UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-18805
ELECTRONICS FOR IMAGING, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3086355
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2855 Campus Drive, San Mateo, CA 94403
(Address of principal executive offices, including zip code)
(650) 286-8600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [x] No [ ]
The number of shares of Common Stock outstanding as of June 30, 1997 was
51,860,097.
An Exhibit Index can be found on Page 16.
<PAGE>
ELECTRONICS FOR IMAGING, INC.
INDEX
Page No.
PART I - Financial Information
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Income
Three Months Ended June 30, 1997 and 1996, and
Six Months Ended June 30, 1997 and 1996 .................3
Condensed Consolidated Balance Sheets
June 30, 1997 and December 31, 1996 .....................4
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1997 and 1996 .................5
Notes to Condensed Consolidated Financial Statements .........6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ..............................8
Item 3. Not Applicable...................................................14
PART II - Other Information
Items 1 - 3 Not Applicable ..................................................15
Item 4. Submission of Matters to a Vote of Security Holders..............15
Item 5. Other Information................................................15
Item 6. Exhibits and Reports on Form 8-K ................................16
Signatures ...................................................................18
2
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
ELECTRONICS FOR IMAGING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- ------------------------------
1997 1996 1997 1996
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenue $ 100,633 $ 69,046 $ 191,639 $ 132,695
Cost of revenue 45,407 34,555 86,500 67,798
------------- ------------- ------------- --------------
55,226 34,491 105,139 64,897
------------- ------------- ------------- --------------
Operating expenses:
Research and development 9,265 5,091 17,391 9,246
Sales and marketing 10,487 6,983 20,045 12,843
General and administrative 2,841 2,387 5,714 4,753
------------- ------------- ------------- --------------
22,593 14,461 43,150 26,842
------------- ------------- ------------- --------------
Income from operations 32,633 20,030 61,989 38,055
Other income, net 2,693 1,690 5,256 3,349
------------- ------------- ------------- --------------
Income before income taxes 35,326 21,720 67,245 41,404
Provision for income taxes 12,717 7,819 24,208 14,906
------------- ------------- ------------- --------------
Net income $ 22,609 $ 13,901 $ 43,037 $ 26,498
============= ============= ============= ==============
Net income per share $ 0.41 $ 0.25 $ 0.77 $ 0.49
============= ============= ============= ==============
Shares used in computing
net income per share 55,734 54,826 55,737 54,484
============= ============= ============= ==============
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
3
<PAGE>
ELECTRONICS FOR IMAGING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
June 30, December 31,
1997 1996
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 93,707 $ 71,946
Short-term investments 151,548 140,154
Accounts receivable 56,245 40,875
Inventories 14,582 11,004
Other current assets 34,151 22,970
---------- ----------
Total current assets 350,233 286,949
Property and equipment, net 13,458 10,640
Other assets 1,460 1,364
---------- ----------
Total assets $ 365,151 $ 298,953
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUIT
Current liabilities:
Accounts payable $ 29,153 $ 16,355
Accrued and other liabilities 30,107 25,980
Income taxes payable 11,055 7,248
---------- ----------
Total current liabilities 70,315 49,583
---------- ----------
Stockholders' equity:
Preferred Stock, $.01 par value,
5,000,000 shares authorized; none
issued and outstanding -- --
Common Stock, $.01 par value,
150,000,000 shares authorized;
51,860,097 and 51,503,314 shares
issued and outstanding, respectively 519 515
Additional paid-in capital 115,085 112,660
Retained earnings 179,232 136,195
---------- ----------
Total stockholders' equity 294,836 249,370
---------- ----------
Total liabilities and stockholders' $ 365,151 $ 298,953
equity ========== ==========
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
ELECTRONICS FOR IMAGING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30,
------------------------
1997 1996
--------- ---------
Cash flows from operating activities:
Net income $ 43,037 $ 26,498
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,798 1,647
Changes in operating assets and liabilities:
Accounts receivable (15,370) (11,993)
Inventories (3,578) (1,563)
Other current assets (11,181) (3,674)
Accounts payable and accrued liabilities 16,925 9,051
Income taxes payable 3,807 1,890
--------- ---------
Net cash provided by operating activities 36,438 21,856
--------- ---------
Cash flows from investing activities:
Purchase of short-term investments (85,797) (124,159)
Sales and maturities of short-term investments 74,403 85,059
Purchases of property and equipment, net (5,616) (4,954)
Other assets (96) (117)
--------- ---------
Net cash used for investing activities (17,106) (44,171)
--------- ---------
Cash flows from financing activities:
Issuance of common stock related to stock plans 2,429 2,812
--------- ---------
Net cash provided by financing activities 2,429 2,812
--------- ---------
Net change in cash and cash equivalents 21,761 (19,053)
Cash and cash equivalents at beginning of period 71,946 46,006
--------- ---------
Cash and cash equivalents at end of period $ 93,707 $ 26,503
========= =========
Supplemental disclosure - cash paid for income taxes $ 17,830 $ 12,794
========= =========
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
ELECTRONICS FOR IMAGING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
(Unaudited)
1. Basis of Presentation
The unaudited interim condensed consolidated financial statements of
Electronics for Imaging, Inc. (the Company) as of and for the interim
periods ended June 30, 1997 have been prepared on the same basis as the
audited consolidated financial statements as of and for the year ended
December 31, 1996, contained in the Company's Annual Report to
Stockholders, and, in the opinion of management, include all adjustments
(consisting only of normal recurring adjustments) necessary to present
fairly the financial position of the Company and the results of its
operations and cash flows, in accordance with generally accepted accounting
principles. The interim condensed consolidated financial statements should
be read in conjunction with the audited consolidated financial statements
and notes thereto referred to above.
The preparation of the interim condensed consolidated financial statements
in conformity with generally accepted accounting principles for such
financial statements requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities as of the date of the interim
condensed consolidated financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could
differ from these estimates.
The interim results of the Company are subject to fluctuation. As a result,
the Company believes the results of operations for the interim periods
ended June 30, 1997 are not necessarily indicative of the results to be
expected for any other interim period or the full year.
2. The Company effected on February 20, 1997, a two-for-one stock split in the
form of a stock dividend payable to stockholders of record as of February
10, 1997. All references in the condensed consolidated financial statements
to weighted average numbers of shares outstanding and per share amounts
have been restated to reflect the stock split.
6
<PAGE>
3. Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share." This
statement is effective for the Company's fiscal year ending December 31,
1997. The Statement redefines earnings per share under generally accepted
accounting principles. Under the new standard, primary earnings per share
is replaced by basic earnings per share and fully diluted earnings per
share is replaced by diluted earnings per share. If the Company had adopted
this Statement as of the beginning of 1996, the pro-forma earnings per
share for the three month and six month periods ended June 30, 1997 and
June 30, 1996 would have been as follows:
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
Basic earnings per share $ 0.44 $ 0.27 $ 0.83 $ 0.53
Diluted earnings per share $ 0.41 $ 0.25 $ 0.77 $ 0.49
4. Inventory Composition
June 30, December 31,
1997 1996
------- -------
Raw materials $12,056 $ 6,696
Work-in-process 1,539 3,374
Finished goods 987 934
------- -------
$14,582 $11,004
======= =======
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
audited consolidated financial statements of Electronics for Imaging, Inc. (the
Company) and related notes thereto contained in the Company's 1996 Annual Report
to Stockholders. Results for the three and six month periods ended June 30, 1997
are not necessarily indicative of the results to be expected for the entire
fiscal year ended December 31, 1997. All assumptions, anticipations,
expectations and forecasts contained herein are forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those discussed here. For a more complete discussion of factors
which might impact the Company's results, please see the section entitled
"Factors that Could Adversely Affect Performance" below and the section entitled
"Risk Factors" in the Company's 1996 Annual Report on Form 10-K, as filed with
the Securities and Exchange Commission. The Company periodically reviews such
factors to ensure their appropriateness.
Results of Operations - Three and Six Month Period Ended 6/30/97 and 6/30/96
Revenue
The Company's revenue was $100.6 million in the second quarter of 1997, compared
to $69.0 million in the corresponding quarter of 1996. Revenue for the six
months ended June 30, 1997 was $191.6 million, compared to $132.7 million in the
corresponding period of 1996. The substantial majority of the Company's revenue
to date is attributable to the sale of Fiery and Fiery XJ Color Servers. The
increases in revenue are a result of ongoing expansion of the Company's sales
and marketing organizations and corresponding new market penetration, as well as
introductions of new features on the Company's Fiery XJ Color Server and Fiery
XJe Controller products. In addition, as the color print market continues to
expand, the Company benefits from the industry expansion. Substantially all of
the Company's sales in the three and six month periods ending June 30, 1997 and
June 30, 1996 were to its OEM partners. No assurance can be given that the
Company's relationships with these OEM partners will continue. In the event that
any of such relationships is discontinued or scaled back, the Company could
experience a significant negative impact on its consolidated financial position
and results of operations.
8
<PAGE>
The Company completed in the fourth quarter of 1995 an agreement with Canon Inc.
for the purchase of Fiery XJ Color Servers. The agreement provides Canon
exclusive distribution rights for Fiery XJ Color Servers designed for Canon's
proprietary color copiers. The agreement effectively replaced the Company's
existing distribution channel through the Canon dealer and distributor network
beginning in April 1995 with shipments to Canon under the terms of a letter of
intent preceding the agreement. This arrangement has resulted to some extent in
lower associated selling and marketing costs. During the first quarter of 1997,
the agreement with Canon expired, but the parties have extended the agreement on
a quarterly basis through the third quarter of 1997. The Company expects to
finalize the terms of the new agreement in due course and is continuing the
relationship with Canon under the terms of the original agreement. No assurance
can be given that the Company will be able to successfully complete the
agreement under terms considered favorable to the Company. If the agreement with
Canon is not signed, the Company's operating results could be adversely
affected, as it would have to transition back to sales through Canon dealers and
distributors worldwide. The Company sells Fiery XJ Color Server products to each
of its significant OEM partners under similar agreements.
The Company also sells the Fiery XJe Controller through similar agreements with
OEM partners. These companies combine the Fiery XJe Controller with a color
laser engine to produce a desktop color laser printer with superior speed and
output quality.
The Company completed a development agreement in the first quarter of 1997 with
Konica to produce a next generation Fiery Print Controller which when combined
with a desktop color laser printer will deliver superior performance at an
extremely economical price point. During the second quarter of 1997 the Company
entered into a similar development agreement with Mita Copystar America. In July
1997, a development agreement was signed with Sharp Electronics Corporation to
produce a Fiery Server for the new generation of mid-range digital black and
white copiers allowing the Company to leverage the technology created for color
products into the black and white digital copier marketplace. Finally, the
Company is still finalizing the terms of a development agreement with Oce to
produce a new Fiery Server for Oce's high-speed black and white production
printing system. The combination printing solution was previewed at a trade show
in the second quarter of 1997. No assurance can be given that the Company will
be able to successfully complete this agreement under terms considered favorable
to the Company or that any of the above products will meet with market
acceptance upon development.
9
<PAGE>
International revenue continued to grow in the second quarter of 1997, and was
affected by sales mix and certain OEM product requirements and shipping
requirements. Direct sales into Japan accounted for approximately 19% and 31% of
revenue in the second quarter of 1997 and 1996, respectively. This decrease is
due to a pipeline fill on the release of a major product in the second quarter
of 1996. Sales into Japan were 20% and 23% of revenue for the six months ended
June 30, 1997 and 1996, respectively. Sales into Europe accounted for
approximately 32% and 21% of revenue in the second quarter of 1997 and 1996,
respectively, and 28% and 22% of revenue for the six months ended June 30, 1997
and 1996, respectively. During the second quarter of 1997, some sales that were
previously being shipped to destinations in the United States and redistributed
to Europe began being shipped directly to Europe due to a change in the
Company's logistics arrangements with one of its major customers. Other
shipments to some of the Company's OEM partners are made to centralized
purchasing and manufacturing locations which in turn sell through to foreign
locations. As a result of these factors, the Company believes that sales of its
products into Europe and Japan may actually be higher, though accurate data is
difficult to obtain. The Company expects that international revenue will
continue to represent a significant portion of its total revenue.
During the first and second quarters of 1997, the Company introduced several new
product upgrades and enhancements. These included the R5000 CPU, which runs at
200 MHz, for the Fiery XJ+ series of color servers and the Fiery Web Tools which
allow the user to access any Fiery Color Server or Fiery Driven desktop printer
from the World Wide Web and distribute data electronically. The user can then
print directly in a remote location as opposed to printing locally and
transporting the document to further locations. While the initial response has
been favorable, it is too soon to assess the extent of market acceptance. The
Company continues to work on the development of products utilizing the Fiery XJ
architecture and other products and intends to continue to introduce new
generations of Fiery Products and other new product lines in 1997. There can be
no assurance that these products will be met with market acceptance.
Cost of Revenue
The substantial majority of the Company's cost of revenue to date has been
attributable to the sale of Fiery and Fiery XJ Color Servers. Fiery XJ Color
Servers are manufactured by third-party manufacturers who purchase most of the
necessary components. The Company sources directly proprietary memory and
certain ASICs, and software licensed from various sources, including PostScript
interpreter software, which the Company licenses from Adobe Systems, Inc. The
Company's gross margin was 54.9% in the second quarter of 1997, up from 50.0% in
the corresponding quarter of 1996. The Company's gross margin was 54.9% for the
six months ended June 30, 1997, up from 48.9% in the corresponding period of
1996. Overall gross margin in 1997 continued to be supported by low market
prices for DRAM components used in the Company's products and other ongoing
manufacturing savings efforts. Further, gross margin was favorably impacted by
the mix of products sold.
10
<PAGE>
The Company's gross margin depends in part on prices it is able to attain on
Fiery XJ Color Servers, Fiery XJe Controllers and future products. The lower
manufacturing costs of the Fiery XJ Color Servers have given the Company
flexibility to offer products with a broad range of prices. In the first and
second quarters of 1997, the Company took significant price reductions across
its line of products and saw substantial increases in volumes while still
maintaining its gross margins. In addition, as the Company continues to
introduce new Fiery products, it may continue to lower prices on existing
products. Embedded Fiery Controllers for desktop color printers will continue to
have lower margins than the Company's other products, reflecting the different
distribution and marketing practices employed for desktop color laser printers.
This will also be the case with the new black and white products currently being
developed. Accordingly, if embedded Fiery Controllers for desktop color printers
and Fiery Servers for digital black and white copiers increase as a percentage
of revenue, the Company's overall gross margin is expected to decline, all other
things being equal. In general, gross margin will continue to be impacted by a
variety of factors including, among others, the availability and pricing of key
components (including DRAMs and PostScript interpreter software), third-party
manufacturing costs, product, channel and geographic mix, the success of the
Company's product transitions and new products, competition, and general
economic conditions. The Company currently expects to continue to take steps to
reduce product costs, expand product offerings and control operating expenses;
however, no assurance can be given that these efforts will be successful.
11
<PAGE>
Operating Expenses
Research and Development. Expenses for research and development consist
primarily of personnel expenses and, to a lesser extent, consulting services,
costs of prototype materials and technology, and depreciation. Research and
development expenses were $9.3 million or 9.2% of revenue in the second quarter
of 1997, compared to $5.1 million or 7.4% of revenue in the corresponding
quarter of 1996, and $17.4 million or 9.1% for the six months ended June 30,
1997, compared to $9.2 million or 7.0% in the corresponding period of 1996.
Research and development expenses increased primarily due to incremental costs
related to the number of engineers employed which in turn relates to the number
of projects now underway. The Company believes that the development of new
products and enhancement of existing products is essential to its continued
success, and management intends to continue to devote substantial resources to
research and new product development. Accordingly, the Company expects that its
research and development expenses may increase in absolute dollars and possibly
also as a percentage of revenue.
Sales and Marketing. Such expenses include personnel expenses, tradeshows and
other promotional expenses, sales commissions, travel, public relations, and
depreciation and facility costs associated with sales offices in the United
States, Europe, Japan and other locations. Sales and marketing expenses were
$10.5 million or 10.4% of revenue in the second quarter of 1997, compared to
$7.0 million or 10.1% of revenue in the corresponding quarter of 1996, and $20.0
million or 10.5% for the six months ended June 30, 1997, compared to $12.8
million or 9.7% in the corresponding period of 1996. Sales and marketing
expenses increased as a percentage of total revenue due primarily to increases
in employee headcount, opening of new sales offices and costs required for the
promotion and support of the Company's existing and new products. The Company
expects that its sales and marketing expenses may increase in absolute dollars
and also as a percentage of revenue as it continues to actively promote its
products, launch new Fiery models and other products, and continue to build its
sales and marketing organization.
General and Administrative. Such expenses consist primarily of personnel
expenses and, to a lesser extent, professional fees, expenses required of a
public company, and depreciation and facility costs. General and administrative
expenses were $2.8 million or 2.8% of revenue in the second quarter of 1997,
compared to $2.4 million or 3.5% of revenue in the corresponding quarter of
1996, and $5.7 million or 3.0% of revenue for the six months ended June 30,
1997, compared to $4.8 million or 3.6% of revenue in the corresponding period of
1996. While general and administrative expenses decreased as a percentage of
total revenue, these expenses have increased in absolute dollars. The increases
were primarily due to the addition of personnel and related expenses to support
the Company's operations. The Company expects that its general and
administrative expenses may increase in absolute dollars and possibly also as a
percentage of revenue in order to support ongoing growth in operations.
12
<PAGE>
Income Taxes
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, for all periods
presented. The Company's effective tax rate was 36.0% for the third quarter of
1997 and 1996. In each period the Company benefited from increased tax-exempt
interest income, increases in foreign sales and to a lesser extent the
utilization of research and development credits in achieving a consolidated
effective tax rate lower than that prescribed by the respective taxing
authorities. The Company anticipates that these benefits will continue to have a
favorable impact on the Company's consolidated effective tax rate.
Liquidity and Capital Resources
Cash, cash equivalents and short-term investments increased to $245.3 million as
of June 30, 1997, up from $212.1 million as of December 31, 1996. Working
capital increased to $279.9 million as of June 30, 1997, up from $237.4 million
as of December 31, 1996. Net cash provided by operating activities was $36.4
million and $21.9 million for the six month periods ended June 30, 1997 and
1996, respectively, primarily as a result of profitable operations in both
periods. The Company purchased approximately $5.6 million of capital equipment
and furniture during the six month period ended June 30, 1997, compared to
purchases of $5.0 million in the corresponding period of 1996.
The Company believes that its existing capital resources together with cash
generated from continuing operations will be sufficient to fund its operations
and meet capital requirements through at least 1998.
Factors That Could Adversely Affect Performance
The following may impact the Company's future performance and financial results:
Product Transitions. Delays in the launch or availability of new product models
could have an adverse effect on the Company's financial results. Product
transitions also carry the risk that customers will delay or cancel orders for
existing models pending shipments of new models. If the Company is not able to
successfully manage future product transitions or cannot guarantee the
availability of products, its results of operations could be adversely affected.
New Product Introductions. The Company continues to look at opportunities to
develop product lines distinct from the Fiery XJ Color Server. Such new products
may require the investment of capital for the development of new distribution
and marketing channels, at an unknown cost to the Company. There can be no
guarantee that the Company would be successful in the development of such
channels or that any new products will gain market acceptance. Further, new
products may directly impact the sales of the Company's Fiery XJ products. If
the Company is not able to successfully manage the introduction of new products,
its results of operations could be adversely affected.
13
<PAGE>
Competition. The Company has seen competition in the market from companies and
products that provide similar functionality and believes that such competition
will continue and may intensify. In addition, the marketplace for printer
controllers and black and white servers involves competitors with significant
resources. There can be no assurance that the Company will be able to continue
to successfully compete against other companies' product offerings or their
financial and other resources.
Fiery XJe. The Company is currently selling the Fiery XJe Controller to several
manufacturers under OEM agreements and has entered into development agreements
with additional companies. No assurance can be given that the Company will
continue to recognize significant revenue from such sales or that the Company
will be successful in further marketing this product to other OEM partners or
other parties.
