stipulations herein contained on the part of the Tenant
to be observed and performed or any claim arising from the Tenant's
failure as aforesaid in excess of the said deposit. Upon adjustment or
revision of the Rents for the time being payable by the Tenant to the
Landlord hereunder the said deposit shall likewise be adjusted or
revised and the Tenant shall pay on demand to the Landlord the
difference thereof Provided Always that the sum held by the Landlord
shall be maintained so as to represent at all times three (3) months'
Rents together with GST thereon as aforesaid and shall not without the
prior written consent of the Landlord be deemed to be or treated as
payment of Rents or any part thereof or any sums owing to the Landlord.
3.4 INCREASE IN PROPERTY TAX
The Tenant shall pay as and when required by the Landlord an additional
amount levied and imposed upon or in respect of or attributable to the
Demised Premises over and above the amount of such rates or assessment
of property tax or other impositions levied and imposed as at the date
of the commencement of the term hereby created and in the event of the
Demised Premises not being separately assessed to pay as and when
required by the Landlord an additional amount attributable to the
Demised Premises in the same proportion as the area of the Demised
Premises bears to the total lettable area of the premises included in
the assessment received by the Landlord for the period of assessment
Provided That this obligation on the part of the Tenant shall not be
extinguished by the determination of this Agreement whether by the
effluxion of time or otherwise until the said obligation, provided that
such taxes relate to or are payable in respect of the term of the
tenancy, shall have been fulfilled by the Tenant.
3.5 UTILITY CHARGES
The Tenant will pay all charges (including any taxes) for electricity
water and gas separately metered and consumed in or on the Demised
Premises and will also pay all charges in respect of any telephone
services connected to the Demised Premises and all other charges and
impositions imposed by public utility or authority for the supply of
any service separately supplied to the Demised Premises.
<PAGE>
- 8 -
3.6 INSURANCE
3.6.1 PUBLIC RISK POLICY
The Tenant will at its own cost and expense effect and keep effected in
respect of the Demised Premises at all times during the continuance of
this tenancy a public risk policy in such amount as may be reasonably
required by the Landlord from time to time. Without limiting or
prejudice to the above, the amount of insurance in respect of any
single accident shall not be less than Dollars Five Hundred Thousand
($500,000.00).
3.6.2 INSURANCE OF PLATE GLASS
The Tenant will insure in the joint names of the Landlord and the
Tenant and in such amount (being not less than the full insurable
value) and against such risk as the Landlord may require all plate
glass windows doors and display showcase at or upon the Demised
Premises.
3.6.3 INSURERS
All policies of insurance liable or required to be effected by the
Tenant hereunder whether in respect of the property or risk either of
the Landlord or the Tenant shall be taken out with substantial and
reputable insurance companies approved by the Landlord, such approval
not to be unreasonably withheld.
3.6.4 PRODUCTION OF POLICY
The Tenant will in respect of any policy of insurance to be effected by
the Tenant hereunder if required by the Landlord forthwith produce to
the Landlord the policy of insurance and the receipts for payment of
the latest premium of such insurance within fourteen (14) days from the
Landlord's written notice requiring the same to be produced.
3.6.5 TENANT NOT TO VOID INSURANCE
The Tenant will not at any time during the said term do or permit or
suffer to be done any act matter or thing upon the Demised Premises
whereby any insurances in respect thereof or the Building may be
vitiated or rendered void or voidable or (except with the approval in
writing of (such approval not to be unreasonably withheld) and subject
to any reasonable conditions specified by the Landlord) whereby the
rate of premium on any insurance shall be liable to be increased.
<PAGE>
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3.7 PERMITTED USE OF DEMISED PREMISES
The Tenant will not use or permit to be used the Demised Premises or
any part thereof otherwise than as administrative office in connection
with the Tenant's business as carried on by the Tenant at the date of
execution of this Agreement which shall not be varied without the prior
written consent of the Landlord and will not permit or suffer the use
of the same or any part thereof for any other purpose or for any
residential purpose whether temporary or permanent.
3.8 REPAIR AND USE OF DEMISED PREMISES
3.8.1 The Tenant will during the whole of the said term and for so long as
the Tenant may remain in possession or occupation of the Demised
Premises when where and so often as need shall be maintain repair and
keep the whole of the Demised Premises in good and substantial repair
working order and condition (damage by fire flood lightning storm
tempest Act of God war damage and reasonable wear and tear only
excepted).
3.8.2 The Tenant will without prejudice to the generality of Clause 3.8.1
hereof at the Tenant's expense:-
(a) CLEANING OF DEMISED PREMISES
cause the Demised Premises to be cleaned in a proper and
workmanlike manner and during the whole of the term of this
tenancy to be kept clean and free from dirt and rubbish and in
particular shall store and keep all trade waste trash and garbage
in proper receptacles and arrange for the regular removal thereof
from the Demised Premises to such proper receptacles thereof as
are provided by the Landlord;
(b) DAMAGE TO COMMON AREA
from time to time make good any breakage defect or damage to the
Common Area or any adjoining premises or any facility or
appurtenances thereof occasioned by want of care misuse or abuse
on the part of the Tenant or its servant agent sub-tenant customer
invite licensee independent contractor or any other persons
claiming through or under the Tenant or otherwise occasioned by
any breach or default of the Tenant hereunder or under any rules
and regulations of the Landlord made pursuant hereto;
(c) REPLACEMENT OF BREAKAGES
from time to time immediately repair and replace all breakages at
the
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Demised Premises, in particular but without limiting the foregoing
to replace any damaged glass of any exterior windows with glass of
similar quality subject to the approval of the Landlord and to
replace all damaged lighting electrical equipment (including light
globes and fluorescent tubes) and plumbing installed upon the
Demised Premises;
(d) COMPLIANCE WITH STATUTES/ACTS
from time to time forthwith comply with all statutes ordinances
proclamations orders or regulations present or future affecting or
relating to the use of the Demised Premises (including but not
limited to the Fire Safety Bureau's regulations in respect of any
partitions erected by the Tenant at the Demised Premises) insofar
as the same relates to the Tenant as tenant of the Demised
Premises and the conduct of the Tenant's business thereon and with
all requirements which may be made or notices or orders which may
be given by any governmental semi-governmental health licensing
civic or any other authority having jurisdiction or authority over
or in respect of the Demised Premises or the user thereof
directly applicable to the Tenant as tenant of the Demised
Premises and will keep the Landlord indemnified in respect of all
such matters referred to herein Provided Always that the Tenant
shall be under no liability in respect of any structural
alterations the requirement for which was not caused or
contributed to by the Tenant's use or occupation of the Demised
Premises; and
(e) REMOVAL OF SIGNS
upon vacating the Demised Premises or immediately prior thereto
remove any signs names advertisements or notices erected painted
displayed affixed or exhibited upon to or within the Demised
Premises and make good any damage or disfigurement caused by the
erection painting displaying affixing exhibiting or removal
thereof.
3.9 ALTERATIONS
The Tenant will not without the prior written consent of the Landlord
make any alteration or addition in or to the Demised Premises or any
part thereof and in particular the Tenant will not install any
partitions or structures inside or outside the Demised Premises or
water gas or electrical fixtures equipment or appliances or any
apparatus for illuminating air-conditioning cooling or ventilating the
Demised Premises. The Landlord shall not withhold its consent
unreasonably. In the course of such alterations or additions made with
the consent of the Landlord the Tenant shall, at its own cost, obtain
all relevant permits, consents
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and licences and shall observe and comply with the requirements of the
Landlord and the competent authorities.
3.10 DAMAGE TO DEMISED PREMISES
The Tenant will not mark paint drill or in any way deface any wall
ceiling partition floor wood or other parts of the Demised Premises
except where such action is required or necessary for renovation in
accordance with such plans which have been approved by the Landlord.
3.11 TO PERMIT LANDLORD TO INSPECT
The Tenant will permit the Landlord and its architects, surveyors,
contractors, workmen and agents (with or without equipment), at all
times after reasonable notice has been given to the Tenant (except in
case of emergency when no notice shall be required), to enter upon the
Demised Premises and view the state of repair thereof. The Landlord
may serve upon the Tenant a notice in writing of any defect for the
repair of which the Tenant may be responsible hereunder requiring the
Tenant within a reasonable time to repair the same. In default of the
Tenant so doing it shall be lawful for the Landlord from time to time
to enter and execute the required repairs and for this purpose the
Landlord and its architects, surveyors, contractors, workmen and agents
(with or without equipment) may enter upon the whole or any part of the
Demised Premises and there remain for the purpose of doing erecting or
effecting any such thing and any expenses and cost of carrying out such
work shall be payable by the Tenant to the Landlord immediately on
demand.
3.12 TO PERMIT LANDLORD TO ENTER AND REPAIR
The Tenant will permit the Landlord and its architects, surveyors,
contractors, workmen and agents (with or without equipment), at all
times after reasonable notice has been given to the Tenant (except in
case of emergency when no notice shall be required) to enter and carry
out repairs renovations maintenance or alterations to the Demised
Premises or to the Common Area or the Building or any part thereof in
compliance with the Landlord's obligations under the provisions of this
Agreement or otherwise to comply with any obligation on the Landlord
affecting the Demised Premises or the Common Area or the Building or
any part thereof or otherwise deemed necessary or desirable by the
Landlord Provided Always that the exercise of such power is carried out
in a reasonable manner.
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3.13 NO ASSIGNMENT
The Tenant shall not transfer, assign, sublet or licence or in any way
encumber its rights or obligations or interests in this Agreement or
the Demised Premises or any part thereof or in any way dispose of or
part with or share possession or occupation of the Demised Premises or
any part thereof without the prior consent in writing of the Landlord.
For the purposes hereof any amalgamation and/or reconstruction effected
by the Tenant (if a company) shall be deemed an assignment of this
tenancy in respect of the Demised Premises and shall require the prior
written consent of the Landlord as aforesaid.
3.14 ACCESS TO DEMISED PREMISES
The Tenant will permit the persons for the time being having the
contract for the cleaning of the Building and its servants agents
contractors and sub-contractors to enter the Demised Premises or any
part thereof for the purpose of cleaning the exterior of the windows
thereof during the normal business hours of the Building.
3.15 REQUIREMENTS OF PUBLIC AUTHORITIES
If any time during the said term any authority having jurisdiction or
authority over or in respect of the Demised Premises or the user
thereof or of the Building requests requires notifies or orders any
structural alterations re-alterations additions conversion improvements
or other works to be made in about or to the Demised Premises or the
Building (the effecting of which necessitates access to the Demised
Premises) the Tenant will at all times permit the Landlord to enter the
Demised Premises or any part thereof for the purpose of making any such
structural alterations additions conversion improvements or other works
or any of them aforesaid Provided Always that in the exercise of such
power no undue inconvenience disruption or interference is caused to
the Tenant or to the Tenant's business at the Demised Premises.
3.16 REPAIR OF CHATTELS
The Tenant will:-
(a) during the whole of the term of this Agreement and otherwise so
long as the Tenant may use or remain in possession of the Chattels
maintain repair and keep the Chattels in good substantial repair
working order and condition (damage by fire, flood, lightning,
storm, tempest, Act of God, war damage, fair wear and tear
excepted); and
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(b) at the expiration or sooner determination of this Agreement unless
renewed pursuant to an option granted to the Tenant to renew the
tenancy peaceably surrender and yield up unto the Landlord the
Chattels and every part thereof in good and substantial repair
order and condition in all respects and clean and free from
rubbish (damage by fire flood lightning storm tempest Act of God
war damage and reasonable wear and tear only excepted) unless such
damage is caused by, or any policy or policies of insurance shall
have been vitiated or payment of insurance moneys is refused in
whole or in part in consequence of, any act the neglect default or
misconduct of the Tenant, its servants agents sub-tenants
customers invitees licensees independent contractors or any person
claiming through or under the Tenant.
3.17 PROPERTY IN CHATTELS
The Tenant shall not sell or offer for sale assign mortgage pledge hire
lend or otherwise deal with the Chattels or any of them in a manner
prejudicial to the Landlord's rights and ownership thereof and shall
keep the Chattels in the Demised Premises and shall not remove the same
or any of them from the Demised Premises and shall protect the Chattels
against execution or seizure and the Tenant shall indemnify the
Landlord against all losses costs charges damage and expenses incurred
by the Landlord by reason or in respect thereof.
3.18 REPAIR ON TERMINATION OF TENANCY
Upon the expiration or any sooner determination of this Agreement
(unless renewed pursuant to an option granted to the Tenant to renew
the Tenancy) to yield up the Demised Premises with the Chattels thereto
(including all the Tenant's alterations and additions but excepting
those which have been required by the Landlord to be removed) in good
and tenantable repair and condition in accordance with the Tenant's
covenants herein contained, fair wear and tear excepted. The Tenant
will make good to the reasonable satisfaction of the Landlord all
damage to the Demised Premises and the Building resulting from the
removal of the Tenant's belongings, reinstatement or redecoration of
the Demised Premises.
3.19 COSTS INCURRED BY LANDLORD
To reimburse the Landlord for all costs fees and expenses (including
costs for the Landlord's solicitors on a full indemnity basis) incurred
by the Landlord for or in the recovery or attempted recovery of any
outstanding
<PAGE>
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Rents or any moneys whatsoever owed by the Tenant in respect of the
Demised Premises or for the enforcement or attempted enforcement of any
covenant hereby created including but not limited to the Landlord
engaging solicitors for the said purposes Provided that this obligation
on the part of the Tenant shall not be extinguished by the
determination of this Agreement whether by the effluxion of time or
otherwise until the said obligation shall have been fulfilled by the
Tenant.
