-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PGqd2dIXQgSnToxT3Dq9eqmFdfvtXnID4+Q0FTKKqLgtUaa854IOi+GmmRUqfXi4 IhCZrTTTdRkJeiqfyuLVUg== 0000738076-97-000005.txt : 19971015 0000738076-97-000005.hdr.sgml : 19971015 ACCESSION NUMBER: 0000738076-97-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19970831 FILED AS OF DATE: 19971014 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: 3COM CORP CENTRAL INDEX KEY: 0000738076 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 942605794 STATE OF INCORPORATION: CA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-12867 FILM NUMBER: 97694717 BUSINESS ADDRESS: STREET 1: 5400 BAYFRONT PLZ CITY: SANTA CLARA STATE: CA ZIP: 95052 BUSINESS PHONE: 4087645000 10-Q 1 ________________________________________________________________ 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 August 31, 1997 Commission File No. 0-12867 or _ transition report pursuant to section 13 or 15(d) of the securities exchange act of 1934 For the transition period from to ____________ 3Com Corporation (Exact name of registrant as specified in its charter) Delaware 94-2605794 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5400 Bayfront Plaza 95052 Santa Clara, California (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code (408) 764-5000 Former name, former address and former fiscal year, if changed since last report: N/A Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ....XX.... No .......... As of August 31, 1997, 345,948,876 shares of the Registrant's Common Stock were outstanding. ________________________________________________________________ 3Com Corporation Table of Contents PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets August 31, 1997 and May 31, 1997 Consolidated Statements of Operations Quarters Ended August 31, 1997 and 1996 Consolidated Statements of Cash Flows Quarters Ended August 31, 1997 and 1996 Notes to Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K Signatures 3Com, CoreBuilder, EtherLink, SuperStack and U.S. Robotics are registered trademarks of 3Com Corporation. Total Control is a trademark of 3Com Corporation. PART I. FINANCIAL INFORMATION Item 1. Financial Statements 3Com Corporation Consolidated Balance Sheets (Dollars in thousands) (Unaudited) August 31, May 31, 1997 1997 ---------- ---------- ASSETS Current Assets: Cash and cash equivalents $ 517,657 $ 401,125 Temporary cash investments 490,830 538,706 Trade receivables 1,139,798 1,234,227 Inventories 410,715 402,356 Deferred income taxes 307,233 165,731 Other 160,709 94,419 ---------- ---------- Total current assets 3,026,942 2,836,564 Property and equipment-net 621,113 660,025 Deposits and other assets 55,683 112,644 ---------- ---------- Total $3,703,738 $3,609,233 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-term debt $ - $ 60,700 Accounts payable 295,407 345,304 Accrued and other liabilities 846,820 477,393 Income taxes payable 28,777 189,399 ---------- ---------- Total current liabilities 1,171,004 1,072,796 Long-term debt 151,795 162,515 Other long-term obligations 6,573 7,942 Deferred income taxes 66,659 25,858 Stockholders' Equity: Preferred stock, no par value, 10,000,000 shares authorized; none outstanding - - Common stock, $.01 par value, 990,000,000 shares authorized; shares outstanding: August 31, 1997: 345,948,876; May 31, 1997: 334,558,193 1,447,639 1,178,359 Unamortized restricted stock grants (4,793) (5,165) Retained earnings 861,286 1,168,941 Unrealized net gain on available-for-sale securities 2,404 2,320 Accumulated translation adjustments 1,171 (4,333) ---------- ---------- Total stockholders' equity 2,307,707 2,340,122 ---------- ---------- Total $3,703,738 $3,609,233 ========== ========== See notes to consolidated financial statements. 3Com Corporation Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) Quarters Ended August 31, ----------------- 1997 1996 ---- ---- Sales $1,600,862 $1,250,060 Cost of sales 832,808 658,204 ---------- ---------- Gross margin 768,054 591,856 Operating expenses: Sales and marketing 301,307 207,208 Research and development 142,117 99,765 General and administrative 62,589 47,642 Merger-related charges 426,000 - ---------- ---------- Total 932,013 354,615 ---------- ---------- Operating income (loss) (163,959) 237,241 Other income--net 2,961 2,973 ---------- ---------- Income (loss) before income taxes (160,998) 240,214 Income tax provision (benefit) (14,178) 88,250 ---------- ---------- Net income (loss) $ (146,820) $ 151,964 ========== ========== Net income (loss) per common and equivalent share: Primary $ (0.43) $ 0.43 Fully diluted $ (0.43) $ 0.43 Common and equivalent shares used in computing per share amounts: Primary 341,973 351,970 Fully diluted 341,973 352,386 See notes to consolidated financial statements. 3Com Corporation Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited) Quarters Ended August 31, ---------------- 1997 1996 ---- ---- Cash flows from operating activities: Net income (loss) $(146,820) $ 151,964 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 47,098 41,091 Deferred income taxes (100,625) (7,609) Adjustment to conform fiscal year of pooled entity - OnStream - 4,850 Adjustment to conform fiscal year of pooled entity - U.S. Robotics (140,216) 71,632 Adjustment to conform accounting policies - 2,906 Changes in assets and liabilities, net of effects of acquisitions: Trade receivables 94,429 (118,535) Inventories (45,668) (27,228) Other current assets (66,993) (11,770) Accounts payable (49,897) (36,961) Accrued and other liabilities 110,705 62,131 Income taxes payable (39,524) 71,308 Merger-related reserves 426,000 (1,036) --------- --------- Net cash provided by operating activities 88,489 202,743 --------- --------- Cash flows from investing activities: Purchase of property and equipment (80,131) (101,956) Purchase of temporary cash investments (102,973) (166,796) Proceeds from temporary cash investments 149,825 96,543 Other-net 989 (8,980) --------- --------- Net cash used for investing activities (32,290) (181,189) --------- --------- Cash flows from financing activities: Common stock issued under stock plans 127,482 12,566 Repayments of notes payable and capital lease obligations (60,762) (286) Repayments of long-term debt (10,720) - Net proceeds from issuance of debt - 316 Other-net 4,333 386 --------- --------- Net cash provided by financing activities 60,333 12,982 --------- --------- Increase in cash and cash equivalents 116,532 34,536 Cash and cash equivalents at beginning of period 401,125 233,573 --------- --------- Cash and cash equivalents at end of period $ 517,657 $ 268,109 ========= ========= Non-cash financing and investing activities: Tax benefit on stock option transactions $ 121,098 $ 33,036 Unrealized net gain (loss) on available-for-sale securities $ 84 $ (1,902) See notes to consolidated financial statements. 3Com Corporation Notes to Consolidated Financial Statements 1. Basis of Presentation On June 12, 1997, 3Com Corporation (the Company) completed the merger with U.S. Robotics, Inc. (U.S. Robotics), which was accounted for as a pooling-of- interests. All financial data of the Company, including the Company's previously issued financial statements for the periods presented in this Form 10-Q, have been restated to include the historical financial information of U.S. Robotics in accordance with generally accepted accounting principles and pursuant to Regulation S-X. The unaudited consolidated financial statements have been prepared by the Company and include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. In the opinion of management, these unaudited consolidated financial statements include all adjustments necessary for a fair presentation of the Company's financial position as of August 31, 1997, and the results of operations and cash flows for the quarters ended August 31, 1997 and 1996. On June 1, 1997, the Company adopted a 52-53 week fiscal year ending on the Sunday nearest to May 31, which for fiscal 1998 will be May 31, 1998. The Company does not expect this change to have a material impact on the Company's financial statements. The results of operations for the quarter ended August 31, 1997 may not necessarily be indicative of the results to be expected for the fiscal year ending May 31, 1998. These financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1997. 2. Inventories consisted of (in thousands): August 31, May 31, 1997 1997 ---- ---- Finished goods $ 261,917 $ 262,023 Work-in-process 27,679 35,462 Raw materials 121,119 104,871 ---------- ---------- Total $ 410,715 $ 402,356 ========== ========== 3. Net Income (Loss) Per Share Net income (loss) per common and equivalent share is computed based on the weighted average number of common shares and the dilutive effects of stock options outstanding during the period using the treasury stock method. Common equivalent shares were not included in the calculation of earnings per share as they were antidilutive for the quarter ended August 31, 1997. The effect of the assumed conversion of the 10.25% convertible subordinated notes was antidilutive for the periods presented. 4. Business Combinations On June 12, 1997 the Company merged with U.S. Robotics by issuing approximately 158 million shares of its common stock in exchange for all outstanding common stock of U.S. Robotics. The Company also assumed and exchanged all options to purchase U.S. Robotics' stock for options to purchase approximately 31 million shares of the Company's common stock. The transaction was accounted for as a pooling-of-interests. U.S. Robotics is the leading supplier of products and systems for accessing information across the wide area network, including modems and remote access products. All financial data of the Company have been restated to include the historical financial information of U.S. Robotics. The consolidated statement of income for the three months ended August 31, 1996 includes the U.S. Robotics statement of income for the three months ended June 30, 1996. The consolidated statement of income for the year ended May 31, 1997 includes the U.S. Robotics statement of income for the twelve months ended March 30, 1997. The consolidated statements of income for the fiscal years ended May 31, 1996 and 1995 include the U.S. Robotics statements of income for the fiscal years ended September 29, 1996 and October 1, 1995, respectively. This presentation has the effect of including U.S. Robotics' results of operations for the six month period ended September 29, 1996 in both the combined years ended May 31, 1997 and 1996, and reflects sales of $1,158.2 million and net income of $76.8 million, which has been reported as a decrease to the Company's fiscal 1997 retained earnings. The combined balance sheet as of May 31, 1997 includes the U.S. Robotics balance sheet as of March 30, 1997, and includes an adjustment to decrease retained earnings by $40.9 million for the cumulative effect of conforming the companies fixed asset capitalization policies. Results of operations for U.S. Robotics for the two months ending May 24, 1997 reflect sales of $15.2 million and net loss of $160.8 million, which has been reported as a decrease to the Company's fiscal 1998 retained earnings. Revenues for the two- month period were below historical revenue trends due primarily to the desire to reduce levels of channel inventory and conform sales return and allowance reserve philosophies with that of the heritage 3Com organization. The differences in such reserve methodologies were not material to the Company's financial statements. The combined results below reflect reclassifications to conform financial statement presentation and adjustments to conform the companies fixed asset capitalization policies. The companies have conformed other accounting practices and policies including revenue recognition. Differences in these practices in the past were deemed not to be material to the Company's financial statements and therefore are being conformed only on a prospective basis. The following information has been prepared for comparative purposes only and does not purport to be indicative of what would have occurred had this transaction not been effected on the date indicated above or of results which may occur in the future. Quarter Ended Years Ended August 31, May 31, ------------- ------------------------------- 1996 1997 1996 1995 ---------------------------------------------- (Unaudited. In thousands, except per share amounts) Sales: 3Com $ 710,140 $3,147,106 $2,327,101 $1,593,469 U.S. Robotics 546,785 2,493,791 1,977,512 889,347 Reclassifications to conform certain accounting policies (6,865) (36,751) (20,105) (3,056) ---------- ---------- ---------- ---------- Combined $1,250,060 $5,604,146 $4,284,508 $2,479,760 ========== ========== ========== ========== Net income: 3Com $ 91,572 $ 373,950 $ 177,854 $ 144,559 U.S. Robotics 63,298 237,258 170,021 65,951 Adjustments to conform certain accounting policies (2,906) (13,585) (7,259) (6,954) ---------- ---------- ---------- ---------- Combined $ 151,964 $ 597,623 $ 340,616 $ 203,556 ========== ========== ========== ========== Net income per share (on a fully diluted basis): 3Com $ 0.50 $ 2.01 $ 1.00 $ 0.84 U.S. Robotics (1) 0.37 1.41 1.02 0.43 Adjustments to conform certain accounting policies (0.01) (0.04) (0.02) (0.02) ---------- ---------- ---------- ---------- Combined $ 0.43 $ 1.69 $ 0.99 $ 0.63 ========== ========== ========== ========== (1) Adjusted for effect of exchange ratio of 1.75 shares of 3Com Common Stock for each share of U.S. Robotics common stock. As a result of the merger, the Company recorded charges of $426.0 million during the first quarter of fiscal 1998. These charges include approximately $364 million of integration expenses, $42 million of direct transaction costs (consisting primarily of investment banking and other professional fees) and $20 million of other merger charges. Integration expenses included: - - $121 million related to the write-off of inventory associated primarily with the elimination of duplicate wide area networking and PC Card products, including a provision for the return of discontinued products in the distribution channel; - - $92 million related to the write-off of fixed assets (including duplicate management information systems and other corporate assets), purchased technology and goodwill primarily associated with the elimination of duplicate wide area networking and PC card products; - - $81 million related to the closure and elimination of duplicate owned and leased facilities, primarily corporate headquarters and domestic and European sales offices; and - - $70 million for severance and outplacement costs specifically related to the merger. Actual termination benefits paid for approximately 300 employees terminated through August 31, 1997 (approximately 30 percent of the total planned severances) were approximately $17 million. Total expected cash expenditures relating to the merger-related charge are estimated to be approximately $193 million, of which $55 million was disbursed prior to August 31, 1997. The remaining $138 million is expected to be paid within the next twelve months, with the exception of certain lease-related cash requirements. 5. Litigation The Company is a party to lawsuits in the normal course of its business. The Company and its counsel believe that it has meritorious defenses in all lawsuits in which the Company or its subsidiaries is a defendant. The Company notes that (i) litigation in general and patent litigation in particular can be expensive and disruptive to normal business operations and (ii) the results of complex legal proceedings can be very difficult to predict with any certainty. On October 13, 1995, the Company acquired Chipcom, which had already been named as a defendant in the litigation described below. Five complaints were filed between May 30, 1995 and June 16, 1995 that alleged violations by the defendants of Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934, and sought unspecified damages. The cases were consolidated for pretrial purposes pursuant to an order entered by the Court on June 15, 1995. The consolidated action is entitled In re: Chipcom Securities Litigation, Civil Action No. 95-111114-DPW. A Consolidated Complaint was filed on September 13, 1995, and an Amended Consolidated Complaint was filed on November 30, 1995. The defendants' motion to dismiss the Amended Consolidated Complaint was granted without leave to amend on May 1, 1996. The dismissal covers all five cases. The plaintiffs appealed the order granting the dismissal. On October 1, 1996, the parties to these cases agreed upon what the Company considers to be favorable financial terms for settlement of all five cases, which amount the Company does not consider material to its operations, financial position, or liquidity. Pursuant to the settlement which was approved by the District Court on June 26, 1997, all claims of all persons which are related to the subject matter of the Consolidated Complaint were settled and released. On March 24, 1997, a putative shareholder class action lawsuit, entitled Hirsch v. 3Com Corporation, et al., Civil Action No. CV764977, was filed against the Company and certain of its officers and directors in the California Superior Court, Santa Clara County (the Superior Court). The complaint alleges, among other things, fraud, negligent misrepresentation and violations of the California securities laws, including that during the putative class period, sales of the Company's stock by officers and directors of 3Com and acquisitions made with the Company's stock occurred at inflated prices in light of undisclosed information. Specifically, the complaint alleges violations of Sections 25400 and 25500 of the California Corporations Code, Sections 1709 and 1710 of the California Civil Code, and Sections 17200 et seq. and 17500 et seq. of the California Business and Professions Code. The complaint, which covers a putative period of September 24, 1996 through February 10, 1997, does not specify the damages sought. On July 30, 1997, the Superior Court sustained in part and overruled in part the Company's demurrer to the complaint. As a result of such ruling, the Civil Code and Business and Professions Codes allegations have been stricken from the complaint. The Company is in the process of appealing the Superior Court's ruling with respect to the remaining Corporations Code allegations. Management believes that the action is not meritorious and intends to vigorously contest it. An adverse resolution of the action could have a material adverse effect on the Company's results of operations and financial condition in the quarter in which such adverse resolution occurs. U.S. Robotics and certain of its directors were named as defendants in eleven lawsuits relating to the merger between the Company and U.S. Robotics brought in the Delaware Chancery Court (In re: U.S. Robotics Corporation Shareholder's Litigation, Delaware Chancery Court Consolidated Civil Action No. 15580). The Company has been named as a defendant in nine of these actions. The lawsuits, which purport to be stockholder class actions brought on behalf of all U.S. Robotics stockholders, allege, inter alia, that the directors of U.S. Robotics have breached their fiduciary duties by approving the Merger Agreement, and that the Company aided and abetted this alleged breach of duty. An agreement in principle to settle this litigation has been reached with plaintiffs' counsel on what the Company considers to be favorable financial terms, which amount the Company does not consider to be material to