Reliance on OEM Partners. No assurance can be given that the Company will
continue to supply products to each of its current OEM partners. In the event
that an OEM partner discontinues or reduces its level of purchases of Fiery XJ
Color Servers, the Company would experience a significant negative impact on its
consolidated financial position and results of operations.
Fluctuations in Operating Results. Operating results may fluctuate due to
factors such as demand for the Company's products, success and timing of the
introduction of new products, price reductions by the Company and its
competitors, delay, cancellation or rescheduling of orders, product performance,
seasonal purchasing patterns of its OEM partners, performance of third-party
manufacturers, product inventory levels, availability of key components for the
Company's products, the status of the Company's relationships with its OEM
partners and Adobe, among others, the Company's ability to develop and market
new products, the timing and amount of sales and marketing expenditures, the
costs of developing new product offerings and the general demand for color
copiers and color laser printers.
Limited Backlog. The Company typically does not obtain long-term volume purchase
contracts from its customers, and a substantial portion of the Company's backlog
is scheduled for delivery within 90 days or less. Customers may cancel orders
and change volume levels or delivery times without penalty. Quarterly sales and
operating results therefore depend on the volume and timing of the backlog as
well as bookings received during the quarter. A significant portion of the
Company's operating expenses are fixed, and planned expenditures are based
primarily on sales forecasts and product development programs. If sales do not
meet the Company's expectations in any given period, the adverse impact on
operating results may be magnified by the Company's inability to adjust
operating expenses sufficiently or quickly enough to compensate for such a
shortfall.
Volatility of Stock Price. Due to various factors, including those noted above,
the Company's future earnings and stock price may be subject to significant
volatility, particularly on a quarterly basis. Any shortfall in revenue or
earnings from levels expected by securities analysts could have an immediate and
significant adverse effect on the trading price of the Company's common stock in
any given period. The Company participates in a highly dynamic industry, which
often results in significant volatility for the Company's common stock price.
ITEM 3. NOT APPLICABLE
14
<PAGE>
PART II OTHER INFORMATION
ITEMS 1 - 3.
There is no applicable information to report under Part II, Items 1 - 3 during
the period covered by this report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following items were submitted to the stockholders of the Company at the
Company's Annual Meeting of Stockholders held May 1, 1997.
(a) The election of six directors to serve a one-year term until
their successors are duly elected and qualified. The following
is a summary of the votes cast for and the votes withheld for
each individual.
Votes For Votes Withheld
---------- --------------
Efraim Arazi 38,897,452 91,446
Dan Avida 38,850,320 138,578
Gill Cogan 38,897,262 91,636
Jean-Louis Gassee 38,898,342 90,556
Dan Maydan 38,899,222 89,676
Thomas Unterberg 38,895,674 93,224
(b) The defeat of an amendment to the Company's 1990 Stock Plan to
increase the number of shares reserved for issuance thereunder
by an additional 1,000,000 shares. Results of the voting
included 19,386,986 votes for, 19,542,747 votes against and
59,165 shares abstained or not voted.
(c) The ratification of the appointment of Price Waterhouse LLP as
the independent accountants of the Company for the fiscal year
ended December 31, 1997. Results of the voting included
38,958,267 votes for, 16,912 votes against and 13,719 shares
abstained.
ITEM 5. OTHER INFORMATION
In July 1997, the Company finalized terms on a financing arrangement
for its new corporate campus in Foster City, California. According to the terms
of the agreement, the company will enter into a $65 million lease financing
structure with FBTC Leasing Corporation of New York for a 10-story, 295,000
square-foot office building, to be constructed on 34.5 acres of land which the
Company previously agreed to purchase from the City of Foster City for $24.5
million. Under this arrangement the Company will act as Construction Agent for
the Lessee and expects to occupy the new facility by late 1998. The financing
arrangement is structured as an off-balance sheet transaction. A copy of the
Master Lease can be found attached to this filing.
15
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10.57 Master Lease and Open End Mortgages dated as of July
18, 1997 by and between the Company and FBTC Leasing Corp. for the
lease financing of the Company's corporate headquarters building
to be built in Foster City, California.
Exhibit 11.1 Statement re Computation of per Share Earnings.
Exhibit 27.1 Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
three-month period ended June 30, 1997.
- --------------------------------------------------------------------------------
MASTER LEASE AND OPEN END MORTGAGES
THIS DOCUMENT SECURES FUTURE ADVANCES
Dated as of July 18, 1997
between
ELECTRONICS FOR IMAGING, INC.,
as the Lessee or Mortgagor
and
FBTC LEASING CORP., as the
Lessor or Mortgagee.
----------------------------
Lease Financing of Corporate Headquarters Building
Located in San Mateo County, California
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This Master Lease and Open End Mortgages is subject to a lien in favor of the
Agent, on behalf of the Lenders, under the Loan Agreement. This Master Lease and
Open End Mortgage has been executed in several counterparts. To the extent, if
any, that this Master Lease and Open End Mortgages constitutes chattel paper (as
such term is defined in the Uniform Commercial Code as in effect in any
applicable jurisdiction), no lien on this Master Lease and Open End Mortgages
may be created through the transfer or possession of any counterpart other than
the original counterpart containing the receipt therefor executed by The Fuji
Bank, Limited, San Francisco Agency, as Agent, on or following the signature
page hereof.
This counterpart is [not] the original counterpart.
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Master Lease
THIS DOCUMENT SECURES FUTURE ADVANCES
THIS MASTER LEASE AND OPEN END MORTGAGES (this "Master Lease"), dated
as of July 18, 1997, between FBTC LEASING CORP., a New York corporation, having
its principal office at Two World Trade Center, New York, New York 10048, as the
Lessor and as Mortgagee for the benefit of the Lenders (as defined below) and
the Lessor, and ELECTRONICS FOR IMAGING, INC., a Delaware corporation, having a
principal office at 2855 Campus Drive, San Mateo, California 94403, as Lessee
and as Mortgagor.
W I T N E S S E T H:
WHEREAS, pursuant to a Participation Agreement dated as of the date
hereof (as amended, modified, restated or supplemented from time to time, the
"Participation Agreement"), among the Lessee, as Lessee and Construction Agent,
the Lessor, the various financial institutions (the "Tranche A Lenders" or the
"Lenders") as are or may from time to time become Tranche A Lenders under the
Loan Agreement (as defined below), and The Fuji Bank, Limited, San Francisco
Agency, as Agent for the Lenders, the Lenders and the Lessor have agreed to
finance the Site Development Work and Construction of the Improvements on the
Land;
WHEREAS, the Lessor and the Lessee intend to enter into the Ground
Lease between the Lessee, as ground lessor, and the Lessor, as ground lessee,
pursuant to which the land in San Mateo County, California, as more particularly
described on Schedule I hereto (together with all Appurtenant Rights attached
thereto, the "Land") will be leased to the Lessor;.
WHEREAS, the Lessee, as Construction Agent, will perform the Site
Development Work and construct certain Improvements on the Land which as
constructed will be the property of the Lessor and will become part of the
Property; and
WHEREAS, the Property will be subject to the terms of this Master
Lease;
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions; Interpretation. Capitalized terms used but
not otherwise defined in this Master Lease have the respective meanings
specified in Appendix A to this Master Lease; and the rules of interpretation
set forth in Appendix A to this Master Lease shall apply to this Master Lease.
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Master Lease
ARTICLE II
MASTER LEASE
SECTION 2.1. Acceptance and Lease of Property. Subject to the
conditions set forth in the Participation Agreement, including without
limitation the satisfaction or waiver of the conditions set forth in Article VI
thereof, the Lessor hereby agrees to accept delivery on the Acquisition Date of
the Property pursuant to the terms of the Participation Agreement and
simultaneously to demise and lease to the Lessee hereunder for the Term (as
defined in Section 2.3), the Lessor's interest in the Land, together with any
Improvements which thereafter may be constructed on or at the Land pursuant to
the Construction Agency Agreement or this Master Lease, and the Lessee hereby
agrees, to lease from the Lessor for the Term, the Lessor's interest in the Land
(including all Improvements which may be constructed on or at the Land pursuant
to the Construction Agency Agreement and this Master Lease).
SECTION 2.2. Acceptance Procedure. The Lessee hereby agrees that the
execution and delivery by the Lessee on the Acquisition Date of an appropriately
completed Lease Supplement in the form of Exhibit A hereto covering the Lessor's
interest in the Land, all Improvements on the Land and all other Improvements
which thereafter may be constructed thereon pursuant to the Construction Agency
Agreement and this Master Lease, shall, without further act, constitute the
irrevocable acceptance by the Lessee of all of the Property for all purposes of
this Master Lease and the other Operative Documents on the terms set forth
therein and herein, and that the Property, together with any Improvements
constructed on the Land pursuant to the Construction Agency Agreement and this
Master Lease, shall be deemed to be included in the leasehold estate of this
Master Lease and shall be subject to the terms and conditions of this Master
Lease as of the Acquisition Date.
SECTION 2.3. Lease Term. The term of this Master Lease (the "Term")
shall consist of an Interim Lease Term (the "Interim Lease Term") and a Base
Lease Term (a "Base Lease Term"). The Interim Lease Term of this Master Lease
shall commence on (and include) the Acquisition Date and end on (but exclude)
the Commitment Termination Date. The Base Lease Term shall commence on (and
include) the last day of the Interim Lease Term and end on (but exclude) the
Expiration Date, as such Expiration Date may be extended from time to time in
accordance with Article XIX.
SECTION 2.4. Title. The Property is leased to the Lessee without any
representation or warranty, express or implied, by the Lessor and subject to the
rights of parties in possession, the existing state of title on the Acquisition
Date with respect thereto (including, without limitation, all Liens other than
Lessor Liens) and all applicable Requirements of Law. The Lessee shall in no
event have any recourse against the Lessor for any defect in or exception to
title to the Property other than resulting from Lessor Liens or a breach by the
Lessor of its obligations under Article IV or Article XXI. Upon termination of
this Master Lease, the Lessee shall have no continuing obligations to the Lessor
under this Master Lease except as expressly set forth herein.
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Master Lease
ARTICLE III
PAYMENT OF RENT
SECTION 3.1. Rent. (a) During the Term, the Lessee shall pay Basic Rent
on each Payment Date, on the date required under Section 20.1(k) in connection
with the Lessee's exercise of the Remarketing Option and on any date on which
this Master Lease shall terminate with respect to the Property.
(b) Basic Rent shall be due and payable in lawful money of the United
States and shall be paid directly to the Account by wire transfer of immediately
available funds on the due date therefor.
(c) The Lessee's inability or failure to take possession of all or any
portion of the Property when delivered by the Lessor, whether or not
attributable to any act or omission of the Lessee, shall not delay or otherwise
affect the Lessee's obligation to pay Rent for the Property in accordance with
the terms of this Master Lease.
SECTION 3.2. Payment of Basic Rent. Basic Rent shall be paid absolutely
net to the Lessor, so that this Master Lease shall yield to the Lessor the full
amount thereof, without setoff, deduction or reduction.
SECTION 3.3. Supplemental Rent. The Lessee shall pay to the Lessor or
the Person entitled thereto any and all Supplemental Rent promptly as the same
shall become due and payable, and if the Lessee fails to pay any Supplemental
Rent, the Lessor shall have all rights, powers and remedies provided for herein
or by law or equity or otherwise in the case of nonpayment of Basic Rent. The
Lessee shall pay to the Lessor, as Supplemental Rent, among other things, on
demand, to the extent permitted by applicable Requirements of Law, interest at
the applicable Overdue Rate on any installment of Basic Rent not paid when due
for the period for which the same shall be overdue and on any payment of
Supplemental Rent payable to the Lessor or any Indemnitee not paid when due for
the period from the due date or the date of any such demand, as the case may be,
until the same shall be paid. The expiration or other termination of the
Lessee's obligations to pay Basic Rent hereunder shall not limit or modify the
obligations of the Lessee with respect to Supplemental Rent. Unless expressly
provided otherwise in this Master Lease, in the event of any failure on the part
of the Lessee to pay and discharge any Supplemental Rent as and when due, the
Lessee shall also promptly pay and discharge any fine, penalty, interest or cost
which may be assessed or added under any agreement with a third party for
nonpayment or late payment of such Supplemental Rent, all of which shall also
constitute Supplemental Rent.
SECTION 3.4. Method of Payment. Each payment of Rent shall be made by
the Lessee to the Lessor prior to 10:00 a.m., San Francisco time to the Account
at the Lessor's Designated Office specified on Schedule II to the Participation
Agreement in funds consisting of lawful currency of the United States of America
which shall be immediately available on the scheduled date when such payment
shall be due, unless such scheduled date shall not be a Business Day, in which
case such payment shall be made on the next succeeding Business Day. Payments
received after 10:00 a.m., San Francisco time on the date due shall for the
purpose of Section 16.1 hereof be deemed received on such day; provided,
however, that for the purposes of the second sentence of Section 3.3 hereof,
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Master Lease
such payments shall be deemed received on the next succeeding Business Day and,
unless the Lessor is otherwise able to invest or employ such funds on the date
received, subject to interest at the Overdue Rate as provided in such Section
3.3.
ARTICLE IV
QUIET ENJOYMENT; RIGHT TO INSPECT
SECTION 4.1. Quiet Enjoyment. Subject to Sections 2.4 and 4.2, and
subject to the rights of the Lessor contained in Article XVI and the other terms
of the Operative Documents to which the Lessee is a party, the Lessee shall
peaceably and quietly have, hold and enjoy the Property for the Term, free of
any claim or other action by the Lessor or anyone claiming by, through or under
the Lessor (other than the Lessee) with respect to any matters arising from and
after the Acquisition Date. Such right of quiet enjoyment is independent of, and
shall not affect the Lessor's rights otherwise to initiate legal action to
enforce, the obligations of the Lessee under this Master Lease.
SECTION 4.2. Right to Inspect. During the Term the Lessee shall, upon
reasonable notice from the Lessor, permit the Lessor, the Agent, the Lenders and
their respective authorized representatives to inspect the Property during
normal business hours; provided, that such inspections shall not unreasonably
interfere with the Lessee's business operations at the Property; provided,
further that the Lenders and their authorized representative may only inspect
the Property twice a calendar year during the Interim Lease Term and once a
calendar year during the Base Lease Term.
ARTICLE V
NET LEASE, ETC.
SECTION 5.1. Net Lease. This Master Lease shall constitute a net lease.
This Master Lease shall not terminate, nor shall the Lessee be entitled to any
abatement, suspension, deferment, reduction, setoff, counterclaim, or defense
with respect to the Rent, nor shall the obligations of the Lessee hereunder be
affected (except as expressly herein permitted and by performance of the
obligations in connection therewith) by reason of: (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, removal, abandonment,
salvage, loss, contamination of, or Release from, scrapping or destruction of or
any requisition or taking of 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 or any Lender; (vi) to the fullest extent permitted by
Applicable Law, any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceedings relating to the
Lessee, the Lessor, any Participant or any other Person, or any action taken
with respect to this Master Lease by any trustee or receiver of the Lessee, any
Participant or any other Person, or by any court, in any such proceeding; (vii)
any claim that the
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Master Lease
Lessee has or might have against any Person, including without limitation any
Participant, or any vendor, manufacturer, contractor of or for the Property;
(viii) any failure on the part of the Lessor to perform or comply with any of
the terms of this Master Lease (other than performance by the Lessor of its
obligations set forth in Section 2.1 hereof), of any other Operative Document or
of any other agreement; (ix) any invalidity or unenforceability or illegality or
disaffirmance of this Master Lease against or by the Lessee or any provision
hereof or any of the other Operative Documents or any provision of any thereof;
(x) the impossibility or illegality of performance by the Lessee, the Lessor
(other than with respect to performance by the Lessor of its obligations set
forth in Section 2.1 hereof) or both; (xi) any action by any court,
administrative agency or other Governmental Authority; (xii) any restriction,
prevention or curtailment of or interference with the construction on or any use
of the Property or any part thereof; or (xiii) except as specifically excluded
above, any other cause or circumstances whether similar or dissimilar to the
foregoing and whether or not the Lessee shall have notice or knowledge of any of
the foregoing. The Lessee's agreement in the preceding sentence shall not affect
any claim, action or right the Lessee may have against the Lessor or any Lender.
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 Operative 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 Master Lease.
SECTION 5.2. No Termination or Abatement. The Lessee shall remain
obligated under this Master Lease in accordance with its terms and shall not
take any action to terminate, rescind or avoid this Master Lease (except as
provided herein) to the fullest extent permitted by Applicable Law,
notwithstanding any action for bankruptcy, insolvency, reorganization,
liquidation, dissolution, or other proceeding affecting the Lessor or any
Lender, or any action with respect to this Master Lease which may be taken by
any trustee, receiver or liquidator of the Lessor or any Lender or by any court
with respect to the Lessor or any Lender. The Lessee hereby waives all right (i)
to terminate or surrender this Master Lease (except as provided herein) or (ii)
to avail itself of any abatement, suspension, deferment, reduction, setoff,
counterclaim or defense with respect to any Rent. The Lessee shall remain
obligated under this Master Lease in accordance with its terms and the Lessee
hereby waives any and all rights now or hereafter conferred by statute or
otherwise to modify or to avoid strict compliance with its obligations under
this Master Lease. Notwithstanding any such statute or otherwise, the Lessee
shall be bound by all of the terms and conditions contained in this Master
Lease.
SECTION 5.3. No Bar. Notwithstanding the foregoing, nothing set forth
herein shall bar, limit, preclude, prevent, stay or otherwise adversely affect
the Lessee's right or ability to bring and pursue any action against the Lessor
for any breach or alleged breach of the Lessor's obligations hereunder.
ARTICLE VI
SUBLEASES; ASSIGNMENT OF SUBLEASES
SECTION 6.1. Subletting. The Lessee may sublease the Property or any
portion thereof to any Person so long as: (i) no sublease or other
relinquishment of possession of the Property or any portion thereof shall in any
way discharge or diminish any of the Lessee's obligations to the Lessor
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Master Lease
hereunder and the Lessee shall remain directly and primarily liable under this
Master Lease as to the Property, or portion thereof, so sublet, (ii) each
sublease of the Property or any portion thereof shall be made subject to and
subordinated to this Master Lease and to the rights of the Lessor hereunder,
(iii) each sublease shall expressly provide for the surrender of the Property or
portion thereof (as applicable) by the applicable sublessee at the election of
the Agent or the Lessor (as applicable) upon termination of this Master Lease,
including any termination pursuant to Section 16.2 hereof, and (iv) each
sublease shall expressly provide for termination prior to the Expiration Date
unless the Lessee shall purchase the entire Property pursuant to Section 18.1.
SECTION 6.2. Assignment of Subleases. As additional security to the
Lessor for the performance of Lessee's obligations under the Operative
Documents, the Lessee hereby assigns to the Lessor and grants to the Lessor a
security interest in all of the following, to the extent assignable: all of the
Lessee's right, title and interest in and to all existing leases and all
subleases of all or any portion of the Property (collectively, "Subleases" and
individually, a "Sublease") and all rents and other sums payable to the Lessee
under each Sublease. The Lessee shall have the right to collect and enjoy all
rents and other sums of money payable under any Sublease; provided, that during
the continuance of a Lease Event of Default, the Lessor shall be entitled
thereafter to collect such rents and other sums and may retain all rents and
such other sums collected unless a Lease Event of Default shall have occurred
and be continuing, the Lessee shall have the right (without the consent of the
Lessor) to modify, renew, extend, amend, waive or terminate any or all of the
Subleases, subject to the provisions of Section 6.2.