3.20 PAYMENT OF GOODS AND SERVICES TAX
3.20.1 Notwithstanding any other provision herein relating to the payment of
goods and services tax on the Rents the Tenant hereby further covenants
with the Landlord to pay goods and services tax charged by any
governmental authority, authorised person and/or agency under the Goods
and Services Tax Act (Cap. 117A) in relation to:-
(a) the supply of goods and services whatsoever or howsoever in
connection herewith by or on behalf of the Landlord;
(b) any payment made or to be made by the Tenant under any of the
terms hereof or in connection herewith or in respect of any
payment made by the Landlord which the Tenant has agreed herein to
reimburse the Landlord; and
(c) all other consideration for goods and services supplied hereunder
or in consequence hereof.
The Tenant shall pay such goods and services tax to the Landlord
contemporaneously with the payments made under sub-paragraphs (a), (b)
and (c) above or on demand by the Landlord whichever is the earlier.
3.20.2 The Tenant covenants with the Landlord to indemnify the Landlord
against any input tax in respect of goods and services supplied to the
Landlord in connection herewith or incidental hereto where the
corresponding supply of goods and services to the Tenant by the
Landlord is not taxable for any reason.
3.21 INDEMNITIES BY TENANT
3.21.1 The Tenant agrees to occupy use and keep the Demised Premises and the
Chattels at the risk of the Tenant and hereby releases to the full
extent permitted at law the Landlord and its agents servants contractors
invitees and employees from all claims and demands of every kind in
respect of or resulting from any accident damage or injury howsoever
caused
<PAGE>
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occurring in the Building or the Demised Premises and the Tenant
expressly agrees that the Landlord shall have no responsibility or for
any loss damage or injury suffered by the Tenant (whether to or in
respect of the Tenant's person or property or the business conducted by
the Tenant) as a result of any theft breakage leakage accident or event
in the Building or the Demised Premises.
3.21.2 The Tenant will and does hereby indemnify and hold harmless the
Landlord from and against all actions claims demands losses damages
costs and expenses for which the Landlord shall or may be or become
liable in respect of and to the extent that they arise from all or some
or any of the following:-
(a) the negligent use misuse waste or abuse by the Tenant or its
servant agent sub-tenant customer invitee licensee independent
contractor or any other persons claiming through or under the
Tenant of the water gas electricity oil lighting and other
services and facilities and appurtenances of the Demised Premises
or the Building;
(b) overflow or leakage of water (including rain water) in or from the
Demised Premises but having origin within the Demised Premises or
caused or contributed to by any act or omission on the part of the
Tenant or its servant agent sub-tenant customer invitee licensee
independent contractor or any other person claiming through or
under the Tenant;
(c) loss damage or injury from any cause whatsoever to property or
persons caused or contributed to by any occurrence in, upon or at
the Demised Premises or the use of the Demised Premises by the
Tenant or its servant agent sub-tenant customer invitee licensee
independent contractor or any other person claiming through or
under the Tenant;
(d) loss damage or injury from any cause whatsoever to property or
person within or without the Demised Premises or the Building
occasioned or contributed to by any act omission neglect breach or
default of the Tenant or its servant agent sub-tenant customer
invitee licensee independent contractor or any other person
claiming through or under the Tenant.
4. LANDLORD'S COVENANTS
The Landlord hereby covenants with the Tenant as follows:-
<PAGE>
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4.1 QUIET POSSESSION
To permit the Tenant duly paying the Rent and any other sums payable
hereunder and observing and performing its several covenants and
conditions herein contained to have quiet possession and enjoyment of
the Demised Premises during term hereby created without any
interruption by the Landlord or anyone claiming under or through or in
trust for the Landlord save as specifically herein provided.
4.2 PROPERTY TAX
To pay the property tax levied or charged on the Demised Premises
subject to the Tenant's payment of its portion of the property tax as
provided in this Agreement.
4.3 MANAGEMENT OF COMMON AREAS
Subject always to the provisions of Clause 5:-
(a) to maintain and keep clean and in repair the Common Area including
the exterior walls and all roads pavements gardens water drainage
lighting and other common facilities and services (fair wear and
tear excepted);
(b) to furnish reasonable illumination to the Common Area during the
term of this Agreement (except when the Building shall be closed)
and may also furnish such further or other illumination as the
Landlord may in the Landlord's absolute discretion deem to be
advantageous to the Tenant or to the Building;
(c) to keep the lifts in the Building working and available for use by
the Tenant and its employees and visitors during Business Hours.
At all other times the Landlord will endeavour to keep one or more
lifts in operation but nothing herein contained shall impose on
the Landlord any obligation so to do so and the Landlord shall not
be liable or responsible for delays or stoppages howsoever caused
or whensoever occurring during the said hours or otherwise;
(d) to keep the air-conditioning plant in the Building working during
Business Hours Provided Always that nothing herein contained shall
impose any requirement on the Landlord to keep the
air-conditioning facilities working at any other time and the
Landlord shall not be liable or responsible for any breakdown or
failure in the air-conditioning howsoever caused or whensoever
occurring during the said hours or otherwise. The Landlord may at
its absolute discretion provide air-conditioning facilities beyond
the specified hours at the
<PAGE>
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Tenant's request and subject to the Tenant agreeing to pay the
additional costs therefor but nothing herein contained shall
impose on the Landlord any obligation to do so Provided Always
that the Landlord may at its absolute discretion withhold add to
extend vary or make any alterations in the rendering of the said
services or any of them from time to time if the Landlord deems it
desirable so to do for the more efficient conduct and management
of the Building;
(e) to maintain in good and tenantable condition and repair (fair
wear and tear excepted) all apparatus equipment plant and
machinery including the passenger lifts the floor and water system
and the electric lighting appliances in the Common Area and all
sewers drains channels water courses gutters rainwater and soil
pipes sanitary apparatus pipes and cables and supply lines in
under or upon the Building which shall serve the same;
(f) to supply maintain repair and renew as need be such fire fighting
equipment in the Common Area as the Landlord may deem desirable or
necessary or as may be required to be supplied and maintained by
it by statute or by the fire authority;
PROVIDED ALWAYS that the manner of such maintenance, provision and
supply of services and the expenditure thereon shall be at the absolute
discretion of the Landlord.
5. LANDLORD NOT LIABLE
Notwithstanding anything herein contained:-
5.1 NO CLAIM BY TENANT
The Landlord shall not be liable to, nor shall any claim be made
against the Landlord by, the Tenant or its servant agent sub-tenant
customer invitee licensee independent contractor or any other person
claiming through or under the Tenant nor shall the Tenant be entitled
to terminate this tenancy due to any matter in respect of:-
(a) any interruption or failure in any of the services mentioned in
Clause 4.3 by reason of necessary repair or maintenance of any
installations or apparatus or damage thereto or destruction
thereof or by reason of mechanical or other defect or breakdown or
by reason of any circumstances whatsoever;
(b) any act, omission, default, misconduct or negligence of any
porter, attendant or other servant or employee, independent
contractor or
<PAGE>
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agent of the Landlord in or about the performance or purported
performance of any duty relating to the provision of the services
or any of them as mentioned in Clause 4.3;
(c) any damage, injury or loss arising out of the leakage or defect of
the piping, wiring and sprinkler system in the Building and/or the
structure of the Building;
(d) any damage, injury or loss caused by other tenants or persons in
the Building;
(e) any damage, injury or loss arising from or in connection with the
use of the carparks in the Building; and
(f) any diminution of light, air or view by any building or structure
erected within or adjacent to the Building.
5.2 ACCIDENTS
The Landlord shall not be responsible to the Tenant or to the Tenant's
servants agents sub-tenants customers invitees licensees independent
contractors nor to any other persons claiming through or under the
Tenant for any:-
(a) accident, happening or injury suffered in the Demised Premises or
in the Building;
(b) damage to or loss of any goods or property sustained in the
Building (whether or not due to the negligence or misconduct of
any security guards or the failure of any security system for
which the Landlord is in any way responsible); or
(c) act, omission or negligence of any employee of the Landlord in
respect of the Building,
howsoever occurring.
6. PROVISOS
Provided Always and it is hereby agreed as follows:-
<PAGE>
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6.1 PROVISO FOR RE-ENTRY
Notwithstanding anything herein contained, if the Rents hereby reserved
or any part thereof shall be unpaid for the space of fourteen (14) days
after it due date (although no formal or legal demand shall have been
made therefor) or if the Tenant commits permits or suffers to occur any
breach or default in the due and punctual observance and performance of
any of the covenants obligations and provisions of this Agreement or
any rules and regulations made hereunder or if an order is made or a
resolution is effectively passed for the winding-up of the Tenant
(except for the purpose of reconstruction or amalgamation with the
written consent of the Landlord which consent shall not be unreasonably
withheld) or if the Tenant becomes bankrupt or goes into liquidation or
makes an assignment for the benefit of or enters into an arrangement or
composition with its creditors or stops payment or is unable to pay its
debts within the meaning of the Companies Act for the time being in
force in the Republic of Singapore or if execution is levied against
the Tenant and not discharged within the thirty (30) days or if events
or circumstances analogous to any of the foregoing events occurs in
relation to the Tenant under the laws of any jurisdiction then and in
any one or more of such events the Landlord shall have the right at any
time thereafter to re-enter into and upon the Demised Premises or any
part thereof in the name of the whole and to repossess and enjoy the
same as of their former estate but without prejudice to any action or
other remedy which the Landlord has or otherwise could have for any
Rents or any other sums payable hereunder which are in arrears or in
respect of any breach as a result of any such event and thereupon the
Landlord shall be freed and discharged from any action suit claim or
demand by or obligation to the Tenant under or by virtue of this
tenancy.
6.2 LANDLORD'S RIGHT TO REMEDY TENANT'S DEFAULT
On each and every occasion on which the Tenant omits or neglects to pay
any money or to do or effect anything which the Tenant herein covenants
to pay do or effect and the Tenant continues to omit or neglect to pay
such money or to do or effect anything which the Tenant has covenanted
to pay or do within seven (7) days from the Landlord's written notice
specifying the omission, neglect or breach and requiring the Tenant to
remedy the same it shall be lawful for but not obligatory upon the
Landlord (and without prejudice to any rights and powers arising from
such default) to pay such money or to do or effect such thing by its
architects contractors workmen and agents as if the Landlord were the
Tenant and for that purpose the Landlord its architects contractors
workmen and agents may enter upon the Demised Premises at all
reasonable times by prior notice and there remain for the purpose of
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doing or effecting any such thing and the Landlord may on demand
recover from the Tenant the amount expenses and cons of such payment
doing or effecting forthwith and/or may deduct the same from the
deposit hereinbefore mentioned.
6.3 INTEREST ON MONEY OVERDUE
Without prejudice to the rights powers and remedies of the Landlord
otherwise under this Agreement the Tenant will pay to the Landlord
interest at the rate of twelve per cent (1.2%) per annum on any Rents
or any other sums hereby reserved or any part thereof due but unpaid for
fourteen (14) days after it due date such interest to be computed from
the due date for the payment of the moneys in respect of which the
interest is chargeable until payment of such moneys in full is received
by the Landlord.
6.4 LANDLORD'S RIGHTS AGAINST TENANT'S GOODS
Notwithstanding anything herein contained if this tenancy shall come to
an end whether by effluxion of time or otherwise and the Tenant shall
fail to remove all its goods (which expression shall include personal
property of every description) from the Demised Premises forthwith or
if the Tenant shall abandon the Demised Premises (and the Tenant shall
be deemed to have abandoned the Demised Premises and terminated this
tenancy unilaterally if the Tenant without the consent of the Landlord
fails to open the Demised Premises for business for a continuous period
of thirty (30) days) without good reasons and the Tenant has failed to
notify the Landlord of the closure and such good reasons shall be
lawful for the Landlord to sell or to otherwise dispose of the goods of
the Tenants in the Demised Premises at such times and at such prices as
the Landlord shall think fit and without prejudice to any other rights
and remedies of the Landlord the Landlord shall after payment out of
the proceeds of sale the costs and expenses connected with the said
sale apply the net proceeds of sale towards payment of all arrears of
Rents and the interest thereon and all other sums of money due and
payable by the Tenant to the Landlord under this tenancy and the
balance (if any) shall be paid over to the Tenant. The Tenant shall
indemnify the Landlord against any liability incurred by the Landlord
to any third party whose property shall have been sold by the Landlord
in the bona fide mistaken belief (which shall be presumed unless the
contrary be proved) that such property belonged to the Tenant and was
liable to be dealt pursuant to this clause.
<PAGE>
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6.5 WAIVER
No waiver by the Landlord of one breach of any covenant obligation or
provision contained or implied in this tenancy shall operate as a
waiver of another breach of the same or of any other covenant
obligation or provision contained or implied in this tenancy.
6.6 ALTERATIONS TO ADJOINING PROPERTIES AND BUILDING
The Landlord shall have the right from time to time, at its absolute
discretion, to improve extend vary amend reduce alter reconstruct in
any way whatsoever or change the use of parts of the Building or
otherwise deal with the Building (other than the Demised Premises) or
any part thereof in any manner whatsoever Provided Always that in
exercising such right the Landlord will use its best endeavors to cause
as little inconvenience to the Tenant as is practicable in the
circumstances. Nothing in this Agreement shall confer on the Tenant
any right to enforce any covenant or agreement relating to other parts
of the Building demised to other tenants or limit in anyway the
Landlord's rights to deal with all or any part (of the Building.