its operations, financial position, or liquidity. Pursuant to the settlement which was approved by the Delaware Chancery Court on October 7, 1997, all claims of all persons which are related to the subject matter were settled and released. On February 13, 1997, Motorola, Inc. filed suit against U.S. Robotics in the United States District Court for the District of Massachusetts (Motorola, Inc. v. U.S. Robotics Corporation, et al., Civil Action No. 97- 10339RCL), claiming infringement of eight United States patents. The complaint alleges willful infringement and prays for unspecified damages and injunctive relief. In a separate statement announcing the filing of the lawsuit published on PRNewswire on the same date, Motorola alleged that the patents at issue cover "technologies essential to the International Telecommunications Union (ITU) V.34 modem standard." In the same statement, a Motorola officer is quoted as saying that Motorola is "committed" to making its technology incorporated in standards available on a "fair, reasonable and non- discriminatory basis." U.S. Robotics has filed an answer to Motorola's claims setting forth its defenses and asserting counterclaims which allege infringement of a U.S. Robotics patent, violation of antitrust laws, promissory estoppel and unfair competition. Although the Company believes it has meritorious defenses to Motorola's claims and intends to contest this lawsuit vigorously, an adverse outcome of such litigation could have a material adverse effect on the business, results of operations or financial condition of the Company in the quarter in which such adverse resolution occurs. On April 26, 1997, Xerox Corporation filed suit against U.S. Robotics in the United States District Court for the Western District of New York (Xerox Corporation v. U.S. Robotics Corporation and U.S. Robotics Access Corp., No. 97-CV-6182T), claiming infringement of one United States Patent. The complaint alleges willful infringement and prays for unspecified damages and injunctive relief. In a press release dated April 30, 1997, Xerox alleged that its patent, issued January 21, 1997, "covers the use and recognition of handwritten text using an alphabet system designed especially for reliable recognition in pen computers," and that U.S. Robotics' PalmPilot hand-held computer and "Graffiti" software infringe the Xerox patent. The Company believes it has meritorious defenses to Xerox's claims and intends to contest the lawsuit vigorously. An adverse resolution of the action could have a material adverse effect on the Company's results of operations and financial condition in the quarter in which such adverse resolution occurs. On April 21, 1997, U.S. Robotics and three of its customers, Best Buy Co., Inc., Egghead, Inc. and Fry's Electronics, Inc., were sued in a purported consumer class action filed in Superior Court in Marin County, California (Bendall et al v. U.S. Robotics Corporation et al, No. 170441). The named plaintiffs are residents of the states of Alabama, California, Tennessee and Washington and they purport to represent various classes of persons who have purchased or otherwise acquired U.S. Robotics' new x2 products and products upgradeable to x2. Damages, including punitive damages, and other relief are sought under the California Consumer Legal Remedies Act and the California Song-Beverly Consumer Warranty Act, and under various common law theories, including breach of contract, fraud and deceit, negligent misrepresentation, breach of implied warranty and unjust enrichment. The Company believes it has meritorious defenses to this lawsuit and intends to contest the lawsuit vigorously. An adverse resolution of the action could have a material adverse effect on the Company's results of operations and financial condition in the quarter in which such adverse resolution occurs. Another lawsuit, purporting to be "For the interests of the General Public" was filed against U.S. Robotics in the same court on March 13, 1997 (Levy v. U.S. Robotics Corporation, No. 170968). This action alleges that U.S. Robotics' promotion and advertising of x2 products constituted unfair competition and deceptive, untrue and misleading advertising in violation of the California Business and Professional Code, and seeks injunctive relief, including "restitution of all revenues" and an award of attorney fees. Additionally, a purported public interest plaintiff sued U.S. Robotics on January 29, 1997 in California Superior Court in San Francisco (Intervention Inc. v. U.S. Robotics Corporation, Case No. 984352) under the same statute, alleging various misrepresentations in connection with the promotion and advertising of U.S. Robotics' x2 products, and seeking injunctive and other relief, including attorney's fees. The Company believes it has meritorious defenses to this lawsuit and intends to contest the lawsuit vigorously. An adverse resolution of the action could have a material adverse effect on the Company's results of operations and financial condition in the quarter in which such adverse resolution occurs. 6. Effects of Recent Accounting Pronouncements In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings per Share." This Statement establishes and simplifies standards for computing and presenting earnings per share. SFAS 128 will be effective for the Company's third quarter of fiscal 1998, and requires restatement of all previously reported earnings per share data that are presented. Early adoption of this Statement is not permitted. SFAS 128 replaces primary and fully diluted earnings per share with basic and diluted earnings per share. The Company expects that basic earnings per share amounts will be accretive compared to the Company's primary earnings per share amounts, and diluted earnings per share amounts will not be materially different from the Company's fully diluted earnings per share amounts. In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income." This statement establishes standards for the reporting and display of comprehensive income and its components. SFAS 130 will be effective for the Company's fiscal year 1999 and requires reclassification of financial statements for earlier periods for comparative purposes. zIn June 1997, the FASB issued SFAS 131, "Disclosures About Segments of an Enterprise and Related Information." This statement requires that financial information be reported on the basis used internally for evaluating segment performance and deciding how to allocate resources to segments. SFAS 131 is effective for the Company's fiscal year 1999 and requires restatement of all previously reported information for comparative purposes. 3Com Corporation Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Business Combinations On June 12, 1997, 3Com Corporation (the Company) merged with U.S. Robotics Corporation (U.S. Robotics) the leading supplier of products and systems for accessing information across the wide area network, including modems and remote access products. The Company issued approximately 158 million shares of its common stock in exchange for all outstanding common stock of U.S. Robotics and assumed and exchanged all options to purchase U.S. Robotics' stock for options to purchase approximately 31 million shares of the Company's common stock. The transaction was accounted for as a pooling- of-interests. See Note 4 of Notes to Consolidated Financial Statements for additional information on the above business combination. Results of Operations The following table sets forth for the fiscal quarters indicated, the percentage of total sales represented by the line items reflected in the Company's consolidated statements of operations: Quarters ended August 31, ------------------------- 1997 1996 ---- ---- Sales 100.0% 100.0% Cost of sales 52.0 52.7 ----- ----- Gross margin 48.0 47.3 Operating expenses: Sales and marketing 18.8 16.5 Research and development 8.9 8.0 General and administrative 3.9 3.8 Merger-related charges 26.6 - ----- ----- Total operating expenses 58.2 28.3 ----- ----- Operating income (loss) (10.2) 19.0 Other income - net 0.1 0.2 ----- ----- Income (loss) before income taxes (10.1) 19.2 Income tax provision (benefit) (0.9) 7.0 ----- ----- Net income (loss) (9.2)% 12.2% ----- ----- Excluding merger-related charges: Total operating expenses 31.6% 28.3% Operating income 16.4 19.0 Net income 10.8 12.2 Quarters Ended August 31, 1997 and 1996 Sales in the first quarter of fiscal 1998 totaled $1.6 billion, an increase of $350.8 million or 28 percent from the corresponding quarter a year ago. The Company believes that the year-over-year increase in first quarter sales is due to several factors, including growth in the networking market as the Internet, corporate Intranets, client server applications and remote access services stimulate customers to migrate from shared to switched media and to larger bandwidth and higher speed technologies, such as Fast Ethernet, ATM and Gigabit Ethernet, to support data, voice and video multimedia traffic. The Company also believes that the strength of the Company's product offerings at the edge of the network, including modems, network interface cards (NICs), workgroup switches and hubs, the continuous expansion of 3Com's product offerings, and the ability to deliver complete data networking solutions for different connectivity environments contributed to the increase in first quarter sales over the same period a year ago. Sales of client access products (modems and NICs) in the first quarter of fiscal 1998 increased 23 percent from the same quarter one year ago, and represented 55 percent of total sales, compared to 58 percent in the first quarter of fiscal 1997. The year-over-year increase in sales of client access products represented a significant increase in unit volume, led primarily by the Fast EtherLink (registered trademark) PCI adapters and Fast EtherLink PC Cards, and an increased mix of the recently introduced U.S. Robotics (registered trademark) brand 56 Kbps modem with x2 technology. This increase was partially offset by a decline in average selling prices of certain Fast EtherLink products and a decline in sales of 10 Mbps Ethernet NICs as a result of the accelerated transition from 10 Mbps Ethernet to Fast Ethernet adapters. Sales of network systems products (i.e. switches, internetworking, remote access and hubs) in the first quarter of fiscal 1998 increased 34 percent from the same quarter one year ago, and represented 45 percent of total sales, compared to 42 percent in the year ago quarter. The year-over-year increase in network systems sales was led primarily by the increase in unit volume of Total Control (trademark) remote access concentrator, the SuperStack (registered trademark) II workgroup switching family, the CoreBuilder (registered trademark) 7000 ATM High-Function switching family, and the CoreBuilder 5000 enterprise switching family, partially offset by the year-over-year declines in average selling prices for remote access and workgroup switching products. The Company experienced a significant increase in unit volume in workgroup switching products and Fast Ethernet stackable hubs, partially offset by a decline in average selling prices resulting from increased competition and pricing pressures. International sales for the first quarter of fiscal 1998 comprised 45 percent of total sales compared to 38 percent in the same period a year ago. International sales increased 49 percent in all major geographic regions, with especially strong growth in the Asia Pacific and European regions. The Company believes that the growth in international sales is due primarily to the Company's continued expansion of operations and sales force internationally. The Company's operations were not significantly impacted by fluctuations in foreign currency exchange rates in the first quarters of fiscal 1998 and 1997. Sales growth in the United States for the first quarter of fiscal 1998 was 15 percent when compared to the first quarter of fiscal 1997. Gross margin as a percentage of sales was 48.0 percent in the first quarter of fiscal 1998, compared to 47.3 percent for the first quarter of fiscal 1997. The corresponding improvement in gross margin in the first quarter of fiscal 1998 primarily reflects an increased mix of higher margin products, such as the U.S. Robotics brand 56 Kbps modem with x2 technology, Total Control remote access concentrators and enterprise switching products. Factors causing the increase in gross margin were partially offset by a higher mix of certain lower margin adapter products and workgroup switching products, for which average selling prices declined during the period due to competitive pricing pressures. Total operating expenses in the first quarter of fiscal 1998 were $932.0 million or 58.2 percent of sales, compared to $354.6 million or 28.3 percent of sales in first quarter of fiscal 1997. Excluding the pre-tax merger-related charge of $426.0 million related to the merger with U.S. Robotics (see Note 4 of Notes to Consolidated Financial Statements), total operating expenses for the first quarter of fiscal 1998 were $506.0 million, or 31.6 percent of sales. Sales and marketing expenses in the first quarter of fiscal 1998 increased $94.1 million or 45 percent from the first quarter of fiscal 1997. Sales and marketing expenses as a percentage of sales increased to 18.8 percent of sales in the first quarter of fiscal 1998, from 16.5 percent in the corresponding fiscal 1997 period. The increase in such expenses reflected increased costs associated with marketing promotions and customer support programs and an increase in field sales and marketing personnel. Research and development expenses in the first quarter of fiscal 1998 increased $42.4 million or 42 percent from the year-ago period. Research and development expenses increased to 8.9 percent in the first quarter of fiscal 1998, compared to 8.0 percent in first quarter of fiscal 1997. The increase in research and development expenses was primarily attributable to the cost of developing 3Com's new products, primarily switching, network management and remote access, and the Company's expansion into new technologies and markets. The Company believes the timely introduction of new technologies and products is crucial to its success, and plans to continue to make acquisitions or strategic investments to accelerate time to market where appropriate. General and administrative expenses in the first quarter of fiscal 1998 increased $14.9 million or 31 percent from the same period a year ago. General and administrative expenses increased to 3.9 percent in the first quarter of fiscal 1998, compared to 3.8 percent in the first quarter of fiscal 1997. The increase in general and administrative expenses primarily reflected an expansion of the Company's infrastructure and duplicate levels of corporate administration as a result of the merger with U.S. Robotics. Other income (net) remained flat at approximately $3.0 million in the first quarters of fiscal 1998 and 1997. Interest income increased primarily due to larger cash and investment balances, but was offset by losses on foreign exchange translations. The Company's effective income tax rate on the pre-tax loss of $161.0 million was a benefit of 8.8 percent in the first quarter of fiscal 1998 compared to a charge of approximately 36.7 percent in the first quarter of fiscal 1997. Excluding the pre-tax merger-related charge associated with U.S. Robotics, which was not fully deductible, the pro forma income tax rate was 35.0 percent. Net loss for the first quarter of fiscal 1998 was $146.8 million, or $0.43 per share, compared to net income of $152.0 million, or $0.43 per share, for the first quarter of fiscal 1997. Excluding the merger-related charge associated U.S. Robotics, net income was $172.2 million, or $0.48 per share for the first quarter of fiscal 1998. Business Environment and Risk Factors This report contains certain forward looking statements, including statements regarding future trends in sales, gross margin, expense and liquidity levels. Actual results could vary materially based upon a number of factors, including but not limited to those set forth below. The Company's future operating results may be affected by various trends and factors which the Company must successfully manage in order to achieve favorable operating results. In addition, there are trends and factors beyond the Company's control which affect its operations. In accordance with the provisions of the Private Securities Litigation Reform Act of 1995, the cautionary statements set forth below identify important factors that could affect future results or cause actual results to differ materially from those in any forward-looking statements which may be contained in this report. Such trends and factors include, but are not limited to, the Company's successful introduction of new products, adverse changes in general economic conditions or conditions in the specific markets for the Company's products, governmental regulation or intervention affecting communications or data networking, fluctuations in foreign exchange rates, and other factors, including those listed below. The Company participates in a highly volatile and rapidly growing industry which is characterized by vigorous competition for market share and rapid technological development carried out amidst uncertainty over adoption of industry standards and protection of proprietary intellectual property rights. This has in the past resulted and could in the future result in aggressive pricing practices and increased competition, both from start-up companies and from well-capitalized computer systems and communications companies. The Company's ability to compete in this environment depends upon a number of competitive and market factors, and is subject to the risks set forth in this report and other factors. The market for the Company's products is intensely competitive and characterized by rapidly changing technology. The Company's success depends, in substantial part, on the timely and successful introduction of new products. An unexpected change in one or more of the technologies affecting data networking, or in market demand for products based on a particular technology, could lead to a slowdown in sales of certain products, and could have a material adverse effect on the Company's operating results if the Company does not respond timely and effectively to such changes. The Company is engaged in research and development activities in certain emerging LAN and WAN high-speed technologies, such as ATM, ISDN, DSL, Fast Ethernet, Gigabit Ethernet and data-over- cable. As the industry standardizes on high-speed technologies, there can be no assurance that the Company will be able to respond promptly and cost-effectively to compete in the marketplace. In addition, if the PC industry migrates toward standardizing the integration of network interface capabilities on the PC motherboard, and if the Company does not manage its business to cost-effectively transition toward this technology, it could have an adverse impact on the Company. The Company recently introduced x2 technology (pulse code modulation technology permitting downloading of data over regular analog telephone lines at speeds up to 56 Kbps). Although the Company was the first to begin shipping in commercial volumes in March 1997, the Company has experienced vigorous competition from many of the significant modem and remote access equipment manufacturers, most of which have begun shipment of, or announced their intentions to bring products featuring the