ARTICLE VII
LESSEE ACKNOWLEDGMENTS
SECTION 7.1. Condition of the Property. THE LESSEE ACKNOWLEDGES AND
AGREES THAT ALTHOUGH THE LESSOR WILL OWN AND HOLD TITLE TO THE IMPROVEMENTS, THE
LESSEE, ACTING AS CONSTRUCTION AGENT, IS SOLELY RESPONSIBLE UNDER THE TERMS OF
THE CONSTRUCTION AGENCY AGREEMENT FOR THE DESIGN, DEVELOPMENT, BUDGETING AND
CONSTRUCTION OF THE IMPROVEMENTS AND ANY ALTERATIONS OR MODIFICATIONS. THE
LESSEE FURTHER ACKNOWLEDGES AND AGREES THAT IT IS LEASING THE PROPERTY "AS IS"
WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY THE LESSOR
OR THE LENDERS AND IN EACH CASE SUBJECT TO (A) THE EXISTING STATE OF TITLE
(EXCLUDING LESSOR LIENS), (B) THE RIGHTS OF ANY PARTIES IN POSSESSION THEREOF,
(C) ANY STATE OF FACTS WHICH AN ACCURATE SURVEY OR PHYSICAL INSPECTION MIGHT
SHOW, AND (D) VIOLATIONS OF REQUIREMENTS OF LAW WHICH MAY EXIST ON THE DATE
HEREOF OR ON ANY ACQUISITION DATE. NONE OF THE LESSOR OR THE LENDERS HAS MADE OR
SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR COVENANT (EXPRESS
OR IMPLIED) OR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE
(OTHER THAN FOR LESSOR LIENS), VALUE, HABITABILITY, USE, CONDITION, DESIGN,
OPERATION, OR FITNESS FOR USE OF THE PROPERTY (OR ANY PART THEREOF), OR ANY
OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS OR IMPLIED,
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Master Lease
WITH RESPECT TO THE PROPERTY (OR ANY PART THEREOF) AND NONE OF THE LESSOR OR THE
LENDERS SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN (OTHER
THAN FOR LESSOR LIENS) OR THE FAILURE OF THE PROPERTY, OR ANY PART THEREOF, TO
COMPLY WITH ANY REQUIREMENT OF LAW.
SECTION 7.2. Risk of Loss. During the Term the risk of loss of or
decrease in the enjoyment and beneficial use of the Property as a result of the
damage or destruction thereof by fire, the elements, casualties, thefts, riots,
wars or otherwise is assumed by the Lessee, and the Lessor shall in no event be
answerable or accountable therefor.
ARTICLE VIII
POSSESSION AND USE OF THE PROPERTY, ETC.
SECTION 8.1. Utility Charges. The Lessee shall pay or cause to be paid
all charges for electricity, power, gas, oil, water, telephone, sanitary sewer
service and all other rents and utilities used in or on the Property during the
Term. The Lessee shall be entitled to receive any credit or refund with respect
to any utility charge paid by the Lessee and the amount of any credit or refund
received by the Lessor on account of any utility charges paid by the Lessee, net
of the costs and expenses reasonably incurred by the Lessor in obtaining such
credit or refund, shall be promptly paid over to the Lessee.
SECTION 8.2. Possession and Use of the Property. The Property shall be
used for any lawful purpose. The Lessee shall pay, or cause to be paid, all
charges and costs required in connection with the use of the Property as
contemplated by this Master Lease and the Construction Agency Agreement. The
Lessee shall not commit or permit any waste of the Property or any part thereof.
SECTION 8.3. Compliance with Requirements of Law and Insurance
Requirements. Subject to the terms of Article XII relating to permitted
contests, the Lessee, at its sole cost and expense, shall (a) comply in all
material respects with all Requirements of Law (including all Environmental
Laws) and Insurance Requirements relating to the Property, including the use,
construction, operation, maintenance, repair and restoration thereof and the
remarketing thereof pursuant to Article XX, whether or not compliance therewith
shall require structural or extraordinary changes in the Improvements or
interfere with the use and enjoyment of the Property, and (b) procure, maintain
and comply with all licenses, permits, orders, approvals, consents and other
authorizations required for the construction, use, maintenance and operation of
the Property and for the use, operation, maintenance, repair and restoration of
the Improvements. Notwithstanding the preceding sentence, the Lessee shall be
deemed to be in compliance with all Environmental Laws for purposes of this
Master Lease notwithstanding any Environmental Violation if the severity of such
Environmental Violation is less than Federal, state or local standards requiring
remediation or removal or, if such standards are exceeded, remediation or
removal is proceeding in accordance with all applicable Environmental Laws.
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Master Lease
SECTION 8.4. Assignment by Lessee. Other than as permitted by Article
XI hereof, the Lessee may not assign this Master Lease or the other Operative
Documents or any of its rights or obligations hereunder or thereunder in whole
or in part to any Person. Nothing contained herein shall be construed to
prohibit the Lessee from causing its obligations under this Master Lease to be
performed by its agents or contractors.
ARTICLE IX
MAINTENANCE AND REPAIR; RETURN
SECTION 9.1. Maintenance and Repair; Return. (a) 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 all Requirements of 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 Property, make any repairs, replacements, alterations or
renewals of any nature or description to the Property, make any expenditure
whatsoever in connection with this Master Lease (other than for Advances made in
accordance with and pursuant to the terms of the Participation Agreement and the
Construction Agency Agreement) or maintain the Property in any way. 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 Requirement of Law, Insurance Requirement, contract, agreement,
or covenant, condition or restriction in effect at any time during the Term.
(c) The Lessee shall, upon the expiration or earlier termination of
this Master Lease (other than as a result of the Lessee's (or its designee's)
purchase of the Property from the Lessor as provided herein), vacate and
surrender the Property to the Lessor in its then-current, "AS IS" condition,
subject to the Lessee's obligations under Sections 8.3, 9.1(a), 10.1, 11.1, 14.2
and 20.1.
ARTICLE X
MODIFICATIONS, ETC.
SECTION 10.1. Modifications, Substitutions and Replacements. (a)
Subject to Section 10.2, 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 a Requirement of Law (a "Required Modification"), no Modification
shall adversely affect the value or useful life of the Property from
that which existed immediately prior to such Modification;
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Master Lease
(ii) the Modification shall be done in a good and workmanlike
manner;
(iii) the Lessee shall comply in all material respects with
all Requirements of Law (including all Environmental Laws) and
Insurance Requirements applicable to the Modification, including the
obtaining of all permits and certificates of occupancy;
(iv) subject to the terms of Article XII relating 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; and
(v) such Modifications shall comply with Sections 8.3 and
9.1(a).
All Modifications shall remain part of the realty and shall be subject to this
Master Lease and title thereto shall immediately vest in the Lessor; provided,
however, that Modifications that (x) are not Required Modifications, (y) were
not financed by the Lessor and (z) are readily removable without impairing the
value, utility or remaining useful life of the Property, shall remain the
personal property of the Lessee, shall not be subject to this Master Lease and
may be removed by the Lessee at any time.
(b) The Lessee may place upon the Property any fixtures, machinery,
equipment, inventory 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 Sections 9.1(a) and 10.1(a); provided, that, subject to Section
10.1(a), such fixtures, machinery, equipment, inventory or other property do not
impair the value or useful life of the Property.
SECTION 10.2. Consent of the Lessor. The Lessee shall not make any
Modification which (a) the Lessee reasonably expects will cost greater than
$10,000,000 (other than construction and alterations performed pursuant to the
Construction Agency Agreement) or (b) will affect any structural element of any
Improvements unless, in each case, the Lessee shall have delivered to the Lessor
a brief written narrative of the work to be performed in connection with such
Modification and the Lessee shall have received the written consent of Lessor to
the making of such Modification, which consent shall not unreasonably be
withheld.
ARTICLE XI
WARRANT OF TITLE; EASEMENTS
SECTION 11.1. Warrant of Title. (a) The Lessee agrees that except as
otherwise provided herein and subject to the terms of Article XII relating to
permitted contests, the Lessee shall not directly or indirectly create or allow
to remain, and shall promptly discharge at its sole cost and expense, any Lien
(other than any Lessor Lien), defect, attachment, levy or title retention
agreement upon the Property or any Modifications or any Lien, attachment, levy
or claim with respect to the Rent or with respect to any amounts held by the
Participants pursuant to the Loan Agreement or the
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other Operative Documents, other than Permitted Liens and Liens on machinery,
equipment, general intangibles and other personal property not financed by the
proceeds of the Loans or Equity Amounts.
(b) Nothing contained in this Master Lease shall be construed as
constituting the request of the Lessor, expressed or implied, to or for the
performance by any contractor, mechanic, laborer, materialman, supplier or
vendor of any labor or services or for the furnishing of any materials for any
construction, alteration, addition, repair or demolition of or to the Property
or any part thereof. NOTICE IS HEREBY GIVEN THAT NONE OF THE LESSOR OR THE
LENDERS IS OR SHALL BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR
TO BE FURNISHED TO THE LESSEE, OR TO ANYONE HOLDING THE PROPERTY OR ANY PART
THEREOF THROUGH OR UNDER THE LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS FOR
ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF
THE LESSOR OR ANY LENDER IN AND TO THE PROPERTY.
SECTION 11.2. Lessee's Grants and Releases of Easements; Lessor's
Waivers. Provided that no Lease Event of Default shall have occurred and be
continuing and subject to the provisions of Articles VII, IX and X and Section
8.3, the Lessor hereby consents in each instance to the following actions by the
Lessee, in the name and stead of the Lessor and as the true and lawful
attorney-in-fact of the Lessor with full power and authority to execute
documents on behalf of the Lessor for the following purposes, but at the
Lessee's sole cost and expense: (a) the granting of easements, licenses,
rights-of-way and other rights and privileges in the nature of easements
reasonably necessary or desirable for the use, repair, or maintenance of the
Property or adjacent properties (owned by the Lessee) as herein provided; (b)
the release of existing easements or other rights in the nature of easements
which affect the Property and are for the benefit of the Property or adjacent
properties (owned by the Lessee); (c) if required by any applicable Governmental
Authority in connection with the Construction, the dedication or transfer of
unimproved portions of the Property for road, highway or other public purposes;
and (d) the imposition of and the execution of amendments to any covenants and
restrictions affecting the Property; provided, however, that in each case (i)
such grant, release, dedication, transfer or amendment does not in the exercise
of the Lessor's reasonable judgment after consultation with the Lessee
materially impair the value or remaining useful life of the Property, (ii) such
grant, release, dedication, transfer or amendment in the Lessee's judgment is
reasonably necessary in connection with the use, maintenance, alteration or
improvement of the Property or adjacent properties (owned by the Lessee), (iii)
such grant, release, dedication, transfer or amendment will not cause the
Property or any portion thereof to fail to comply with the provisions of this
Master Lease or any other Operative Document or any Requirement of Law
(including, without limitation, all applicable zoning, planning, building and
subdivision ordinances, all applicable restrictive covenants and all applicable
architectural approval requirements); (iv) all governmental consents or
approvals required prior to such grant, release, dedication, transfer,
annexation or amendment have been obtained, and all filings required prior to
such action have been made; (v) the Lessee shall remain obligated under this
Master Lease and under any instrument executed by the Lessee consenting to the
assignment of the Lessor's interest in this Master Lease as security for
indebtedness, in each such case in accordance with their terms, as though such
grant, release, dedication, transfer or amendment had not been effected; and
(vi) the Lessee shall pay and perform any obligations of the Lessor under such
grant, release, dedication, transfer or amendment. The Lessor acknowledges the
Lessee's and any existing lessee's or existing or future sublessee's right to
finance and to secure under the Uniform
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Commercial Code, inventory, furnishings, furniture, equipment, machinery,
leasehold improvements and other personal property located at the Property other
than Equipment, and the Lessor agrees to execute Lessor waiver forms and release
of Lessor's Liens in favor of any purchase money seller, lessor or lender which
has financed or may finance in the future such items. Without limiting the
effectiveness of the foregoing, and provided, that no Lease Event of Default
shall have occurred and be continuing, the Lessor shall, upon the request of the
Lessee, and at the Lessee's sole cost and expense, execute and deliver any
instruments necessary or appropriate to confirm any such grant, release,
dedication, transfer, annexation or amendment to any Person permitted under this
Section including landlord waivers with respect to any of the foregoing.
SECTION 11.3. Lessor Grant. (a) The Lessor hereby grants a Lien to the
Lessee against all of the Lessor's right, title and interest in and to the
Property, WITH POWER OF SALE, to secure (i) the Lessor's obligations hereunder
in respect of the due and punctual transfer by the Lessor to the Lessee of all
of the Lessor's right, title and interest in and to the Property when required
by and in accordance with this Master Lease, and (ii) if the Lessor shall then
be the subject of any bankruptcy, insolvency or similar proceeding, satisfaction
of the Lessee's right to damages and other claims arising out of the rejection
of this Master Lease or unilateral termination of such obligation to transfer to
the Lessee all of the Lessor's right, title and interest in and to the Property.
(b) During the existence of a Lessor Default (as defined below), the
Lessee shall have the power and authority, to the extent provided by Applicable
Law, to exercise any or all of the rights and powers and pursue any and all of
the remedies provided under the Operative Documents or by Applicable Law in
respect of the obligations secured in accordance with clause (a) above
(including specific performance of any covenant or agreement contained in this
Master Lease or any other Operative Document, in aid of the execution of any
power granted in this Master Lease or any other Operative Document, or for the
enforcement of any other appropriate legal or equitable remedy including
judicial foreclosure and/or foreclosure by power of sale). The Lessee shall have
all the rights available to a mortgagee under the laws of the jurisdiction in
which the Property is located, including that, upon the occurrence of any Lessor
Default, (i) the Lessee shall have the power and authority, to the extent
provided by law, after proper notice and lapse of such time as may be required
by law, to sell the Lessor's interest in the Property at the time and place of
sale fixed by the Lessee in such notice of sale, either as a whole, or in a
separate lots or parcels or items and in such order as the Lessee may elect, at
auction to the highest bidder for cash in lawful money of the United States
payable at the time of sale; accordingly, it is acknowledged that A POWER OF
SALE HAS BEEN GRANTED IN THIS INSTRUMENT; A POWER OF SALE MAY ALLOW THE LESSEE
TO TAKE THE PROPERTY AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION
UPON DEFAULT BY THE LESSOR UNDER THIS INSTRUMENT, and (ii) the Lessee, in lieu
of or in addition to exercising any power of sale hereinabove given, may proceed
by a suit or suits in equity or at law for the enforcement of any other
appropriate legal or equitable remedy. Lessee may postpone sale of all or any
portion of the Property by public announcement at such time and place of sale,
and from time to time thereafter may postpone such sale by public announcement
at the time fixed by the preceding postponement. Lessee shall deliver to such
purchaser its deed conveying the property so sold, but without any covenant or
warranty, express or implied. The recitals in such deed of any matters or facts
shall be conclusive proof of the truthfulness thereof. Any Person, including
Lessee or Lessor, may purchase at such sale.
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Master Lease
After deducting all costs, fees and expenses of Lessee, including cost
of evidence of title in connection with sale, Lessee shall apply the proceeds of
sale to payment of all sums expended in enforcement of its right hereunder with
accrued interest at the amount allowed by law in effect at the date hereof and
the remainder to the Person or Persons legally entitled thereof. The following
shall constitute a Lessor default ("Lessor Default"): the Lessee shall have
exercised any of its purchase options in this Master Lease for the Property in
accordance with the terms hereof and shall have tendered in full all amounts to
be paid by Lessee in connection therewith and complied with all other
requirements hereunder in connection with such purchase and all of the Lessor's
right, title and interest in and to the Property shall not have been thereupon
transferred to the Lessee in accordance with this Master Lease.
(c) The Lien created in clause (a) shall automatically terminate and be
deemed released without further act or consideration upon the termination of the
Master Lease or exercise by Lessor of its power of sale of the Property.
ARTICLE XII
PERMITTED CONTESTS
SECTION 12.1. Permitted Contests in Respect of Applicable Law. If, to
the extent and for so long as (a) a test, challenge, appeal or proceeding for
review of any Applicable Law relating to the Property or the obligation to
comply therewith shall be prosecuted diligently and in good faith in appropriate
proceedings by the Lessee or (b) compliance with such Applicable Law shall have
been excused or exempted by a valid nonconforming use, variance permit, waiver,
extension or forbearance, the Lessee shall not be required to comply with such
Applicable Law if and so long as, in each case, such test, challenge, appeal,
proceeding, waiver, extension, forbearance or noncompliance shall not, in the
reasonable opinion of the Lessor and the Lenders, involve (A) any risk of
criminal liability being imposed on the Lessor, any Lender or the Property or
(B) any significant risk of (1) the foreclosure, forfeiture or loss of the
Property, or any part thereof, (2) the nonpayment of Rent, (3) the sale of, or
the creation of any Lien (other than a Permitted Lien) on, any part of the
Property, (4) civil liability being imposed on the Lessor, any Lender or the
Property for which the Lessee is not obligated to indemnify such parties under
the Operative Documents, or (5) enjoinment of, or interference with, the use,
possession or disposition of the Property in any respect.
The Lessor will not be required to join in any proceedings pursuant to
this Section 12.1 unless a provision of any Applicable Law requires that such
proceedings be brought by or in the name of the Lessor or it is customary in the
applicable jurisdiction for the title holder to join in such proceedings; and in
that event the Lessor will join in the proceedings or permit them or any part
thereof to be brought in its name if and so long as (i) the Lessee has not
elected the Remarketing Option, (ii) no Lease Event of Default shall have
occurred and be continuing and (iii) the Lessee pays all related expenses and
indemnifies the Lessor and the Lenders to the reasonable satisfaction of the
respective Indemnitees.
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ARTICLE XIII
INSURANCE
SECTION 13.1. Public Liability and Workers' Compensation Insurance. (a)
During the Term, the Lessee shall procure and carry, at the Lessee's sole cost
and expense, commercial general liability insurance for claims for injuries or
death sustained by persons or damage to property while on the Property and such
other public liability coverages as are ordinarily procured by the Lessee or its
Affiliates who own or operate similar properties, but in any case shall provide
liability coverage that is (i) in an amount not less than $2 million per
occurrence and $10 million in the aggregate and (ii) on terms and in amounts
that are no less favorable than insurance maintained by the Lessee or such
Affiliates with respect to similar properties that they own and that are in
accordance with normal industry practice. The policy shall be endorsed to name
the Lessor and each Lender as additional insureds. The policy shall also
specifically provide that the policy shall be considered primary insurance which
shall apply to any loss or claim before any contribution by any insurance which
the Lessor or any Lender may have in force.
(b) The Lessee shall, in the construction of the Improvements
(including in connection with any Modifications thereof) and the operation of
the Property, comply with all applicable workers' compensation laws.
SECTION 13.2. Hazard and Other Insurance. During the Term, the Lessee
shall keep, or cause to be kept, the Property insured against loss or damage by
fire and other risks (other than earthquake and flood) on terms and in amounts
that are no less favorable than insurance covering other similar properties
owned by the Lessee or its Affiliates and that are in accordance with normal
industry practice, but in any case shall provide casualty coverage in an amount
not less than the replacement cost of the Improvements. During the construction
of any Improvements the Lessee shall also maintain or cause to be maintained
builders' risk insurance. In addition, the Lessee shall at all times during the
Term maintain business interruption insurance in an amount of $15,000,000
covering actual losses for any period during which the earnings of the Lessee
are impaired as a result of any property damage or other casualty.
SECTION 13.3. Insurance Coverage. (a) The Lessee shall furnish the
Lessor and the Lenders with certificates showing the insurance required under
Sections 13.1 and 13.2 to be in effect and (i) in the case of insurance policies
required by Section 13.1, naming the Lessor and each Lender as additional
insureds with respect to liability coverage (excluding worker's compensation
insurance), and (ii) in the case of casualty coverage required by Section 13.2,
naming the Lenders, the Lessor and the Lessee as their interests may appear,
naming the Lessor as loss payee, and including a standard form mortgagee
endorsement in favor of the Lessor and the Lenders. All such insurance shall be
at the cost and expense of the Lessee. Such certificates shall include a
provision for no less than thirty (30) days' advance written notice by the
insurer to the Lessor in the event of cancellation or reduction of such
insurance. In addition, the Lessee shall cause the Lessor and each Lender to be
named as additional insureds under each liability policy maintained by the
Lessee in connection with the Construction.