6.7 PARKING FACILITIES
Subject to the Landlord's absolute discretion the Landlord may allow
any car park or parking lot for the use of the Tenant its employees
agents and servants on such terms and conditions as the Landlord may
impose such use to be in common with the Landlord and all others to
whom the Landlord has granted or may hereinafter grant such rights
Provided Always that the Tenant shall observe and conform to and shall
use his best efforts to cause its employees agents and servants to
observe and conform to all such rules regulations and restrictions as
the Landlord may from time to time impose in relation to the use of such
car parks or car parking lots. The Landlord reserves the right to
charge a fee at such rate or rates as may from time to time be fixed by
the Landlord in respect of the use by the Tenant or any other person of
the car parks or car parking lots.
6.8 NOTICES
Except as otherwise expressly provided herein any notice, request,
demand or other communication to be given or served hereunder by one of
the parties hereto to or on the other may be delivered at or sent by
prepaid registered post or by telex, facsimile transmission, telegram
or
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cable to the address in Singapore as herein specified of the other
party and shall be deemed to be duly served:-
(a) if it is delivered, at the time of delivery;
(b) if it is sent by prepaid registered post, on the second Business
Day after the date of posting thereof, whose address of the other
party is within Singapore;
(c) if it is sent by telegram or cable, on the first Business Day
immediately after the date of despatch; or
(d) if it is sent by facsimile transmission or telex, immediately
after transmission thereof, if the transmission takes place on a
Business Day and prior to the close of business on such a Business
Day, otherwise the same shall be deemed to be served on the next
Business Day.
For the purpose of this Clause, each of the parties hereto shall from
time to time notify the other party in writing of an address in
Singapore where such notice, request, demand or other communication as
aforesaid can be given or served and such notification shall be
effective only when it is actually received. In the absence of such
notification, the notice, request, demand or other communication
aforesaid may be given or served at the addresses of the respective
parties hereinbefore set out.
6.9 COSTS OF TENANCY
The Tenant shall pay the Landlord's solicitors' costs of preparation
and completion of this Agreement together with any stamp duty (in
duplicate) and out-of pocket expenses which shall be payable by the
Tenant upon the execution of this Agreement.
6.10 INSPECTION BY PURCHASERS/TENANTS
The Tenant will at all reasonable times by prior appointment permit the
Landlord to exhibit to prospective tenants or purchasers the Demised
Premises and will at all times within the six (6) months preceding the
termination of this tenancy allow the Landlord to exhibit where the
Landlord shall think fit any notice or notices indicating that the
Demised Premises are to become vacant which notice or notices the
Tenant shall not remove or conceal.
<PAGE>
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6.11 EFFECT OF RULES AND REGULATIONS
The rules and regulations set forth in Schedule B hereto are deemed to
form part of this Agreement and the Tenant covenants to observe and
comply with such rules and regulations as added varied or amended as
hereinafter provided. The failure by the Tenant to keep and observe
all such rules and regulations as the same may be added or varied from
time to time shall constitute a breach of the terms of this Agreement
in the same manner as if the rules and regulations were contained
herein as covenants.
6.12 RULES AND REGULATIONS
The Landlord shall have the right at any time from time to time delete
vary amend or add to the rules and regulations for the time being
deemed to be included in Schedule B hereto whenever the Landlord deems
such variations amendment deletion or addition thereto necessary or
desirable for regulating the use of the Demised Premises or the Common
Area or the Building or any part thereof or for the safety care and
cleanliness thereof and a certificate signed by an officer managing
agent property manager or any authorized person for the time being of
the Landlord stating the rules and regulations, a copy of which is to
be given to the Tenant, for the time being in force or any amendment
thereof shall until further notices be conclusive evidence of the rules
and regulations made pursuant to the term hereof save for manifest
error.
6.13 EXCLUSION OF IMPLIED TERMS ETC.
The covenants provisions terms and agreements herein cover and comprise
the whole of the agreement between the parties hereto and their
appointed agents and it is expressly agreed and declared that no
further or other covenants agreements provisions or terms whether in
respect of the Demised Premises or this tenancy or otherwise shall be
deemed to be implied herein or to arise between the parties hereto by
way of collateral or other agreement by reason of any promise
representation warranty or undertaking given or made by either party
hereto to the other on or prior to the execution hereof and the
existence of any such implication or collateral or other agreement is
hereby expressly excluded SAVE AND EXCEPT THAT all the terms and
conditions stipulated in the letter of offer for the Demised Premises
dated 29 December 1995 from the Landlord and accepted by the Tenant
shall, insofar as such terms and conditions are not inconsistent with
the terms and conditions herein, remain in full force and effect as if
they were
<PAGE>
- 24 -
specifically incorporated herein and insofar as the same remain to be
fulfilled, performed, observed and complied with.
6.14 EASEMENTS
The Landlord hereby grants to the Tenant and its agents servants
customers and others authorised by the Tenant, in common with
the Landlord and all others to whom the Landlord has granted or may
hereafter grants, the rights of ingress to and egress from the Demised
Premises through the Common Area and the right to use the Common Area
for all proper purposes in connection with the permitted use of the
Demised Premises (apart from the parking areas governed by Clause 6.7
hereof) such rights only so far as is necessary for the permitted use
of the Demised Premises and so far as the Landlord can lawfully grant.
Reserving Nevertheless to the Landlord:-
(1) the right of free and uninterrupted passage and running of water,
gas, sewage, electricity, air-conditioning services, telephone and
other services or supplies from and to other parts of the Building
in and through all pipes, sewers, ducts, cables, wires and any
conduit which are now or at any time in through or under the
Demised Premises;
(2) the rights of ingress to and egress from the Demised Premises
which the Tenant is obliged to grant to the Landlord or for the
Landlord to exercise any of the Landlord's rights under this
Agreement.
6.15 LIMITATION OF LANDLORD'S OBLIGATIONS
The obligations of the Landlord under this Agreement shall be subject
to the express condition that the Landlord shall not be required to
perform or do any act or thing if it is rendered reasonably or
practically impossible by reason of any riot civil commotion strike
lock-out Act of God or public enemy priority allocation rationing or
the regulation or prohibition of the use of any material fuel hours of
work or awards or by reason of any matter or thing beyond the control
of the Landlord.
6.16 PUBLIC ADDRESS SYSTEM
Notwithstanding anything herein contained the Landlord may but shall
not be compelled to provide and install a public address system
throughout the Common Area or any part hereof and may at its absolute
discretion
<PAGE>
- 25 -
play relay or broadcast or permit any other person to play relay or
broadcast recorded music or public announcements thereon.
6.1 7 TERMINATION OR ABATEMENT ON DAMAGE
6.17.1 If during the term the whole or any part of the Building shall be
destroyed or damaged:-
(a) so as to render the Demised Premises unfit for the use and
occupation of the Tenant; and
(b) such damage or destruction is not caused by any act or default of
the Tenant or its servants agents sub-tenants customers invitees
licensees, independent contractors or any person claiming through
or under the Tenant; and
(c) no policy or policies of insurance in relation to the Demised
Premises is vitiated, and no payment of insurance moneys is
refused in whole or in part, due to any act or default of the
Tenant or its servants agents sub-tenants customers invitees
licensees independent contractors or any person claiming
through or under the Tenant;
then the Rents hereby reserved, or a proportionate part thereof
according to the nature and extent of the damage or destruction, shall
be suspended until the Building is repaired so that the Demised Premises
shall be rendered fit for occupation and use SUBJECT HOWEVER to the
remaining provisions of this Clause 6.17.
6.17.2 The provisions in Clause 6.17.1 are subject to the following
provisos:-
(a) nothing in this Clause 6.17 shall be deemed to impose any
obligation on the Landlord to rebuild or reconstruct the Building
and after the occurrence of such damage or destruction, the
Landlord may at any time and at its absolute discretion terminate
this Agreement immediately by written notice to the Tenant; and
(b) if the Demised Premises shall remain unfit for occupation and use
for a period of more than 6 months from the date of the occurrence
of such damage or destruction, the Tenant may terminate this
Agreement immediately by written notice to the Landlord.
6.17.3 Upon termination of this Agreement in accordance with Clause 6.17.2,
the Tenant shall (if it is still in occupation) vacate the Demised
Premises within seven (7) days from the date of the Landlord's written
notice to the Tenant without compensation from the Landlord, but
without
<PAGE>
- 26 -
prejudice to any accrued rights or remedies in respect of any
antecedent breach of this Agreement.
6.17.4 In the event of any dispute arising out of this Clause 6.17 the same
shall be referred to arbitration in accordance with and subject to the
provisions of the Arbitration Act (Cap. 10 1985 Revised Edn.) or any
statutory modification or reenactment thereof for the time being in
force.
6.18 RIGHT TO DISTRAIN
It is hereby expressly agreed that all moneys payable under this
Agreement by the Tenant to the Landlord, including but not limited to
the Rents (comprising the rent, hire charge and maintenance and service
charge), increases in property tax payable by the Tenant, goods and
services tax, interest payable on moneys which are due but unpaid and
costs and expenses payable by the Tenant to the Landlord, shall be
deemed to be rent recoverable in the manner provided in the Distress
Act (Cap. 84). For the purposes of the said Act and for the purposes
of any right or remedy which the Landlord wishes to exercise or pursue,
all such moneys shall be deemed to be rent in arrears if not paid at
the times and in the manner as provided in this Agreement. All costs
and expenses (including all legal costs and charges on a solicitor and
client and indemnity basis) incurred pursuant to, or in any way arising
in relation to, any step taken by the Landlord in the exercise of its
rights under the said Act, or pursuant to any other right or remedy
available to the Landlord, shall be payable by the Tenant, and, insofar
as such sums are not recovered under such distrain, they shall be
recoverable as a debt from the Tenant to the Landlord.
7. GOVERNING LAW AND SUBMISSION TO JURISDICTION
This Agreement shall be construed and governed by the laws of Singapore
and the parties hereby irrevocably submit to the non-exclusive
jurisdiction of the courts of Singapore.
<PAGE>
- 27 -
SCHEDULE A
CHATTELS AND FITTINGS IN DEMISED PREMISES
1. Ceiling : Suspended ceiling system comprising
acoustic white insulation tiles on
semi-concealed aluminum tees and
acoustic baffles between tenancy.
2. Light Fittings : Flush light fittings and diffusers to a
standard layout.
3. Window Blinds : Standard vertical slat venetian
blinds provided to all office windows.
4. Partitioning : Dry wall gypsum board full height
partition with fibre glass infill
complete with painting.
<PAGE>
- 28 -
SCHEDULE B
RULES AND REGULATIONS OF THE BUILDING
The Tenant covenants with the Landlord to observe and comply with the following
Rules and Regulations, as the same may be suspended, deleted, expanded or
otherwise amended and updated in any way from time to time and the Landlord
shall furnish the Tenant with a copy of the updated Rules and Regulations:-
1. OBNOXIOUS OR INFLAMMABLE SUBSTANCES OR STORAGE OF GOODS
1.1 The Tenant shall not erect nor install any machinery which causes noise,
fumes or vibration which can be heard, smelled or felt outside the
Demised Premises.
1.2. The Tenant shall not store in the Demised Premises any petrol or other
inflammable, explosive or combustible substance.
2. ILLEGAL OR IMMORAL PURPOSE
The Tenant shall not use the Demised Premises for any noxious, noisy or
offensive trade or business nor for gambling nor betting nor any illegal
or immoral act or purpose.
3. SALES, AUCTION, EXHIBITION OR PUBLIC MEETING
3.1 The Tenant shall not hold any sales by auction on the Demised Premises.
3.2 The Tenant shall not hold any exhibition, public meeting or public
entertainment at the Demised Premises.
4. MUSIC
The Tenant shall not permit any vocal or instrumental music in the
Demised Premises so that it can be heard outside the Demised Premises.
5. PESTS AND LIVESTOCK
The Tenant shall keep the Demised Premises free of pests, rodents,
vermin and shall not permit livestock of any kind to be kept at the
Demised Premises.
6. ANNOYANCE OR NUISANCE
The Tenant shall not do anything which may be or may become a nuisance,
<PAGE>
- 29 -
annoyance, disturbance, an inconvenience or may cause damage to the
Landlord or any other tenants licensees or occupiers of the Building or
to the owners tenants licensees and occupiers of adjoining and
neighbouring properties or any persons lawfully in the Building or
adjoining or neighbouring properties.
7. INCENSE
The Tenant shall not burn any incense or joss sticks or permit any
unusual or offensive odours to be produced upon or to permeate from the
Demised Premises.
8. LOADING, USE OF LIFTS AND ELECTRICAL INSTALLATIONS
8.1 The Tenant shall not bring into the Building any machinery equipment
goods or objects which, in the opinion of the Landlord, is likely to
cause any structural or other damage to any part of the Building. Without
limiting the foregoing, the Tenant shall not load any part of the Demised
Premises or the Building with any machinery equipment or any goods or
object with an imposed load in excess of 2.5 kN/m2 without the prior
written consent, and according to the directions, of the Landlord.
8.2 Before any machinery safe or furniture is moved into or out of the
Demised Premises due notice must be given to the Landlord or its managing
agent by the Tenant and the moving of the same must be done under the
supervision of a person nominated by the Landlord and at a time approved
by the Landlord or its managing agent and at no other time.