same basic 56 Kbps technology and capabilities to market in the coming weeks and months. The Company's success depends, in substantial part, on the adoption of industry standards and on the timely and successful introduction of upgrades of this product to comply with emerging industry standards and on the Company's ability to address competing technological and product developments carried out by others. Delays in adoption of industry standards or adoption of standards not fully compatible with x2 technology could adversely affect the Company's sales of products incorporating the x2 technology. Although annual growth rates for the networking infrastructure industry have recently been in the 30 to 50 percent range, and annual growth rates for the PC industry have recently been in the high teens, there can be no assurance that these industry growth rates will continue at the same level. As both industries affect the Company's business, a slowdown in either of these industries could adversely affect the financial results of Company. There can be no assurance that the Company's results in any particular quarter will fall within that range. The Company's customers historically request fulfillment of orders in a short period of time, resulting in a minimal backlog. Quarterly sales and results of operations generally depend on the volume and timing of orders, and the ability to fulfill them within the quarter. As a result, the lack of backlog provides limited visibility to the Company's future sales trends. Should incoming orders rates decline, the Company's financial results would be adversely affected in such period. In addition, if the Company is not successful in meeting its linearity objectives, sales during the quarter may become back-end loaded which may expose the Company to potential risk due to unforeseen circumstances, as well as incremental costs caused by temporary fluctuations in business operations. The Company sells its products through a large and diverse set of direct and indirect (third party) distribution channels, and the Company considers its broad distribution capabilities to be a competitive asset. Management of these distribution channels requires the Company to work with its channel partners to monitor inventories of the Company's products held by channel partners and maintain these inventories at levels which are appropriate to the level of sales anticipated by each channel partner. Visibility as to the total levels of inventory held by channel partners is limited as information from channel partners may not be complete or accurate. However, based on the limited data available, the Company believes that channel inventory levels are at or above the high range of where the Company would like to operate. If the Company is not successful in working with its channel partners to monitor and reduce channel inventories to appropriate levels on an ongoing basis, future results may be affected. The non-linearity of sales throughout the quarter, while improved from the restated quarter ended May 31, 1997, subjects the Company to business risks due to unexpected disruptions in functions including but not limited to manufacturing, order management, information systems and shipping, and could have an adverse affect on the Company's results of operations. The Company operates in an industry in which the ability to compete is dependent on the development or acquisition of proprietary technology, which must be protected both to preserve the benefits of exclusive use of the Company's own technology, and enable the Company to license technology from other parties on acceptable terms. The Company attempts to protect its intellectual property rights through a combination of patents, copyrights, trademarks and trade secret laws. There can be no assurance that the steps taken by the Company will be sufficient to prevent misappropriation of intellectual properties or that competitors will not independently develop technologies that are equivalent or superior to the technologies of the Company. The Company must, from time to time, and may in the future, negotiate licenses with third parties with respect to third-party proprietary technologies that are required for implementation of certain networking and communication protocols and standards. In most instances, the owners of intellectual property rights covering technologies required for official standards have formally undertaken to license such rights on fair, reasonable and non-discriminatory terms. However, there can be no assurance in this regard, and there is still the potential for disputes and litigation even where a third party has undertaken to make licenses generally available. Some key components of the Company's products are currently available only from single sources. There can be no assurance that in the future the Company's suppliers will be able to meet the Company's demand for components in a timely and cost-effective manner. The Company's operating results and customer relationships could be adversely affected by either an increase in prices for, or an interruption or reduction in supply of, any key components. The Company distributes a significant portion of its products through third party distributors and resellers. Due to consolidation in the distribution and reseller channels and the Company's increased volume of sales into these channels, the Company has experienced an increased concentration of credit risk. While the Company continually monitors and manages this risk, financial difficulties on the part of one or more of the Company's resellers may have a material adverse effect on the Company. Likewise, the Company's expansion into certain emerging geographic markets, characterized by economic and political instability and currency fluctuations, may subject the Company's resellers to financial difficulties which may have an adverse impact on the Company. The Company will continue to invest in expanding its sales, marketing, service, logistics and manufacturing operations worldwide. The Company's sales and earnings may be adversely affected unless the Company can successfully assimilate and train new employees in a timely manner. The Company may also be adversely affected if it cannot successfully expand its sales and distribution capabilities, in particular, the new manufacturing and distribution facility in the Asia Pacific region, in a timely manner. Although substantially all of the Company's historical sales have been denominated in U.S. dollars, the Company does have operations in other geographic markets and occasionally transacts business in other currencies. Should the international environment change such that the Company must expand its exposure to foreign currencies, despite the fact that the Company does attempt to mitigate this risk by hedging foreign currency transactions, a significant fluctuation in foreign currency could have an adverse impact on the Company. Recruiting and retaining skilled personnel, especially in certain locations in which the Company operates, is highly competitive. Retention of key employees following an acquisition or merger is typically challenging and the Company's success in retaining such employees or effectively recruiting new employees may impact future operations. See discussion of the U.S. Robotics transaction below. Unless the Company can successfully recruit and retain such personnel, the Company's ability to achieve continued growth in sales and earnings may be adversely affected. Acquisitions of complementary businesses and technologies, including technologies and products under development, are an active part of the Company's overall business strategy. Certain of the Company's major competitors have also been engaged in merger and acquisition transactions. Such consolidations by competitors are creating entities with increased market share, customer base, technology and marketing expertise, sales force size, or proprietary technology in segments in which the Company competes. These developments may adversely affect the Company's ability to compete in such segments. On June 12, 1997, the Company merged with U.S. Robotics, the largest acquisition in the history of the networking industry (see Note 4 of Notes to Consolidated Financial Statements). Large acquisitions are challenging, in general, and there can be no assurance that products, technologies, distribution channels, customer support operations, management information systems, key personnel and businesses of U.S. Robotics or other acquired companies will be effectively assimilated into the Company's business or product offerings, or that such integration will not adversely affect the Company's business, financial condition or results of operations. The difficulties of such integration may be increased by the size and number of future acquisitions and the requirements of coordinating geographically separated organizations, such as the U.S. Robotics merger. The integration of the companies will require the dedication of management resources which may temporarily distract attention from the day-to-day business of the combined company. The inability of management to successfully integrate the operations of the two companies in a timely manner could have a material adverse effect on the business, results of operations, and financial condition of the Company, including, without limitation, product development cycles and marketing efforts. In addition, there can be no assurance that any acquired products, technologies or businesses will contribute at anticipated levels to the Company's sales or earnings, or that the sales, earnings and technologies under development from acquired businesses will not be adversely affected by the integration process or other general factors. If the Company is not successful in the integration of such acquisitions, there could be an adverse impact on the financial results and financial condition of the Company. For a detailed discussion of these and other risks related to the U.S. Robotics merger, see the Joint Proxy Statement/Prospectus dated May 8, 1997 at pages 21 through 26. The high-growth nature of the computer networking industry, coupled with critical time-to-market factors, has caused increased competition and consolidation. As a result, there has been a significant increase in the cost of acquiring computer networking companies. Future acquisitions are therefore more likely to result in costs that are material to the Company's operations. There can be no assurance that the Company will continue to be able to identify and consummate suitable acquisition transactions in the future. However, should the Company consummate acquisitions in the future, the impact may result in increased dilution of the Company's earnings. The Company's business is characterized by the continuous introduction of new products and the management of the transition of those products from prior generations of technology or product platforms. In each product transition cycle, the Company faces the challenge of managing the inventory of its older products, including materials, work-in- process, and products held by resellers. If the Company is not successful in managing these transitions, there could be an adverse impact on the financial results of the Company. The Company's products are covered by product warranties and the Company may be subject to contractual commitments concerning product features or performance. If unexpected circumstances arise such that the product does not perform as intended and the Company is not successful in resolving product quality or performance issues, there could be an adverse impact on sales and earnings. The market price of the Company's common stock has been, and may continue to be, extremely volatile. Factors such as new product, pricing or acquisition announcements by the Company or its competitors, quarterly fluctuations in the Company's operating results, challenges associated with integration of businesses and general conditions in the data networking market, such as a decline in industry growth rates, may have a significant impact on the market price of the Company's common stock. These conditions, as well as factors which generally affect the market for stocks of high technology companies, could cause the price of the Company's stock to fluctuate substantially over short periods. The Company is in the process of transitioning its manufacturing requirements planning (MRP), accounts payable, purchasing and intercompany accounting systems to a new set of applications which operate on a client server based platform. In the second quarter of fiscal 1998, the Company plans to transition to the first installation at several manufacturing sites. Further development of the client server system will be required to assure production stability of the new applications systems. As a result of the transition to the new client server platform, the Company may experience processing or financial system disruptions, which may have an adverse effect on the Company. Notwithstanding the Company's increased geographical diversification, the Company's corporate headquarters and a large portion of its research and development activities and other critical business operations are located in California, near major earthquake faults. The Company's business, financial condition and operating results could be materially adversely affected in the event of a major earthquake. Because of the foregoing factors, as well as other factors affecting the Company's operating results, past trends and performance should not be presumed by investors to be an accurate indicator of future results or trends. Liquidity and Capital Resources Cash, cash equivalents and temporary cash investments at August 31, 1997 were $1.0 billion, increasing $68.7 million from May 31, 1997. For the three months ended August 31, 1997, net cash generated from operating activities was $88.5 million. Trade receivables at August 31, 1997 decreased $94.4 million to $1.1 billion from May 31, 1997. Days sales outstanding in receivables decreased to 64 days at August 31, 1997, compared to 74 days at May 31, 1997 primarily due to the extended collection period for the heritage U.S. Robotics organization. Inventory levels at August 31, 1997 increased $8.4 million from the prior fiscal year-end to $410.7 million. Inventory turnover increased to 8.2 turns at August 31, 1997, compared to 7.5 turns at May 31, 1997. During the three months ended August 31, 1997, the Company made $80.1 million in capital expenditures. Major capital expenditures included upgrades and expansion of the Company's facilities in Santa Clara, California and the continuing development of the Company's worldwide information systems. As of August 31, 1997, the Company had outstanding approximately $140 million in capital expenditure commitments primarily associated with the construction and expansion of office and manufacturing space in Singapore, the U.K. and Ireland. During the first quarter of fiscal 1998, the Company received cash of $127.5 million from the sale of its common stock to employees through its employee stock purchase and option plans. During the first quarter of fiscal 1998, the Company signed a lease, which replaces a previous land lease, for 300,000 square feet of office and research and development space and a data center to be built on land adjacent to the Company's headquarters site. The lease expires in August 2002, with an option to extend the lease term for two successive periods of five years each. The Company has an option to purchase the property for $83.6 million, or at the end of the lease arrange for the sale of the property to a third party with the Company retaining an obligation to the owner for the difference between the sale price and $83.6 million, subject to certain provisions of the lease. The Company began construction of the buildings in July 1997, and anticipates that it will occupy and begin lease payments in the second quarter of fiscal 1999. During the first quarter of fiscal 1998, the Company signed a lease, which replaces a previous land lease, for 525,000 square feet of office, research and development and manufacturing space to be built on land in Marlborough, Massachusetts. The lease expires in August 2002, with an option to extend the lease term for two successive periods of five years each. The Company has an option to purchase the property for $86.0 million, or at the end of the lease arrange for the sale of the property to a third party with the Company retaining an obligation to the owner for the difference between the sale price and $86.0 million, subject to certain provisions of the lease. The Company began construction of the buildings in the first quarter of fiscal 1998, and anticipates that it will occupy and begin lease payments in the third quarter of fiscal 1999. During the first quarter of fiscal 1998, the Company signed a lease for an existing 400,000 square foot building and for 100,000 square feet to be built on adjacent land in Rolling Meadows, Illinois. The new and renovated facility will be used for research and development and office space. The lease expires in September 2002, with an option to extend the lease term for two successive periods of five years each. The Company has an option to purchase the property for $95.0 million, or at the end of the lease arrange for the sale of the property to a third party with the Company retaining an obligation to the owner for the difference between the sale price and $95.0 million, subject to certain provisions of the lease. The Company expects to begin renovation and construction of the buildings in the second quarter of fiscal 1998, and anticipates that it will occupy and begin lease payments in the first quarter of fiscal 1999. The three aforementioned leases require the Company to maintain specified financial covenants, all of which the Company was in compliance with as of August 31, 1997. The Company has a $100 million revolving bank credit agreement which expires December 20, 1999. Payment of cash dividends are permitted under the credit agreement, subject to certain limitations based on net income levels of the Company. The Company has not paid and does not anticipate it will pay cash dividends on its common stock. The credit agreement requires the Company to maintain specified financial covenants. As of August 31, 1997, there were no outstanding borrowings under the credit agreement and the Company was in compliance with all required covenants. During the quarter ended August 31, 1997, the Company retired certain debt held by the heritage U.S. Robotics organization, which included approximately $170 million of borrowings that occurred during the April and May time period, which was not reflected in the restated May 31, 1997 balance sheet. See Note 4 to the Consolidated Financial Statements for further detail. In November 1997, the $110 million aggregate principal amount of convertible subordinated notes become redeemable at the option of the Company at an initial redemption price of 102.929% of the principal amount. The notes are convertible at the option of the note holders into the Company's common stock at an initial conversion price of $34.563 per share. The Company has reserved 3,182,640 shares of common stock for the conversion of these notes. The notes mature in 2001, and interest is payable semi-annually at 10.25 percent per annum. The Company is evaluating the opportunities for redemption of these notes. During the quarter ended August 31, 1997, the Company completed the merger transaction with U.S. Robotics. As a