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(b) The Lessee agrees that the insurance policy or policies required by
Section 13.2 shall include an appropriate clause pursuant to which such policy
shall provide that it will not be invalidated should the Lessee waive, in
writing, prior to a loss, any or all rights of recovery against the Lessor or
any Lender for losses covered by such policy, and that the insurance in favor of
the Lessor and the Lenders and their respective rights under and interests in
said policies shall not be invalidated or reduced by any act or omission
(including breach of warranty) or negligence of the Lessee or any other Person
having any interest in the Property other than the Lessor and the Lenders. The
Lessee hereby waives any and all such rights against the Lessor and the Lenders
to the extent of payments made under such policies.
(c) All insurance required under this Article XIII shall be written by
reputable insurance companies that are financially sound and solvent and
otherwise reasonably appropriate considering the amount and type of insurance
being provided by such companies.
(d) The Lessor shall not carry separate insurance concurrent in kind or
form or contributing in the event of loss with any insurance required under this
Article XIII except that the Lessor may, at the Lessor's expense, carry separate
liability insurance so long as (i) the Lessee's insurance is designated as
primary and in no event excess or contributory to any insurance the Lessor may
have in force which would apply to a loss covered under the Lessee's policy and
(ii) each such insurance policy will not cause the Lessee's insurance required
under this Article XIII to be subject to a coinsurance exception of any kind.
(e) The Lessee shall pay as they become due all premiums for the
insurance required by Sections 13.1 and 13.2, and shall renew or replace each
policy prior to the expiration date thereof. Throughout the Term, at the time
each of the Lessee's insurance policies is renewed (but in no event less
frequently than once each year), the Lessee shall deliver to the Lessor
certificates of insurance evidencing that all insurance required by this Article
XIII is being maintained by the Lessee and is in effect.
SECTION 13.4. Adjustment of Proceeds, etc. All insurance proceeds in
respect of any loss or occurrence for which the proceeds related thereto, in the
absence of the occurrence and continuance of a Lease Event of Default, are
payable to the Lessee shall be adjusted by and paid to the Lessee for
application toward the reconstruction, repair or refurbishment of the Property,
and if a Lease Event of Default has occurred and is continuing, such proceeds
shall be adjusted solely by the Lessor and held by the Lessor for application in
accordance with Article XIV.
ARTICLE XIV
CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS
SECTION 14.1. Casualty and Condemnation. (a) Subject to the provisions
of this Article XIV, (i) if all or a portion of the Property is damaged or
destroyed in whole or in part by a Casualty (other than a Significant Casualty),
any insurance proceeds payable with respect to such Casualty shall be paid
directly to the Lessee, or if received by the Lessor or the Lenders, shall be
paid over to the Lessee for the reconstruction, refurbishment and repair of the
Property and (ii) if the
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use, access, occupancy, easement rights or title to the Property or any part
thereof is the subject of a Condemnation (other than a Significant
Condemnation), then any award or compensation relating thereto shall be paid to
the Lessee; provided, however, that, in each case, if any Lease Event of Default
shall have occurred and be continuing, such award, compensation or insurance
proceeds shall be paid directly to the Lessor or, if received by the Lessee,
shall be held in trust for the Lessor and the Lenders, and shall be paid over by
the Lessee to the Lessor to be distributed by the Lessor in accordance with the
Participation Agreement. All amounts held by the Lessor or the Lenders on
account of any award, compensation or insurance proceeds either paid directly to
the Lessor or the Lenders or turned over to the Lessor or the Lenders, in each
case in accordance with the preceding sentence, shall at the option of the
Lessor either be (A) paid to the Lessee for the repair of damage caused by such
casualty or Condemnation in accordance with clause (d) of this Section 14.1, or
(B) applied to the purchase price of the Property on the Termination Date with
respect to the Property in accordance with Article XV, with any Excess
Casualty/Condemnation Proceeds being payable to the Lessee.
(b) The Lessee may appear in any proceeding or action to negotiate,
prosecute, adjust or appeal any claim for any award, compensation or insurance
payment on account of any such Casualty or Condemnation and shall pay all
expenses thereof. At the Lessee's reasonable request, and at the Lessee's sole
cost and expense, the Lessor and the Lenders shall participate in any such
proceeding, action, negotiation, prosecution or adjustment. The Lessor and the
Lessee agree that this Master Lease shall control the rights of the Lessor and
the Lessee in and to any such award, compensation or insurance payment.
(c) If the Lessor or the Lessee shall receive notice of a Casualty for
which the reasonable anticipated cost of restoration equals or exceeds $500,000
or of an actual, pending or threatened Condemnation of the Property or any
material interest therein, the Lessor or the Lessee, as the case may be, shall
give notice thereof to the other and to the Lenders promptly after the receipt
of such notice.
(d) If pursuant to Section 15.1 this Master Lease shall continue in
full force and effect following a Casualty or Condemnation with respect to the
Property, the Lessee shall, at its sole cost and expense (and, without
limitation, if any award, compensation or insurance payment is not sufficient to
restore the Property in accordance with this clause (d), the Lessee shall pay
the shortfall), promptly and diligently repair any damage to the Property caused
by such Casualty or Condemnation in conformity with the requirements of Sections
9.1 and 10.1 using the as-built Plans and Specifications for the Property (as
modified to give effect to any subsequent Modifications, any Condemnation
affecting the Property and all applicable Requirements of Law) so as to restore
the Property to at least the same condition, operation, function and value as
existed immediately prior to such Casualty or Condemnation with such
Modifications as the Lessee may elect in accordance with Section 10.1. In such
event, title to the Property shall remain with the Lessor subject to the terms
of this Master Lease. Upon completion of such restoration, the Lessee shall
furnish the Lessor an architect's certificate of substantial completion or a
Responsible Officer's Certificate confirming that such restoration has been
completed pursuant to this Master Lease.
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(e) In no event shall a Casualty or Condemnation affect the Lessee's
obligations to pay Rent pursuant to Section 3.1 or to perform its obligations
and pay any amounts due on the Expiration Date or pursuant to Articles XVIII and
XXI.
(f) Any Excess Casualty/Condemnation Proceeds received by the Lessor or
the Lenders in respect of a Casualty or Condemnation shall be turned over to the
Lessee.
SECTION 14.2. Environmental Matters. Promptly upon the Lessee's
knowledge of the existence of any Environmental Violation with respect to the
Property, the Lessee shall notify the Lessor in writing of such Environmental
Violation. So long as the Lessor has not elected (or does not have the right to
elect) to terminate this Master Lease with respect to the Property pursuant to
Section 15.1, at the Lessee's sole cost and expense, the Lessee shall promptly
and diligently commence any response, clean up, remedial or other action
necessary to remove, clean up or remediate the Environmental Violation in
accordance with the terms of Section 8.3 (including the last sentence thereof).
The Lessee shall provide to the Lessor all material and relevant reports,
assessments, sampling results and correspondence with Governmental Authorities
concerning the Environmental Violation and shall, upon completion of remedial
action of such Environmental Violation by the Lessee, cause to be prepared by an
environmental consultant reasonably acceptable to the Lessor a report describing
the Environmental Violation and the actions taken by the Lessee (or its agents)
in response to such Environmental Violation, and a statement by the consultant
that the Environmental Violation has been remedied in compliance in all material
respects with applicable Environmental Law. Each such Environmental Violation
shall be remedied prior to the Expiration Date unless the Property has been
purchased by the Lessee (or its designee) in accordance with Article XV or
Section 18.1. Nothing in this Article XIV shall reduce or limit the Lessee's
obligations under Sections 13.1, 13.2 or 13.3 of the Participation Agreement.
SECTION 14.3. Notice of Environmental Matters. Promptly, but in any
event within sixty (60) Business Days from the date the Lessee has actual
knowledge thereof, the Lessee shall provide to the Lessor written notice of any
pending or threatened claim, action or proceeding involving any Environmental
Law or any Release on, at, under or from the Property. All such notices shall
describe in reasonable detail the nature of the claim, action or proceeding and
the Lessee's proposed response thereto. In addition, the Lessee shall provide to
the Lessor, within sixty (60) Business Days of receipt, copies of all written
communications with any Governmental Authority relating to any Environmental
Violation in connection with the Property. The Lessee shall also promptly
provide such detailed reports of any such environmental claims as may reasonably
be requested by the Lessor or the Lenders. In the event that the Lessor receives
written notice of any pending or threatened claim, action or proceeding
involving any Environmental Law or any Release on or in connection with the
Property, the Lessor shall promptly give notice thereof to the Lessee.
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Master Lease
ARTICLE XV
TERMINATION OF LEASE
SECTION 15.1. Termination upon Certain Events. If any of the following
occurs with respect to the Property:
(i) a Significant Condemnation occurs; or
(ii) a Significant Casualty occurs; or
(iii) an Environmental Violation occurs or is discovered the
cost of remediation of which would exceed $7,000,000;
and the Lessor shall have given written notice (a "Termination Notice") to the
Lessee that, as a consequence of such event, the Lease Supplement and this
Master Lease are to be terminated, then the Lessee shall be obligated to
purchase the Lessor's interest in the Property on the next occurring Payment
Date that occurs no earlier than thirty (30) days from the date the Lessee
receives the applicable Termination Notice by paying to the Lessor an amount
equal to the sum of (x) the Lease Balance on the date of such purchase plus (y)
all accrued and unpaid Basic Rent on the date of such purchase plus (z) all
Supplemental Rent (including Break Costs) due and owing on the date of such
purchase after giving effect thereto.
SECTION 15.2. Termination Procedures. On the date of the payment by the
Lessee of the Lease Balance and all other amounts then due in accordance with
Section 15.1 (such date, the "Termination Date"), the Lease Supplement and this
Master Lease shall terminate and, concurrent with the Lessor's receipt of such
payment:
(a) the Lessor shall execute and deliver to the Lessee (or to
the Lessee's designee) at the Lessee's cost and expense a termination
of the Ground Lease and an assignment of the Lessor's entire interest
in the Property (which shall include an assignment of all of the
Lessor's right, title and interest in and to any Net Proceeds with
respect to the Property not previously received by the Lessor), in each
case in recordable form and otherwise in conformity with local custom
and free and clear of the Lien of this Master Lease and the applicable
Lease Supplement, any other Liens created by the Operative Documents
that are attributable to the Lessor, and any Lessor Liens attributable
to the Lessor;
(b) the Property shall be conveyed to the Lessee (or to the
Lessee's designee) "AS IS" and in its then present physical condition;
and
(c) in the case of a termination pursuant to clause (i) or
(ii) of Section 15.1 the Lessor shall convey to the Lessee any Net
Proceeds or an assignment of Lessor's right to receive such net
proceeds with respect to the Casualty or Condemnation giving rise to
the termination of this Master Lease theretofore received by the Lessor
or at the request of the Lessee, such amounts shall be applied against
sums due hereunder.
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Master Lease
ARTICLE XVI
EVENTS OF DEFAULT
SECTION 16.1. Lease Events of Default. The occurrence of any one or
more of the following events (whether 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 administrative or governmental body) shall constitute a
"Lease Event of Default":
(a) the Lessee shall fail to make any payment of (i) Basic
Rent within three (3) Business Days after same shall be due and payable
or (ii) Loan Balance, Lease Balance, Purchase Option Price, or Recourse
Amount, including, without limitation, amounts due pursuant to Sections
15.1, 18.1, 18.3 or 20.1, on the date due; or
(b) the Lessee shall fail to make payment of any Supplemental
Rent (other than Supplemental Rent referred to in clause (a) of this
Section 16.1) due and payable within five (5) Business Days after
receipt of notice thereof; or
(c) the Lessee shall fail to maintain the insurance required
under Article XIII hereof or shall fail to observe or perform any term,
covenant on condition to be performed by it under Section 10.2 of the
Participation Agreement or Section 20.1 of this Master Lease; or
(d) The Lessee shall fail to observe or perform any term,
covenant or condition of the Lessee under this Master Lease or the
Participation Agreement (other than those described in clause (a), (b)
or (c) of this Section 16.1) and such failure shall have continued for
thirty (30) days after the earlier of (i) delivery to the Lessee of
written notice thereof from the Lessor or (ii) a Responsible Officer of
the Lessee having actual knowledge of such failure; provided, however,
that if the default by its nature cannot be cured within such thirty
(30) day period, but is curable, then the Lessee shall have an
additional ninety (90) days in which to diligently proceed to cure such
default; or
(e) any representation or warranty made by the Lessee in any
of the Operative Documents to which it is a party shall have been
inaccurate in any material respect at the time made; or
(f) a Construction Agency Agreement Event of Default shall
have occurred and be continuing; or
(g) the Lessee shall (i) admit in writing its inability to pay
its debts generally as they become due, (ii) file a petition under the
United States bankruptcy laws or any other applicable insolvency law or
statute of the United States of America or any State or Commonwealth
thereof, (iii) make a general assignment for the benefit of its
creditors, (iv) consent to the appointment of a receiver of itself or
the whole or any substantial part of its property, (v) fail to cause
the discharge of any custodian, trustee or receiver appointed for the
Lessee or the whole or a substantial part of its property within sixty
(60) days after such
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appointment, or (vi) file a petition or answer seeking or consenting to
reorganization under the United States bankruptcy laws or any other
applicable insolvency law or statute of the United States of America or
any State or Commonwealth thereof; or
(h) insolvency proceedings or a petition under the United
States bankruptcy laws or any other applicable insolvency law or
statute of the United States of America or any State or Commonwealth
thereof shall be filed against the Lessee and not dismissed within
sixty (60) days from the date of its filing (provided, that the Lessee,
hereby expressly authorizes the Lessor and each Lender to appear in any
court conducting any such proceeding during such sixty (60) day period
to preserve, protect and defend their respective rights under the
Operative Documents), or a court of competent jurisdiction shall enter
an order or decree appointing, without the consent of the Lessee, a
receiver of the Lessee or the whole or a substantial part of any of its
property, and such order or decree shall not be vacated or set aside
within sixty (60) days from the date of the entry thereof; or
(i) (x) a default beyond notice and applicable cure periods
shall occur in the payment when due (subject to any applicable grace
period), resulting in acceleration of any indebtedness (other than
indebtedness described in clause (a) or (b) of this Section 16.1) of
the Lessee or any of its Subsidiaries having a principal amount,
individually or in the aggregate, in excess of $10 million or (y) a
default shall occur in the performance or observance of any obligation
or condition with respect to any indebtedness described in clause (x)
if the effect of such default is to accelerate the maturity of such
indebtedness or such default shall continue unremedied for any
applicable period of time sufficient to permit the holder or holders of
such indebtedness, or any trustee or agent for such holders, to cause
such indebtedness to become due and payable prior to its expressed
maturity; or
(j) any judgment or order for the payment of money in excess
of $10 million shall be rendered against the Lessee or any of its
Subsidiaries and either (x) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (y) there
shall be any period of thirty (30) consecutive days during which a stay
of enforcement of such judgment or order, by reason of a pending appeal
or otherwise, shall not be in effect; or
(k) any material provision with respect to the Collateral or
payment obligations of the Lessee under any Operative Document to which
the Lessee is a party or any Lien granted under any Operative Document
shall, in whole or in part, terminate, cease to be effective against
(except by virtue of affirmative action of the Lessor that the Lessee
did not direct or authorize), or cease to be the legally valid, binding
and enforceable obligation of, the Lessee or, except as permitted under
any Operative Document, any Lien securing any Obligation shall, in
whole or in part, cease to be a perfected first priority Lien; or
(l) the Lessee shall directly or indirectly contest in any
manner the effectiveness, validity, binding nature or enforceability of
any Operative Document or any Lien granted under any Operative
Document; or
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Master Lease
(m) the Lessee, as Pledgor, shall fail to comply with Section
2.4(d) of the Pledge Agreement; or
(n) any other event which Lessor, Agent and Lessee specify in
any Operative Document to be a Lease Event of Default hereunder shall
occur.
SECTION 16.2. Remedies. Upon the occurrence of any Lease Event of
Default and at any time thereafter, the Lessor may, so long as such Lease Event
of Default is continuing, first demand that the Lessee purchase all of Lessor's
interest in the Property as set forth in Section 16.2(e) and then do one or more
of the following as the Lessor in its sole discretion shall determine, without
limiting any other right or remedy the Lessor may have on account of such Lease
Event of Default:
(a) The Lessor may, by notice to the Lessee, rescind or
terminate this Master Lease as of the date specified in such notice;
provided, however, (i) no reletting, reentry or taking of possession of
the Property (or any portion thereof) by the Lessor will be construed
as an election on the Lessor's part to terminate this Master Lease
unless a written notice of such intention is given to the Lessee, (ii)
notwithstanding any reletting, reentry or taking of possession, the
Lessor may at any time thereafter elect to terminate this Master Lease
for a continuing Lease Event of Default and (iii) no act or thing done
by the Lessor 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 Lessor;
(b) The Lessor may (i) demand that the Lessee, and the Lessee
shall upon the written demand of the Lessor, return the Property
promptly to the Lessor in the manner and condition required by, and
otherwise in accordance with all of the provisions of, Articles VII and
IX and Section 8.3 hereof as if the Property were being returned at the
end of the Term, and the Lessor 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 Lessor 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, 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 Lessor's other damages, the Lessee
shall be responsible for all costs and expenses incurred by the Lessor
and the Lenders in connection with any reletting, including, without
limitation, reasonable brokers' fees and all costs of any alterations
or repairs made by the Lessor;
(c) Subject to Section 16.4, the Lessor may (i) sell all or
any part of the Property at public or private sale, as the Lessor may
determine, free and clear of any rights of the Lessee but subject to
the Ground Lease (except that Excess Sales Proceeds are payable to and
shall be paid to the Lessee) with respect thereto (except to the extent
required by clause (ii) below if the Lessor shall elect to exercise its
rights thereunder) in which event the Lessee's obligation to pay Basic
Rent hereunder for periods commencing after the date of such sale shall
be terminated; and (ii) if the Lessor shall so elect, demand that the
Lessee pay to the Lessor, and
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the Lessee shall pay to the Lessor, on the date of such sale, as
damages for loss of a bargain and not as a penalty (in lieu of Basic
Rent due for periods commencing on or after the Payment Date coinciding
with such date of sale (or, if the sale date is not a Payment Date, the
Payment Date next preceding the date of such sale)), an amount equal to
(A) the excess, if any, of (1) the Lease Balance calculated as of such
Payment Date (including all Rent due and unpaid to and including such
Payment Date), over (2) the net proceeds of such sale (that is, after
deducting all costs and expenses incurred by the Lessor or any
Participant(s) 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 Payment Date
until the date of payment;
(d) The Lessor may, at its option, elect not to terminate this
Master Lease with respect to the Property and continue to collect all
Basic Rent, Supplemental Rent, and all other amounts due the Lessor
(together with all costs of collection) and enforce the Lessee's
obligations under this Master Lease as and when the same become due, or
are to be performed, and at the option of the Lessor, upon any
abandonment of the Property by the Lessee or re-entry of same by the
Lessor, the Lessor may, in its sole and absolute discretion, elect not
to terminate this Master 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 Term of this Master Lease) and at such rental or rentals and upon
such other terms and conditions as the Lessor in its reasonable
discretion may deem advisable; and upon each such reletting all rentals
actually received by the Lessor from such reletting shall be applied to
the Lessee's obligations hereunder and the other Operative Documents in
such order, proportion and priority as the Lessor may elect in the
Lessor's sole and absolute discretion. If such rentals received from
such reletting during any period are less than the Rent with respect to
the Property to be paid during that period by the Lessee hereunder, the
Lessee shall pay any deficiency, as calculated by the Lessor, to the
Lessor on the next Payment Date;
(e) Unless the Property has been sold in its entirety, the
Lessor may, whether or not the Lessor shall have exercised or shall
thereafter at any time (subject to the Lessee's prior performance in
full under this clause) exercise any of its rights under clause (b),
(c) or (d) with respect to the Property or any portions thereof,
demand, by written notice to the Lessee specifying a date (a
"Termination Date") not earlier than ten (10) days after the date of
such notice, that the Lessee purchase, on such Termination Date, all
unsold portions of the Property in the manner provided in Section 18.3
and in accordance with the provisions of Article XXI;
(f) The Lessor may exercise any other right or remedy that may
be available to it under Applicable Law, or proceed by appropriate
court action (legal or equitable) to enforce the terms hereof or to
recover damages for the breach hereof. Separate suits may be brought to
collect any such damages for any period(s), and such suits shall not in
any manner prejudice the Lessor's right to collect any such damages for
any subsequent period(s), or the
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Lessor may defer any such suit until after the expiration of the Term,
in which event such suit shall be deemed not to have accrued until the
expiration of the Term;
(g) The Lessor may retain and apply against the Lease Balance
all sums which the Lessor would, absent such Lease Event of Default, be
required to pay to, or turn over to, the Lessee pursuant to the terms
of this Master Lease; or
(h) The Lessor, as a matter of right and with notice to 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 Lessor
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 marshaling in the
event of any sale of the Property or any interest therein.