8.3 The Tenant shall not overload the lifts pipes conduits electrical
installations wirings and cables in or serving the Demised Premises and/or
the Building.
8.4 The Tenant shall not without the prior written consent of the Landlord
install or use any air-conditioning or cooling devices or any other
electrical devices or equipment in the Demised Premises except those
which are provided in the Building. The Tenant shall not do nor omit to
do anything which interferes with or which imposes an additional loading
on any ventilation, air-conditioning or other plant or machinery serving
or electrical supply to the Building.
8.5 Where air-conditioning is installed in or about the Demised Premises the
Tenant will to the extent of the Tenant's control over the same at all
times use and regulate the same to ensure that air-conditioning is
employed to the best advantage in the conditions from time to time
prevailing and so that it is in reasonable balance with conditions in the
Common Area and shall at the Tenant's expense keep air-conditioning in
good repair and condition (fair wear and tear and Act of God excepted)
and regularly serviced by the local
<PAGE>
- 30 -
agents of air-conditioning at least once a calendar month.
9. AVOIDANCE OF LANDLORD'S INSURANCE POLICIES
The Tenant shall not do anything whereby any policy of insurance on
including or in any way relating to the Demised Premises taken out by the
Landlord may become void or voidable or whereby the rate of premium
thereon or on the remainder of the Building may be increased. The
Landlord will on request of Tenant provide relevant details of the policy
to enable Tenant to comply with the provisions of this paragraph. The
Tenant shall provide one or more efficient fire extinguishers of a type
approved by the Landlord and to take such other precautions against fire
as may be deemed necessary by the Landlord or its insurers. The Tenant
will from time to time as and when required by notice in writing from the
Landlord pay all extra premiums of insurance of the Demised Premises and
the contents thereof if any be required on account of extra risk caused
by the use of the Demised Premises by the Tenant as approved by the
Landlord.
10. RESIDENTIAL PURPOSE
The Tenant shall not allow any person to sleep in the Demised Premises
nor to use the Demised Premises for residential purposes nor to cook at
the Demised Premises.
11. CLEANLINESS
11.1 The Tenant shall keep the Demised Premises and every part thereof clean
and hygienic and all pipes, drains, basins, sinks and water-closets in
the Demised Premises clean and unblocked.
11.2 The Tenant shall employ, to clean the Demised Premises, the cleaning
contractor nominated by the Landlord to carry out the cleaning work for
the Building provided that such employment shall be at the sole expense,
risk and responsibility of the Tenant. The Tenant may employ a cleaner
other than that nominated by the Landlord with the prior written consent
of the Landlord, which consent shall not be withheld unreasonably.
12. WINDOWS, DOORS AND BUILDING EXTERIOR
12.1 The Tenant shall ensure that the decor and design of the exterior of the
Demised Premises and the interior of the Demised Premises which is
visible from the outside (including all blinds shades awnings window
ventilators and other similar fittings and fixtures) shall conform to the
reasonable requirements and standards of the Landlord as to design
quality and appearance. The Tenant shall not make any changes to such
external and internal parts without the prior written consent of the
Landlord.
<PAGE>
- 31 -
12.2 The Tenant shall not use nor permit the use of the Demised Premises for
the storage of goods except in connection with the Tenant's business at
the Demised Premises.
12.3 The Tenant shall not display nor place nor permit nor suffer to be
displayed nor placed in or against any part of the Demised Premises any
cartons or boxes which may be visible from the exterior of the Building or
any part thereof. The Tenant shall not throw or permit to be thrown or
to fall any articles or substances from the Demised Premises or Common
Area and shall not place on any sill ledge or similar part of the Demised
Premises or Common Area any articles or substances.
12.4 The Tenant shall keep the windows of the Demised Premises closed at all
times and shall take such steps as may be necessary to prevent air
leakages and excessive infiltration of air from outside the Building into
the Demised Premises and shall not do any act or thing whereby the
working of the air circulating plant in the Building shall be affected.
13. SECURITY
13.1 The Tenant shall ensure that all doors of the Demised Premises are safely
and properly locked and secured when the Demised Premises are not
occupied and shall use its best endeavours to protect and keep the Demised
Premises and any property contained therein from theft or robbery. The
Landlord reserves the right by its agent caretaker employees servants and
workmen to enter and fasten the same if left insecurely fastened.
13.2 The Landlord will provide keys for locks on doors or other openings of the
Demised Premises and the Tenant will return to the Landlord on the
determination of the tenancy all such keys and shall not permit the same
at any time to come into the possession or control of any person other
than the Tenant its servants or agents.
14. OBSTRUCTION
14.1 The Tenant shall not cover or obstruct or permit to be covered or
obstructed in any manner (other than in compliance with paragraph 12)
the windows, sky-lights or ventilating shafts or air inlets or outlets
which reflect or admit light or enable air to flow into or out of the
Demised Premises or any part of the Building.
14.2 The Tenant shall not in any way obstruct or permit the obstruction of any
Common Area and in particular shall not permit any bicycles, motor cycles
or scooters, trolleys and other vehicles for transportation to be parked
nor permit the stocking or storage or littering of any goods or garbage
in any Common Area (other than at the proper lots and areas designated by
the
<PAGE>
- 32 -
Landlord for parking of vehicles and the loading and unloading of goods).
Without limiting or prejudice to the foregoing, the Tenant will keep
clean and free from dirt and rubbish such parts of the Common Area in the
immediate vicinity of the Demised Premises.
15. USE OF CONVENIENCES
The Tenant shall not throw, place or allow to fall or cause or permit to
be thrown or placed in the lift shafts, water-closets or other
conveniences in the Building any sweepings, rubbish, waste paper or other
similar substances, and the Tenant shall on demand pay to the Landlord
the costs of repairing any damage to such lift shafts, water-closets or
other conveniences arising therefrom.
16. USE OF LIFTS
16.1 The Tenant shall not place nor permit to be placed into the passenger
lifts any baggage, furniture, parcels, sacks, bags, heavy articles or
other goods or other merchandise save only such light articles as
brief-cases, attached cases and handbags and to use only the service lift
prescribed by the Landlord for the transportation of furniture, goods and
other heavy equipment.
16.2 The Tenant shall not permit or allow the contractors, workmen or cleaners
(with or without equipment and tools) engaged by the Tenant to use the
passenger lifts of the Building and to ensure that they use only the
service lifts prescribed by the Landlord.
17. INFECTIOUS DISEASES
In the event of any infectious illness set out in the Infectious Diseases
Act, Cap 137, occurring at the Demised Premises to give notice thereof as
soon as it becomes aware of it to the Landlord and the proper authorities
and at its cost and expense to fumigate and disinfect the Demised
Premises and to comply with the reasonable and lawful requirements in
respect of the same.
18. AERIALS, SIGNS AND ADVERTISEMENTS
18.1 The Tenant shall not erect display affix or exhibit on or to any part of
the Demised Premises visible to the Common Area any signs lights flags
advertisement notice pole mast wire radio or television aerial or antenna
or any loudspeakers or similar devices at the Demised Premises without
the prior written consent of Landlord, which consent may be given on such
terms and conditions as the Landlord deems fit and provided always that
the Tenant shall at its cost obtain all necessary approvals from the
competent authorities. Any consent given may at any time be withdrawn as
the
<PAGE>
- 33 -
Landlord may determine having regard to the interest of the Building as
a whole and/or the interest of other tenant's occupiers and persons
lawfully therein.
18.2 The Landlord shall be entitled to determine the hours of illumination of
signs in accordance with the Business Hours as from time to time
prescribed by the Landlord.
19. TEMPORARY PARKING AND LOADING BAYS
19.1 The Tenant shall not load or unload any goods or materials except at the
loading and unloading bays or areas designated by the Landlord and so as
not to cause congestion nor inconvenience to any other user.
19.2 The Tenant shall ensure that the Tenant's agents, employees, servants,
licensees or permitted occupiers do not obstruct any areas designated for
temporary parking only or as loading and unloading bays and at all times
shall comply with the directions of the Landlord's employees or agents in
respect of the use of such areas.
20. FIRE AND ALARM SYSTEMS
20.1 The Tenant shall permit the duly authorised agents or employees of
Landlord at anytime during Business Hours by prior appointment to service
and maintain any fire or alarm systems of the Building.
20.2 The Tenant shall not install nor maintain any fire or security system at
the Demised Premises without the prior written approval of the Landlord
such approval not to be unreasonably withheld or which may interfere with
any fire or alarm system installed or maintained by the Landlord for the
Building.
20.3 No rubbish or waste shall at any time be burnt upon the Demised Premises
or the Common Area or any part thereof.
21. SOLICITING
The Tenant shall not solicit business, display or distribute advertising
material in the carparks or any Common Areas or use the same for
business or commercial purposes except in such manner and under such
conditions as may be approved from time to time by the Landlord.
22. NOTICE OF DEFECTS
The Tenant shall give notice in writing to the Landlord as soon as it
becomes aware of it of the occurrence of any damage or want of repair at
or to the Demised Premises and of any damage or want of repair to the
water pipes
<PAGE>
- 34 -
electrical wiring air-conditioning ducts fittings or fixtures at the
Demised Premises and of any circumstances which are or are likely to be
hazardous to or jeopardise the safety of any person or property.
23. NOTICE OF ADDRESS
The Tenant shall advise the Landlord or its managing agent of the private
address of the Tenant or if the Tenant shall be a corporation, of the
manager thereof, or if there shall be more than one tenant of any two of
them. The Landlord or its managing agent shall be promptly informed of
any change in any such address.
24. RESTRICTION OF USE OF NAME OF BUILDING
The Tenant shall not without the Landlord's prior written consent use the
name of the Building or any picture or likeness of the Building or the
Demised Premises in his or its registered or trading name or for any
advertising or purpose other than as the address and place of business of
the Tenant Provided That the Tenant shall be entitled to incorporate
references to and illustrations and sketches of the Building in any
dockets, vouchers, catalogues, advertisement or sales promotion material
relating to the business carried on by it in the Building. If the
Tenant's registered or trading name shall include the name or title of
the Building the Tenant will upon the expiration or sooner determination
of the term hereby created lodge with the Registrar of Business Notice of
Cessation of the use of its name if registered under the Business
Registration Act 1973 or if the Tenant is a company and the name of the
company includes the said name or title take all steps necessary to
remove such name or title from the name of the company.
25. CONTROL OF ACCESS
The Landlord will be entitled to close the Building and the Common Area
or any part thereof and to prevent and prohibit any person (including the
Tenant) from entering or remaining thereon between the hours of midnight
and 6 a.m. inclusive. Without affecting the generality of the preceding
provision of this rule the Landlord may close lock-off or otherwise
control the Common Area of any part thereof from time to time and may
take all such actions as the Landlord may deem necessary for the purposes
aforesaid and in particular may prohibit the use of the parking areas in
the Building prior to the hour of 9 a.m. or such earlier hour as the
Landlord may from time to time determine to prevent unauthorised persons
not intending to conduct business with or become customers of any of the
occupants of the Building from using the parking areas of the Building
for any private or other purpose. Notwithstanding anything herein
contained, the Landlord shall have the right at all times to refuse or
control access to the Building or any
<PAGE>
- 35 -
part thereof to any person whose presence would or might, in the
Landlord's opinion, be prejudicial to the safety, character or interest
of the Building or the Landlord or any tenant occupier or other person.
26. CONDUCT OF BUSINESS
Notwithstanding anything hereinbefore contained the Demised Premises
shall not be or remain open for business at or during any time or times
prohibited by law for that class of premises or the business carried on
therein.
<PAGE>
- 36 -
ANNEXURE
PLAN OF DEMISED PREMISES
<PAGE>
-37 -
AS WITNESS the hands of the parties the day and year first above
mentioned.
SIGNED by the duly authorised ) FOR UOL PROPERTY INVESTMENTS PTE LTD
signatory of the Landlord ) /s/
in the presence of:- ) ----------------------------------------
/s/ Wellington Foo Thiam Fong
Wellington Foo Thiam Fong
COMPANY SECRETARY
SIGNED by the duly authorised )
signatory of the Tenant )
in the presence of:- ) /s/
Name: Chan Meng Yook Christine
NRIC No: S1238658C
Position: Director
Shum Sze-Ling
Advocate & Solicitor
Singapore
<PAGE>
[Confidential Treatment Requested]
<PAGE>
[SELECTED CONSOLIDATED FINANCIAL DATA] [in thousands, except per share data]:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Consolidated Statements
of Income Data:
Net sales $461,736 $373,732 $224,679 $113,543 $69,800
Gross profit 264,574 216,147 128,453 64,479 38,907
Net income 94,029 82,543 44,932 16,115 6,240
Net income per share $ 5.70 $ 4.82 $ 2.72 $ 1.10 $ .44
Shares used in per share calculations 16,509 17,137 16,495 14,670 14,342
<CAPTION>
DECEMBER 31, 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheets Data:
Cash, cash equivalents,
and short-term investments $176,668 $149,799 $136,539 $ 48,622 $42,988
Working capital 287,818 226,257 183,581 83,486 65,276
Total assets 459,787 364,688 265,000 113,117 97,334
Long-term obligations, excluding
current portions - - - - 763
Shareholders' equity 373,636 272,782 214,214 105,461 82,681
Cash dividends per share - - - - -
</TABLE>
11
<PAGE>
[MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS]
RESULTS OF OPERATIONS
NET SALES
Net sales were $461,736,000, $373,732,000, and $224,679,000 in 1996, 1995, and
1994, respectively. The increase of approximately 24% from 1995 to 1996 was
a result of continued worldwide demand in the first and second quarters of
the year offset by a slow down in the demand in the third and fourth quarters
of the year. The increase of approximately 66% from 1994 to 199S was caused
by continued worldwide demand for semiconductor equipment resulting in
significant growth in all product lines. The increase from 1995 to 1996 was
primarily due to continuing increases in demand for the Concept Two products,
particularly the introduction and significant demand for the industry's first
high density plasma (HDP) deposition system. This increase was offset by a
decline in the demand for the Company's Concept One products. Approximately
78% and 22% of the sales growth in 1995 from 1994 was due to increased
shipments and higher average unit prices, respectively. The higher average
unit prices were primarily due to an increased proportion of sales coming
from the higher priced Concept Two product lines. International sales were
approximately 64% of total sales in 1996, 56% in 1995 and 55% in 1994.