result, the Company recorded merger-related charges of $426.0 million. Total expected cash expenditures relating to the merger-related charges are approximately $193 million, of which $55 million was disbursed prior to August 31, 1997. The remaining $138 million is expected to be paid from existing cash balances within the next twelve months, with the exception of lease-related cash requirements (see Note 4 of Notes to Consolidated Financial Statements). Based on current plans and business conditions, the Company believes that its existing cash and equivalents, temporary cash investments, cash generated from operations and the available revolving credit agreement will be sufficient to satisfy anticipated operating cash requirements for at least the next twelve months. Effects of Recent Accounting Pronouncements In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings per Share." This Statement establishes and simplifies standards for computing and presenting earnings per share. SFAS 128 will be effective for the Company's third quarter of fiscal 1998, and requires restatement of all previously reported earnings per share data that are presented. Early adoption of this Statement is not permitted. SFAS 128 replaces primary and fully diluted earnings per share with basic and diluted earnings per share. The Company expects that basic earnings per share amounts will be accretive compared to the Company's primary earnings per share amounts, and diluted earnings per share amounts will not be materially different from the Company's fully diluted earnings per share amounts. In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income." This statement establishes standards for the reporting and display of comprehensive income and its components. SFAS 130 will be effective for the Company's fiscal year 1999 and requires reclassification of financial statements for earlier periods for comparative purposes. In June 1997, the FASB issued SFAS 131, "Disclosures About Segments of an Enterprise and Related Information." This statement requires that financial information be reported on the basis used internally for evaluating segment performance and deciding how to allocate resources to segments. SFAS 131 is effective for the Company's fiscal year 1999 and requires restatement of all previously reported information for comparative purposes. PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is a party to lawsuits in the normal course of its business. The Company and its counsel believe that it has meritorious defenses in all lawsuits in which the Company or its subsidiaries is a defendant. The Company notes that (i) litigation in general and patent litigation in particular can be expensive and disruptive to normal business operations and (ii) the results of complex legal proceedings can be very difficult to predict with any certainty. On October 13, 1995, the Company acquired Chipcom, which had already been named as a defendant in the litigation described below. Five complaints were filed between May 30, 1995 and June 16, 1995 that alleged violations by the defendants of Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934, and sought unspecified damages. The cases were consolidated for pretrial purposes pursuant to an order entered by the Court on June 15, 1995. The consolidated action is entitled In re: Chipcom Securities Litigation, Civil Action No. 95-111114-DPW. A Consolidated Complaint was filed on September 13, 1995, and an Amended Consolidated Complaint was filed on November 30, 1995. The defendants' motion to dismiss the Amended Consolidated Complaint was granted without leave to amend on May 1, 1996. The dismissal covers all five cases. The plaintiffs appealed the order granting the dismissal. On October 1, 1996, the parties to these cases agreed upon what the Company considers to be favorable financial terms for settlement of all five cases, which amount the Company does not consider material to its operations, financial position, or liquidity. Pursuant to the settlement which was approved by the District Court on June 26, 1997, all claims of all persons which are related to the subject matter of the Consolidated Complaint were settled and released. On March 24, 1997, a putative shareholder class action lawsuit, entitled Hirsch v. 3Com Corporation, et al., Civil Action No. CV764977, was filed against the Company and certain of its officers and directors in the California Superior Court, Santa Clara County (the Superior Court). The complaint alleges, among other things, fraud, negligent misrepresentation and violations of the California securities laws, including that during the putative class period, sales of the Company's stock by officers and directors of 3Com and acquisitions made with the Company's stock occurred at inflated prices in light of undisclosed information. Specifically, the complaint alleges violations of Sections 25400 and 25500 of the California Corporations Code, Sections 1709 and 1710 of the California Civil Code, and Sections 17200 et seq. and 17500 et seq. of the California Business and Professions Code. The complaint, which covers a putative period of September 24, 1996 through February 10, 1997, does not specify the damages sought. On July 30, 1997, the Superior Court sustained in part and overruled in part the Company's demurrer to the complaint. As a result of such ruling, the Civil Code and Business and Professions Codes allegations have been stricken from the complaint. The Company is in the process of appealing the Superior Court's ruling with respect to the remaining Corporations Code allegations. Management believes that the action is not meritorious and intends to vigorously contest it. An adverse resolution of the action could have a material adverse effect on the Company's results of operations and financial condition in the quarter in which such adverse resolution occurs. U.S. Robotics and certain of its directors were named as defendants in eleven lawsuits relating to the merger between the Company and U.S. Robotics brought in the Delaware Chancery Court (In re: U.S. Robotics Corporation Shareholder's Litigation, Delaware Chancery Court Consolidated Civil Action No. 15580). The Company has been named as a defendant in nine of these actions. The lawsuits, which purport to be stockholder class actions brought on behalf of all U.S. Robotics stockholders, allege, inter alia, that the directors of U.S. Robotics have breached their fiduciary duties by approving the Merger Agreement, and that the Company aided and abetted this alleged breach of duty. An agreement in principle to settle this litigation has been reached with plaintiffs' counsel on what the Company considers to be favorable financial terms, which amount the Company does not consider to be material to its operations, financial position, or liquidity. This settlement is not yet final and will not be final until approved by the Court after a hearing. Pursuant to the settlement which was approved by the Delaware Chancery Court on October 7, 1997, all claims of all persons which are related to the subject matter were settled and released. On February 13, 1997, Motorola, Inc. filed suit against U.S. Robotics in the United States District Court for the District of Massachusetts (Motorola, Inc. v. U.S. Robotics Corporation, et al., Civil Action No. 97-10339RCL), claiming infringement of eight United States patents. The complaint alleges willful infringement and prays for unspecified damages and injunctive relief. In a separate statement announcing the filing of the lawsuit published on PRNewswire on the same date, Motorola alleged that the patents at issue cover "technologies essential to the International Telecommunications Union (ITU) V.34 modem standard." In the same statement, a Motorola officer is quoted as saying that Motorola is "committed" to making its technology incorporated in standards available on a "fair, reasonable and non- discriminatory basis." U.S. Robotics has filed an answer to Motorola's claims setting forth its defenses and asserting counterclaims which allege infringement of a U.S. Robotics patent, violation of antitrust laws, promissory estoppel and unfair competition. Although the Company believes it has meritorious defenses to Motorola's claims and intends to contest this lawsuit vigorously, an adverse outcome of such litigation could have a material adverse effect on the business, results of operations or financial condition of the Company in the quarter in which such adverse resolution occurs. On April 26, 1997, Xerox Corporation filed suit against U.S. Robotics in the United States District Court for the Western District of New York (Xerox Corporation v. U.S. Robotics Corporation and U.S. Robotics Access Corp., No. 97- CV-6182T), claiming infringement of one United States Patent. The complaint alleges willful infringement and prays for unspecified damages and injunctive relief. In a press release dated April 30, 1997, Xerox alleged that its patent, issued January 21, 1997, "covers the use and recognition of handwritten text using an alphabet system designed especially for reliable recognition in pen computers," and that U.S. Robotics' PalmPilot hand-held computer and "Graffiti" software infringe the Xerox patent. The Company believes it has meritorious defenses to Xerox's claims and intends to contest the lawsuit vigorously. An adverse resolution of the action could have a material adverse effect on the Company's results of operations and financial condition in the quarter in which such adverse resolution occurs. On April 21, 1997, U.S. Robotics and three of its customers, Best Buy Co., Inc., Egghead, Inc. and Fry's Electronics, Inc., were sued in a purported consumer class action filed in Superior Court in Marin County, California (Bendall et al v. U.S. Robotics Corporation et al, No. 170441). The named plaintiffs are residents of the states of Alabama, California, Tennessee and Washington and they purport to represent various classes of persons who have purchased or otherwise acquired U.S. Robotics' new x2 products and products upgradeable to x2. Damages, including punitive damages, and other relief are sought under the California Consumer Legal Remedies Act and the California Song-Beverly Consumer Warranty Act, and under various common law theories, including breach of contract, fraud and deceit, negligent misrepresentation, breach of implied warranty and unjust enrichment. The Company believes it has meritorious defenses to this lawsuit and intends to contest the lawsuit vigorously. An adverse resolution of the action could have a material adverse effect on the Company's results of operations and financial condition in the quarter in which such adverse resolution occurs. Another lawsuit, purporting to be "For the interests of the General Public" was filed against U.S. Robotics in the same court on March 13, 1997 (Levy v. U.S. Robotics Corporation, No. 170968). This action alleges that U.S. Robotics' promotion and advertising of x2 products constituted unfair competition and deceptive, untrue and misleading advertising in violation of the California Business and Professional Code, and seeks injunctive relief, including "restitution of all revenues" and an award of attorney fees. Additionally, a purported public interest plaintiff sued U.S. Robotics on January 29, 1997 in California Superior Court in San Francisco (Intervention Inc. v. U.S. Robotics Corporation, Case No. 984352) under the same statute, alleging various misrepresentations in connection with the promotion and advertising of U.S. Robotics' x2 products, and seeking injunctive and other relief, including attorney's fees. The Company believes it has meritorious defenses to this lawsuit and intends to contest the lawsuit vigorously. An adverse resolution of the action could have a material adverse effect on the Company's results of operations and financial condition in the quarter in which such adverse resolution occurs. Item 2. Changes in Securities None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders (a) The Special Meeting of Shareholders was held on June 12, 1997. (b) The following are the voting results on each of the proposals: Proposal I In Favor Opposed Abstain No Vote To approve and adopt an Amended and Restated Agreement and Plan of Merger 114,552,862 754,643 488,536 7,377,365 Proposal II To approve and adopt an amendment to the Company's Articles of Incorporation to increase the number of authorized shares of 3Com capital stock from 403,000,000 to 1,000,000,000 shares 113,176,896 9,103,780 892,730 0 Proposal III To change 3Com's state of incorporation from California to Delaware 89,551,087 25,505,914 739,040 7,377,365 Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Number Description 3.1 Certificate of Incorporation 3.2 Certificate of Correction Filed to Correct a Certain Error in the Certificate of Incorporation 3.3 Certificate of Merger 3.4 Bylaws of 3Com Corporation, As Amended 4.1 Indenture Agreement between 3Com Corporation and The First National Bank of Boston for the private placement of convertible subordinated notes dated as of November 1, 1994 (Exhibit 5.2 to Form 8-K) (6) 4.2 Placement Agreement for the private placement of convertible subordinated notes dated November 8, 1994 (Exhibit 5.1 to Form 8-K) (6) 4.3 Amended and Restated Rights Agreement dated December 31, 1994 (Exhibit 10.27 to Form 10-Q) (7) 10.1 1983 Stock Option Plan, as amended (Exhibit 10.1 to Form 10-K) (3)* 10.2 Amended and Restated Incentive Stock Option Plan (2)* 10.3 License Agreement dated March 19, 1981 (1) 10.4 First Amended and Restated 1984 Employee Stock Purchase Plan, as amended (Exhibit 19.1 to Form 10-Q) (4)* 10.5 Second Amended and Restated 1984 Employee Stock Purchase Plan (Exhibit 10.5 to Form 10-Q)(8)* 10.6 3Com Corporation Director Stock Option Plan, as amended (Exhibit 19.3 to Form 10-Q) (4)* 10.7 Amended 3Com Corporation Director Stock Option Plan (Exhibit 10.8 to Form 10-Q)(8)* 10.8 3Com Corporation Restricted Stock Plan, as Amended (Exhibit 10.17 to Form 10-Q)(8)* 10.9 1994 Stock Option Plan (Exhibit 10.22 to Form 10-K) (5)* 10.10 Lease Agreement between BNP Leasing Corporation, as Landlord, and 3Com Corporation, as Tenant, effective as of November 20, 1996 (Exhibit 10.37 to Form 10-Q) (10) 10.11 Purchase Agreement between BNP Leasing Corporation and 3Com Corporation, effective as of November 20, 1996 (Exhibit 10.38 to Form 10-Q) (10) 10.12 Agreement and Plan of Reorganization among 3Com Corporation, OnStream Acquisition Corporation and OnStream Networks, Inc. dated as of October 5, 1996 (Exhibit 2.1 to Form S-4) (9) 10.13 Lease Agreement between BNP Leasing Corporation, as Landlord, and 3Com Corporation, as Tenant, effective as of February 3, 1997 for the Combined Great America Headquarters site (Exhibit 10.19 to Form 10-Q) (12) 10.14 Purchase Agreement between BNP Leasing Corporation and 3Com Corporation, effective as of February 3, 1997 for the Combined Great America Headquarters site (Exhibit 10.20 to Form 10-Q) (12) 10.15 Credit Agreement dated as of December 20, 1996 among 3Com Corporation, Bank of America National Trust and Savings Association, as Agent, and the Other Financial Institutions Party Hereto Arranged by BA Securities, Inc. (Exhibit 10.21 to Form 10-Q) (12) 10.16 Amended and Restated Agreement and Plan of Merger by and among 3Com Corporation, TR Acquisitions Corporation, 3Com (Delaware) Corporation, and U.S. Robotics Corporation, dated as of February 26, 1997 and amended as of March 14, 1997(11) 10.17 Lease Agreement between BNP Leasing Corporation, as Landlord, and 3Com Corporation, as Tenant, effective as of July 25, 1997 for the Great America Phase III (PAL) site 10.18 Purchase Agreement between BNP Leasing Corporation and 3Com Corporation, effective as of July 25, 1997 for the Great America Phase III (PAL) site 10.19 Lease Agreement between BNP Leasing Corporation, as Landlord, and 3Com Corporation, as Tenant, effective as of July 29, 1997 for the Marlborough site 10.20 Purchase Agreement between BNP Leasing Corporation and 3Com Corporation, effective as of July 29, 1997 for the Marlborough site 10.21 Lease Agreement between BNP Leasing Corporation, as Landlord, and 3Com Corporation, as Tenant, effective as of August 11, 1997 for the Rolling Meadows site 10.22 Purchase Agreement between BNP Leasing Corporation and 3Com Corporation, effective as of August 11, 1997 for the Rolling Meadows site 10.23 First Amendment to Credit Agreement 18.1 Letter Re Change in Accounting Principles * Indicates a management contract or compensatory plan. (1) Incorporated by reference to the corresponding Exhibit previously filed as an Exhibit to Registrant's Registration Statement on Form S-1 filed January 25, 1984 (File No. 2-89045) (2) Incorporated by reference to Exhibit 10.2 to Registrant's Registration Statement on Form S-4 filed on August 31, 1987 (File No. 33-16850) (3) Incorporated by reference to the Exhibit identified in parentheses previously filed as an Exhibit to Registrant's Form 10-K filed on August 27, 1991 (File No. 0-12867) (4) Incorporated by reference to the Exhibit identified in parentheses previously filed as an Exhibit to Registrant's Form 10-Q filed January 10, 1992 (File No. 0-12867) (5) Incorporated by reference to the Exhibit identified in parentheses previously filed as an Exhibit to Registrant's Form 10-K filed on August 31, 1994 (File No. 0-12867) (6) Incorporated by reference to the Exhibit identified in parentheses previously filed as an Exhibit to Registrant's Form 8-K filed on November 16, 1994 (File No. 0-12867) (7) Incorporated by reference to the Exhibit identified in parentheses previously filed as an Exhibit to Registrant's Form 10-Q filed on January 13, 1995 (File No. 0-12867) (8) Incorporated by reference to the Exhibit identified in parentheses previously filed as an Exhibit to Registrant's Form 10-Q, filed on January 15, 1996 (File No. 0-12867) (9) Incorporated by reference to the Exhibit identified in parentheses previously filed as an Exhibit to Registrant's Registration Statement on Form S-4, originally filed on October 11, 1996 (File No. 333-13993) (10) Incorporated by reference to the Exhibit identified in parentheses previously filed as an Exhibit to Registrant's Form 10-Q filed on January 13, 1997 (File No. 0-12867) (11) Incorporated by reference to the Exhibit identified in parentheses previously filed as an Exhibit to Registrant's Registration Statement on Form S-4, filed on March 17, 1997 (File No. 333-23465) (12) Incorporated by reference to the Exhibit identified in parentheses previously filed as an Exhibit to Registrant's Form 10-Q, filed on April 11, 1997 (File No. 0-12867) (b) Reports on Form 8-K The Company filed one report on Form 8-K during the fiscal quarter covered by this report, as follows: (i) Report on Form 8-K filed on June 26, 1997, reporting under Item 2 the completion of the merger with U.S. Robotics, Inc. effective June 12, 1997. 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. 3Com Corporation (Registrant) Dated: October 13, 1997 By: /s/ Christopher B. Paisley -------------------- ------------------------------- Christopher B. Paisley Senior Vice President, Finance and Chief Financial Officer (Principal Financial and Accounting Officer) EX-3 2 EXHIBIT 3.1 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 09:00 AM 03/10/1997 971077721 - 2725137 CERTIFICATE OF INCORPORATION OF 3COM CORPORATION FIRST: The name of the Corporation is 3Com Corporation (hereinafter sometimes referred to as the "Corporation"). SECOND: The address of the registered office of the Corporation in the State of Delaware is 15 East North Street, in the City of Dover, County of Kent. The name of the registered agent at that address is Incorporating Services, Ltd. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware. FOURTH: The Corporation is authorized to issue a total of one thousand (1,000) shares of stock in one class designated as "Common Stock", par value $0.001 per share. FIFTH: The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to the powers and authority expressly conferred upon them by Statute or by this Certificate of Incorporation or the Bylaws of the Corporation, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation. Election of directors need not be by written ballot, unless the Bylaws so provide. SIXTH: The Board of Directors is authorized to make, adopt, amend, alter or repeal the Bylaws of the Corporation. The stockholders shall also have power to make, adopt, amend, alter or repeal the Bylaws of the Corporation. SEVENTH: The name and address of the incorporator is as follows: Andrea Charvet GRAY CARY WARE & FREIDENRICH 400 Hamilton Avenue Palo Alto, California 94301 EIGHTH: To the fullest extent permitted by the Delaware General Corporation Law, a director of this Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Any repeal or modification of the foregoing provisions of this Article EIGHTH by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. NINTH: This Corporation reserves the right to amend or repeal any of the provisions contained in this Certificate of Incorporation in any manner now or hereafter permitted by law, and the rights of the stockholders of this Corporation are granted subject to this reservation. I, THE UNDERSIGNED, being the incorporator, for the purpose of forming a corporation under the laws of the State of Delaware, do make, file and record this Certificate of Incorporation, do certify that the facts herein stated are true, and accordingly, have hereto set my hand this 10th day of March, 1997. /s/ Andrea Charvet ---------------------- Andrea Charvet Incorporator State of Delaware Office of the Secretary of State -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF INCORPORATION OF "3COM CORPORATION", FILED IN THIS OFFICE ON THE TENTH DAY OF MARCH, A.D. 1997, AT 9 O'CLOCK A.M. A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY RECORDER OF DEEDS FOR RECORDING. /s/ Edward J. Freel -----------------------------------_ Edward J. Freel, Secretary of State 2725137 8100 AUTHENTICATION: 8367386 971077721 DATE: 03-11-97 EXHIBIT 3.2 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 09:00 AM 03/12/1997 971081337 - 2725137 CERTIFICATE OF CORRECTION FILED TO CORRECT A CERTAIN ERROR IN THE CERTIFICATE OF INCORPORATION OF 3COM CORPORATION FILED IN THE OFFICE OF THE SECRETARY OF STATE OF DELAWARE ON MARCH 10, 1997 Andrea Charvet certifies that: 1. She is the incorporator of 3Com Corporation., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware. 2. A Certificate of Incorporation was filed by the Secretary of State of Delaware on March 10, 1997, and recorded in the office of the Recorder of Deeds of Kent County on March 11, 1997, and said Certificate of Incorporation requires correction as permitted by subsection (f) of Section 103 of the General Corporation Law of the State of Delaware. 3. The first inaccuracy or defect of said Certificate of Incorporation to be corrected as follows: The Article FIRST as is set forth below: "The name of the corporation is: 3Com Corporation." is corrected to read as follows: "The name of the corporation is: 3Com (Delaware) Corporation." 4. The second inaccuracy or defect of said Certificate of Incorporation to be corrected as follows: The Article FOURTH as is set forth below: "The Corporation is authorized to issue a total of one thousand (1,000) shares of stock in one class designated as "Common Stock", par value $0.001 per share." is corrected to read as follows: "The Corporation is authorized to issue a total of one thousand (1,000) shares of stock in one class designated as "Common Stock", par value $0.01 per share." IN WITNESS WHEREOF, the undersigned Incorporator, has hereunto set her hand this 12th day of March, 1997. 3COM (DELAWARE) CORPORATION /s/ Andrea Charvet ----------------------------_ Andrea Charvet, Incorporator State of Delaware Office of the Secretary of State ________________________________ I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF CORRECTION OF "3COM CORPORATION", CHANGING ITS NAME FROM "3COM CORPORATION" TO "3COM (DELAWARE) CORPORATION", FILED IN THIS OFFICE ON THE TWELFTH DAY OF MARCH, A.D. 1997, AT 9 O'CLOCK A.M. A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY RECORDER OF DEEDS FOR RECORDING. /s/ Edward J. Freel ----------------------------------- Edward J. Freel, Secretary of State 2725137 8100 AUTHENTICATION: 8375265 971081337 DATE: 03-17-97 EXHIBIT 3.3 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 02:01 PM 06/12/1997 971192951 - 2725137 CERTIFICATE OF MERGER OF 3COM CORPORATION (A CALIFORNIA CORPORATION) INTO 3COM (DELAWARE) CORPORATION (A DELAWARE CORPORATION) (UNDER SECTION 252 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE) The undersigned corporation, a Delaware corporation, does hereby certify: First: That the name and state of incorporation of each of the constituent corporations of the merger is as follows: Name State of Incorporation __________________________ ______________________ 3Com Corporation California 3Com (Delaware) Corporation Delaware Second: That an Agreement and Plan of Merger and Reincorporation dated as of March 14, 1997 by and between 3Com Corporation and 3Com (Delaware) Corporation has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with the provisions of Section 252 of the General Corporation Law of the State of Delaware. Third: That the name of the surviving corporation of the merger is 3Com (Delaware) Corporation, a Delaware corporation (the "Surviving Corporation"). Fourth: That the Certicate of Incorporation of 3Com (Delaware) Corporation in effect immediately prior to the Effective Time shall be the Certificate of Incorporation of the Surviving Corporation, and that Articles First and Fourth are hereby amended to read in their entirety as follows: "FIRST. The name of the Corporation is 3Com Corporation (hereinafter sometimes referred to as the "Corporation"). FOURTH: A. The total number of shares of all classes of stock which the Corporation shall have authority to issue is One Billion Shares (1,000,000,000) consisting of: 1. Nine Hundred Ninety Million (990,000,000) shares of Common Stock, par value one cent ($.01) per share (the "Common Stock"); and 2. Ten Million (10,000,000) shares of Preferred Stock, par value one cent ($.01) per share (the "Preferred Stock"). B. The Board of Directors is authorized, subject to any limitations prescribed by law, to provide for the issuance of shares of Preferred Stock in one or more series and, by filing a certificate pursuant to the applicable law of the State of Delaware, from time to time to determine the designation of any series, to fix the number of shares of any series, to determine or alter the rights, preferences, privileges and powers granted to any wholly unissued series of Preferred Stock and any qualifications, limitations or restrictions imposed thereon, and, within the limits of restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series, to increase or decrease (but not below the number of shares of any such series then outstanding) the number of shares of any such series subsequent to the issue of shares of that series." Fifth: That the Bylaws, as amended, of 3Com (Delaware) Corporation as in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation. Sixth: That the directors (including their respective denomination as Class I or Class II directors) and officers of 3Com Corporation immediately prior to the Effective Time shall be the initial directors and officers of the Surviving Corporation, until their respective successors are duly elected or appointed. Seventh: That the executed Agreement and Plan of Merger and Reincorporation is on file at the principal place of business of the Surviving Corporation. The address of said principal place of business is 5400 Bayfront Plaza, Santa Clara, California 95052. Eighth: That a copy of the Agreement and Plan of Merger and Reincorporation will be furnished by the Surviving Corporation upon request and without charge to any stockholder of any constituent corporation. Ninth: The authorized capital Stock of 3Com Corporation is 400,000,000 shares of Common Stock, $0.01 par value, and 3,000,000 shares of Preferred Stock, without par value. Tenth: That this Certificate of Merger shall be effective on June 12, 1997 at 4:45 p.m. (Eastern Time). IN WITNESS WHEREOF, the undersigned has caused this Certificate to be executed by its President and attested by its Secretary this 11th day of June, 1997. 3COM (DELAWARE) CORPORATION (a Delaware corporation) By: /s/ Mark D. Michael --------------------------- Mark D. Michael, President Dated: June 11, 1997 ATTESTED TO BY: /s/ Mark D. Michael - ---------------------------- Mark D. Michael, Secretary State of Delaware Office of the Secretary of State -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF MERGER, WHICH MERGES: "3COM CORPORATION", A CALIFORNIA CORPORATION, WITH AND INTO "3COM (DELAWARE) CORPORATION" UNDER THE NAME OF "3COM CORPORATION", A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE, AS RECEIVED AND FILED IN THIS OFFICE THE TWELFTH DAY OF JUNE, A.D. 1997, AT 2:01 O'CLOCK P.M. A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY RECORDER OF DEEDS FOR RECORDING. /s/ Edward J. Freel ------------------------------------- Edward J. Freel, Secretary of State 2725137 8100M AUTHENTICATION: 8508751 971192951 DATE: 06-12-97 EXHIBIT 3.4 BYLAWS OF 3COM CORPORATION TABLE OF CONTENTS _________________ ARTICLE I STOCKHOLDERS Section 1.1. Annual Meeting Section 1.2. Special Meetings Section 1.3. Notice of Meetings Section 1.4. Quorum Section 1.5. Organization Section 1.6. Conduct of Business Section 1.7. Notice of Stockholder Business Section 1.8. Proxies and Voting Section 1.9. Stock List Section 1.10. Stockholder Action by Written Consent ARTICLE II BOARD OF DIRECTORS Section 2.1. Number and Term of Office Section 2.2. Vacancies and Newly Created Directorships Section 2.3. Removal Section 2.4. Regular Meetings Section 2.5. Special Meetings Section 2.6. Quorum Section 2.7. Participation in Meetings by Conference Telephone Section 2.8. Conduct of Business Section 2.9. Powers Section 2.10. Action Without Meeting Section 2.11. Compensation of Directors Section 2.12. Nomination of Director Candidates ARTICLE III COMMITTEES Section 3.1. Committees of the Board of Directors Section 3.2. Conduct of Business ARTICLE IV OFFICERS Section 4.1. Generally Section 4.2. Chairman of the Board Section 4.3. President Section 4.4. Vice President Section 4.5. Chief Financial Officer Section 4.6. Secretary Section 4.7. Delegation of Authority Section 4.8. Removal Section 4.9. Action With Respect to Securities of Other Corporations ARTICLE V STOCK Section 5.1. Certificates of Stock Section 5.2. Transfers of Stock Section 5.3. Record Date Section 5.4. Lost, Stolen or Destroyed Certificates Section 5.5. Regulations ARTICLE VI NOTICES Section 6.1. Notices Section 6.2. Waivers ARTICLE VII MISCELLANEOUS Section 7.1. Facsimile Signatures Section 7.2. Corporate Seal Section 7.3. Reliance Upon Books, Reports and Records Section 7.4. Fiscal Year Section 7.5. Time Periods ARTICLE VIII INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 8.1. Right to Indemnification Section 8.2. Right of Claimant to Bring Suit Section 8.3. Indemnification of Employees and Agents Section 8.4 Non-Exclusivity of Rights Section 8.5. Indemnification Contracts Section 8.6. Insurance Section 8.7. Effect of Amendment Section 8.8. Savings Clause ARTICLE IX AMENDMENTS BYLAWS OF 3Com CORPORATION ARTICLE I STOCKHOLDERS Section 1.1. Annual Meeting. An annual meeting of the stockholders of 3Com Corporation (the "Corporation"), for the election of directors and for the transaction of such other business as may properly come before the meeting, shall be held at such place, on such date, and at such time as the Board of Directors shall each year fix, which date shall be within thirteen months after the organization of the Corporation or after its last annual meeting of stockholders. Section 1.2. Special Meetings. Special meetings of the stockholders, for any purpose or purposes prescribed in the notice of the meeting, may be called by (a) the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board for adoption), (b) the Chairman of the Board, (c) the President or (d) the holders of shares entitled to cast not less than twenty percent (20%) of the votes at the meeting, and shall be held at such place, on such date, and at such time as they shall fix. Business transacted at special meetings shall be confined to the purpose or purposes stated in the notice. Section 1.3. Notice of Meetings. Written notice of the place, date, and time of all meetings of the stockholders shall be given, not less than ten (10) nor more than sixty (60) days before the date on which the meeting is to be held, to each stockholder entitled to vote at such meeting, except as otherwise provided herein or required by law (meaning, here and hereinafter, as required from time to time by the Delaware General Corporation Law or the Certificate of Incorporation of the Corporation). When a meeting is adjourned to another place, date or time, written notice need not be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than thirty (30) days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, date, and time of the adjourned meeting shall be given in conformity herewith. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting. Section 1.4. Quorum. At any meeting of the stockholders, the holders of a majority of all of the shares of the stock entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum for all purposes, unless or except to the extent that the presence of a larger number may be required by law or by the Certificate of Incorporation. If a quorum shall fail to attend any meeting, the chairman of the meeting or the holders of a majority of the shares of stock entitled to vote who are present, in person or by proxy, may adjourn the meeting to another place, date, or time. If a notice of any adjourned special meeting of stockholders is sent to all stockholders entitled to vote thereat, stating that it will be held with those present constituting a quorum, then except as otherwise required by law, those present at such adjourned meeting shall constitute a quorum, and all matters shall be determined by a majority of the votes cast at such meeting. Section 1.5. Organization. Such person as the Board of Directors may have designated or, in the absence of such a person, the President of the Corporation or, in his absence, such person as may be chosen by the holders of a majority of the shares entitled to vote who are present, in person or by proxy, shall call to order any meeting of the stockholders and act as chairman of the meeting. The secretary of the meeting shall be such person as the chairman appoints. Section 1.6. Conduct of Business. The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to him in order. Section 1.7. Notice of Stockholder Business. At an annual or special meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before a meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) properly brought before the meeting by or at the direction of the Board of Directors, or (c) properly brought before an annual meeting by a stockholder and if, and only if, the notice of a special meeting provides for business to be brought before the meeting by stockholders, properly brought before the special meeting by a stockholder. For business to be properly brought before a meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal offices of the Corporation no later than (i) in the case of an annual meeting, ninety (90) days before the anticipated date of the next annual meeting, under the assumption that the next annual meeting will occur on the same calendar day as the day of the most recent annual meeting, and (ii) in the case of a special meeting, ten (10) days prior to date of such meeting. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual or special meeting (1) a brief description of the business desired to be brought before the annual or special meeting and the reasons for conducting such business at the annual or special meeting, (2) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, (3) the class and number of shares of the Corporation which are beneficially owned by the stockholder, and (4) any material interest of the stockholder in such business. Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at an annual or special meeting except in accordance with the procedures set forth in this Section 1.7. The chairman of an annual or special meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of this Section 1.7, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Section 1.8. Proxies and Voting. At any meeting of the stockholders, every stockholder entitled to vote may vote in person or by proxy authorized by an instrument in writing filed in accordance with the procedure established for the meeting. Each stockholder shall have one vote for every share of stock entitled to vote which is registered in his name on the record date for the meeting, except as otherwise provided herein or required by law. All voting, including on the election of directors, and except where otherwise required by law, may be by a voice vote; provided, however, that upon demand therefor by a stockholder entitled to vote or by his proxy, a stock vote shall be taken. Every stock vote shall be taken by ballots, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting. Every vote taken by ballots shall be counted by an inspector or inspectors appointed by the chairman of the meeting. All elections shall be determined by a plurality of the votes cast, and except as otherwise required by law or the Certificate of Incorporation or the Bylaws of this Corporation, all other matters shall be determined by a majority of the votes cast. Section 1.9. Stock List. A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in his name, shall be open to the examination of any such stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The stock list shall also be kept at the place of the meeting during the whole time thereof and shall be open to the examination of any such stockholder who is present. This list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them. Section 1.10. Stockholder Action by Written Consent. An action which may be taken at any annual or special meeting of stockholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the actions so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes which would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. All such consents shall be filed with the Secretary of the Corporation and shall be maintained in the corporate records. Prompt notice of the taking of a corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE II BOARD OF DIRECTORS Section 2.1. Number and Term of Office. The authorized number of directors shall initially be one (1) and thereafter shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors. The Board of Directors shall be comprised of eleven (11) Directors. The number of Directors provided in this Section 2.1 may be changed by a Bylaw duly adopted by the affirmative vote of a majority of the outstanding shares entitled to vote. Section 2.2. Vacancies and Newly Created Directorships. Subject to the rights of the holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, or other cause (other than removal from office by a vote of the stockholders) may be filled only by a majority vote of the directors then in office, though less than a quorum, and directors so chosen shall hold office for a term expiring at the next annual meeting of stockholders. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Section 2.3. Removal. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any director, or the entire Board of Directors, may be removed from office at any time, with or without cause, but only by the affirmative vote of the holders of at least a majority of the voting power of the then outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class. Vacancies in the Board of Directors resulting form such removal may be filled by (i) a majority of the directors then in office, though less than a quorum, or (ii) the stockholders at a special meeting of the stockholders properly called for that purpose, by the vote of the holders of a plurality of the shares entitled to vote at such special meeting. Directors so chosen shall hold office until the next annual meeting of stockholders. Section 2.4. Regular Meetings. Regular meetings of the Board of Directors shall be held at such place or places, on such date or dates, and at such time or times as shall have been established by the Board of Directors and publicized among all directors. A notice of each regular meeting shall not be required. Section 2.5. Special Meetings. Special meetings of the Board of Directors may be called by a majority of the directors then in office (rounded up to the nearest whole number), by the Chairman of the Board or by the President and shall be held at such place, on such date, and at such time as they or he shall fix. Notice of the place, date, and time of each such special meeting shall be given to each director who does not waive the right to a notice by (i) mailing written notice not less than five (5) days before the meeting, (ii) sending notice one (1) day before the meeting by an overnight courier service and two (2) days before the meeting if by overseas courier service, or (iii) by telephoning, telecopying, telegraphing or personally delivering the same not less than twenty-four (24) hours before the meeting. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting. Section 2.6. Quorum. At any meeting of the Board of Directors, a majority of the total number of authorized directors shall constitute a quorum for all purposes. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date, or time, without further notice or waiver thereof. Section 2.7. Participation in Meetings by Conference Telephone. Members of the Board of Directors, or of any committee of the Board of Directors, may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and such participation shall constitute presence in person at such meeting. Section 2.8. Conduct of Business. At any meeting of the Board of Directors, business shall be transacted in such order and manner as the Board may from time to time determine, and all matters shall be determined by the vote of a majority of the directors present, except as otherwise provided herein or required by law. Section 2.9. Powers. The Board of Directors may, except as otherwise required by law, exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, including, without limiting the generality of the foregoing, the unqualified power: (1) To declare dividends from time to time in accordance with law; (2) To purchase or otherwise acquire any property, rights or privileges on such terms as it shall determine; (3) To authorize the creation, making and issuance, in such form as it may determine, of written obligations of every kind, negotiable or non-negotiable, secured or unsecured, and to do all things necessary in connection therewith; (4) To remove any officer of the Corporation with or without cause, and from time to time to pass on the powers and duties of any officer upon any other person for the time being; (5) To confer upon any officer of the Corporation the power to appoint, remove and suspend subordinate officers, employees and agents; (6) To adopt from time to time such stock option, stock purchase, bonus or other compensation plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine; (7) To adopt from time to time such insurance, retirement, and other benefit plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine; and (8) To adopt from time to time regulations, not inconsistent with these Bylaws, for the management of the Corporation's business and affairs. Section 2.10. Action Without Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if all members of the Board shall individually or collectively consent in writing to such action. Such written consent or consents shall be filed with the minutes of the proceedings of the Board. Such action by written consent shall have the same force and effect as a unanimous vote of such directors. Section 2.11. Compensation of Directors. Directors, as such, may receive, pursuant to resolution of the Board of Directors, fixed fees and other compensation for their services as directors, including, without limitation, their services as members of committees of the Board of Directors. Section 2.12. Nomination of Director Candidates. Subject to any limitations stated in the Certificate of Incorporation of this Corporation, nominations for the election of directors may be made by the Board of Directors or a proxy committee appointed by the Board of Directors or by any stockholder entitled to vote in the election of directors. ARTICLE III COMMITTEES Section 3.1. Committees of the Board of Directors. The Board of Directors, by a vote of a majority of the whole Board, may from time to time designate one or more committees of the Board, with such lawfully delegable powers and duties as it thereby confers, to serve at the pleasure of the Board and shall, for those committees and any others provided for herein, elect a director or directors to serve as the member or members, designating, if it desires, other directors as alternate members who may replace any absent or disqualified member at any meeting of the committee. Any committee so designated may exercise the power and authority of the Board of Directors to declare a dividend, to authorize the issuance of stock or to adopt a certificate of ownership and merger if the resolution which designates the committee or a supplemental resolution of the Board of Directors shall so provide. In the absence or disqualification of any member of any committee and any alternate member in his place, the member or members of the committee present at the meeting and not disqualified from voting, whether or not he or they constitute a quorum, may by unanimous vote appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member. Section 3.2. Conduct of Business. Each committee may determine the procedural rules for meeting and conducting its business and shall act in accordance therewith, except as otherwise provided herein or required by law. Adequate provision shall be made for notice to members of all meetings; one-half of the authorized members shall constitute a quorum unless the committee shall consist of one or two members, in which event all members of the committee shall constitute a quorum; and all matters shall be determined by a majority vote of the members present. Action may be taken by any committee without a meeting if all members thereof consent thereto in writing. Such written consent or consents shall be filed with the minutes of the proceedings of such committee. ARTICLE IV OFFICERS Section 4.1. Generally. The officers of the Corporation shall consist of a President, a Secretary and a Chief Financial Officer. The Corporation may also have, at the discretion of the Board of Directors, a Chairman of the Board, one or more Vice Presidents, and such other officers as may from time to time be appointed by the Board of Directors. Officers shall be elected by the Board of Directors, which shall consider that subject at its first meeting after every annual meeting of stockholders. Each officer shall hold office at the pleasure of the Board, until his successor is elected and qualified or until his earlier resignation or removal. Any number of offices may be held by the same person. Section 4.2. Chairman of the Board. The Chairman of the Board, if there shall be such an officer, shall, if present, preside at all meetings of the Board of Directors, and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or as provided by these Bylaws. Section 4.3. President. Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board, if there be such an officer, the President shall be the general manager and chief executive officer of the Corporation and shall, subject to the control of the Board of Directors, have general supervision, direction, and control of the business and other officers, employees and agents of the Corporation. He shall preside at all meetings of the stockholders. He shall be an ex-officio member of all the standing committees, including the executive committee, if any, and shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or by these Bylaws. He shall have power to sign all stock certificates, contracts and other instruments of the Corporation which are authorized by the Board of Directors. Section 4.4. Vice President. In the absence or disability of the President, the Vice Presidents, if any, in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice President designated by the Board of Directors, shall perform the duties of the President, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the President. The Vice Presidents, if any, shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors or these Bylaws. Section 4.5. Chief Financial Officer. The Chief Financial Officer shall keep and maintain or cause to be kept and maintained, adequate and correct financial books and records of account of the Corporation in written form or any other form capable of being converted into written form. The Chief Financial Officer shall deposit all monies and other valuables in the name and to the credit of the Corporation with such depositories as may be designated by the Board of Directors. He shall disburse all funds of the Corporation as may be ordered by the Board of Directors, shall render to the President and the Board of Directors, whenever they request it, an account of all of his transactions as Chief Financial Officer and of the financial condition of the Corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by these Bylaws. Section 4.6. Secretary. The Secretary shall keep, or cause to be kept, a book of minutes in written form of the proceedings of the Board of Directors, committees of the Board, and stockholders. Such minutes shall include all waivers of notice, consents to the holding of meetings, or approvals of the minutes of meetings executed pursuant to these Bylaws or the General Delaware Corporation Law. The Secretary shall keep, or cause to be kept at the principal executive office or at the office of the Corporation's transfer agent or registrar, a record of its stockholders, giving the names and addresses of all stockholders and the number and class of shares held by each. The Secretary shall give or cause to be given, notice of all meetings of the stockholders and of the Board of Directors required by these Bylaws or by law to be given, and shall keep the seal of the Corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or these Bylaws. Section 4.7. Delegation of Authority. The Board of Directors may from time to time delegate the powers or duties of any officer to any other officers or agents, notwithstanding any provision hereof. Section 4.8. Removal. Any officer of the Corporation may be removed at any time, with or without cause, by the Board of Directors. Section 4.9. Action With Respect to Securities of Other Corporations. Unless otherwise directed by the Board of Directors, the President or any officer of the Corporation authorized by the President shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of stockholders of or with respect to any action of stockholders of any other corporation in which this Corporation may hold securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other corporation. ARTICLE V STOCK Section 5.1. Certificates of Stock. Each stockholder shall be entitled to a certificate signed by, or in the name of the Corporation by, the President or a Vice President, and the Secretary, an Assistant Secretary or the Chief Financial Officer, certifying the number of shares owned by him or her. Any or all the signatures on the certificate may be facsimile. Section 5.2. Transfers of Stock. Transfers of stock shall be made only upon the transfer books of the Corporation kept at an office of the Corporation or by transfer agents designated to transfer shares of the stock of the Corporation. Except where a certificate is issued in accordance with Section 5.4 of these Bylaws, an outstanding certificate for the number of shares involved shall be surrendered for cancellation before a new certificate is issued therefor. Section 5.3. Record Date. The Board of Directors may fix a record date, which shall not be more than sixty (60) nor fewer than ten (10) days before the date of any meeting of stockholders, nor more than sixty (60) days prior to the time for the other action hereinafter described, as of which there shall be determined the stockholders who are entitled: to notice of or to vote at any meeting of stockholders or any adjournment thereof; to express consent to corporate action in writing without a meeting; to receive payment of any dividend or other distribution or allotment of any rights; or to exercise any rights with respect to any change, conversion or exchange of stock or with respect to any other lawful action. Section 5.4. Lost, Stolen or Destroyed Certificates. In the event of the loss, theft or destruction of any certificate of stock, another may be issued in its place pursuant to such regulations as the Board of Directors may establish concerning proof of such loss, theft or destruction and concerning the giving of a satisfactory bond or bonds of indemnity. Section 5.5. Regulations. The issue, transfer, conversion and registration of certificates of stock shall be governed by such other regulations as the Board of Directors may establish. ARTICLE VI NOTICES Section 6.1. Notices. Except as otherwise specifically provided herein or required by law, all notices required to be given to any stockholder, director, officer, employee or agent shall be in writing and may in every instance be effectively given by hand delivery to the recipient thereof, by depositing such notice in the mails, postage paid, or by sending such notice by prepaid telegram, mailgram or commercial courier service. Any such notice shall be addressed to such stockholder, director, officer, employee or agent at this last known address as the same appears on the books of the Corporation. The time when such notice is received by such stockholder, director, officer, employee or agent, or by any person accepting such notice on behalf of such person, if hand delivered, or dispatched, if delivered through the mails or by telegram, courier or mailgram, shall be the time of the giving of the notice. Section 6.2. Waivers. A written waiver of any notice, signed by a stockholder, director, officer, employee or agent, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required to be given to such stockholder, director, officer, employee or agent. Neither the business nor the purpose of any meeting need be specified in such a waiver. Attendance of a person at a meeting shall constitute a waiver of notice for such meeting, except when the person attends a meeting for the express purpose of objecting, and does in fact object, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. ARTICLE VII MISCELLANEOUS Section 7.1. Facsimile Signatures. In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these Bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof. Section 7.2. Corporate Seal. The Board of Directors may provide a suitable seal, containing the name of the Corporation, which seal shall be in the charge of the Secretary. If and when so directed by the Board of Directors or a committee thereof, duplicates of the seal may be kept and used by the Chief Financial Officer or by an Assistant Secretary or other officer designated by the Board of Directors. Section 7.3. Reliance Upon Books, Reports and Records. Each director, each member of any committee designated by the Board of Directors, and each officer of the Corporation shall, in the performance of his duties, be fully protected in relying in good faith upon the books of account or other records of the Corporation, including reports made to the Corporation by any of its officers, by an independent certified public accountant, or by an appraiser. Section 7.4. Fiscal Year. The fiscal year of the Corporation shall be as fixed by the Board of Directors. Section 7.5. Time Periods. In applying any provision of these Bylaws which require that an act be done or not done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included. ARTICLE VIII INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 8.1. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative ("Proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such Proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the General Corporation Law of Delaware, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said Law permitted the Corporation to provide prior to such amendment) against all expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in Section 8.2, the Corporation shall indemnify any such person seeking indemnity in connection with a Proceeding (or part thereof) initiated by such person only if such Proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. Such right shall be a contract right and shall include the right to be paid by the Corporation expenses incurred in defending any such Proceeding in advance of its final disposition; provided, however, that, if required by the General Corporation Law of Delaware, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of such Proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it should be determined ultimately that such director or officer is not entitled to be indemnified under this Section or otherwise. Any indemnification as provided herein (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of a director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in the General Corporation Law of Delaware. Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders. Section 8.2. Right of Claimant to Bring Suit. If a claim under Section 8.1 is not paid in full by the Corporation within ninety (90) days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any Proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of Delaware for the Corporation to indemnify the claimant for the amount claimed. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of Delaware, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct. Section 8.3. Indemnification of Employees and Agents. The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and to the advancement of related expenses, to any employee or agent of the Corporation to the fullest extent of the provisions of this Article with respect to the indemnification of and advancement of expenses to directors and officers of the Corporation. Section 8.4 Non-Exclusivity of Rights. The rights conferred on any person by Sections 8.1, 8.2 and 8.3 shall not be exclusive of any other right which such persons may have or hereafter acquire under any statute, provisions of the Certificate of Incorporation, bylaw, agreement, vote of stockholders or disinterested directors or otherwise. Section 8.5. Indemnification Contracts. The Board of Directors is authorized to enter into a contract with any director, officer, employee or agent of the Corporation, or any person serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including employee benefit plans, providing for indemnification rights equivalent to those provided for in this Article VIII. Section 8.6. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any such director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expenses, liability or loss under Delaware General Corporation Law. Section 8.7. Effect of Amendment. Any amendment, repeal or modification of any provision of this Article VIII by the stockholders or the directors of the Corporation shall not adversely affect any right or protection of a director or officer of the Corporation existing at the time of such amendment, repeal or modification. Section 8.8. Savings Clause. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each director, officer, employee and agent of the Corporation as to costs, charges and expenses (including attorneys' fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article that shall not have been invalidated and to the fullest extent permitted by applicable law. ARTICLE IX AMENDMENTS The Board of Directors is expressly empowered to adopt, amend, alter or repeal Bylaws of the Corporation, subject to the right of the stockholders to adopt, amend, alter or repeal the Bylaws of the Corporation. Any adoption, amendment or repeal of Bylaws of the Corporation by the Board of Directors shall require the approval of a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any resolution providing for adoption, amendment or repeal is presented to the Board). The stockholders shall also have power to adopt, amend, alter or repeal the Bylaws of the Corporation. EX-10 3 EXHIBIT 10.17 The transactions contemplated in this Lease Agreement have been made possible by the following banks, acting in the capacities indicated: Banque Nationale de Paris ABN Amro Bank N.V., as Administrative/Documentation as Syndication Agent and Agent and Arranger Co-Arranger $83,600,000 LEASE AGREEMENT BETWEEN BNP LEASING CORPORATION, AS LANDLORD AND 3COM CORPORATION, AS TENANT EFFECTIVE AS OF JULY 25, 1997 (Pal Site - Phase III) This Lease Agreement amends, restates and replaces the Lease Agreement between the Landlord and Tenant dated June 12, 1997, covering the Land (as described in Exhibit A attached hereto). TABLE OF CONTENTS 1. Definitions (a) Active Negligence (b) Additional Rent (c) Administrative Fee (d) Advance Date (e) Affiliate (f) Applicable Laws (g) Applicable Purchaser (h) Approved Participants (i) Attorneys' Fees (j) Base Rent (k) Base Rent Date (l) Breakage Costs (m) Business Day (n) Capital Adequacy Charges (o) Carrying Costs (p) Carrying Costs Accrual Termination Date (q) Cash Collateral (r) Certificate of Deposit Collateral Percentage (s) Closing Costs (t) Change of Control Event (u) Code (v) Collateral (w) Commitment Fee (x) Completion Deadline (y) Completion Notice (z) Construction Advances (aa) Construction Allowance (ab) Construction Documents (ac) Construction Periods (ac) Custodial Agreement (ad) Debt (ae) Default (af) Default Rate (ag) Defaulting Participant (ah) Designated Improvements (ai) Designated Sale Date (aj) Effective Rate (ak) Environmental Indemnity (al) Environmental Laws (am) Environmental Losses (an) Environmental Report (ao) ERISA (ap) ERISA Affiliate (aq) ERISA Termination Event (ar) Escrowed Proceeds (as) Eurocurrency Liabilities (at) Eurodollar Rate Reserve Percentage (au) Event of Default (av) Excluded Taxes (aw) Fair Market Value (ax) Fed Funds Rate (ay) Funding Advances (az) GAAP (ba) Hazardous Substance (bb) Hazardous Substance Activity (bc) Impositions (bd) Improvements (be) Indemnified Party (bf) Initial Investment (bg) Landlord's Parent (bh) Last Advance Date (bi) LIBOR (bj) LIBOR Period Election (bk) Lien (bl) Losses (bm) Maximum Construction Allowance (bn) Notice of Last Advance (bo) Ordinary Negligence (bp) Outstanding Construction Allowance (bq) Participant (br) Participation Agreement (bs) Period (bt) Permitted Encumbrances (bu) Permitted Hazardous Substance Use (bv) Permitted Hazardous Substances (bw) Permitted Transfer (bx) Person (by) Plan (bz) Pledge Agreement (ca) Prime Rate (cb) Purchase Agreement (cc) Purchase Documents (cd) Purchase Price (ce) Qualified Payments (cf) Qualifying Security Interest (cg) Remaining Proceeds (ch) Rent (ci) Responsible Financial Officer (cj) Scope Change (ck) Securities Collateral (cl) Securities Collateral Percentage (cm) Spread (cn) Stipulated Loss Value (co) Subsidiary (cp) Tenant's Knowledge (cq) Term (cr) Unfunded Benefit Liabilities (cs) Upfront Fee (ct) Voluntary Minimum Pledge Commitment (cu) Other Terms and References 2. Term 3. Rental (a) Base Rent (b) Upfront Fee (c) Commitment Fees (d) Administrative Agency Fees (e) Additional Rent (f) Interest and Order of Application (g) Net Lease (h) No Demand or Setoff (i) Overdrawn Allowance 4. Insurance and Condemnation Proceeds 5. No Lease Termination (a) Status of Lease (b) Waiver By Tenant 6. Construction Allowance (a) Advances; Outstanding Construction Allowance (b) Designated Improvements (i) Responsibility for Construction. (ii) Scope Changes. (iii) Value Added. (iv) Estoppel Letters Required. (v) Advances Not a Waiver. (c) Conditions to Construction Advances (i) Prior Notice (ii) Amount of the Advances (iii) Insurance a) Title Insurance b) Builder's Risk Insurance (iv) Progress of Construction (v) Evidence of Costs to be Reimbursed (vi) No Event of Default or Change of Control Event (vii) No Sale of Landlord's Interest (viii) Certificate of No Default (ix) Removal of Open Space Restrictions (x) Payments by Approved Participants (d) Completion Notice 7. Purchase Documents and Environmental Indemnity 8. Use and Condition of Leased Property (a) Use (b) Condition (c) Consideration of and Scope of Waiver 9. Other Representations, Warranties and Covenants of Tenant (a) Financial Matters (b) Existing Contract (c) No Default or Violation (d) Compliance with Covenants and Laws (e) Environmental Representations (f) No Suits (g) Condition of Property (h) Organization (i) Enforceability (j) Not a Foreign Person (k) Omissions (l) Existence (m) Tenant Taxes (n) Operation of Property (o) Debts for Construction (p) Impositions (q) Repair, Maintenance, Alterations and Additions (r) Insurance and Casualty (s) Condemnation (t) Protection and Defense of Title (u) No Liens on the Leased Property (v) Books and Records (w) Financial Statements; Required Notices; Certificates as to Default (x) Further Assurances (y) Fees and Expenses; General Indemnification; Increased Costs; and Capital Adequacy Charges (z) Liability Insurance (aa) Permitted Encumbrances (ab) Environmental (ac) Affirmative Financial Covenants (ad) Negative Covenants (i) Liens (ii) Transactions with Affiliates (iii) Mergers; Sales of Assets (v) Change of Business (ae) ERISA 10. Representations, Warranties and Covenants of Landlord (a) Title Claims By, Through or Under Landlord (b) Actions Required of the Title Holder (c) No Default or Violation (d) No Suits (e) Organization (f) Enforceability (g) Existence (h) Not a Foreign Person 11. Assignment and Subletting (a) Consent Required (b) Standard for Landlord's Consent to Assignments and Certain Other Matters (c) Consent Not a Waiver (d) Landlord's Assignment 12. Environmental Indemnification (a) Indemnity (b) Assumption of Defense (c) Notice of Environmental Losses (d) Rights Cumulative (e) Survival of the Indemnity 13. Landlord's Right of Access 14. Events of Default (a) Definition of Event of Default (b) Remedies (c) Enforceability (d) Remedies Cumulative (e) Waiver by Tenant (f) No Implied Waiver 15. Default by Landlord 16. Quiet Enjoyment 17. Surrender Upon Termination 18. Holding Over by Tenant 19. Miscellaneous (a) Notices (b) Severability (c) No Merger (d) NO IMPLIED REPRESENTATIONS BY LANDLORD (e) Entire Agreement (f) Binding Effect (g) Time is of the Essence (h) Termination of Prior Rights (i) Governing Law (j) Waiver of a Jury Trial (k) Not a Partnership, Etc (l) Tax Reporting Exhibits and Schedules Exhibit A Legal Description Exhibit B Encumbrance List Exhibit C Permitted Hazardous Substances Exhibit D Resolution of Disputed Insurance Claims Exhibit E Covenant Compliance Certificate Exhibit F Certificate Setting Forth the Calculation of the Spread Exhibit G List of Environmental Reports Exhibit H Information Concerning Designated Improvements Exhibit I Contractor's Estoppel Letter Exhibit J Architect's Estoppel Letter Exhibit K Draw Request Forms Exhibit L Notice to Accelerate the Carrying Costs Accrual Termination Date Exhibit M Notice of Libor Period Election Schedule 1 List of Approved Participants LEASE AGREEMENT This LEASE AGREEMENT (hereinafter called this "Lease"), made to be effective as of July 25, 1997 (all references herein to the "date hereof" or words of like effect shall mean such effective date), by and between BNP LEASING CORPORATION, a Delaware corporation (hereinafter called "Landlord"), and 3COM CORPORATION, a Delaware corporation (hereinafter called "Tenant"); W I T N E S E T H T H A T: WHEREAS, pursuant to an Offer to Purchase Real Property and Agreement for the Sale of Real Property Located in the City of Santa Clara dated as of April 19, 1996 (as amended, hereinafter called the "Existing Contract") between Tenant and the City of Santa Clara, California, a chartered municipal corporation (hereinafter called "Seller"), concerning the land described in Exhibit A attached hereto (hereinafter called the "Land") and the improvements on such Land, if any, Landlord acquired the Land and improvements (if any) from Seller contemporaneously with the execution of the Original Lease (hereinafter defined); WHEREAS, Tenant assigned its rights under the Existing Contract to Landlord on or about June 12, 1997; Landlord acquired the Land on or about June 12, 1997; and Landlord leased the Land and any improvements thereon to Tenant pursuant to a Lease Agreement between Landlord and Tenant dated as of June 12, 1997 (as supplemented or amended to the date hereof, the "Original Lease"); WHEREAS, by this Lease Landlord and Tenant desire to amend, restate and replace the Original Lease; NOW, THEREFORE, in consideration of the rent to be paid and the covenants and agreements to be performed by Tenant, as hereinafter set forth, Landlord and Tenant hereby amend and restate the Original Lease in its entirety, and Landlord does hereby LEASE, DEMISE and LET unto Tenant for the term hereinafter set forth the Land, together with: (i) Landlord's interest in any and all buildings and improvements now existing or hereafter erected on the Land, including, but not limited to, the fixtures, attachments, appliances, equipment, machinery and other articles attached to such buildings and improvements (hereinafter called the "Improvements"); (ii) all easements and rights-of-way now owned or hereafter acquired by Landlord for use in connection with the Land or Improvements or as a means of access thereto; (iii) all right, title and interest of Landlord, now owned or hereafter acquired, in and to (A) any land lying within the right-of-way of any street, open or proposed, adjoining the Land, (B) any and all sidewalks and alleys adjacent to the Land and (C) any strips and gores between the Land and abutting land (except strips and gores, if any, between the Land and abutting land owned by Landlord, with respect to which this Lease shall cover only the portion thereof to the center line between the Land and the abutting land owned by Landlord). The Land and all of the property described in items (i) through (iii) above are hereinafter referred to collectively as the "Real Property". In addition to conveying the leasehold in the Real Property as described above, Landlord hereby grants and assigns to Tenant for the term of this Lease the right to use and enjoy (and, to the extent the following consist of contract rights, to enforce) any assignable interests or rights in, to or under the following that have been transferred to Landlord by Seller under the Existing Contract: (a) any goods, equipment, furnishings, furniture, chattels and personal property of whatever nature that are located on the Real Property and all renewals or replacements of or substitutions for any of the foregoing; and (b) any general intangibles, permits, licenses, franchises, certificates, and other rights and privileges. All of the property, rights and privileges described above in this paragraph are hereinafter collectively called the "Personal Property". The Real Property and the Personal Property are hereinafter sometimes collectively called the "Leased Property." Provided, however, the leasehold estate conveyed hereby and Tenant's rights hereunder are expressly made subject and subordinate to the Permitted Encumbrances (as hereinafter defined) and to any other claims or encumbrances not asserted by Landlord itself or by third parties lawfully claiming through or under Landlord. The Leased Property is leased by Landlord to Tenant and is accepted and is to be used and possessed by Tenant upon and subject to the following terms, provisions, covenants, agreements and conditions: 1. Definitions. As used herein, the terms "Lease," "Landlord," "Tenant," "Existing Contract," "Seller," "Land," "Improvements," "Real Property," "Personal Property" and "Leased Property" shall have the meanings indicated above and the terms listed immediately below shall have the following meanings: (a) Active Negligence. "Active Negligence" of an Indemnified Party means, and is limited to, the negligent conduct of activities on the Leased Property by the Indemnified Party in a manner that proximately causes actual bodily injury or property damage to occur. "Active Negligence" shall not include (1) any negligent failure of Landlord to act when the duty to act would not have been imposed but for Landlord's status as owner of the Leased Property or as a party to the transactions described in this Lease, (2) any negligent failure of any other Indemnified Party to act when the duty to act would not have been imposed but for such party's contractual or other relationship to Landlord or participation or facilitation in any manner, directly or indirectly, of the transactions described in this Lease, or (3) the exercise in a lawful manner by Landlord (or any party lawfully claiming through or under Landlord) of any remedy provided herein or in the Purchase Documents. (b) Additional Rent. "Additional Rent" shall have the meaning assigned to it in subparagraph 3.(e) below. (c) Administrative Fee. "Administrative Fee" shall have the meaning assigned to it in subparagraph 3.(d) below. (d) Advance Date. "Advance Date" means, regardless of whether any Construction Advance shall actually be made thereon, the first Business Day of every calendar month, beginning with August 1, 1997 and continuing regularly thereafter to and including the Carrying Costs Accrual Termination Date; provided, that if the Carrying Costs Accrual Termination Date occurs before the Last Advance Date (as defined below), then after the Carrying Costs Accrual Termination Date each Base Rent Date upon which commences a new Base Rent Period (and only such Base Rent Dates) through and including the Last Advance Date shall also constitute an "Advance Date" hereunder. In any event, no Advance Date shall occur after the Last Advance Date. (e) Affiliate. "Affiliate" of any Person means any other Person controlling, controlled by or under common control with such Person. For purposes of this definition, the term "control" when used with respect to any Person means the power to direct the management of policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. (f) Applicable Laws. "Applicable Laws" shall have the meaning assigned to it in subparagraph 9.(d) below. (g) Applicable Purchaser. "Applicable Purchaser" means any third party designated by Tenant to purchase the Landlord's interest in the Leased Property and in any Escrowed Proceeds as provided in the Purchase Agreement. (h) Approved Participants. "Approved Participants" means (1) the existing Participants and prospective participants listed on Schedule 1 attached hereto; and (2) any other party which Tenant shall have approved as a Participant, which approval shall not be unreasonably withheld for any party that Landlord proposes as a new Participant to replace, in whole or in part, an Approved Participant under the Participation Agreement and the Pledge Agreement; provided, the party proposed by Landlord as a new Participant is a commercial bank operating in the United States of America having capital and surplus in excess of $500,000,000 or an Affiliate of such a bank; and, provided further, the replacement will not reduce the aggregate Percentages of Landlord and Landlord's Parent under and as defined in the Participation Agreement below the minimum percentage specified in paragraph 14.2 of the Participation Agreement. (i) Attorneys' Fees. "Attorneys' Fees" means the reasonable fees and expenses of counsel to the parties incurring the same, which may include fairly allocated costs of in-house counsel, printing, photostating, duplicating and other expenses, air freight charges, and fees billed for law clerks, paralegals, librarians and others not admitted to the bar but performing services under the supervision of an attorney. Such terms shall also include, without limitation, all such fees and expenses incurred with respect to appeals, arbitrations and bankruptcy proceedings, and whether or not any manner or proceeding is brought with respect to the matter for which such fees and expenses were incurred. (j) Base Rent. "Base Rent" means the rent payable by Tenant pursuant to subparagraph 3.