The Lessor 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 Operative 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, security agreement, pledge, lien, assignment or otherwise.
Neither the acceptance of this instrument nor its enforcement, shall prejudice
or in any manner affect the Lessor's right to realize upon or enforce any other
security now or hereafter held by the Lessor, it being agreed that the Lessor
shall be entitled to enforce this instrument and any other security now or
hereafter held by the Lessor in such order and manner as the Lessor may
determine in its absolute discretion. No remedy herein conferred upon or
reserved to the Lessor 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
Operative Documents to the Lessor 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 Lessor. In no event shall the Lessor, in the
exercise of the remedies provided in this instrument (including, without
limitation, in connection with the assignment of rents to the Lessor, or the
appointment of a receiver and the entry of such receiver onto all or any part of
the Property), be deemed a "mortgagee in possession," and the Lessor shall not
in any way be made liable for any act, either of commission or omission, in
connection with the exercise of such remedies.
If, pursuant to the exercise by the Lessor of its remedies pursuant to
this Section 16.2, the sum of (x) the Lease Balance on the date of such purchase
plus (y) all accrued and unpaid Basic Rent on the date of such purchase plus (z)
all Supplemental Rent (including Break Costs) due and owing on the date of such
purchase after giving effect thereto, plus all other amounts due and owing from
the
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Lessee under this Master Lease and the other Operative Documents, shall have
been paid in full in cash, then the Lessor shall remit to the Lessee any excess
amounts received by the Lessor.
SECTION 16.3. Waiver of Certain Rights. If this Master Lease shall be
terminated pursuant to Section 16.2, the Lessee waives, to the fullest extent
permitted by law (except as set forth in Section 16.2), (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 Lessor with respect to the election of
remedies; and (d) any other rights which might otherwise limit or modify any of
the Lessor's rights or remedies under this Article XVI.
SECTION 16.4. Power of Sale and Foreclosure. (a) In the event that a
court of competent jurisdiction rules that this Master Lease constitutes a
mortgage, deed of trust or other secured financing with respect to the Property
as is the intent of the parties pursuant to Article XXV, then the Lessor and the
Lessee agree that (i) the Lessee hereby grants a Lien to the Lessor to secure
all Loans and Equity Amounts advanced by the Participants for construction of
the Improvements on the Land, together with interest thereon, and all other
amounts payable under the Operative Documents in connection therewith, against
the Lessee Interest WITH POWER OF SALE, and that, upon the occurrence of any
Lease Event of Default, the Lessor shall have the power and authority, to the
extent provided by law, after proper notice and lapse of such time as may be
required by law, to sell the Lessee Interest at the time and place of sale fixed
by the Lessor in such notice of sale, either as a whole, or in separate lots or
parcels or items and in such order as the Lessor may elect, at auction to the
highest bidder for cash in lawful money of the United States payable at the time
of sale; accordingly, it is acknowledged that A POWER OF SALE HAS BEEN GRANTED
IN THIS INSTRUMENT; A POWER OF SALE MAY ALLOW THE LESSOR TO TAKE THE LESSEE
INTEREST AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT
BY THE LESSEE UNDER THIS INSTRUMENT, and (ii) upon the occurrence of a Lease
Event of Default, the Lessor, in lieu of or in addition to exercising any power
of sale hereinabove given, may proceed by a suit or suits in equity or at law,
whether for a foreclosure hereunder, or for the sale of the Lessee Interest, or
against the Lessee on a recourse basis for the Lease Balance, or for the
specific performance of any covenant or agreement herein contained or in aid of
the execution of any power herein granted, or for the appointment of a receiver
pending any foreclosure hereunder or the sale of the Lessee Interest, or for the
enforcement of any other appropriate legal or equitable remedy.
(b) Without limiting any other remedies set forth herein, and
notwithstanding anything to the contrary contained herein but subject to the
notice provisions specifically set forth in Section 16.2, the Lessee and the
Lessor agree that upon default by Lessee in payment of any indebtedness secured
hereby or in performance of any agreement hereunder, Lessor may declare all sums
secured hereby immediately due and payable by written notice of default and of
election to cause to be sold the Lessee Interest, which notice Lessor shall
cause to be filed for record.
After the lapse of such time as may then be required by law following
the recordation of said notice of default, and notice of sale having been given
as then required by law, Lessor, without demand on Lessee, may sell the Lessee
Interest at the time and place fixed by it in said notice of sale,
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either as a whole or in separate parcels, and in such order as it may determine,
at public auction to the highest bidder for cash in lawful money of the United
States, payable at time of sale. Lessor may postpone sale of all or any portion
of the Lessee Interest by public announcement at such time and place of sale,
and from time to time thereafter may postpone such sale by public announcement
at the time fixed by the preceding postponement. Lessor shall deliver to such
purchaser its deed conveying the property so sold, but without any covenant or
warranty, express or implied. The recitals in such deed of any matters or facts
shall be conclusive proof of the truthfulness thereof. Any Person, including
Lessee or Lessor, may purchase at such sale.
After deducting all costs, fees and expenses of Lessor, including cost
of evidence of title in connection with sale, Lessor shall apply the proceeds of
sale to payment of all sums expended in enforcement of its right hereunder with
accrued interest at the amount allowed by law in effect at the date hereof and
the remainder to the Person or Persons legally entitled thereof.
WARNING: THIS MASTER LEASE CONTAINS A POWER OF SALE AND UPON DEFAULT
MAY BE FORECLOSED BY ADVERTISEMENT. IN FORECLOSURE BY ADVERTISEMENT AND
THE SALE OF THE LESSEE INTEREST IN CONNECTION THEREWITH, NO HEARING IS
REQUIRED AND THE ONLY NOTICE REQUIRED IS TO PUBLISH NOTICE IN A LOCAL
NEWSPAPER AND TO POST A COPY OF THE NOTICE ON THE LESSEE INTEREST.
Upon the occurrence of a Lease Event of Default, the Lessor, in lieu of
or in addition to exercising any power of sale hereinabove given, may proceed by
a suit or suits in equity or at law, whether for a foreclosure hereunder, or for
the sale of the Lessee Interest or against the Lessee on a recourse basis for
the Lease Balance, or for the specific performance of any covenant or agreement
contained herein or in any Lease Supplement or any other Operative Document in
aid of the execution of any power granted herein or in any Lease Supplement or
in any other Operative Document, or for the appointment of a receiver pending
any foreclosure hereunder or the sale of the Lessee Interest, or for the
enforcement of any other appropriate legal or equitable remedy. The Lessee shall
have all rights available to a mortgagor under the laws of the jurisdiction in
which the Lessee Interest is located.
ARTICLE XVII
LESSOR'S RIGHT TO CURE; NOTICE OF
RENEWAL, PURCHASE OR REMARKETING OPTION
SECTION 17.1. The Lessor's Right to Cure the Lessee's Lease Defaults.
The Lessor, without waiving or releasing any obligation or Lease Event of
Default, may (but shall be under no obligation to), upon three (3) days' prior
notice to the Lessee, remedy any Lease Event of Default for the account and at
the sole cost and expense of the Lessee, including the failure by the Lessee to
maintain the insurance required by Article XIII, and may, to the fullest extent
permitted by law, and notwithstanding any right of quiet enjoyment in favor of
the Lessee, enter upon the Property for such purpose and take all such action
thereon as Lessor may reasonably determine to be necessary or appropriate
therefor. No such entry shall be deemed an eviction of the Lessee. All
reasonable out-of-pocket costs and expenses so incurred (including fees and
expenses of counsel), together with interest thereon at the Overdue Rate from
the date on which such sums or expenses are paid by the Lessor, shall be paid by
the Lessee to the Lessor as Supplemental Rent.
SECTION 17.2. Renewal, Purchase or Remarketing Notice. Not less than
one hundred eighty (180) days prior to the Expiration Date, the Lessee shall
notify the Lessor in writing of its irrevocable election to (a) renew the Master
Lease pursuant to Article XIX (subject to the consent of the Lessor and each
Lender, which consent may be given or withheld in each such Participant's sole
discretion), (b) purchase the entire Property pursuant to Article XVIII or (c)
exercise its Remarketing Option pursuant to Article XX.
ARTICLE XVIII
PURCHASE PROVISIONS
SECTION 18.1. Purchase Option. Subject to the conditions contained
herein, the Lessee shall have the option on any Scheduled Payment Date to
purchase (or cause its designee to purchase) all (and not less than all) the
Property at a price equal to the sum of (x) the Lease Balance on the date of
such purchase plus (y) all accrued and unpaid Basic Rent on the date of such
purchase plus (z) all Supplemental Rent (including Break Costs) due and owing on
the date of such purchase after giving effect thereto (the "Purchase Option
Price"). The Lessee's exercise of its option pursuant to this Section 18.1 shall
be subject to the following conditions:
(i) the Lessee shall have delivered a Purchase Notice to the
Lessor not less than ninety (90) days prior to such purchase (or, in
the case of a purchase on or before any Scheduled Payment Date in the
last year of the Term, one hundred eighty (180) days prior to such
purchase) which Purchase Notice shall specify the date of such
purchase; and
(ii) no Lease Event of Default shall have occurred and then be
continuing or, if a Lease Event of Default shall then be continuing,
Lessor shall not have commenced the exercise of remedies as a
consequence thereof.
If the Lessee exercises its option to purchase all of the Property pursuant to
this Section 18.1 (the "Purchase Option") then, upon the Lessor's receipt of all
amounts due in connection therewith, the Lessor shall transfer to the Lessee or
its designee all of the Lessor's right, title and interest in and to the
Property in accordance with the procedures set forth in Section 21.1(a), such
transfer to be effective as of the date specified in the Purchase Notice. The
Lessee may designate, in a notice given to the Lessor not less than ten (10)
Business Days prior to the closing of such purchase (time being of the essence),
the transferee or transferees to whom the conveyance shall be made (if other
than to the Lessee), in which case such conveyance shall (subject to the terms
and conditions set forth herein) be made to such designee; provided, however,
that such designation of a transferee or transferees shall not cause the Lessee
to be released, fully or partially, from any of its Obligations, including,
without limitation, the obligation to pay to the Lessor the Purchase Option
Price on the date specified in the applicable Purchase Notice.
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Master Lease
SECTION 18.2. [Intentionally Omitted].
SECTION 18.3. Acceleration of Property Purchase. (a) The Lessee shall
be obligated to purchase all of the Lessor's interest in the Property for an
amount equal to the sum of (x) the Lease Balance plus (y) all accrued and unpaid
Basic Rent plus (z) all Supplemental Rent (including Break Costs) due and owing
on the date of such purchase after giving effect thereto, (notwithstanding any
prior election by the Lessee to exercise its Purchase Option pursuant to Section
18.1) (i) automatically and without notice upon the occurrence of any Lease
Event of Default specified in clause (g) or (h) of Section 16.1 and (ii) as
provided for at Section 16.2(e) immediately upon written demand of the Lessor
upon the occurrence of any other Lease Event of Default.
(b) The Lessee shall be obligated to purchase all of the Lessor's
interest in the Property for an amount equal to the sum of (x) the Lease Balance
on the date of such purchase plus (y) all accrued and unpaid Basic Rent on the
date of such purchase plus (z) all Supplemental Rent (including Break Costs) due
and owing on the date of such purchase after giving effect thereto, immediately
upon written demand of the Lessor at any time during the Term when (i) the
Lessor ceases to have title as contemplated by Section 11.1 (other than solely
as a result of the imposition of Lessor Liens or the imposition of any other
Liens created by the Operative Documents) or (ii) any related Operative Document
to which the Lessee is a party shall cease to be in full force and effect, or
shall cease to give the Participants the Liens granted by the Lessee and other
material rights, powers and privileges granted by the Lessee purported to be
created thereby (except by virtue of affirmative action of the Lessor that the
Lessee did not direct or authorize).
(c) Any purchase under this Section 18.3 shall be in accordance with
the procedures for transfer set forth in Section 21.1(a).
ARTICLE XIX
RENEWAL PROCEDURES
SECTION 19.1. Renewal. Subject to the conditions set forth herein, the
Lessee and the Lessor may agree to renew the Base Lease Term for the Property
for one or more terms (each, a "Renewal Term"), with each such Renewal Term to
commence on the first day following the Expiration Date then in effect and end
on the date mutually agreed to by the Lessor, the Lenders and the Lessee. The
effective extension of the Base Lease Term for the Property shall be subject to
the satisfaction of each of the following conditions:
(a) the Lessee shall have delivered written notice to each
Participant of the Lessee's request to extend the Base Lease Term for
the Property pursuant to Section 17.2;
(b) on both the date of delivery of the notice referred to in
clause (a) and on the Expiration Date then in effect for the Property,
(i) no Event of Default shall have occurred and be continuing, and (ii)
by delivery of written notice of its intent to renew the Base Lease
Term, the Lessee shall be deemed to represent to the Lessor as to the
matters set forth in clause (i) of this condition (b);
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(c) the Lessee shall not have given notice of its intention to
exercise the Remarketing Option; and
(d) the Lessor and the Lenders, in the exercise of their sole
discretion and subject to the approval of their respective credit
committees, shall have agreed with the Lessee (w) to the extension of
the Maturity Date with respect to the Loans and Equity Amounts relating
to the Property, (x) upon the Rent applicable for such Renewal Term,
(y) upon the conditions for permitting such renewal (including, without
limitation, the delivery of an Appraisal satisfactory in form and
substance to each Participant and such other conditions as any
Participant, in its sole discretion, may request) and (z) upon such
other modifications to this Master Lease as the Participants and the
Lessee then deem appropriate.
ARTICLE XX
REMARKETING OPTION
SECTION 20.1. Option to Remarket. Subject to the fulfillment of each of
the conditions set forth in this Section 20.1, the Lessee may elect to remarket
all (but not less than all) of the Property (such election being referred to as
the "Remarketing Option").
(I) The Lessee's effective exercise and consummation of the Remarketing
Option shall be subject to the due and timely fulfillment of each of the
following provisions as to the Property as of the dates set forth below.
(a) the Lessee shall have given to the Lessor and the Lenders
written notice of the Lessee's exercise of the Remarketing Option in
accordance with Section 17.2.
(b) Not later than one hundred twenty (120) days prior to
Expiration Date, the Lessee shall deliver to the Lessor an
Environmental Audit for the Property. Such Environmental Audit shall be
prepared by an environmental consultant selected by the Lessor in the
Lessor's reasonable discretion and shall contain conclusions reasonably
satisfactory to the Lessor as to the environmental status of the
Property. If any such Environmental Audit indicates any exceptions, the
Lessee shall have also delivered prior to the Expiration Date a Phase
Two environmental assessment by such environmental consultant and a
written statement by such environmental consultant indicating that all
such exceptions have been remedied in compliance with Applicable Law.
(c) On the date of the Lessee's notice to the Lessor of the
Lessee's exercise of the Remarketing Option, no Lease Event of Default
or Lease Default shall exist, and thereafter, no Lease Event of Default
or Lease Default shall exist.
(d) The Completion Date shall have occurred, and the
appropriate Governmental Authority shall have issued permanent
certificates of occupancy for all of the Improvements on the Property.
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(e) The Lessee shall have completed all Modifications,
restoration and rebuilding of the Property pursuant to Sections 10.1
and 14.1 (as the case may be) and shall have fulfilled all of the
conditions and requirements in connection therewith pursuant to said
Sections, in each case prior to the date on which the Lessee delivers
notice of its intention to exercise the Remarketing Option with respect
to the Property (time being of the essence), regardless of whether the
same shall be within the Lessee's control. The Lessee shall have also
paid the cost of all Modifications commenced prior to the Expiration
Date. The Lessee shall not have been excused pursuant to Section 12.1
from complying with any Applicable Law relating to the Property that
involved the extension of the ultimate imposition of such Applicable
Law beyond the Expiration Date. Any Permitted Liens (other than Lessor
Liens) on the Property or any part thereof that were contested by the
Lessee shall have been removed.
(f) During the Marketing Period, the Lessee shall, as
nonexclusive agent for the Lessor, use its best efforts to sell the
Lessor's interest in the Property and will attempt to obtain the
highest purchase price therefor and for not less than the Fair Market
Sales Value of the Property; provided, however, that the Lessor and/or
any Participant may, but shall be under no obligation to, market the
Property during the Marketing Period. The Lessee will be responsible
for hiring brokers and making the Property available for inspection by
prospective purchasers. The Lessee shall promptly upon request permit
inspection of the Property and any maintenance records relating to the
Property by the Lessor, any Participant and any potential purchasers,
and shall otherwise do all things necessary to sell and deliver
possession of the Property to any purchaser. The Lessee shall allow the
Lessor, the Participants and any potential qualified purchaser
reasonable access to the Property for the purpose of inspecting the
same.
(g) The Lessee shall use its best efforts to procure bids from
one or more bona fide prospective purchasers and deliver the same, if
any, to the Lessor and the Participants not less than thirty (30) days
prior to the Expiration Date. At the request of any such bona fide
prospective purchaser, or the Lessor after consultation with the
prospective purchaser, the Lessee shall waive its right to exercise the
Purchase Option. No such purchaser shall be the Lessee or any
Subsidiary or Affiliate of the Lessee if the bid made by such purchaser
does not, together with the Recourse Amount, equal or exceed the Lease
Balance at the Expiration Date. The written offer must specify the
Expiration Date as the closing date unless the Lessor and the Lenders
shall otherwise agree in their sole discretion.
(h) The Lessee shall submit all bids to the Lessor and the
Participants, and the Lessor will have the right to submit any one or
more bids. Any sale by the Lessee shall be for the highest cash bid
submitted to the Lessor. The determination of the highest bid shall be
made by the Lessor prior to the end of the Marketing Period, but in any
event, the Lessor shall have no obligation to approve any bid unless
the highest bid for the Property, together with the Recourse Amount,
equals or exceeds the Lease Balance determined as of the Expiration
Date. In the event the Lessee has used its best efforts to obtain bona
fide bids and has otherwise complied with the requirements of Section
20.1, including, without limitation, payment of the Recourse Amount and
payments under clause (l) hereof, but no bids were accepted by the
Lessor hereunder, Lessee shall not be subject to Section 20.2 hereof.
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(i) In connection with any such sale of the Property, the
Lessee will provide to the purchaser all customary "seller's"
indemnities, representations and warranties regarding title, absence of
Liens (except Lessor Liens) and the condition of the Property,
including, without limitation, an environmental indemnity, to the
extent the same are required by the purchaser. The Lessee shall have
obtained, at its cost and expense, all required governmental and
regulatory consents and approvals and shall have made all filings as
required by Applicable Law in order to carry out and complete the
transfer of the Property. As to the Lessor, any such sale shall be made
on an "as is, with all faults" basis without representation or warranty
by the Lessor other than the absence of Lessor Liens attributable to
the Lessor. Any agreement as to such sale shall be made subject to the
Lessor's rights hereunder.
(j) The Lessee shall pay directly, and not from the sale
proceeds, all prorations, credits, costs and expenses of any such sale,
("Costs of Sale") whether incurred by the Lessor, the Agent, any Lender
or the Lessee, including without limitation, the cost of all title
insurance, surveys, Environmental Audits and other environmental
reports, appraisals, transfer taxes, the Lessor's reasonable attorneys'
fees, the Lessee's attorneys' fees, commissions, escrow fees, recording
fees, and all applicable documentary and other transfer taxes, to the
extent such Costs of Sale exceed three percent (3%) of the Lease
Balance.