Strong demand in the Pacific Rim counties was the primary cause of the
increases in international sales. The Company expects international sales to
continue to represent a significant portion of its overall net sales.
GROSS PROFIT
Gross profit was $264,574,000, $216,147,000, and $128,453,000 in 1996, 1995,
and 1994, respectively. The increases were due to higher net sales. As a
percentage of net sales, gross profit was approximately 57%, 58%, and 57% in
1996, 1995, and 1994, respectively. The slight decrease in gross profit as a
percentage of net sales from 1995 to 1996 was primarily due to competitive
pricing pressures encountered during the industry slow down in the second
half of 1996. The Company anticipates this trend will continue throughout
1997. The slight increase in gross profit as a percentage of net sales from
1994 to 1995 was primarily due to increased manufacturing efficiencies and
material cost reductions on the Concept Two product line, as well as overall
efficiencies and lower fixed costs per system due to the higher volume of
systems manufactured and shipped in 1995 as compared to 1994.
RESEARCH AND DEVELOPMENT
Research and development expenses were $53,902,000, $41,009,000, and
$26,012,000 in 1996, 1995, and 1994, respectively. The increases were due to
continued increased spending on new product development. As a percentage of
net sales research and development expenses were approximately 12%, 11%, and
12%, 1996, 1995, and 1994, respectively. The Company plans to continue to
invest in new products and increase research and development spending in
absolute dollars.
SELLING, GENERAL, AND ADMINISTRATIVE
Selling, general and administrative expenses were $74,419,000, $59,347,000,
and $38,744,000 in 1996, 1995, and 1994, respectively. As a percentage of
net sales, selling, general, and administrative expenses were approximately
16% in 1996 and 1995 and 17% in 1994. The increases in absolute dollars were
primarily due to higher sales commissions or increased revenues and generally
higher levels of spending to support an expanding worldwide business,
particularly in the Pacific Rim.
Gross profit, research and development expenses, and selling, general, and
administrative, expenses were affected throughout the periods indicated by
charges to expense for the Company's profit sharing and bonus programs.
Amounts charged to expense for these programs in 1996, 1995, and 1994 were
$10,222,000, $8,418,000, and $6,247,000, respectively.
NET INTEREST INCOME
Net interest income was $8,407,000, $9,274,000, and $4,382,000 in 1996, 1995,
and 1994, respectively. The decrease from 1995 to 1996 was primarily due to
lower interest rates earned on the outstanding cash and short-term investment
balances. The increase from 1994 to 1995 was primarily due to interest
earned on higher average outstanding cash and short-term investments
balances, resulting from cash generated from operations and proceeds from the
Company's common stock offering in 1994, as well as generally higher interest
rates.
12
<PAGE>
PROVISION FOR INCOME TAXES
The provision for income taxes reflects an effective tax rate of 35% in 1996,
and 34% in 1995 and 1994. The increase from 1995 to 1996 was due to the fact
that the U.S. Congress did not reinstate the research and development tax
credit until the second half of 1996.
At December 31, 1996, the Company has recognized a deferred tax asset of
$18,058,000 related to temporary differences between the book and tax basis
of assets and liabilities. It is the opinion of management that it is more
likely than not that this asset will be realized by an offset against the
recognized deferred tax liability of $3,545,000 and by carryback against
previously paid income taxes.
REPURCHASE OF COMMON STOCK
During 1996 and 1995, the Company repurchased 86,000 and 641,000 shares of
common stock, respectively. The 1996 repurchase had no material impact on
earnings per share for 1996. The 1995 repurchase resulted in an increase to
earnings per share for 1995 of approximately $0.02.
FOREIGN CURRENCY ACCOUNTING
The local currency is the functional currency for all foreign operations. In
1996, the Company changed the functional currency for subsidiaries in Korea,
Taiwan, Singapore, the United Kingdom, the Netherlands, Germany, France, and
China from the U.S. dollar to the local currency. On January 1, 1995, the
Company changed the functional currency for its Japanese subsidiary from the
U.S. dollar to the local currency. These changes were made in order to
reflect the changing nature of the operations of the Company's foreign
subsidiaries. Accordingly, translation gains or losses related to the foreign
subsidiaries have been included as a component of shareholders' equity
subsequent to these changes.
FOREIGN EXCHANGE CONTRACTS
The Company conducts its business in various foreign currencies. The Company
enters into forward foreign exchange contracts primarily to hedge against the
short-term impact of foreign currency fluctuations of intercompany accounts
payable denominated in U.S. dollars recorded by the Japanese subsidiary. The
Company also enters into forward foreign exchange contracts to buy and sell
foreign currencies as economic hedges of the parent's intercompany balances
denominated in a currency other than the U.S. dollar. In 1996, these hedging
contracts were denominated primarily in the Japanese Yen. The maturities of
all the forward foreign exchange contacts are generally short-term in nature.
Because the impact of movements in currency exchange rates on forward foreign
exchange contracts offsets the related impact on the underlying items being
hedged, these financial instruments do not subject the Company to speculative
risk that would otherwise result from changes in currency exchange rates.
Net foreign currency gains and losses have not been material.
OTHER ISSUES
In 1995, the Financial Accounting Standards Board released the Statement of
Financial Accounting Standards No. 121 (SFAS 121), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
SFAS 121 requires recognition of impairment of long-lived assets in the event
the net book value of such assets exceeds the future undiscounted cash flows
attributable to such assets. The Company adopted SFAS 121 on January 1,
1996. Adoption of SFAS 121 did not have a material impact on the Company's
financial condition or results of operations.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation." In accordance with the provisions of SFAS No. 123, the Company
applies APB Opinion 25 and related interpretations in accounting for its
employee stock option and stock purchase plans and, accordingly, does not
recognize compensation cost.
13
<PAGE>
CAUTIONARY STATEMENTS
Certain of the statements contained in this annual report are forward-looking
statements that involve a number of risks and uncertainties. These forward
looking statements include, but are not limited to the statements above
regarding the Company's expectation that the Company will continue to grow,
international sales will continue to represent a significant portion of its
overall net sales, gross profit will continue to decrease due to competitive
pricing pressures, the Company's plans to continue to invest in new products
and increase research and development spending in absolute dollars and the
Company's belief that the deferred tax asset will be realized by an offset
against the recognized deferred tax liability, and other matters discussed in
this report. These risks and uncertainties could cause actual results to
differ materially from those described herein and include the following:
MARKET RISK
The Company's business depends predominantly on capital expenditures of
semiconductor manufacturers, which, in turn, depend on the current and
anticipated market demand for integrated circuits and products utilizing
integrated circuits. The semiconductor industry has historically been very
cyclical and has experienced periodic downturns which have had a material
adverse effect on the semiconductor industry's demand for semiconductor
processing equipment, including equipment manufactured and marketed by the
Company. No assurance can be given that the Company's net sales and
operating results will not be adversely affected if downturns or slowdowns in
the rate of capital investment in the semiconductor industry occur in the
future. In addition, the semiconductor equipment industry is highly
competitive and subject to rapid change and new products and enhancements.
COMPETITION
The Company faces substantial competition in each of the markets in which it
sells its products. Certain of the Company's competitors are larger and have
greater resources, financial and otherwise, than the Company. There can be
no assurance that be Company will be successful or as successful as in
competitors, in selecting, developing, manufacturing, and marketing its new
products or enhancing its existing products. Failure to successfully develop
new products could materially adversely affect the Company's business,
financial condition, and results of operations.
PATENTS AND PROPRIETARY RIGHTS
There has been substantial litigation regarding patent and other intellectual
property rights in semiconductor related industries. The Company is
currently involved in such litigation (see Note 9 to the Consolidated
Financial Statements), and although the Company is not aware of any
infringement by its products of any patent or proprietary rights of others,
it could become involved in additional litigation in the future. Although
the Company does not believe the outcome of the current litigation will have
a material impact on the Company's financial condition or results of
operations, no assurances can be given that this litigation or future
litigation will not have such an impact.
INTERNATIONAL OPERATIONS
Export sales accounted for approximately 64%, 56%, and 55% of net sales in
1996, 1995, and 1994, respectively. The Company anticipates that export
sales will account for a significant portion of net sales in the foreseeable
future. As a result a significant portion of the Company's sales will be
subject to certain risks, including tariffs and other barriers, difficulties
in staffing and managing foreign subsidiary operations, difficulties in
managing distributors, potentially adverse tax consequences, and the
possibility of difficulty in accounts receivable collection. The Company is
also subject to the risks associated with the imposition of legislation and
regulations relating to the import and export of semiconductor products. The
Company cannot predict whether quotas, duties, taxes, or other changes or
restrictions will be implemented by the United States or any other country
upon the importation or exportation of the Company's products in the future.
There can be no assurance that any of these factors or the adoption of
restrictive policies will not have a material adverse effect on the Company's
business, financial condition, or results of operations.
14
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations and capital resources through cash
flow from operations, sale of equity securities, and borrowings. The
Company's primary sources of funds at December 31, 1996 consisted of
$176,668,000 of cash, cash equivalents, and short-term investments. In
addition, at December 31, 1996, there was $15,153,000 available under bank
lines of credit that expire at various dates through April 30, 1997. At
December 31, 1996, there were no borrowings by the parent company and the
Japanese subsidiary had $13,153,000 outstanding under these bank lines of
credit which bear interest at an annual weighted average rate of 1.26%.
Cash and cash equivalents increased $5,648,000 from $60,114,000 at December
31, 1995 to $65,762,000 at December 31, 1996. Net cash provided by operating
activities represented $67,274,000 primarily due to net income of
$94,029,000, and depreciation and amortization of $11,332,000. These amounts
were partially offset by increases in accounts receivable ($7,867,000), and
inventories ($18,669,000), and a decrease in accounts payable of $6,819,000.
The increases are generally due to the higher levels of business activity in
1996, as evidenced by the 24% increase in net sales. The increase in
accounts receivable was affected by an increase in days sales outstanding in
receivables, from 86 days at December 31, 1995 to 97 days at December 31,
1996. This increase is primarily due to the expansion of business in the
Pacific Rim, as receivables there typically have longer collection cycles.
In 1996, the Company used $72,046,000 of cash for investing activities,
primarily to purchase short-term investments and for capital expenditures to
increase manufacturing capacity, to support new product development, and to
expand other facilities to support the higher levels of business activity.
The Company also invested in equipment used for customer evaluation and
demonstration purposes. Net cash provided by financing activities in 1996
was $10,420,000, as purchases under the stock option and employee stock
repurchase plans ($7,880,000) were partially offset by expenditures under the
Company's common stock repurchase plan ($3,244,000).
The Company believes that funds generated from operations, existing cash
balances, and borrowing capacity will be sufficient to meet the Company's
requirements through 1997.
15
<PAGE>
STOCK INFORMATION
Novellus' common stock is traded on the Nasdaq Stock Market and is quoted on the
Nasdaq National Market under the symbol NVLS. The following table sets forth
the high and low closing prices as reported by the Nasdaq National Market for
the periods indicated:
1996 HIGH LOW
------------------------------------------------------
First Quarter $61 1/4 $43 1/4
Second Quarter 63 1/8 35 3/4
Third Quarter 44 32 3/4
Fourth Quarter 62 1/2 39
1995 HIGH LOW
------------------------------------------------------
First Quarter $65 1/2 $42 3/4
Second Quarter 72 1/4 55 3/4
Third Quarter 87 1/4 66 7/8
Fourth Quarter 74 1/4 47 3/4
The Company has not paid cash dividends on its common stock since inception,
and its Board of Directors presently plans to reinvest the Company's earnings
in its business. Accordingly, it is anticipated that no cash dividends will
be paid to holders of common stock in the foreseeable future. Additionally,
certain covenants set forth in the Company's bank lines of credit limit the
Company's ability to pay dividends. As of December 31, 1996, there were 607
holders of record of the Company's common stock.
16
<PAGE>
[consolidated statements of income] [in thousands, except per share data]:
YEAR ENDED DECEMBER 31, 1996 1995 1994
- ------------------------------------------------------------------------------
Net Sales $461,736 $373,732 $224,679
Cost of Sales 197,162 157,585 96,226
-------------------------------------
Gross profit 264,574 216,147 128,453
Operating expenses:
Research and development 53,902 41,009 26,012
Selling, general and administrative 74,419 59,347 38,744
-------------------------------------
Total operating expenses 128,321 100,356 64,756
-------------------------------------
Operating income 136,253 115,791 63,697
Interest:
Income 8,884 9,501 4,670
Expense (477) (227) (288)
-------------------------------------
Net interest 8,407 9,274 4,382
-------------------------------------
Income before provision for income taxes 144,660 125,065 68,079
Provision for income taxes 50,631 42,522 23,147
-------------------------------------
Net income
$94,029 $82,543 $44,932
-------------------------------------
Net income per share $ 5.70 $ 4.82 $ 2.72
-------------------------------------
Shares used in per share calculations 16,509 17,137 16,495
-------------------------------------
See accompanying notes.