(k) Whether or not the Property has been sold and the Gross
Remarketing Proceeds (as defined below) paid to the Lessor, the Lessee
shall pay to the Lessor on or prior to the Expiration Date for the
Property (or in the case of Supplemental Rent, to the Person entitled
thereto) an amount equal to the Recourse Amount plus all accrued and
unpaid Basic Rent plus all Supplemental Rent (including Break Costs)
due and owing on the Expiration Date after giving effect to such
payment and all other amounts under the Operative Documents which have
accrued or will accrue prior to or as of the Expiration Date, in the
type of funds specified in Section 3.4 hereof.
(l) The Lessee shall pay to the Lessor on or prior to the
Expiration Date the amounts, if any, required to be paid pursuant to
Section 13.2 of the Participation Agreement.
(m) The purchase of the Property shall be consummated on the
Expiration Date therefor and the gross proceeds (the "Gross Remarketing
Proceeds") of the sale of the Property (i.e., without deduction for any
marketing, closing or other costs, prorations or commissions) shall be
paid directly to the Lessor; provided, however, that if the sum of (x)
the Gross Remarketing Proceeds from such sale plus (y) the Recourse
Amount received by the Lessor pursuant to clause (k) plus (z) amounts
received by the Lessor pursuant to Section 13.2 of the Participation
Agreement, exceeds the sum of the Lease Balance as of such date plus
all accrued and unpaid Rent (including Supplemental Rent) and all other
amounts under the Operative Documents which have accrued on will accrue
prior to the Expiration Date, then the excess shall be paid to the
Lessee on such Expiration Date.
(II) If the Lessee effectively elects the Remarketing Option and each
of the conditions and requirements set forth in Clause (I) shall have been
satisfied, but, nevertheless, the Lessee is unable to obtain bids satisfactory
to the Lessor pursuant to Section 20.1(h) above and no sale of the Property is
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consummated prior to the end of the Marketing Period, then the Lessee shall, in
addition to making the payment required pursuant to Section 20.1(k) above,
return the Property to the Lessor (or to any other Person specified by the
Lessor) subject to the Ground Lease (which at such time provides for payment of
fair market ground rent by the Lessor to the Lessee). In connection with any
such return of the Property, the Lessee shall, at its own cost and expense, do
each of the following:
(i) the Lessee shall, on or prior to the Expiration
Date, execute and deliver to the Lessor (or to the Lessor's
designee) (A) a deed with respect to the Improvements on the
Land containing representations and warranties of grantor to
the Lessor (or such other Person) regarding the absence of
Liens (other than Permitted Liens of the type described in
clause (i), (viii) or (x) of the definition of "Permitted
Liens"), (B) a bill of sale with respect to all Equipment (if
any) financed by Advances under the Operative Documents and
(C) an assignment of the Lessee's entire interest in the
Improvements (which shall include an assignment of all of the
Lessee's right, title and interest in and to any Net Proceeds
with respect to the Property not previously received by the
Lessee and an assignment of leases of the Property), in each
case in recordable form and otherwise in conformity with local
custom and free and clear of any Liens attributable to the
Lessee;
(ii) the Lessee shall execute and deliver to the
Lessor and the Lessor's title insurance company an affidavit
as to the absence of any Liens (other than Permitted Liens of
the type described in clause (i), (viii) or (x) of the
definition of "Permitted Liens"), and shall execute and
deliver to the Lessor a statement of termination of this
Master Lease to the extent relating to the Property;
(iii) the Lessee shall, on the Expiration Date for
the Property, vacate the Property and transfer possession of
the Property to the Lessor or any Person designated by the
Lessor, in each case by surrendering the same into the
possession of the Lessor or such Person, as the case may be,
configured as a first class office building, in broom clean
condition, and in the other conditions required by this
Section and in compliance with Applicable Law; and
(iv) the Lessee shall, for a period of up to one year
after the Expiration Date, cooperate reasonably with the
Lessor and/or any Person designated by the Lessor to receive
the Property, which cooperation shall include reasonable
efforts with respect to the following, all of which the Lessee
shall do on or before the Expiration Date for the Property or
as soon thereafter as is reasonably practicable: providing
copies of all books and records regarding the maintenance and
ownership of the Property and all know-how, data and technical
information relating thereto, providing a current copy of the
Plans and Specifications for the Property, granting or
assigning all assignable licenses necessary for the operation
and maintenance of the Property and cooperating reasonably in
seeking and obtaining all necessary Governmental Action. The
obligations of the Lessee under this paragraph shall survive
the expiration or termination of this Master Lease.
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Master Lease
SECTION 20.2. Failure to Comply with Remarketing Option. If one or more
of the provisions in Section 20.1 above shall not be fulfilled as of the
applicable date set forth above, then the Lessor shall declare by written notice
to the Lessee the Remarketing Option to be null and void (whether or not it has
been theretofore exercised by the Lessee), in which event all of the Lessee's
rights under Section 20.1 shall immediately terminate and, as a consequence of
the Lessee's failure to comply with such provisions, the Lessee shall be deemed
to have exercised its option to purchase the Property and shall purchase the
Property on the Expiration Date in the manner provided in Section 18.3.
SECTION 20.3. Sales. Except as expressly set forth in Section 20.1, the
Lessee shall have no right, power or authority to bind the Lessor in connection
with any proposed sale of the Property. The Lessor shall have the right, but
shall be under no duty, to solicit bids, to inquire into the efforts of the
Lessee to obtain bids or otherwise to take action in connection with any such
sale.
SECTION 20.4. Certain Obligations Continue. During the Marketing Period
for the Property, the obligation of the Lessee to pay Rent with respect to the
Property (including the installment of Rent due on the Expiration Date for the
Property) shall continue undiminished.
ARTICLE XXI
PROCEDURES RELATING TO PURCHASE OR REMARKETING
SECTION 21.1. Provisions Relating to Conveyance of the Property Upon
Purchase by the Lessee, Remarketing or Certain Other Events.
(a) Conveyance Upon Purchase by the Lessee, Etc. In connection
with any termination of this Master Lease pursuant to the terms of
Article XV, in connection with any purchase or in connection with the
Lessee's purchase of the Property in accordance with Section 18.1 or
pursuant to the Construction Agency Agreement or in connection with the
Lessee's obligations under Section 16.2(e) or 18.3, then, upon the date
on which this Master Lease is to terminate with respect to the Property
and upon the payment of all amounts due under Section 5.1 of the
Construction Agency Agreement and upon tender by the Lessee of the
amounts set forth in Article XV, Sections 16.2(e), 18.1 or 18.3, as
applicable:
(i) the Lessor shall execute and deliver to the
Lessee (or to the Lessee's designee) at the Lessee's cost and
expense a termination of the Ground Lease and an assignment of
the Lessor's entire interest in the Property (which shall
include an assignment of all of the Lessor's right, title and
interest in and to any Net Proceeds with respect to the
Property not previously received by the Lessor and an
assignment of leases of the Property), in each case in
recordable form and otherwise in conformity with local custom
and free and clear of the Lien of this Master Lease and the
Lease Supplement, any other Liens created by the Operative
Documents that are attributable to the Lessor, and any Lessor
Liens attributable to the Lessor;
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(ii) the Property shall be conveyed to the Lessee "AS
IS" and in its then present physical condition; and
(iii) the Lessor shall, at the Lessee's sole cost and
expense, execute and deliver to Lessee and the Lessee's title
insurance company an affidavit as to the Lessor's title and
the absence of Lessor Liens and any Liens created by the
Operative Documents attributable to the Participants, and
shall, at the Lessee's sole cost and expense, execute and
deliver to Lessee a statement of termination of this Master
Lease and the Construction Agency Agreement, releases of any
Liens created by the Operative Documents attributable to the
Lessor, and termination statements for any financing
statements which are then of record naming the Lessor as the
secured party.
(b) Conveyance Upon Remarketing. If the Lessee properly
exercises the Remarketing Option with respect to the Property, then the
Lessee shall, on the Expiration Date and at its own cost, transfer
possession of the Property to the independent purchaser(s) thereof, in
each case by surrendering the same into the possession of the Lessor or
such purchaser(s), as the case may be, free and clear of all Liens
(other than Lessor Liens and the Lien of the Mortgage), in good
condition (as modified by Modifications permitted by this Master
Lease), ordinary wear and tear excepted, and in compliance with
Applicable Law. The Lessee shall, on and within a reasonable time
before and up to one year after the Expiration Date for the Property,
cooperate reasonably with the Lessor and the independent purchaser(s)
of the Property in order to facilitate such purchase, which cooperation
shall include reasonable efforts with respect to the following, all of
which the Lessee shall do on or before the Expiration Date for the
Property or as soon thereafter as is reasonably practicable: providing
copies of all books and records regarding the maintenance and ownership
of the Property and all know-how, data and technical information
relating thereto, providing a current copy of the Plans and
Specifications for the Property, granting or assigning all assignable
licenses necessary for the operation and maintenance of the Property
and cooperating reasonably in seeking and obtaining all necessary
Governmental Action. The obligations of the Lessee under this paragraph
shall survive the expiration or termination of this Master Lease.
ARTICLE XXII
ESTOPPEL CERTIFICATES
SECTION 22.1. Estoppel Certificates. At any time and from time to time
upon not less than ten (10) Business Days' prior request by the Lessor or the
Lessee (the "Requesting Party"), the other party (whichever party shall have
received such request, the "Certifying Party") shall furnish to the Requesting
Party a certificate signed by an authorized officer of the Certifying Party (or,
in the case of the Lessee, a Responsible Officer) certifying that this Master
Lease is in full force and effect (or that this Master Lease is in full force
and effect as modified and setting forth the modifications); the dates to which
the Basic Rent and Supplemental Rent have been paid; to the best knowledge of
the signer of such certificate, whether or not the Requesting Party is in
default under any of its obligations hereunder (and, if so, the nature of such
alleged default); and such other matters under
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Master Lease
this Master Lease as the Requesting Party may reasonably request. Any such
certificate furnished pursuant to this Article XXII may be relied upon by the
Requesting Party, and any existing or prospective mortgagee, purchaser or
lender, and any accountant or auditor, of, from or to the Requesting Party (or
any Affiliate thereof).
ARTICLE XXIII
ACCEPTANCE OF SURRENDER
SECTION 23.1. Acceptance of Surrender. No surrender to the Lessor of
this Master Lease or of the Property or of any part of any thereof or of any
interest therein shall be valid or effective unless agreed to and accepted in
writing by the Lessor and, prior to the payment or performance of all
obligations under the Loan Agreement and termination of the Commitments, the
Lenders, and no act by the Lessor or the Lenders or any representative or agent
of the Lessor or the Lenders, other than a written acceptance, shall constitute
an acceptance of any such surrender.
ARTICLE XXIV
NO MERGER OF TITLE
SECTION 24.1. No Merger of Title. There shall be no merger of this
Master Lease or of the leasehold estate created hereby by reason of the fact
that the same Person may acquire, own or hold, directly or indirectly, in whole
or in part, (a) this Master Lease or the leasehold estate created hereby or any
interest in this Master Lease or such leasehold estate or (b) the fee or
groundleasehold estate in the Property, except as may expressly be stated in a
written instrument duly executed and delivered by the appropriate Person.
ARTICLE XXV
INTENT OF THE PARTIES
SECTION 25.1. Nature of Transaction. (a) It is the intent of the
parties hereto that for state, real estate, commercial law, bankruptcy and
federal, state and local income tax purposes, and not for financial accounting
purposes, the transaction contemplated hereby is a financing arrangement and
preserves ownership in the Property in the Lessee.
(b) It is the intent of the parties hereto and the parties hereby agree
that (i) the obligations of the Lessee under this Master Lease to pay Basic Rent
and Supplemental Rent or Lease Balance in connection with any purchase of the
Property pursuant to this Master Lease shall be treated as payments of interest
on and principal of, respectively, loans from the Lessor and the Lenders to the
Lessee, and (ii) this Master Lease and the Lease Supplement grant a security
interest and mortgage or deed of trust or lien, as the case may be, on the
Property to the Lessor to secure the Lessee's performance under and payment of
all amounts under this Master Lease and the other Operative Documents, including
all amounts advanced by the Participants for the payment of Property Improvement
Costs (corresponding to the value of the Property as indicated on the Appraisal
of the
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Master Lease
Property delivered on the Acquisition Date) under the Participation Agreement
and all other amounts payable under the Operative Documents in connection
therewith.
(c) Specifically, without limiting the generality of clause (a), the
Lessor and the Lessee intend and agree that with respect to the nature of the
transactions evidenced by this Master Lease in the context of the exercise of
remedies under the Operative 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 Lessee, the Lessor or any Lender or any enforcement or collection actions,
the transactions evidenced by this Master Lease are loans to the Lessee made by
the Lessor and the Lenders (through the Lessor), in each case as unrelated third
party lenders to the Lessee, secured by the Lessee Interest. Accordingly, and
notwithstanding anything contained herein or in any other Operative Document to
the contrary, the Lessee hereby mortgages and warrants and grants a security
interest in the Lessee Interest to the Lessor to secure all Loans and Equity
Amounts advanced by the Participants for the construction of Improvements on the
Land (corresponding to the value of the Improvements as indicated on the
Appraisal of the Improvements delivered on the Documentation Date), in the
maximum principal amount of Sixty-Five Million Dollars ($65,000,000), maturing
on the Maturity Date for the Property, as such maturity date may be extended in
accordance with the provisions of this Master Lease or the other Operative
Documents, together with interest thereon, and all other amounts payable under
the Operative Documents in connection therewith, effective on the date hereof.
(d) Specifically, but without limiting the generality of clause (a),
the Lessor and the Lessee further intend and agree that, for the purpose of
securing the Lessee's obligations for the repayment of the above-described loans
from the Lessor and the Lenders to the Lessee, (i) this Master Lease and the
Lease Supplement(s) are security agreements and financing statements within the
meaning of Article 9 of the Uniform Commercial Code and real property mortgages
or deeds of trust; (ii) the conveyance provided for in this Article XXV and in
the Lease Supplement(s) is a grant by the Lessee to the Lessor of a security
interest in all of the Lessee's right, title and interest in and to the Lessee
Interest and all proceeds of the conversion, voluntary or involuntary, of the
foregoing into cash, investments, securities or other property (it being
understood that the Lessee hereby mortgages and warrants and grants a security
interest in the Lessee Interest to the Lessor to secure all Loans and Equity
Amounts advanced by the Participants for the construction of the Improvements
(not to exceed the amount set forth in Section 25.1(c)), together with interest
thereon, and all other amounts payable under the Operative Documents in
connection therewith); (iii) the possession by the Lessor or any of its agents
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 Uniform Commercial Code; and (iv) to the extent required by
the applicable Uniform Commercial Code, notifications to Persons holding such
property, and acknowledgments, receipts or confirmations from financial
intermediaries, bankers or agents (as applicable) of the Lessee shall be deemed
to have been given for the purpose of perfecting such security interest under
Applicable Law. The Lessor and the Lessee shall, to the extent consistent with
this Master Lease and the other Operative Documents, 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 this Master
Lease and the Lease Supplement(s) were
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Master Lease
deemed to create security interests in the Improvements in accordance with this
Section, such security interests would be perfected security interests of first
priority under Applicable Law and will be maintained as such throughout the
Term.
SECTION 25.2. Agreement to Pay Amounts Due With Respect to Recourse
Amount. In furtherance of the intent of the parties as set forth in Section 25.1
above and as set forth in Article V of the Participation Agreement, the Lessee
hereby absolutely, unconditionally and irrevocably (i) agrees to pay in full
when due (after giving effect to any applicable grace period), whether at stated
maturity, by required prepayment, declaration, acceleration, demand or
otherwise, all amounts owing by the Lessee with respect to the Recourse Amount
(including all such amounts which would become due but for the operation of the
automatic stay under Section 362(a) of the United States Bankruptcy Code, 11
U.S.C. ss.362(a), and the operation of Sections 502(b) and 506(b) of the United
States Bankruptcy Code, 11 U.S.C. ss.502(b) and ss.506(b)), and (ii) indemnifies
and holds harmless the Lessor and each Tranche A Lender for any and all costs
and expenses (including reasonable attorneys' fees and expenses) incurred by the
Lessor or such Tranche A Lender in enforcing any rights under this Section 25.2.
Notwithstanding anything contained herein to the contrary, any payment by the
Lessee in respect of amounts due under this Master Lease, whether paid to the
Lessor or paid directly to the Lenders and the Lessor, shall be applied by the
Lessor, or deemed applied, as the case may be, to the Loans and Equity Amounts
as set forth in Section 5.4 of the Participation Agreement.
ARTICLE XXVI
MISCELLANEOUS
SECTION 26.1. Survival; Severability; Etc. Anything contained in this
Master Lease to the contrary notwithstanding, all claims against and liabilities
of the Lessee or the Lessor arising from events commencing prior to the
expiration or earlier termination of this Master Lease shall survive such
expiration or earlier termination for a period of one year except as to
indemnification which shall continue to survive. If any term or provision of
this Master Lease or any application thereof shall be declared invalid or
unenforceable, the remainder of this Master Lease and any other application of
such term or provision shall not be affected thereby. If any right or option of
the Lessee provided in this Master Lease, including any right or option
described in Article XIV, XV, XVIII or XX, would, in the absence of the
limitation imposed by this sentence, be invalid or unenforceable as being in
violation of the rule against perpetuities or any other rule of law relating to
the vesting of an interest in or the suspension of the power of alienation of
property, then such right or option shall be exercisable only during the period
which shall end twenty-one (21) years less one day after the date of death of
the last survivor of the descendants of Franklin D. Roosevelt, the former
President of the United States, and John D. Rockefeller, the founder of the
Standard Oil Company (excluding Michael Rockefeller, the son of Nelson
Rockefeller, and his descendants, if any), known to be alive on the date of the
execution, acknowledgment and delivery of this Master Lease.
SECTION 26.2. Amendments and Modifications. Subject to the
requirements, restrictions and conditions set forth in the Participation
Agreement, neither this Master Lease nor any provision
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Master Lease
hereof may be amended, waived, discharged or terminated except by an instrument
in writing in recordable form signed by the Lessor and the Lessee.
SECTION 26.3. No Waiver. No failure by the Lessor or the Lessee to
insist upon the strict performance of any term hereof or to exercise any right,
power or remedy upon a default hereunder, and no acceptance of full or partial
payment of Rent during the continuance of any such default, shall constitute a
waiver of any such default or of any such term. To the fullest extent permitted
by law, no waiver of any default shall affect or alter this Master Lease, and
this Master Lease shall continue in full force and effect with respect to any
other then existing or subsequent default.
SECTION 26.4. Notices. All notices, demands, requests, consents,
approvals and other communications hereunder shall be in writing and directed to
the address described in, and deemed received in accordance with the provisions
of, Section 14.3 of the Participation Agreement.
SECTION 26.5. Successors and Assigns. All the terms and provisions of
this Master Lease shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
SECTION 26.6. Headings and Table of Contents. The headings and table of
contents in this Master Lease are for convenience of reference only and shall
not limit or otherwise affect the meaning hereof.
SECTION 26.7. Counterparts. This Master Lease may be executed in any
number of counterparts, each of which shall be an original, but all of which
shall together constitute one and the same instrument.
SECTION 26.8. GOVERNING LAW. THIS MASTER LEASE 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, EXCEPT AS TO MATTERS
RELATING TO THE CREATION OF THE LEASEHOLD ESTATES HEREUNDER AND THE EXERCISE OF
RIGHTS AND REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE IN WHICH SUCH ESTATES ARE
LOCATED. WITHOUT LIMITING THE FOREGOING, IN THE EVENT THAT THIS MASTER LEASE IS
DEEMED TO CONSTITUTE A FINANCING FOR TAX PURPOSES, WHICH IS THE INTENTION OF THE
PARTIES, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF
LAWS PRINCIPLES, SHALL GOVERN THE CREATION, TERMS AND PROVISIONS OF THE
INDEBTEDNESS EVIDENCED HEREBY, BUT THE LIEN CREATED HEREBY AND THE CREATION AND
THE ENFORCEMENT OF SAID LIEN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE IN WHICH SUCH ESTATES ARE LOCATED.
SECTION 26.9. Original Lease. The single executed original of this
Master Lease marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on
the signature page thereof and containing the receipt thereof of THE FUJI BANK
LIMITED, SAN FRANCISCO AGENCY, as Agent, on or following the signature page
thereof shall be the Original Executed
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Master Lease
Counterpart of this Master Lease (the "Original Executed Counterpart"). To the
extent that this Master Lease constitutes chattel paper, as such term is defined
in the Uniform Commercial Code as in effect in any applicable jurisdiction, no
security interest in this Master Lease may be created through the transfer or
possession of any counterpart other than the Original Executed Counterpart.
SECTION 26.10. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY LAW,
THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
THEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS MASTER LEASE
AND/OR ANY OF THE OTHER OPERATIVE DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
THEREBY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL
OR WRITTEN) OR ACTIONS OF SUCH PARTIES. THE PARTIES HERETO ACKNOWLEDGE AND AGREE
THAT THEY HAVE RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THE
MASTER LEASE AND EACH SUCH OTHER OPERATIVE DOCUMENT.
[The remainder of this page has been
intentionally left blank]
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Master Lease
IN WITNESS WHEREOF, the parties have caused this Master Lease be duly
executed and delivered as of the date first above written.
ELECTRONICS FOR IMAGING, INC., as Lessee
By /s/ Dan Avida
------------------------------------------------
Name: Dan Avida
Title: President and Chief Executive Officer
FBTC LEASING CORP., as Lessor
By /s/ Akihiro Hashimoto
------------------------------------------------
Name: Akihiro Hashimoto
Title: Treasurer
Payment Office:
____________________________________________
____________________________________________
____________________________________________
Attention: _____________________________________
THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART.
Receipt of this original counterpart of the foregoing Master Lease is hereby
acknowledged as of the date hereof.
THE FUJI BANK, LIMITED, SAN FRANCISCO AGENCY, as Agent
By /s/ Keiichi Ozawa
Name: Keiichi Ozawa
Title: Joint General Manager
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Master Lease
STATE OF _________________________________ )
) ss.:
COUNTY OF ________________________________ )
The foregoing Master Lease was acknowledged before me, the undersigned
Notary Public, in the County of ________________, State of ______________, this
_____ day of July, 1997, by _________________, as ____________________ of
ELECTRONICS FOR IMAGING, INC., a ____________ corporation, on behalf of the
corporation.
[Notarial Seal] ___________________________
Notary Public
My commission expires: _____________________
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Master Lease
STATE OF ________________________________ )
) ss.:
COUNTY OF _______________________________ )
The foregoing Master Lease was acknowledged before me, the undersigned
Notary Public, in the County of ________________, State of __________________,
this ____ day of July, 1997, by _____________________________, as
____________________ of FBTC LEASING CORP., a New York corporation, as Lessor.
[Notarial Seal] ___________________________
Notary Public
My commission expires: ________________________
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SCHEDULE I
Legal Description of Land
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<TABLE>
TABLE OF CONTENTS
<CAPTION>
ARTICLE I
DEFINITIONS
<S> <C> <C>
SECTION 1.1. Definitions; Interpretation.................................................................1
ARTICLE II
MASTER LEASE
SECTION 2.1. Acceptance and Lease of Property............................................................2
SECTION 2.2. Acceptance Procedure........................................................................2
SECTION 2.3. Lease Term..................................................................................2
SECTION 2.4. Title.......................................................................................2
ARTICLE III
PAYMENT OF RENT
SECTION 3.1. Rent........................................................................................3
SECTION 3.2. Payment of Basic Rent.......................................................................3
SECTION 3.3. Supplemental Rent...........................................................................3
SECTION 3.4. Method of Payment...........................................................................3
ARTICLE IV
QUIET ENJOYMENT; RIGHT TO INSPECT
SECTION 4.1. Quiet Enjoyment.............................................................................4
SECTION 4.2. Right to Inspect............................................................................4
ARTICLE V
NET LEASE, ETC.
SECTION 5.1. Net Lease...................................................................................4
SECTION 5.2. No Termination or Abatement.................................................................5
SECTION 5.3. No Bar......................................................................................5
ARTICLE VI
SUBLEASES; ASSIGNMENT OF SUBLEASES
SECTION 6.1. Subletting..................................................................................5
SECTION 6.2. Assignment of Subleases.....................................................................6
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ARTICLE VII
LESSEE ACKNOWLEDGMENTS
SECTION 7.1. Condition of the Property...................................................................6
SECTION 7.2. Risk of Loss................................................................................7
ARTICLE VIII
POSSESSION AND USE OF THE PROPERTY, ETC.
SECTION 8.1. Utility Charges.............................................................................7
SECTION 8.2. Possession and Use of the Property..........................................................7
SECTION 8.3. Compliance with Requirements of Law and Insurance Requirements..............................7
SECTION 8.4. Assignment by Lessee........................................................................8
ARTICLE IX
MAINTENANCE AND REPAIR; RETURN
SECTION 9.1. Maintenance and Repair; Return..............................................................8
ARTICLE X
MODIFICATIONS, ETC.
SECTION 10.1. Modifications, Substitutions and Replacements...............................................8
SECTION 10.2. Consent of the Lessor.......................................................................9
ARTICLE XI
WARRANT OF TITLE; EASEMENTS
SECTION 11.1. Warrant of Title............................................................................9
SECTION 11.2. Lessee's Grants and Releases of Easements; Lessor's Waivers................................10
SECTION 11.3. Lessor Grant...............................................................................11
ARTICLE XII
PERMITTED CONTESTS
SECTION 12.1. Permitted Contests in Respect of Applicable Law............................................12
ARTICLE XIII
INSURANCE
SECTION 13.1. Public Liability and Workers' Compensation Insurance.......................................13
SECTION 13.2. Hazard and Other Insurance.................................................................13
SECTION 13.3. Insurance Coverage.........................................................................13
SECTION 13.4. Adjustment of Proceeds, etc................................................................14
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ARTICLE XIV
CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS
SECTION 14.1. Casualty and Condemnation..................................................................14
SECTION 14.2. Environmental Matters......................................................................16
SECTION 14.3. Notice of Environmental Matters............................................................16
ARTICLE XV
TERMINATION OF LEASE
SECTION 15.1. Termination upon Certain Events............................................................17
SECTION 15.2. Termination Procedures.....................................................................17
ARTICLE XVI
EVENTS OF DEFAULT
SECTION 16.1. Lease Events of Default....................................................................18
SECTION 16.2. Remedies...................................................................................20
SECTION 16.3. Waiver of Certain Rights...................................................................23
SECTION 16.4. Power of Sale and Foreclosure..............................................................23
ARTICLE XVII
LESSOR'S RIGHT TO CURE; NOTICE OF
RENEWAL, PURCHASE OR REMARKETING OPTION
SECTION 17.1. The Lessor's Right to Cure the Lessee's Lease Defaults.....................................24
SECTION 17.2. Renewal, Purchase or Remarketing Notice....................................................25
ARTICLE XVIII
PURCHASE PROVISIONS
SECTION 18.1. Purchase Option............................................................................25
SECTION 18.2. [Intentionally Omitted]....................................................................26
SECTION 18.3. Acceleration of Property Purchase..........................................................26
ARTICLE XIX
RENEWAL PROCEDURES
SECTION 19.1. Renewal....................................................................................26
ARTICLE XX
REMARKETING OPTION
SECTION 20.1. Option to Remarket.........................................................................27
SECTION 20.2. Failure to Comply with Remarketing Option..................................................31
SECTION 20.3. Sales......................................................................................31
SECTION 20.4. Certain Obligations Continue...............................................................31
-iii-
<PAGE>
ARTICLE XXI
PROCEDURES RELATING TO PURCHASE OR REMARKETING
SECTION 21.1. Provisions Relating to Conveyance of the Property Upon Purchase by the
Lessee, Remarketing or Certain Other Events............................................31
ARTICLE XXII
ESTOPPEL CERTIFICATES
SECTION 22.1. Estoppel Certificates......................................................................33
ARTICLE XXIII
ACCEPTANCE OF SURRENDER
SECTION 23.1. Acceptance of Surrender....................................................................33
ARTICLE XXIV
NO MERGER OF TITLE
SECTION 24.1. No Merger of Title.........................................................................33
ARTICLE XXV
INTENT OF THE PARTIES
SECTION 25.1. Nature of Transaction......................................................................34
SECTION 25.2. Agreement to Pay Amounts Due With Respect to Recourse Amount...............................35
ARTICLE XXVI
MISCELLANEOUS
SECTION 26.1. Survival; Severability; Etc................................................................35
SECTION 26.2. Amendments and Modifications...............................................................36
SECTION 26.3. No Waiver..................................................................................36
SECTION 26.4. Notices....................................................................................36
SECTION 26.5. Successors and Assigns.....................................................................36
SECTION 26.6. Headings and Table of Contents.............................................................36
SECTION 26.7. Counterparts...............................................................................36
SECTION 26.8. GOVERNING LAW..............................................................................36
SECTION 26.9. Original Lease.............................................................................37
SECTION 26.10. WAIVER OF JURY TRIAL.......................................................................37
</TABLE>
EXHIBITS
EXHIBIT A -- Form of Lease Supplement
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<PAGE>
SCHEDULES
SCHEDULE I -- Description of Land
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<PAGE>
EXHIBIT A
This instrument prepared by,
recording requested by,
and when recorded return to:
MAYER, BROWN & PLATT
1675 Broadway
New York, New York 10019
Attention: Michael Sloyer, Esq.
LEASE SUPPLEMENT NO. 1 AND
MEMORANDUM OF LEASE AND DEED OF TRUST
dated as of July __, 1997
among
ELECTRONICS FOR IMAGING, INC.,
as the Lessee,
FBTC LEASING CORP.,
as the Lessor,
and
Chicago Title Company,
as Trustee
Location of Premises:
County of San Mateo
State of California
<PAGE>
THIS LEASE SUPPLEMENT NO. 1 AND MEMORANDUM OF LEASE AND DEED OF TRUST
(this "Memorandum") dated as of July __, 1997, among ELECTRONICS FOR IMAGING,
INC., a Delaware corporation, having a principal office at 2855 Campus Drive,
San Mateo, California 94403, as the Lessee and as Mortgagor (the "Lessee"), FBTC
LEASING CORP., as the Lessor (the "Lessor"), having an address at Two World
Trade Center, New York, New York 10048, and Chicago Title Company (the
"Trustee").
W I T N E S S E T H:
WHEREAS, the Lessee is the record owner of the Land described in
Schedule I attached hereto and the Lessor is the owner of all the Improvements
and Appurtenant Rights located on such Land as described in Schedule II hereto;
and
WHEREAS, the Lessor wishes to lease the Property to the Lessee and the
Lessee wishes to lease the Property from the Lessor;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree to enter
into this Memorandum, as follows:
SECTION 1. Certain Terms. Capitalized terms used but not otherwise
defined in this Memorandum have the meanings specified in Appendix A to the
Master Lease and Open End Mortgages dated as of June 30, 1997 (as amended,
supplemented, amended and restated or otherwise modified from time to time, the
"Lease"), between the Lessee and the Lessor; and the rules of interpretation
specified in Appendix A to the Lease (as such Appendix A may be amended,
supplemented, amended and restated or otherwise modified from time to time)
shall apply to this Memorandum.
SECTION 2. Property. Effective upon the execution and delivery of this
Memorandum by the Lessor and the Lessee, the Property shall be subject to the
terms and provisions of the Lease. Subject to the terms and conditions of the
Lease, the Lessor hereby leases the Property to the Lessee for the Term (as
defined below) of this Memorandum, and the Lessee hereby agrees, expressly for
the direct benefit of the Lessor, to lease the Property from the Lessor for the
Term.
SECTION 3. Lease Term. The term of this Memorandum (the "Term") shall
consist of an Interim Lease Term (the "Interim Lease Term") and a Base Lease
Term (a "Base Lease Term"). The Interim Lease Term of this Master Lease shall
commence on (and include) the Acquisition Date and end on (but exclude) the
Commitment Termination Date. The Base Lease Term shall commence on (and include)
the last day of the Interim Lease Term and end on (but exclude) the Expiration
Date, as such Expiration Date may be extended from time to time in accordance
with Article XIX of the Master Lease, unless the Term with respect to the
Property is earlier terminated in accordance with the provisions of the Lease or
the other Operative Documents. For and in consideration of good and valuable
consideration paid by the Lessee to the Lessor as described in the Lease, the
Lessor hereby grants to the Lessee the right to purchase the Property or to
market and sell the Property during the Term of this Memorandum on the terms set
forth in the Lease.
SECTION 4. Ownership of the Property. (a) It is the intent of the
parties that: (i) the Lease constitutes an operating lease from Lessor to the
Lessee for purposes of the Lessee's
<PAGE>
financial reporting, (ii) the Lease and other transactions contemplated hereby
will result in Lessee being recognized as the owner of the Land and Improvements
for Federal and state income tax and bankruptcy purposes, (iii) this Lease
Supplement grants to Lessor a Lien on Lessee's right, title and interest in the
Improvements (the "Lessee Interest"), and (iv) the obligations of the Lessee to
pay Basic Rent and any part of the Lease Balance shall be treated as payments of
interest and principal, respectively, for Federal and state income tax and
bankruptcy purposes. Lessor shall be deemed to have a valid and binding security
interest in and Lien on the Lessee Interest, free and clear of all Liens other
than Permitted Liens, as security for the obligations of the Lessee under the
Operative Documents (it being understood and agreed that the Lessee does hereby
grant a Lien, and convey, transfer, assign, mortgage and warrant to Lessor and
its successors, transferees and assigns, the Lessee Interest and any proceeds or
products thereof, to have and hold the same as collateral security for the
payment and performance of the obligations of the Lessee under the Operative
Documents). Each of the parties hereto agrees that it will not, nor will it
permit any Affiliate to at any time, take any action or fail to take any action
with respect to the preparation or filing of any income tax return, including an
amended income tax return, to the extent that such action or such failure to
take action would be inconsistent with the intention of the parties expressed in
this Section 4.
(b) The Lessor and the Lessee 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 Operative 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 Lessee and the Lessor, or any enforcement or collection actions, the
transactions evidenced by the Lease are loans made by the Participants as
unrelated third party lenders to the Lessee secured by the Lessee Interest (it
being understood that the Lessee hereby mortgages, grants, bargains, sells,
releases, confirms, conveys, assigns, transfers and sets over to the Lessor, and
grants a security interest in, all of Lessee's right, title and interest in and
to the Lessee Interest) and a leasehold deed of trust on the Lessee'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 Lessee Interest unto the Lessor and
its successors and assigns, forever, provided always that these presents are
upon the express condition that, if all amounts due under the Lease and the
other Operative Documents shall have been paid and satisfied in full, then this
instrument and the estate hereby granted shall cease and become void.
As additional security for the Rent, the Lease Balance and all other
sums owed to the Lessor by the Lessee under the Lease, the Lessee does hereby
grant, bargain, sell, transfer and convey unto the Trustee, its successors in
trust and assigns, IN TRUST, WITH POWER OF SALE, the Lessee Interest, including,
without limitation, all buildings, structures and other improvements, and all
fixtures and other property now or hereafter permanently 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 Lessee Interest, all rents, additional rents, issues,
income, revenues, distributions, royalties and profits now or in the future
payable in respect of the Lessee Interest, together with all of the right, power
and authority of the Lessee to alter, modify or change the terms, conditions and
provisions of the Lease and any other lease pertaining to the Lessee Interest,
to consent to any request made by a tenant or landlord pursuant thereto, or to
surrender, cancel or terminate the same or to
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<PAGE>
accept any surrender, cancellation or termination of the same, together with all
of the options, rights, powers and privileges of the Lessee under any lease
pertaining to the Lessee Interest, whether heretofore or hereafter existing,
including, without limitation, the rights and options to purchase the Property
contained in Articles XVIII and XX of the Lease, and all present and future
right, title and interest of the Lessee 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 Lessee Interest, 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 Lessee in respect of the Lessee Interest, and all plans and
specifications, designs, drawings and other information, materials and matters
heretofore or hereafter prepared relating to the Lessee Interest or any
construction on the Land to the extent each, by its terms, does not prohibit
such assignment, 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 limitation 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 Lessee in the
Lessee Interest, or any portion thereof, together with all proceeds of the
conversion, whether voluntary or involuntary, of any of the Lessee Interest into
cash or other liquid claims, including without limitation, all awards, payments
or proceeds, including interest thereon, 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 Lessee Interest and
any defect in title in the Lessee Interest or other matter insured under any
policy of title insurance, together with attorney's fees, costs and
disbursements incurred by the Lessor in connection with the collection of such
awards, payments and proceeds, and the Lessee further grants to the Lessor,
pursuant to the California Uniform Commercial Code (the "UCC"), a security
interest in all present and future right, title and interest of the Lessee in
and to any portion of the foregoing property for which a security interest may
be created under the UCC.
To have and to hold the same whether now owned or held or hereafter
acquired unto the Trustee, its successors-in-trust forever, IN TRUST, WITH POWER
OF SALE, to secure to the Lessor the payment of the Rent, the Lease Balance and
all other sums owing to the Lessor under the Lease and the performance and
observance of the terms, covenants, warranties, conditions, agreements and
obligations under the Lease. If the Lessee 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 this conveyance shall become null and void.
In the event of the occurrence of a Lease Event of Default, then the
entire unpaid balance of all sums due under the Lease and the interest accrued
thereon shall, at the option of the Lessor and with prior written notice,
immediately become due and payable for all purposes, whether or not due
according to the maturity date or dates thereof; and all other indebtedness, the
payment of which is secured hereby, shall likewise become due and payable. The
Trustee and the Lessor and each of them are authorized prior or subsequent to
the institution of any foreclosure proceedings to enter upon the Land or any
part thereof and to take possession of the Lessee Interest and exercise without
interference from the Lessee, any and all rights which the Lessee has with
respect to the management, possession, operation, protection or preservation of
the
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<PAGE>
Lessee Interest; provided, however, that the Lessee shall be entitled, up to 90
days after the consummation of any foreclosure proceedings hereunder to enter
the Lessee Interest during normal business hours for the purpose of removing its
personal property and trade fixtures therefrom at its expense, provided that
such personal property and trade fixtures are not Improvements and the Lessee
repairs any damage to the Improvements caused by such removal.
Upon the occurrence of a Lease Event of Default, the Lessor
shall have the power and authority, after proper notice and lapse of such time
as may be required by law, to cause the Trustee to sell the Lessee Interest by
notifying the Trustee of that election and depositing with the Trustee this
instrument and receipts and evidence of expenditures made and secured hereby as
the Trustee may reasonably require. Upon receipt of any such notice from the
Lessor, the Trustee shall cause to be recorded, published and delivered to the
Lessee such Notice of Default and Election to Sell as is then required by
applicable statutory authority and by this instrument, which notice shall set
forth, among other things, the nature of the breach(es) or default(s), the
action(s) required to effect a cure thereof and the time period within which
that cure may be effected. If no cure is effected within the statutory time
limits following recordation of the Notice of Default and Election to Sell and
after Notice of Sale has been given as required by the above-referenced
statutes, the Trustee may without further notice or demand sell and convey the
Lessee Interest in accordance with the above-referenced statutes. The Lessee
Interest may be sold at public auction to the highest bidder for cash in lawful
money of the United States payable at the time of sale. The Trustee shall
deliver to such purchaser(s) a good and sufficient deed or deeds conveying the
Lessee Interest so sold, but without any covenant or warranty express or
implied. The recitals in such deed of any matter or fact shall be conclusive
proof of the truthfulness thereof. Any Person, including the Lessee, the Trustee
or the Lessor, may purchase at any sale. After deducting all costs, fees and
expenses of the Lessor and the Trustee, including costs of evidence of title in
connection with any sale, the Lessor shall apply the proceeds of sale, in the
following order of priority, to payment of the following (collectively, the
"Obligations"): (i) first, all amounts expended by or for the account of the
Lessor under the terms hereof and not then repaid, with accrued interest at the
Overdue Rate; and (ii) second, all other amounts then due and owing hereunder
including, without limitation, all Basic Rent, Supplemental Rent, the full
amount of the Lease Balance as of the date of sale as if the Lease had been
terminated with respect to the Property then subject to the Lease under Article
XVIII of the Lease, and all other amounts then payable by the Lessee under the
Lease and the other Operative Documents, with the Lessor having the right to
apply the proceeds of sale to the amounts described above in this clause (ii) in
such order, proportion and priority as set forth in the Participation Agreement.