17
<PAGE>
[consolidated balance sheets] [in thousands):
DECEMBER 31, 1996 1995
- -----------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 65,762 $ 60,114
Short-term investments 110,906 89,685
Accounts receivable, net of allowance for doubtful
accounts of $2,777 in 1996 and $2,196 in 1995 119,710 112,088
Inventories 55,448 36,779
Deferred taxes 18,058 16,666
Prepaid and other current assets 4,085 2,831
--------------------
Total current assets 373,969 318,163
Property and equipment:
Machinery and equipment 60,240 39,590
Furniture and fixtures 4,660 2,587
Leasehold improvements 36,309 23,947
--------------------
101,209 66,124
Less accumulated depreciation and amortization 34,991 23,745
--------------------
66,218 42,379
Other assets 19,600 4,146
--------------------
Total assets $459,787 $364,688
--------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current obligations under lines of credit $ 13,153 $ 7,369
Accounts payable 26,047 32,866
Accrued payroll and related expenses 17,404 15,578
Accrued warranty 18,566 15,261
Other accrued liabilities 10,210 9,580
Income taxes payable 771 11,252
--------------------
Total current liabilities 86,151 91,906
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value;
Authorized shares - 10,000
Issued and outstanding shares - none - -
Common stock, no par value;
Authorized shares - 40,000
Issued and outstanding shares - 16,255 in 1996
and 15,942 in 1995 128,751 118,423
Retained earnings 244,966 153,595
Cumulative translation adjustments (81) 764
--------------------
Total shareholders' equity 373,636 272,782
--------------------
Total liabilities and shareholders' equity $459,787 $364,688
--------------------
See accompanying notes.
18
<PAGE>
[consolidated statements of cash flows] (in thousands):
YEAR ENDED DECEMBER 31, 1996 1995 1994
- ------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $94,029 $82,543 $44,932
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 11,332 7,649 3,973
Changes in operating assets and
liabilities:
Accounts receivable (7,867) (51,774) (24,294)
Inventories (18,669) (9,576) (6,157)
Deferred taxes and prepaid and
other current assets (2,646) (9,538) (6,857)
Accounts payable (6,819) 18,021 6,622
Accrued payroll and related
expenses 1,626 5,459 5,852
Accrued warranty 3,305 7,001 4,860
Other accrued liabilities 430 2,601 4,274
Income taxes payable (7,447) 9,484 7,244
-----------------------------
Total adjustments (26,755) (20,673) (4,483)
-----------------------------
Net cash provided by operating activities 67,274 61,870 40,449
INVESTING ACTIVITIES
Purchase of held-to-maturity debt securities - (518,021) (128,565)
Proceeds from the sale and maturity of
held-to-maturity debt securities - 518,888 62,577
Purchase of available-for-sale securities (387,709) - -
Proceeds from the sale and maturity of
available-for-sale securities 366,488 - -
Capital expenditures (35,285) (21,829) (12,689)
(Increase) decrease in other assets (15,540) (596) 58
-----------------------------
Net cash used for investing activities (72,046) (21,558) (78,619)
-----------------------------
FINANCING ACTIVITIES
Principal payments under capital lease
obligations - - (38)
Proceeds from lines of credit 5,784 2,851 38
Common stock issued 7,880 6,696 60,099
Common stock repurchased (3,244) (35,732) -
-----------------------------
Net cash provided by (used in) financing
activities 10,420 (26,185) 60,099
-----------------------------
Net increase in cash and cash equivalents 5,648 14,127 21,929
Cash and cash equivalents at the beginning
of the period 60,114 45,987 24,058
-----------------------------
Cash and cash equivalents at the end
of the period $65,762 $60,114 $45,987
-----------------------------
Supplemental disclosures:
Cash paid during the year for:
Interest $ 477 $ 227 $ 287
Income taxes 57,611 40,209 21,892
OTHER NONCASH CHANGES:
Income tax benefits from employee stock plans 3,034 4,297 3,722
Transfers of securities from held-to-maturity
to available-for-sale - 145,265 -
See accompanying notes.
19
<PAGE>
[consolidated statements of shareholders' equity] [in thousands]:
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK RETAINED TRANSLATION SHAREHOLDERS'
SHARES AMOUNT EARNINGS ADJUSTMENT EQUITY
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 14,167 $ 48,711 $ 56,750 $ - $105,461
Exercise of stock options 456 5,213 - - 5,213
Shares issued under employee
stock purchase plan 46 999 - - 999
Income tax benefits realized from
activity in employee stock
plans - 3,722 - - 3,722
Stock offering 1,500 53,887 - - 53,887
Net income - - 44,932 - 44,932
---------------------------------------------------------------
Balance at December 31, 1994 16,169 112,532 101,682 - 214,214
Exercise of stock options 372 5,230 - - 5,230
Shares issued under employee
stock purchase plan 42 1,466 - - 1,466
Income tax benefits realized from
activity in employee stock
plans - 4,297 - - 4,297
Common stock repurchased (641) (5,102) (30,630) - (35,732)
Cumulative translation adjustment - - - 764 764
Net income - - 82,543 - 82,543
---------------------------------------------------------------
Balance at December 31, 1995 15,942 118,423 153,595 764 272,782
Exercise of stock options 335 5,619 - - 5,619
Shares issued under employee
stock purchase plan 64 2,261 - - 2,261
Income tax benefits realized from
activity in employee stock
plans - 3,034 - - 3,034
Common stock repurchased (86) (586) (2,658) - (3,244)
Cumulative translation adjustment - - - (845) (845)
Net income - - 94,029 - 94,029
---------------------------------------------------------------
Balance at December 31, 1996 16,255 $128,751 $244,966 $ (81) $373,636
---------------------------------------------------------------
</TABLE>
See accompanying notes.
20
<PAGE>
[notes to consolidated financial statements] [December 31, 1996]:
NOTE 1 BUSINESS AND NATURE OF OPERATIONS
NATURE OF OPERATIONS
Novellus Systems, Inc. (the Company) is a leading manufacturer of chemical
vapor deposition (CVD) systems used in the fabrication of integrated
circuits. The Company's products are differentiated by their ability to
provide simultaneous solutions to productivity and wafer quality problems
facing the worldwide semiconductor manufacturing industry. Novellus serves
the global semiconductor manufacturing market from its corporate headquarters
in San Jose, California and through subsidiaries in Europe and the Pacific
Rim.
CONCENTRATION OF CREDIT RISK
The Company uses financial instruments that potentially subject it to
concentrations of credit risk. Such instruments include cash equivalents,
short-term investments, accounts receivable, and financial instruments used
in hedging activities. The Company invests its cash in cash deposits, money
market funds, commercial paper, certificates of deposit, readily marketable
debt securities, or medium term notes. The Company places its investments
with high-credit-quality financial institutions and limits the credit
exposure from any one financial institution or instrument. To date, the
Company has not experienced losses on these investments. The Company
performs ongoing credit evaluations of its customers' financial condition and
generally requires no collateral. The Company has an exposure to
nonperformance by counterparties on the foreign exchange contracts used in
hedging activities. These counterparties are large international financial
institutions and to date, no such counterpart has failed to meet its
financial obligations to the Company. The Company does not believe there is
a significant risk of nonperformance by these counterparties because the
Company continuously monitors its positions and the credit ratings of such
counterparties and the amount and contracts it enters into with any one party.
CONCENTRATIONS OF OTHER RISKS
Certain of the statements contained in this annual report are forward looking
statements that involve a number of risks and uncertainties. These risks and
uncertainties could cause actual results to differ materially from those
described herein and include the following:
Market Risk
The Company's business depends predominantly on capital
expenditures of semiconductor manufacturers, which in turn,
depend on the current and anticipated market demand for
integrated circuits and products utilizing integrated
circuits. The semiconductor industry has historically been
very cyclical and has experienced periodic downturns, which
have had a material adverse effect on the semiconductor
industry's demand for semiconductor processing equipment,
including equipment manufactured and marketed by the Company.
No assurance can be given that the Company's net sales and
operating results will not be adversely affected if downturns
or slowdowns in the rate of capital investment in the
semiconductor industry occur in the future. In addition, the
semiconductor equipment industry is highly competitive, and
subject to rapid technological change and new products and
enhancements.
Competition
The Company faces substantial competition in each of the
markets in which it sells its products. Certain of the
Company's competitors are larger, and have greater resources,
financial, and otherwise, than the Company. There can be no
assurances that the Company will be successful or as
successful as its competitors, in selecting, developing,
manufacturing and marketing its new products, or in enhancing
its existing products. Failure to successfully develop new
products could materially adversely affect the Company's
business, financial condition and results of operations.
Patents and Proprietary Rights
There has been substantial litigation regarding patent and
other intellectual property rights in semiconductor related
industries. The Company is currently involved in such
litigation (see Note 9) and although it is not aware of any
infringement by its products of any patents or proprietary
rights of others, it could become involved in additional
litigation in the future. Although the Company does not
believe the outcome of the current litigation will have a
material impact on the Company's financial condition, or
results of operations, no assurances can be given that this
litigation or future litigation will not have such an impact.
International Operations
Export sales accounted for approximately 64%, 56%, and 55% of
net sales in 1996, 1995, and 1994, respectively. The Company
anticipates that export sales will account for a significant
portion of net sales in the foreseeable future. As a result,
a significant portion of the Company's sales will be subject
to certain risks, including tariffs and other barriers,
difficulties in staffing and managing foreign subsidiary
operations, difficulties in managing distributors, potentially
adverse tax consequences, and the possibility of difficulty in
accounts receivable collection. The Company is also subject
to the
21
<PAGE>
risks associated with the legislation and regulations related to the import
and export of semiconductor products. The Company cannot predict whether
quotas, duties, taxes or large charges or restrictions will be implemented by
the United States or any other country upon the importation or exportation of
the Company's products in the future. There can be no assurance that any of
these factors or the adoption of restrictive policies will not have a
material adverse affect upon the Company's business, financial condition, or
results of operations.
- --------------------------------------------------------------------------------
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries after elimination of all
significant intercompany accounts and transactions.
Certain prior year amounts in the consolidated financial statements and the
notes thereto have been reclassified to conform to the 1996 presentation.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results inevitably will differ from those estimates and such
differences may be material to the financial statements.
REVENUE RECOGNITION
Net sales consist of system and spare part sales as well as revenues from
maintenance and service contracts. Revenue related to system and spare part
sales is recognized on shipment. Revenue related to maintenance and service
contracts is recognized ratably over the duration of the contracts. Unearned
maintenance and service contract revenue is immaterial and included in
accrued liabilities.
WARRANTY AND INSTALLATION
The Company generally warrants its systems for a period of up to 24 months
from shipment for material and labor to repair and service the system. A
provision for the estimated cost of installation and warranty is recorded
upon shipment.
CASH AND CASH EQUIVALENTS
For the purpose of the statement of cash flows, the Company considers all
highly liquid debt instruments with insignificant interest rate risk and
maturities of ninety days or less at date of purchase to be cash equivalents.
SHORT-TERM INVESTMENTS
The Company classifies its marketable debt and equity securities as
available-for-sale in accordance with the provisions of the Statement of
Financial Accounting Standards No. 115 (SFAS No. 115), "Accounting for
Certain Investments in Debt and Equity Securities." Securities classified as
available-for-sale are reported at fair market value with the related
unrealized gains and losses included in retained earnings. Realized gains
and losses and declines in value of securities judged to be other than
temporary are included in net interest. Interest on all securities is
included in net interest.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market.
Inventories consisted of the following at December 31 (IN THOUSANDS):
1996 1995
- -----------------------------------------------------------------------------
PURCHASED AND SPARE PARTS $40,211 $17,571
WORK-IN-PROCESS 11,347 14,550
FINISHED GOODS 3,890 4,658
- -----------------------------------------------------------------------------
$55,448 $36,779
- -----------------------------------------------------------------------------
22
<PAGE>
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization are
provided mainly on the straight-line method over the following useful lives:
- -----------------------------------------------------------------------------
MACHINERY AND EQUIPMENT 3-5 YEARS
FURNITURE AND FIXTURES 3-5 YEARS
LEASEHOLD IMPROVEMENTS SHORTER OF USEFUL LIFE OR
REMAINING LEASE TERM
- -----------------------------------------------------------------------------
In 1995, the Financial Accounting Standards Board released the Statement of
Financial Accounting Standards No. 121 (SFAS 121), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
SFAS 121 requires recognition of impairment of long-lived assets in the event
the net book value of such assets exceeds the future undiscounted cash flows
attributable to such assets. SFAS 121 is effective for fiscal years
beginning after December 15, 1995. The Company adopted SFAS 121 on January
1, 1996. Adoption of SFAS 121 did not have a material impact on the Company's
financial position or results of operations.