To the extent permitted by applicable statutes, the Trustee may postpone the
sale of all or any portion of the Lessee Interest by public announcement at the
time and place of sale, and from time to time thereafter may again postpone that
sale by public announcement or subsequently noticed sale, and without further
notice may make such sale at the time fixed at the last postponement or may, in
its discretion, give a new notice of sale. A sale of less than all of the Lessee
Interest or any defective or irregular sale made hereunder shall not exhaust the
power of sale provided for herein, and subsequent sales may be made hereunder
until all of the Obligations have been satisfied or the entire Lessee Interest
has been sold, without defect or irregularity. No action of the Lessor or the
Trustee based upon the provisions contained herein or contained in the
applicable statutes, including, without limitation, the giving of the Notice of
Default and Election to Sell or the Notice of Sale, shall constitute an election
of remedies which would preclude the Lessor from pursuing judicial foreclosure
before a completed sale pursuant to
-4-
<PAGE>
the power of sale contained herein. The Lessor shall have the right, with the
irrevocable consent of the Lessee hereby given and evidenced by the execution of
this instrument, to obtain appointment of a receiver by any court of competent
jurisdiction without further notice to the Lessee, which receiver shall be
authorized and empowered to enter upon and take possession of the Lessee
Interest, including all personal property used upon or in connection with the
property herein conveyed comprising Improvements to such real property, to let
the Lessee Interest, to receive all the rents, issues and profits, if any, which
may be due or become due in respect to the leasing of the Lessee Interest to
another party ("Property Rents"), and apply the Property Rents after payment of
all necessary charges and expenses to reduction of the Obligations in such
order, proportion and priority as set forth in the Participation Agreement. At
the option of the Lessor, the receiver shall accomplish entry and taking
possession of the Lessee Interest by actual entry and possession or by notice to
the Lessee. The receiver so appointed by a court of competent jurisdiction shall
be empowered to issue receiver's certificates for funds advanced by the Lessor
for the purpose of protecting the value of the Lessee Interest as security for
the Obligations. The amounts evidenced by receiver's certificates shall bear
interest at the Overdue Rate and may be added to the Obligations if the Lessee
or a junior lienholder purchases the Property at the trustee's sale. The Trustee
or any successor acting hereunder may resign and thereupon be discharged of the
trusts hereunder upon thirty (30) days' prior written notice to the Lessor.
Regardless of whether the Trustee resigns, the Lessor may, from time to time,
substitute a successor or successors to any Trustee named herein or acting
hereunder in accordance with any statutory procedure for such substitution; or
if the Lessor, in its sole and absolute discretion, so elects, and if permitted
by law, the Lessor may substitute such successor or successors by recording, in
the office of the recorder of the county or counties where the Property is
located, a document executed by the Lessor and containing the name of the
original Lessee and Lessor hereunder, the book and page where this instrument
(or a memorandum hereof) is recorded (and/or instrument number, as applicable)
and the name of the new Trustee, which instrument shall be conclusive proof of
proper substitution of such successor Trustee or Trustees, who shall, without
conveyance from the predecessor Trustee, succeed to the rights, powers and
duties hereunder. It is acknowledged that A POWER OF SALE HAS BEEN GRANTED IN
THIS INSTRUMENT; A POWER OF SALE MAY ALLOW THE LESSOR TO TAKE THE LESSEE
INTEREST AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT
BY THE LESSEE UNDER THIS INSTRUMENT.
If in addition to this Memorandum, the Lessor shall now or hereafter
hold one or more additional mortgages, liens, deeds of trust or other security
(directly or indirectly) for the Obligations upon other property in the State in
which the Lessee Interest is located (whether or not such property is owned by
the Lessor or by others) or then to the fullest extent permitted by law, the
Lessor may, in its sole discretion, commence or consolidate in a single
foreclosure action all foreclosure proceedings against all such collateral
securing the Obligations (including the Lessee Interest), which action may be
brought or consolidated in the courts of any county in which any of such
collateral is located. The Lessee acknowledges that the right to maintain a
consolidated foreclosure action is a specific inducement to the Lessor to extend
the Advances, and the Lessee expressly and irrevocably waives any objections to
the commencement or consolidation of the foreclosure proceedings in a single
action and any objections to the laying of venue or based on the grounds of
forum non conveniens which it may now or hereafter have. The Lessee further
agrees that if the Lessor shall be prosecuting one or more foreclosure or other
proceedings against a portion of the Lessee Interest or against any collateral
other than the Lessee
-5-
<PAGE>
Interest, which collateral directly or indirectly secures the Obligations, or if
the Lessor shall have obtained a judgment of foreclosure and sale or similar
judgment against such collateral, then, whether or not such proceedings are
being maintained or judgments were obtained in or outside the State in which the
Lessee Interest is located, the Lessor may commence or continue foreclosure
proceedings and exercise its other remedies granted in this Memorandum against
all or any part of the Lessee Interest and the Lessee waives any objections to
the commencement or continuation of a foreclosure of this Memorandum or exercise
of any other remedies hereunder based on such other proceedings or judgments,
and waives any right to seek to dismiss, stay, remove, transfer or consolidate
either any action under this Memorandum or such other proceedings on such basis.
Neither the commencement nor continuation of proceedings to foreclose this
Memorandum nor the exercise of any other rights hereunder nor the recovery of
any judgment by the Lessor in any such proceedings shall prejudice, limit or
preclude the Lessor's right to commence or continue one or more foreclosure or
other proceedings or obtain a judgment against any other collateral (either in
or outside the State in which the Lessee Interest is located) which directly or
indirectly secures the Obligations, and the Lessee expressly waives any
objections to the commencement of, continuation of, or entry of a judgment in
such other proceedings or exercise of any remedies in such proceedings based
upon any action or judgment connected to this Memorandum, and the Lessee also
waives any right to seek to dismiss, stay, remove, transfer or consolidate
either such other proceedings or any action under this Memorandum on such basis.
If the Lessor so elects, the Trustee may sell any personal property
covered by this instrument at one or more separate sales in any manner permitted
by the UCC. One or more exercises of the powers herein granted shall not
extinguish nor exhaust such powers until the entire Lessee Interest is sold or
until the entire amounts evidenced and/or secured by the Lease and the Operative
Documents is paid in full.
(c) Specifically, but without limiting the generality of subsection
(b), the Lessor and the Lessee further intend and agree that, with respect to
that portion of the Lessee Interest constituting personal property, for the
purpose of securing the Lessee's obligations for the repayment of the
above-described obligations to the Lessor, (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 Lessee to the Lessor of a lien and security interest in all of the
Lessee's present and future right, title and interest in and to such portion of
the Lessee Interest, including but not limited to the Lessee'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 Lessee Interest unto the Lessor 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
this instrument and the estate hereby granted shall cease and become void; (iii)
the possession by the Lessor 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 property, and acknowledgments, receipts or confirmations
from financial intermediaries, bankers or agents (as applicable) of the Lessee
shall be deemed to have been given for the purpose of
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<PAGE>
perfecting such security interest under Applicable Law. The Lessor and the
Lessee shall, to the extent consistent with this Memorandum, 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 Lessee Interest in
accordance with this Section, 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 Term.
SECTION 5. Lessor Grant. (a) The Lessor hereby grants a Lien against
all of the Lessor's right, title and interest in and to the Property and all
rents, additional rents, issues, income, revenues, distributions, royalties and
profits now or in the future payable in respect of the Property to the Lessee to
secure (i) the Lessor's obligations hereunder in respect of the due and punctual
transfer by the Lessor to the Lessee of all of the Lessor's right, title and
interest in and to the Property when required by and in accordance with the
Lease, and (ii) if the Lessor shall then be the subject of any bankruptcy,
insolvency or similar proceeding, the satisfaction of the Lessee's right to
damages and other claims arising out of the rejection of the Lease or unilateral
termination of such obligation to transfer to the Lessee all of the Lessor's
right, title and interest in and to the Property.
(b) During the existence of a Lessor Default (as defined below), the
Lessee shall have the power and authority, to the extent provided by law, to
exercise any or all of the rights and powers and pursue any and all of the
remedies provided under the Operative Documents or by Applicable Law in respect
of the obligations secured in accordance with clause (a) above (including
specific performance of any covenant or agreement contained in the Lease or any
other Operative Document, in aid of the execution of any power granted in the
Lease or any other Operative Document, or for the enforcement of any other
appropriate legal or equitable remedy including judicial foreclosure and/or
foreclosure by power of sale), and the Lessee shall have all the rights
available to a mortgagor under the laws of the jurisdiction in which the
Property is located, including that, upon the occurrence of any Lessor Default,
(i) the Lessee shall have the power and authority, to the extent provided by
law, after proper notice and lapse of such time as may be required by law, to
sell the Lessor's interest in the Property at the time and place of sale fixed
by the Lessee in such notice of sale, either as a whole, or in a separate lots
or parcels or items and in such order as the Lessee may elect, at auction to the
highest bidder for cash in lawful money of the United States payable at the time
of sale; accordingly, it is acknowledged that A POWER OF SALE HAS BEEN GRANTED
IN THIS INSTRUMENT; A POWER OF SALE MAY ALLOW THE LESSEE TO TAKE THE PROPERTY
AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE
LESSOR UNDER THIS INSTRUMENT, and (ii) the Lessee, in lieu of or in addition to
exercising any power of sale hereinabove given, may proceed by a suit or suits
in equity or at law for the enforcement of any other appropriate legal or
equitable remedy. Lessee may postpone sale of all or any portion of the Property
by public announcement at such time and place of sale, and from time to time
thereafter may postpone such sale by public announcement at the time fixed by
the preceding postponement. The Lessee shall deliver to such purchaser its deed
conveying the property so sold, but without any covenant or warranty, express or
implied. The recitals in such deed of any matters or facts shall be conclusive
proof of the truthfulness thereof. Any Person, including the Lessee or Lessor,
may purchase at such sale. After deducting all costs, fees and expenses of the
Lessee, including cost of evidence of title in connection with sale, the Lessee
shall apply the proceeds of sale to payment of all
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<PAGE>
sums expended in enforcement of its right hereunder with accrued interest at the
amount allowed by law in effect at the date hereof and the remainder to the
Person or Persons legally entitled thereof. The following shall constitute a
Lessor default ("Lessor Default"): the Lessee shall have been required to
purchase all or any portion of Property pursuant to the Lease or have exercised
any of its purchase options in the Lease for all or any portion of the Property
in accordance with the terms thereof and shall have tendered in full all amounts
to be paid by the Lessee in connection therewith and complied with all other
requirements under the Lease in connection with such purchase and all of the
Lessor's right, title and interest in and to all or any portion of the Property
shall not have been transferred to the Lessee in accordance with the Lease, or
voluntary or involuntary bankruptcy proceedings with respect to the Lessor or
the Lender shall have been commenced or Lessor or Lender shall have become
insolvent, or a receiver over Lessor's or Lender's interest in the Property
shall have been appointed.
(c) The Lessee covenants and agrees that it will not assign, transfer,
mortgage, pledge, hypothecate, or encumber the Lien created in clause (a). Any
such attempted assignment, transfer, mortgage, pledge, hypothecation, or
encumbrance shall be null and void.
SECTION 6. Ratification. The terms and provisions of the Lease are
hereby ratified and confirmed and remain in full force and effect. In the event
of any conflict between the terms of the Lease and the terms of this Memorandum,
the terms of the Lease shall control.
SECTION 7. GOVERNING LAW. THE LEASE AND THIS MEMORANDUM 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 THEREOF.
SECTION 8. Counterpart Execution. This Memorandum 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 9. Future Advances; Revolving Credit. In the event a court of
competent jurisdiction rules that this instrument constitutes a mortgage, deed
of trust or other secured financing as is the intent of the parties pursuant to
Section 4 hereof, 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 Lessor, 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.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
-8-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Memorandum to be duly executed by an officer thereunto duly authorized as of the
date and year first above written.
ELECTRONICS FOR IMAGING, INC.,
as the Lessee
By:__________________________
Name:
Title:
FBTC LEASING CORP.,
as the Lessor
By:__________________________
Name:
Title:
LEASE SUPPLEMENT AND MEMORANDUM
OF LEASE AND DEED OF TRUST
<PAGE>
ALL-PURPOSE ACKNOWLEDGMENT
State of _________________________ )
)
County of ________________________ )
On _______________________ before me, _______________________________________,
Date Notary Public
personally appeared _________________________________________________________,
Name, Title of Officer
[ ] personally known to me - OR -
[ ] proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
Witness my hand and official seal.
-----------------------------------
Signature of Notary Public
CAPACITY CLAIMED BY SIGNER: SIGNER IS REPRESENTING:
NAME OF PERSON(S) OR ENTITY(IES)
[ ] INDIVIDUAL(S) ______________________________
[ ] CORPORATE OFFICER(S) ______________________________
------------------------------ ______________________________
TITLE
------------------------------
TITLE
[ ] PARTNER(S)
[ ] ATTORNEY-IN-FACT
[ ] TRUSTEE(S)
[ ] SUBSCRIBING WITNESS
[ ] GUARDIAN/CONSERVATOR
[ ] OTHER _______________________
______________________________
______________________________
- -------------------------------
ATTENTION NOTARY: Although the information requested below is optional, it could
prevent fraudulent attachment of this certificate to unauthorized document.
THIS CERTIFICATE
Title or Type of Document:
Lease Supplement No. 1 and Memorandum of Lease and Deed of Trust
Date of Document:
June __, 1997
MUST BE ATTACHED TO THE DOCUMENT
Signer(s) Other Than Named Above ___________________________
DESCRIBED AT RIGHT:
<PAGE>
ALL-PURPOSE ACKNOWLEDGMENT
State of _________________________ )
)
County of ________________________ )
On _______________________ before me, _______________________________________,
Date Notary Public
personally appeared _________________________________________________________,
Name, Title of Officer
[ ] personally known to me - OR -
[ ] proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
Witness my hand and official seal.
-----------------------------------
Signature of Notary Public
CAPACITY CLAIMED BY SIGNER: SIGNER IS REPRESENTING:
NAME OF PERSON(S) OR ENTITY(IES)
[ ] INDIVIDUAL(S) ______________________________
[ ] CORPORATE OFFICER(S) ______________________________
------------------------------ ______________________________
TITLE
------------------------------
TITLE
[ ] PARTNER(S)
[ ] ATTORNEY-IN-FACT
[ ] TRUSTEE(S)
[ ] SUBSCRIBING WITNESS
[ ] GUARDIAN/CONSERVATOR
[ ] OTHER _______________________
______________________________
______________________________
- -------------------------------
ATTENTION NOTARY: Although the information requested below is optional, it could
prevent fraudulent attachment of this certificate to unauthorized document.
THIS CERTIFICATE
Title or Type of Document:
Lease Supplement No. 1 and Memorandum of Lease and Deed of Trust
Date of Document:
June __, 1997
MUST BE ATTACHED TO THE DOCUMENT
Signer(s) Other Than Named Above ___________________________
DESCRIBED AT RIGHT:
<PAGE>
ALL-PURPOSE ACKNOWLEDGMENT
State of _________________________ )
)
County of ________________________ )
On _______________________ before me, _______________________________________,
Date Notary Public
personally appeared _________________________________________________________,
Name, Title of Officer
[ ] personally known to me - OR -
[ ] proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
Witness my hand and official seal.
-----------------------------------
Signature of Notary Public
CAPACITY CLAIMED BY SIGNER: SIGNER IS REPRESENTING:
NAME OF PERSON(S) OR ENTITY(IES)
[ ] INDIVIDUAL(S) ______________________________
[ ] CORPORATE OFFICER(S) ______________________________
------------------------------ ______________________________
TITLE
------------------------------
TITLE
[ ] PARTNER(S)
[ ] ATTORNEY-IN-FACT
[ ] TRUSTEE(S)
[ ] SUBSCRIBING WITNESS
[ ] GUARDIAN/CONSERVATOR
[ ] OTHER _______________________
______________________________
______________________________
- -------------------------------
ATTENTION NOTARY: Although the information requested below is optional, it could
prevent fraudulent attachment of this certificate to unauthorized document.
THIS CERTIFICATE
Title or Type of Document:
Lease Supplement No. 1 and Memorandum of Lease and Deed of Trust
Date of Document:
June __, 1997
MUST BE ATTACHED TO THE DOCUMENT
Signer(s) Other Than Named Above ___________________________
DESCRIBED AT RIGHT:
<PAGE>
SCHEDULE I
TO MEMORANDUM OF LEASE
Legal Description of Land
LEASE SUPPLEMENT AND MEMORANDUM
OF LEASE AND DEED OF TRUST
<PAGE>
SCHEDULE II
TO MEMORANDUM OF LEASE
Legal Description of Improvements
[All structures and buildings on the parcel described in
Schedule I]
LEASE SUPPLEMENT AND MEMORANDUM
OF LEASE AND DEED OF TRUST
EXHIBIT 11.1
<TABLE>
ELECTRONICS FOR IMAGING, INC.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (1)
(In thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ende Six Months Ended
June 30, June 30,
----------------- -----------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income for purposes of computing
net income per share $22,609 $13,901 $43,037 $26,498
======= ======= ======= =======
Weighted average common shares outstanding 51,818 50,548 51,729 50,328
Weighted common equivalent shares
from options (3) 3,916 4,278 4,008 4,156
------- ------- ------- -------
Weighted average common shares
and equivalents 55,734 54,826 55,737 54,484
======= ======= ======= =======
Net income per share $ 0.41 $ 0.25 $ 0.77 $ 0.49
======= ======= ======= =======
<FN>
(1) This Exhibit should be read in conjunction with "Summary of Significant
Accounting Policies - Net Income per Share" in Note 1 of Notes to
Consolidated Financial Statements, contained in the Company's 1996 Annual
Report to Stockholders.
(2) All per share data and shares used in computing net income per share have
been restated to reflect the Company's two-for-one stock split of
February 20, 1997.
(3) Computed using the treasury stock method. The difference between primary
net income per share and fully diluted net income per share is not
significant.
</FN>
</TABLE>
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ELECTRONICS FOR IMAGING, INC.
Date: August 11, 1997
By /s/ Dan Avida
--------------------------------------
Dan Avida
President and Chief Executive Officer
and Acting Principal Financial Officer
By /s/ Eric Saltzman
--------------------------------------
Eric Saltzman
Vice President, Strategic Relations
and Duly Authorized Officer
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed balance sheet, condensed statement of operations and condensed
statement of cash flows included in the Company's Form 10-Q for the three month
period ended March 31, 1997 and is qualified in its entirety by reference to
such financial statements and the notes thereto.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 93,707
<SECURITIES> 151,548
<RECEIVABLES> 57,703
<ALLOWANCES> 1,458
<INVENTORY> 14,582
<CURRENT-ASSETS> 350,233
<PP&E> 31,425
<DEPRECIATION> 17,966
<TOTAL-ASSETS> 365,151
<CURRENT-LIABILITIES> 70,315
<BONDS> 0
0
0
<COMMON> 518
<OTHER-SE> 294,317
<TOTAL-LIABILITY-AND-EQUITY> 365,151
<SALES> 100,633
<TOTAL-REVENUES> 100,633
<CGS> 45,407
<TOTAL-COSTS> 45,407
<OTHER-EXPENSES> 22,593
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 35,326
<INCOME-TAX> 12,717
<INCOME-CONTINUING> 22,609
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,609
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.41
</TABLE>