FOREIGN CURRENCY ACCOUNTING
The local currency is the functional currency for all foreign operations. In
1996, the Company changed the functional currency for subsidiaries in Korea,
Taiwan, Singapore, the United Kingdom, the Netherlands, Germany, France, and
China from the U.S. dollar to the local currency. On January 1, 1995, the
Company changed the functional currency for its Japanese subsidiary from the
U.S. dollar to the local currency. These changes were made in order to
reflect the changing nature of the operations of the Company's foreign
subsidiaries. These changes had no material impact on financial position or
results of operations for the year ended December 31, 1996. Accordingly,
translation gains or losses related to the foreign subsidiaries have been
included as a component of shareholders' equity subsequent to these changes.
FORWARD FOREIGN EXCHANGE CONTRACTS
The Company enters into forward foreign exchange contracts primarily to hedge
against the short-term impact of foreign currency fluctuations of
intercompany accounts payable denominated in U.S. Dollars recorded by the
Japanese subsidiary. The Company also enters into forward foreign exchange
contracts to buy and sell foreign currencies as economic hedges of the
parent's intercompany balances denominated in a currency other than the U.S.
dollar. In 1996, these hedging contracts were denominated primarily in the
Japanese Yen. The maturities of all forward foreign exchange contracts are
generally short-term in nature. Because the impact of movements in currency
exchange rates on forward foreign exchange contracts offsets the related
impact on the underlying items being hedged, these financial instruments do
not subject the Company to speculative risk that would otherwise result from
changes in currency exchange rates. Net foreign currency gains and losses
have not been material.
NET INCOME PER SHARE
Net income per share is based on the weighted average common and dilutive
common equivalent shares outstanding during the period. Stock options are
considered common stock equivalents and are included in the weighted average
computation using the treasury stock method.
ADVERTISING EXPENSES
The Company accounts for advertising costs as expenses in the period in which
they are incurred. Advertising expenses for 1996, 1995, and 1994 were
$3,259,000, $2,692,000, and $1,164,000, respectively.
EMPLOYEE STOCK PLANS
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation." In accordance with the provisions of SFAS No. 123, the Company
applies APB Opinion 25 and related interpretations in accounting for its
employee stock option and stock purchase plans and, accordingly, does not
recognize compensation cost. Note 6 to the Consolidated Financial Statements
contains a summary of the pro forma effects to reported net income and
earnings per share for 1996 and 1995 as if the Company had elected to
recognize compensation cost based on the fair value of the options granted at
grant date as prescribed by SFAS No. 123.
23
<PAGE>
- --------------------------------------------------------------------------------
NOTE 3 FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
As part of the Company's asset and liability management, the Company enters
into various types of transactions that involve financial instruments with
off-balance sheet risk. The Company enters into foreign forward exchange
contracts in order to manage foreign exchange risk. The notional values,
carrying amounts, and fair market values are as follows at December 31 (in
thousands):
<TABLE>
<CAPTION>
1996 1995
-----------------------------------------------------------------------------
NOTIONAL CARRYING ESTIMATED NOTIONAL CARRYING ESTIMATED
AMOUNT AMOUNT FAIR VALUE AMOUNT AMOUNT FAIR VALUE
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SELL FOREIGN CURRENCY, PRIMARILY YEN $27,140 $(279) $1,325 $24,031 $(222) $2,257
</TABLE>
AVAILABLE-FOR-SALE SECURITIES
The Company currently invests in only high quality, short-term investments
which it classifies as available-for-sale. As such, there were no
significant differences between amortized cost and estimated fair value at
December 31, 1996 and 1995. Additionally, because investments are short-term
and are generally allowed to mature, realized gains and losses for both years
have been minimal. All investments held at December 31, 1996 are due in less
than one year.
The following table presents the estimated fair value of the Company's
investments by balance sheet classification at December 31 (IN THOUSANDS):
1996 1995
------------------------------------------------------------------------
INSTITUTIONAL MONEY MARKET FUNDS $ - $ 2,942
COMMERCIAL PAPER 27,339 52,638
------------------------------------------------------------------------
AMOUNT INCLUDED IN CASH AND CASH EQUIVALENTS 27,339 55,580
------------------------------------------------------------------------
COMMERCIAL PAPER 75,085 76,019
U.S. TREASURY SECURITIES AND OBLIGATIONS OF
U.S. GOVERNMENT AGENCIES 35,821 13,666
------------------------------------------------------------------------
AMOUNTS INCLUDED IN SHORT-TERM INVESTMENTS 110,906 89,685
------------------------------------------------------------------------
U.S. TREASURY SECURITIES 5,489 -
------------------------------------------------------------------------
AMOUNTS INCLUDED IN OTHER ASSETS 5,489 -
------------------------------------------------------------------------
TOTAL AVAILABLE-FOR-SALE SECURITIES $143,734 $145,265
------------------------------------------------------------------------
On November 15, 1995, the Financial Accounting Standards Board (FASB) staff
issued a Special Report "A Guide to Implementation of Statement 115 on
Accounting for Certain Investments in Debt and Equity Securities." In
accordance with the provisions in the Special Report, the Company chose to
reclassify securities from held-to-maturity to available-for-sale. At
December 31, 1995, (the date of transfer) the amortized cost of these
securities was $145,265,000 and the unrealized gain was not material.
FAIR VALUE OF OTHER FINANCIAL INSTRUMENTS
The carrying and fair values of the Company's other financial instruments
were as follows at December 31 (IN THOUSANDS):
<TABLE>
<CAPTION>
1996 1995
------------------------------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
------------------------------------------------------
<S> <C> <C> <C> <C>
CASH AND CASH EQUIVALENTS $65,762 $65,762 $60,114 $60,114
CURRENT OBLIGATIONS UNDER LINES OF CREDIT $13,153 $13,153 $ 7,369 $ 7,369
</TABLE>
24
<PAGE>
The fair values of the Company's short-term investments are based on quoted
market prices as of December 31, 1996 and 1995. The fair value of the
Company's obligations under lines of credit is based on current rates offered
to the Company for similar debt instruments of the same remaining maturities.
- --------------------------------------------------------------------------------
NOTE 4 LINES OF CREDIT
- --------------------------------------------------------------------------------
The Company has lines of credit with three banks under which the Company can
borrow up to $15,153,000 at the bank's prime rates (1% to 8.25% at December
31, 1996), which expire at various dates through June 1998. The lines
restrict payment of cash dividends on the Company's stock. A portion of this
facility ($13,153,000) is available to the Company's Japanese subsidiary.
Borrowings by the subsidiary are at various rates as negotiated with the
banks. At December 31, 1996 and 1995, there were no borrowings by the parent
company, and $13,153,000 and $7,369,000 by the Japanese subsidiary,
respectively, at annual weighted average interest rates of 1.26% and 3.80%,
respectively.
- --------------------------------------------------------------------------------
NOTE 5 COMMITMENTS
- --------------------------------------------------------------------------------
The Company leases its facilities under operating leases. These leases
expire January 1997 through October 2006. As of December 31, 1996, the
minimum annual rental commitments are as follows (IN THOUSANDS):
1997 3,897
1998 3,577
1999 3,575
2000 3,407
2001 1,139
BEYOND 1,535
------------------------
$17,130
------------------------
Rent expense was approximately $4,094,000, $2,854,000, and $1,748,000 for the
years ended December 31, 1996, 1995, and 1994, respectively.
On April 10, 1996, the Company entered into a lease agreement for five
buildings in the San Jose area, three of which are currently occupied and
were previously leased by the Company. The agreement is for five years at
interest rates that approximate the London Interbank Offering Rate (LIBOR).
At current interest rates, the annual lease payments represent approximately
$1.9 million. During the term of the lease, the Company may elect to
purchase the buildings for an amount that approximates the lessor's cost of
the property and any current rent due and payable. The guaranteed residual
payment on the lease agreement is approximately $28.0 million. In connection
with the collateral requirements of this agreement, at the option of the
Company to reduce interest expense related to this lease agreement, it has
pledged securities of approximately $29.4 million which are included in
short-term investments.
On October 24, 1996, the Company entered into an additional lease agreement
for approximately 4.4 acres of undeveloped land adjacent to the five
buildings referred to above. The agreement is for ten years at an interest
rate that approximates LIBOR. At current interest rates, the annual lease
payments represent approximately $0.3 million. During the term of the lease,
the Company may elect to purchase the land for an amount that approximates
the lessor's cost of the property and any current rent due and payable. The
guaranteed residual payment on the lease agreement is approximately $5.2
million. In connection with the collateral requirements of this agreement,
the Company has pledged securities of approximately $5.5 million which are
included in other assets.
These leases contain certain restrictive financial covenants. The Company
was in compliance with these covenants at December 31, 1996.
25
<PAGE>
- --------------------------------------------------------------------------------
NOTE 6 EMPLOYEE BENEFIT PLANS
- --------------------------------------------------------------------------------
EMPLOYEE STOCK OPTION PLANS
The Company grants options to employees under the 1984 and 1992 Stock Option
Plans (the Plans). Under the Plans, options to purchase up to 5,670,000
shares of the Company's common stock may be granted at not less than fair
market value. Options generally vest ratably over a four year period on the
anniversary date of the grant or as determined by the Board of Directors.
Stock options expire ten years after date of grant. At December 31, 1996,
approximately 2,502,000 shares were reserved for future issuance under the
Employee Stock Option Plans and options to purchase 580,715 shares were
exercisable at a weighted average exercise price of $30.30.
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized for the
stock option Plans. Had compensation cost for the Company's stock option and
stock purchase plans been determined based on the fair value at the grant
date for awards in 1996 and 1995 consistent with the provisions of SFAS No.
123, the Company's net income and earnings per share would have been reduced
to the pro forma amounts indicated below:
1996 1995
--------------------------
NET INCOME AS REPORTED $94,029 $82,543
PRO FORMA NET INCOME $86,791 $79,553
EARNINGS PER SHARE AS REPORTED $ 5.70 $ 4.82
PRO FORMA EARNINGS PER SHARE $ 5.23 $ 4.73
Because SFAS No. 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until
approximately 1997.
In calculating pro forma compensation, the fair value of each option grant is
estimated on the date of grant using the Black-Scholes option-pricing model
with the following weighted average assumptions for grants made in 1996 and
1995:
1996 1995
--------------------------
DIVIDEND YIELD NONE NONE
EXPECTED VOLATILITY 56% 56%
RISK FREE INTEREST RATE 5.98% 6.34%
EXPECTED LIVES 2.9 YEARS 2.9 YEARS
The weighted average fair value of options granted during the year were
$21.45 and $26.25 for 1996 and 1995, respectively.
The pro forma net income and earnings per share listed above includes expense
related to the Company's Employee Stock Purchase Plans. The fair value of
issuances under the employee stock purchase plans is estimated on the
issuance date using the Black-Scholes model with the following weighted
average assumptions for issuances made in 1996 and 1995:
1996 1995
--------------------------
DIVIDEND YIELD NONE NONE
EXPECTED VOLATILITY 60% 60%
RISK FREE INTEREST RATE 5.8% 5.8%
EXPECTED LIVES 1/2 YEAR 1/2 YEAR
The weighted average fair value of purchase rights granted during the year
were $13.82 and $17.51 for 1996 and 1995, respectively.
26
<PAGE>
Information with respect to stock option activity is as follows:
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
AUTHORIZED OUTSTANDING PRICE PER SHARE EXERCISE PRICE
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 454 1,880 $ 0.40 - $34.00
Options granted (516) 516 $28.13 - $53.38
Options exercised - (456) $ 3.50 - $38.50
Options canceled 105 (105) $ 7.06 - $43.50
---------------------------------------------------------------------
Balance at December 31, 1994 43 1,835 $ 0.40 - $53.38
Additional authorization 700 - -
Options granted (771) 771 $48.13 - $83.25
Options exercised - (372) $ 5.69 - $53.38
Options canceled 179 (194) $ 8.38 - $83.25
---------------------------------------------------------------------
Balance at December 31, 1995 151 2,040 $ 0.40 - $83.25 $38.83
Additional authorization 680 - -
Options granted (885) 885 $36.38 - $60.25 $52.37
Options exercised - (326) $ 8.38 - $57.25 $15.56
Options canceled 192 (235) $ 0.40 - $83.25 $49.41
---------------------------------------------------------------------
Balance at December 31, 1996 138 2,364 $ 8.38 - $83.25 $46.13
---------------------------------------------------------------------
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------------------------------- ------------------------------------
OPTIONS WEIGHTED OPTIONS
OUTSTANDING AT AVERAGE REMAINING WEIGHTED EXERCISABLE AT WEIGHTED
RANGE OF DECEMBER 31, CONTRACTUAL LIFE AVERAGE DECEMBER 31, AVERAGE
EXERCISE PRICES 1996 (YEARS) EXERCISE PRICE 1996 EXERCISE PRICE
- ------------------------------------------------------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C>
$8.38 - $23.13 252,813 0.78 $12.41 215,493 $11.54
$23.38 - $34.00 390,243 6.84 27.50 202,532 26.91
$35.50 - $41.38 229,295 9.31 39.82 8,794 37.86
$43.50 - $49.98 237,461 8.70 46.38 22,087 45.71
$50.75 - $57.25 528,477 8.57 53.90 33,162 54.90
$60.25 460,600 9.62 60.25 30,000 60.25
$62.00 - $83.25 264,788 8.24 70.92 68,647 68.28
- ------------------------------------------------------------------------------------- ------------------------------------
$8.38 - $83.25 2,363,677 7.71 $46.13 580,715 $30.30
- ------------------------------------------------------------------------------------- ------------------------------------
</TABLE>
EMPLOYEE STOCK PURCHASE PLANS
In December 1988 and May 1992, the Company adopted qualified Employee Stock
Purchase Plans under Sections 421 and 423 of the Internal Revenue Code and
reserved 200,000 and 150,000 shares of common stock for issuance under the
plans, respectively. In 1995, the Company's shareholders approved an
amendment to increase shares reserved for issuance under the 1992 Employee
Stock Purchase Plan from 150,000 shares to 250,000 shares. Under the two
plans, qualified employees are entitled to purchase shares at 85% of the fair
market value on specified dates. There were approximately 62,000, 42,000,
and 46,000 shares issued under the two plans in 1996, 1995, and 1994,
respectively. At December 31, 1996, approximately 20,000 shares were
reserved for future issuance under the Employee Stock Purchase Plans.
COMMON STOCK REPURCHASE PROGRAM
In October 1992 and January 1996, the Company announced it would repurchase
700,000 and 1,000,000 shares, respectively, of common stock for issuance in
future Company employee benefit and compensation plans and other
requirements. During 1996, the Company repurchased 86,000 shares under the
program, and had purchased a total of 781,000 shares as of December 31, 1996.
27
<PAGE>
Employee Savings and Retirement Plan
The Company maintains a 401(k) retirement savings plan for its full-time
employees. Participants in the plan may contribute up to 20% of their annual
salary, limited by the maximum dollar amount allowed by the Internal Revenue
Code.
Profit Sharing and Bonus Programs
The Company has profit sharing and bonus programs that distribute cash based
on the performance of the Company and its employees, including the executive
officers. Charges to operations under these programs were $10,222,000,
$8,418,000, $6,247,000 in 1996, 1995, and 1994, respectively.
NOTE 7 TAXES ON INCOME
Significant components of the provision for income taxes attributable to
operations are as follows (in thousands):
1996 1995 1994
--------------------------------
State:
Current $ 6,145 $ 6,251 $4,053
Deferred 222 (1,248) (466)
--------------------------------
6,367 5,003 3,587
Federal:
Current 38,701 38,245 21,084
Deferred 1,545 (7,186) (5,662)
--------------------------------
40,246 31,059 15,422
Foreign:
Current 984 2,163 416
Income tax benefits attributable
to employee stock plan activity
allocated to shareholders' equity 3,034 4,297 3,722
--------------------------------
Total provision for income taxes $50,631 $42,522 $23,147
--------------------------------
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities
are as follows at December 31 (in thousands):
1996 1995
--------------------
Deferred tax assets:
Financial valuation accounts $ 5,464 $ 5,524
Expenses not currently deductible 9,807 9,754
State and other taxes 1,315 1,388
Foreign losses 1,472 -
--------------------
Total deferred tax assets 18,058 16,666
--------------------
Deferred tax liabilities:
Fixed assets (3,545) (386)
--------------------
Total net deferred tax assets $14,513 $16,280
--------------------
28
<PAGE>
The provisions for income taxes differ from provisions calculated by applying
the federal statutory tax rate to income before taxes because of the
following (in thousands):
1996 1995 1994
--------------------------------
Expected provisions at 35% $50,631 $43,773 $23,828
State taxes, net of federal benefit 4,200 3,252 2,332
Research and development credits (500) (566) (962)
Foreign Sales Corporation benefit (4,300) (3,868) (2,195)
Other 600 (69) 144
--------------------------------
$50,631 $42,522 $23,147
--------------------------------
NOTE 8 GEOGRAPHIC INFORMATION REPORTING AND MAJOR CUSTOMERS
The Company and its subsidiaries operate in one industry segment, principally
the development, manufacture, sale and service of chemical vapor deposition
systems for use in the manufacture of integrated circuits.
The following is a summary of operations in geographic areas (in thousands):
<TABLE>
<CAPTION>
North America Europe Pacific Rim Eliminations Consolidated
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Sales to unaffiliated customers $387,396 $4,336 $70,004 $ - $461,736
Transfers between geographic locations 59,771 2,377 9,438 (71,586) -
-------------------------------------------------------------------------------
Total net sales 447,167 6,713 79,442 (71,586) 461,736
Operating income 137,887 203 (1,837) - 136,253
Identifiable assets 407,472 1,501 50,814 - 459,787
1995
Sales to unaffiliated customers $315,976 $2,967 $54,789 $ - $373,732
Transfers between geographic locations 39,376 2,190 8,164 (49,730) -
--------------------------------------------------------------------------------
Total net sales 355,352 5,157 62,953 (49,730) 373,732
Operating income 110,224 201 5,366 - 115,791
Identifiable assets 319,502 1,072 44,114 - 364,688
1994
Sales to unaffiliated customers $194,139 $2,633 $27,907 $ - $224,679
Transfers between geographic locations 24,160 1,822 7,495 (33,477) -
--------------------------------------------------------------------------------
Total net sales 218,299 4,455 35,402 (33,477) 224,679
Operating income 61,656 223 1,818 - 63,697
Identifiable assets 237,870 882 26,248 - 265,000
</TABLE>
Transfers and commission arrangements between geographic areas are at prices
sufficient to recover a reasonable profit.
In 1996, 1995, and 1994, sales to one customer (a distributor) were
approximately 12%, 11%, and 13% of net sales, respectively.
Export sales were 64% in 1996 (54% to the Pacific Rim, 10% to all other), 56% of
net sales in 1995 (47% to the Pacific Rim, 9% to all other), and 55% of net
sales in 1994 (43% to the Pacific Rim, 12% to all other).
29
<PAGE>
NOTE 9 LEGAL PROCEEDINGS AND CONTINGENCIES
On January 20, 1995, Applied Materials Inc. (Applied) filed a patent
infringement suit against the Company, alleging that the Company's TEOS
products infringe one of Applied's patents that was issued in November 1994.
The Company expects the case to go to trial in the second quarter of 1997.
On September 15, 1995, Applied and the Company filed separate lawsuits each
claiming the other is liable for patent infringement. As the lawsuits,
including counterclaims, are now amended, the Company alleges that: (1)
Applied's tungsten products infringe three of the Company's patents, issued
in July 1993, August 1993, and December 1994, respectively. (2) Applied's
TEOS products infringe one of the Company's patents issued in June 1995.
Applied alleges that one of the Company's tungsten processes infringes one of
Applied's patents that was issued in 1991. Discovery is ongoing in the
matters initiated on September 15, 1995 and trial is currently scheduled for
August 1997, but is expected to the continued until a later date.
Management's expectations are that the ultimate resolution of these matters
will not have a material adverse effect on the Company's financial position,
cash flows or results of operations; however, based on future developments,
management's estimate of the ultimate outcome could change in the near term.
In the normal course of business, the Company from time to time receives
inquiries with regard to possible patent infringements. Management believes
that it is unlikely that the outcome of the patent infringement inquiries
will have a material adverse effect on the Company's financial position or
results of operations.
NOTE 10 RELATED PARTY TRANSACTIONS
The President of Submicron Technology, Inc. (Submicron), which is one of the
Company's customers, is also a member of the Company's Board of Directors.
The Company sells systems and spare parts to Submicron.
During 1996, the Company sold approximately $20,200,000 to Submicron.
Management believes these transactions were under terms no less favorable to
the Company than those arranged with other parties. There were no material
transactions with Submicron prior to 1996. Trade receivables from Submicron
at December 31, 1996 were $10,195,000.
30
<PAGE>
[report of Ernst & Young LLP, independent auditors]
The Shareholders and Board of Directors
Novellus Systems, Inc.
We have audited the accompanying consolidated balance sheets of Novellus
Systems, Inc. as of December 31, 1996 and 1995, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Novellus
Systems, Inc. at December 31, 1996 and 1995, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
San Jose, California
January 19, 1997
31
<PAGE>
[shareholders' information]
- --------------------------------------------------------------------------------
ANNUAL MEETING
THE 1997 ANNUAL MEETING OF THE SHAREHOLDERS WILL BE HELD AT 8:00 A.M. ON MAY
23, 1997 AT NOVELLUS CORPORATE HEADQUARTERS
3970 NORTH FIRST STREET,
SAN JOSE CA 95134.
FORM 10-K
THE COMPANY'S FISCAL 1996 ANNUAL REPORT ON FORM 10K, FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, WILL BE AVAILABLE AFTER MARCH 10, 1997. A
COPY OF THIS REPORT MAY BE OBTAINED BY WRITING THE SECRETARY OF THE
CORPORATION.
TRANSFER AGENT
CHEMICAL MELLON SHAREHOLDERS SERVICE
SAN FRANCISCO, CALIFORNIA
AUDITORS
ERNST & YOUNG LLP
SAN JOSE, CALIFORNIA
GENERAL COUNSEL
MORRISON & FOERSTER LLP
PALO ALTO, CALIFORNIA
STOCK LISTING
NOVELLUS SYSTEMS' COMMON STOCK IS TRADED ON THE NATIONAL MARKET SYSTEM OF
NASDAQ UNDER THE SYMBOL NVLS.
[corporate directory]
<TABLE>
<CAPTION>
BOARD OF DIRECTORS CORPORATE OFFICERS OPERATING OFFICERS
- ------------------------------------------------------------------------------------
<S> <C> <C>
RICHARD S. HILL RICHARD S. HILL DAVID AVERY
CHAIRMAN OF THE BOARD CHAIRMAN OF THE BOARD PRESIDENT, EUROPEAN OPERATIONS
AND CHIEF EXECUTIVE OFFICER AND CHIEF EXECUTIVE OFFICER
NOVELLUS SYSTEMS, INC. MATTHEW CHAN
ROBERT H. SMITH PRESIDENT, ASIA OPERATIONS
D. JAMES GUZY EXECUTIVE VICE PRESIDENT,
PRESIDENT AND CHIEF FINANCIAL OFFICER NAK-KYUNG CHUNG
ARBOR COMPANY PRESIDENT, KOREA OPERATIONS
PETER HANLEY
TOM LONG EXECUTIVE VICE PRESIDENT, YUTAKA KISANUKI
DIRECTOR OF PROGRAMS SALES AND MARKETING PRESIDENT, JAPAN OPERATIONS
PLANAR ADVANCE, INC.
JOHN CHENAULT DENNIS R. RICCIO
GLEN POSSLEY VICE PRESIDENT, OPERATIONS PRESIDENT, U.S. OPERATIONS
PRESIDENT OF SUBMICRON
TECHNOLOGY, INC. JEFFREY C. BENZING
VICE PRESIDENT, ENGINEERING
ROBERT H. SMITH
EXECUTIVE VICE PRESIDENT ALAIN HARRIS
AND CHIEF FINANCIAL OFFICER VICE PRESIDENT AND
NOVELLUS SYSTEMS, INC. CHIEF TECHNICAL OFFICER
JOSEPH VAN POPPELEN
PRESIDENT
VAN POPPELEN COMPANY
</TABLE>
32
<PAGE>
EXHIBIT 22.1
SUBSIDIARIES OF REGISTRANT
Novellus Systems, Ltd. (U.K.)
Novellus Systems, B.V. (Netherlands)
Nippon Novellus Systems, K.K. (Japan)
Novellus Systems Korea Co., Ltd. (Korea)
Novellus Systems (H.K.) Limited (Hong Kong)
Novellus Systems International (U.S.)
Novellus Systems Export Inc. (Barbados)
Novellus Singapore PTE Ltd. (Singapore)
Novellus Systems Semiconductor Equipment Shanghai Co. Ltd (China)
Novellus Systems, Thailand Ltd. (Thailand)
Novellus Systems, GMBH (Germany)
Novellus Systems, SARL (France)
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Novellus Systems, Inc. of our report dated January 19, 1997, included in the
1996 Annual Report to Shareholders of Novellus Systems, Inc.
Our audits also included the financial statement schedule of Novellus Systems,
Inc. listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statements
on Form S-8 (Nos. 33-11825, 33-88156, 33-51056, 33-36787, 33-25897, 33-62807)
pertaining to the Amended and Restated 1992 Employee Stock Purchase Plan, the
Amended and Restated 1984 Stock Option Plan, the Employee Stock Purchase Plan,
and the Amended and Restated 1992 Stock Option Plan, and in the related
prospectuses of our report dated January 19, 1997 with respect to the
consolidated financial statements incorporated herein by reference, and of our
report included in the preceding paragraph with respect to the financial
statement schedule included in this Annual Report (Form 10-K) of Novellus
Systems, Inc.
March 18, 1997
San Jose, California /s/ Ernst & Young LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
NOVELLUS SYSTEMS 1996 10K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 65,762
<SECURITIES> 110,906
<RECEIVABLES> 119,710<F1>
<ALLOWANCES> 2,777
<INVENTORY> 55,448
<CURRENT-ASSETS> 373,969
<PP&E> 101,209
<DEPRECIATION> 34,991
<TOTAL-ASSETS> 459,787
<CURRENT-LIABILITIES> 86,151
<BONDS> 0
0
0
<COMMON> 128,751
<OTHER-SE> 244,985
<TOTAL-LIABILITY-AND-EQUITY> 459,787
<SALES> 461,736
<TOTAL-REVENUES> 461,736
<CGS> 197,162
<TOTAL-COSTS> 197,162
<OTHER-EXPENSES> 128,321
<LOSS-PROVISION> 581
<INTEREST-EXPENSE> 477
<INCOME-PRETAX> 140,660
<INCOME-TAX> 50,631
<INCOME-CONTINUING> 94,029
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 94,029
<EPS-PRIMARY> 5.70
<EPS-DILUTED> 5.70
<FN>
<F1>Net of Allowances for Doubtful Accounts
</FN>
</TABLE>