(a) below. (k) Base Rent Date. "Base Rent Date" means a date upon which Base Rent must be paid under the Lease, all of which dates shall be the first Business Day of a calendar month. The first Base Rent Date shall be determined as follows: a) If a LIBOR Period Election of one month is in effect on the Carrying Costs Accrual Termination Date, then the first Business Day of the first calendar month following the Carrying Costs Accrual Termination Date shall be the first Base Rent Date. b) If a LIBOR Period Election of two months is in effect on the Carrying Costs Accrual Termination Date, then the first Business Day of the second calendar month following the Carrying Costs Accrual Termination Date shall be the first Base Rent Date. c) If the LIBOR Period Election in effect on the Carrying Costs Accrual Termination Date is three months or six months, then the first Business Day of the third calendar month following the Carrying Costs Accrual Termination Date shall be the first Base Rent Date. Each successive Base Rent Date after the first Base Rent Date shall be the first Business Day of the first, second or third calendar month following the calendar month which includes the preceding Base Rent Date, determined as follows: (1) If a LIBOR Period Election of one month is in effect on a Base Rent Date, then the first Business Day of the first calendar month following such Base Rent Date shall be the next following Base Rent Date. (2) If a LIBOR Period Election of two months is in effect on a Base Rent Date, then the first Business Day of the second calendar month following such Base Rent Date shall be the next following Base Rent Date. (3) If a LIBOR Period Election of three months or six months is in effect on a Base Rent Date, then the first Business Day of the third calendar month following such Base Rent Date shall be the next following Base Rent Date. Thus, for example, if the Carrying Costs Accrual Termination Date falls on the first Business Day of June, 1999 and a LIBOR Period Election of six months commences on the Carrying Costs Accrual Termination Date, then the first Base Rent Date shall be the first Business Day of September, 1999, and the second Base Rent Date shall be the first Business Day of December, 1999. "Base Rent Period" means a period for which Base Rent must be paid under the Lease, each of which periods shall correspond to the LIBOR Period Election for such period. The first Base Rent Period shall begin on and include the Carrying Costs Accrual Termination Date, and each successive Base Rent Period shall begin on and include the Base Rent Date upon which the preceding Base Rent Period ends. Each Base Rent Period, including the first Base Rent Period, shall end on but not include the first or second Base Rent Date after the Base Rent Date upon which such period began, determined as follows: (1) If the LIBOR Period Election for a Base Rent Period is one month, two months or three months, then such Base Rent Period shall end on the first Base Rent Date after the Base Rent Date upon which such period began. (2) If the LIBOR Period Election for a Base Rent Period is six months, then such Base Rent Period shall end on the second Base Rent Date after the Base Rent Date upon which such period began. The determination of Base Rent Periods can be illustrated by two examples: 1) If Tenant makes a LIBOR Period Election of three months for a hypothetical Base Rent Period beginning on the first Business Day in January, 2000, then such Base Rent Period will end on but not include the first Base Rent Date after it begins; that is, such Base Rent Period will end on the first Business Day in April, 2000, the third calendar month after January, 2000. 2) If, however, Tenant makes a LIBOR Period Election of six months for the hypothetical Base Rent Period beginning the first Business Day in January, 2000, then such Base Rent Period will end on but not include the second Base Rent Date after it begins; that is, the first Business Day in July, 2000. (l) Breakage Costs. "Breakage Costs" means any and all costs, losses or expenses incurred or sustained by Landlord's Parent or any other Participant, for which Landlord's Parent or the other Participant shall expect reimbursement from Landlord, because of the resulting liquidation or redeployment of deposits or other funds used to make Funding Advances upon any termination of this Lease by Tenant pursuant to Paragraph 2 or any sale of the Leased Property pursuant to the Purchase Agreement, if such termination or sale is effective as of any day other than a Base Rent Date. Breakage Costs will include losses attributable to any decline in LIBOR as of the effective date of termination or sale as compared to LIBOR used to determine the Effective Rate then in effect. (However, if Landlord's Parent or another Participant actually receives a profit upon the liquidation or redeployment of deposits or other funds used to make Funding Advances, because of any increase in LIBOR, then such profit will be offset against costs or expenses that would otherwise be charged as Breakage Costs for the account of Landlord's Parent or the applicable Participant under this Lease.) Each determination by Landlord's Parent of Breakage Costs shall, in the absence of clear and demonstrable error, be conclusive and binding upon Landlord and Tenant. (m) Business Day. "Business Day" means any day that is (1) not a Saturday, Sunday or day on which commercial banks are generally closed or required to be closed in New York City, New York or San Francisco, California, and (2) a day on which dealings in deposits of dollars are transacted in the London interbank market; provided that if such dealings are suspended indefinitely for any reason, "Business Day" shall mean any day described in clause (1). (n) Capital Adequacy Charges. "Capital Adequacy Charges" means any additional amounts Landlord's Parent or any other Participant requires Landlord to pay as compensation for an increase in required capital as provided in subparagraph 9.(y)(iv). (o) Carrying Costs. "Carrying Costs" means the charges added to and made a part of the Outstanding Construction Allowance from time to time on and before the Carrying Costs Accrual Termination Date pursuant to and as more particularly described in subparagraph 6.(a)(ii) below. (p) Carrying Costs Accrual Termination Date. "Carrying Costs Accrual Termination Date" means the earlier of (1) the Last Advance Date or (2) the first Advance Date that occurs at least ten (10) days after Landlord has received a notice from Tenant, in the form of Exhibit L attached hereto, stating that Tenant irrevocably elects to accelerate the Carrying Costs Accrual Termination Date and thereby accelerate the commencement of Base Rent accruals and the termination of accruals of Carrying Costs. It is understood that Tenant may, but shall not be required, to give such a notice at any time. (q) Cash Collateral. "Cash Collateral" shall have the meaning assigned to it in the Pledge Agreement. (r) Certificate of Deposit Collateral Percentage. "Certificate of Deposit Collateral Percentage" for each Period means the Certificate of Deposit Collateral Percentage for such Period (as defined in and determined in accordance with the Pledge Agreement); provided, however, for purposes of this Lease, the Certificate of Deposit Collateral Percentage for any Period shall not exceed a fraction, the numerator of which fraction shall equal the Value (as defined in and determined in accordance with the Pledge Agreement) of all Cash Collateral that is, on the first day of such Period, held by the Deposit Takers under (and as defined in) the Pledge Agreement, subject to a Qualifying Security Interest and free from claims or security interests held or asserted by any third party, and the denominator of which fraction shall equal the Stipulated Loss Value on the first day of such Period (computed after the addition of any Construction Advance made on such first day, after the addition of all Carrying Costs for prior Construction Periods, and after the subtraction of any Qualified Payments applied on such first day). (s) Closing Costs. "Closing Costs" means an amount requested by Tenant, not to exceed $200,000, advanced by or on behalf of Landlord on the effective date of this Lease to pay on behalf of Tenant (i) the Upfront Fee, (ii) "Base Rent" and "Breakage Costs" which have accrued and are due under (and as are defined in) the Original Lease, and (iii) expenses incurred in connection with the preparation and negotiation of this Lease, the Purchase Documents, the Environmental Indemnity, the Participation Agreement and related documents. To the extent that Landlord does not itself apply funds advanced as provided in this definition, the remainder thereof will be advanced to Tenant, with the expectation that Tenant shall use any such amount advanced for one or more of the following purposes: (1) the payment of the Upfront Fee and expenses incurred in connection with the preparation and negotiation of this Lease, the Purchase Documents, the Environmental Indemnity, the Participation Agreement and related documents; (2) the payment or reimbursement of other expenses incurred by Tenant in connection with any improvements Tenant may elect to make to the Leased Property in accordance with the requirements and limitations imposed by this Lease, including the planning, design, engineering and permitting of thereof; (3) the maintenance of the Leased Property; or (4) the payment of Rents next due. The advance described in this definition shall constitute part of the Initial Investment, and the amount thereof may be confirmed by Landlord and Tenant in a separate closing certificate. (t) Change of Control Event. "Change of Control Event" means the occurrence of any merger or consolidation or sale of assets involving Tenant that is prohibited by subparagraph 9.(ad)(iii). (u) Code. "Code" means the Internal Revenue Code of 1986, as amended from time to time. (v) Collateral. "Collateral" shall have the meaning assigned to it in the Pledge Agreement. (w) Commitment Fee. "Commitment Fee" shall have the meaning assigned to it in subparagraph 3.(c) below. (x) Completion Deadline. "Completion Deadline" means the first Business Day in August, 1999. (y) Completion Notice. "Completion Notice" shall have the meaning assigned to it in subparagraph 6.(d) below. (z) Construction Advances. "Construction Advances" means actual advances of funds made by or on behalf of Landlord pursuant to Paragraph 6.(a)(i) below for costs incurred to construct the Designated Improvements or for property taxes and assessments assessed against the Leased Property paid prior to the Last Advance Date. (aa) Construction Allowance. "Construction Allowance" means the allowance, consisting of all Construction Advances and Carrying Costs, which is to be provided by Landlord for the construction of the Designated Improvements as more particularly described in Paragraph 6 below. (ab) Construction Documents. "Construction Documents" means all construction contracts, architectural contracts, engineering contracts, drawings, plans, specifications, change orders, budgets, surveys, soils reports, environmental impact studies and other documents executed by or prepared for Tenant with respect to the construction of the Designated Improvements. (ac) Construction Periods. The first "Construction Period" shall be the period beginning on and including the effective date hereof and ending on but not including the first Advance Date. Each successive "Construction Period" after the first Construction Period shall be a period of approximately one (1) month (except Construction Periods, if any, commencing on or after the Carrying Costs Accrual Termination Date, which shall be coterminous with Base Rent Periods) and shall begin on and include the day on which the preceding Construction Period ends and shall end on but not include the next following Advance Date. The last "Construction Period" shall end on but not include the Last Advance Date. (ac) Custodial Agreement. "Custodial Agreement" means the Custodial Agreement dated as of the date hereof between Banque Nationale de Paris, New York Branch, and Tenant pursuant to which such bank will hold securities pledged by Tenant as collateral for Tenant's obligations under the Purchase Agreement, as such Custodial Agreement may be extended, supplemented, amended, restated or otherwise modified from time to time. (ad) Debt. "Debt" of any Person means (i) indebtedness of such Person for borrowed money, (ii) obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) obligations of such Person to pay the deferred purchase price of property or services, (iv) obligations of such Person as lessee under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases, (v) obligations of such Person, contingent or otherwise, under any lease of real property or related documents (including a separate purchase agreement) which provide that such Person must purchase or cause another to purchase any interest in the leased property and thereby guarantee a minimum residual value of the leased property to the lessor; (vi) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (v) above, (vii) liabilities of another Person secured by a Lien on, or payable out of the proceeds of production from, property of such Person even though such obligation shall not be assumed by such Person (but in the case of such liabilities not assumed by such Person, the liabilities shall constitute Debt of such Person only to the extent of the value of such Person's property encumbered by the Lien securing such liabilities) and (viii) Unfunded Benefit Liabilities. (ae) Default. "Default" means any event which, with the passage of time or the giving of notice or both, would (if not cured within any applicable cure period) constitute an Event of Default. (af) Default Rate. "Default Rate" means a floating per annum rate equal to three percent (3%) above the Prime Rate. However, in no event will the Default Rate exceed the maximum interest rate permitted by law. (ag) Defaulting Participant. "Defaulting Participant" means any Approved Participant that shall have breached the Participation Agreement by failing to provide a Funding Advance to Landlord for (or equal to) such Participant's percentage of any Construction Advance requested by Tenant. (For purposes of this Lease a "Participant's percentage" shall mean the percentage that, under the Participation Agreement, is to be multiplied against Construction Advances to compute the amount the Participant must advance to Landlord for (or equal to) a percentage of Construction Advances requested hereunder.) (ah) Designated Improvements. "Designated Improvements" shall mean the improvements on the Land and any furnishings for such improvements which are to be constructed and installed by Tenant using the Construction Allowance as described in Paragraph 6 below. (ai) Designated Sale Date. "Designated Sale Date" shall have the meaning assigned to it in the Purchase Agreement. (aj) Effective Rate. "Effective Rate" means, for each Period, the per annum rate determined by dividing (A) LIBOR for such Period, by (B) 100% minus the Eurodollar Rate Reserve Percentage for such Period; provided, however, for each day during the short first Construction Period ending on August 1, 1997, the Effective Rate will equal the per annum rate which is fifty basis points (50/100 of 1%) above the Fed Funds Rate on that day. If LIBOR or the Eurodollar Rate Reserve Percentage changes from Period to Period, then the Effective Rate shall be automatically increased or decreased, as the case may be, as of the date of the change from Period to Period. If for any reason Landlord's Parent determines that it is impossible or unreasonably difficult to determine the Effective Rate with respect to a given Period in accordance with the preceding sentences, then the "Effective Rate" for that Period shall equal any published index or per annum interest rate determined reasonably and in good faith by Landlord's Parent to be a comparable rate at the beginning of the first day of that period. A comparable interest rate might be, for example, the then existing yield on short term United States Treasury obligations (as compiled by and published in the then most recently published United States Federal Reserve Statistical Release H.15(519) or its successor publication), plus or minus a fixed adjustment based on Landlord's Parent's comparison of past eurodollar market rates to past yields on such Treasury obligations. Any determination by Landlord's Parent of the Effective Rate hereunder shall, in the absence of clear and demonstrable error, be conclusive and binding. (ak) Environmental Indemnity. "Environmental Indemnity" means the separate Environmental Indemnity Agreement dated as of the date hereof executed by Tenant in favor of Landlord covering the Land and certain other property described therein, as such agreement may be extended, supplemented, amended, restated or otherwise modified from time to time. (al) Environmental Laws. "Environmental Laws" means any and all existing and future Applicable Laws pertaining to safety, health or the environment, or to Hazardous Substances or Hazardous Substance Activities, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 (as amended, hereinafter called "CERCLA"), and the Resource Conservation and Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal Act Amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984 (as amended, hereinafter called "RCRA"). (am) Environmental Losses. "Environmental Losses" means Losses suffered or incurred by any Indemnified Party, directly or indirectly, relating to or arising out of, based on or as a result of: (i) any Hazardous Substance Activity; (ii) any violation of Environmental Laws relating to the Leased Property or to the ownership, use, occupancy or operation thereof; (iii) any investigation, inquiry, order, hearing, action, or other proceeding by or before any governmental or quasi-governmental agency or authority in connection with any Hazardous Substance Activity; or (iv) any claim, demand, cause of action or investigation, or any action or other proceeding, whether meritorious or not, brought or asserted against any Indemnified Party which directly or indirectly relates to, arises from, is based on, or results from any of the matters described in clauses (i), (ii), or (iii) of this subparagraph 1.(am), or any allegation of any such matters. ENVIRONMENTAL LOSSES INCURRED BY OR ASSERTED AGAINST A PARTICULAR INDEMNIFIED PARTY SHALL INCLUDE LOSSES RELATING TO OR ARISING OUT OF OR AS A RESULT OF ANY MATTERS LISTED IN THE PRECEDING SENTENCE EVEN WHEN SUCH MATTERS ARE CAUSED BY THE ORDINARY NEGLIGENCE (AS DEFINED BELOW) OF THAT PARTICULAR OR ANY OTHER INDEMNIFIED PARTY. However, Losses incurred by or asserted against a particular Indemnified Party and proximately caused by (and attributed by any applicable principles of comparative fault to) the wilful misconduct, Active Negligence or gross negligence of any Indemnified Party will not constitute Environmental Losses of such Indemnified Party for purposes of this Lease. (an) Environmental Report. "Environmental Report" means, collectively, the reports listed on Exhibit G attached hereto. (ao) ERISA. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, together with all rules and regulations promulgated with respect thereto. (ap) ERISA Affiliate. "ERISA Affiliate" means any Person who for purposes of Title IV of ERISA is a member of Tenant's controlled group, or under common control with Tenant, within the meaning of Section 414 of the Code, and the regulations promulgated and rulings issued thereunder. (aq) ERISA Termination Event. "ERISA Termination Event" means (i) the occurrence with respect to any Plan of a) a reportable event described in Sections 4043(b)(5) or (6) of ERISA or b) any other reportable event described in Section 4043(b) of ERISA other than a reportable event not subject to the provision for 30-day notice to the Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation under Section 4043(a) of ERISA, or (ii) the withdrawal of Tenant or any Affiliate of Tenant from a Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or (iii) the filing of a notice of intent to terminate any Plan or the treatment of any Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate any Plan by the Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or (v) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. (ar) Escrowed Proceeds. "Escrowed Proceeds" shall mean any proceeds that are received by Landlord from time to time during the Term (and any interest earned thereon), which Landlord is holding for the purposes specified in the next sentence, from any party (1) under any casualty insurance policy as a result of damage to the Leased Property, (2) as compensation for any restriction placed upon the use or development of the Leased Property or for the condemnation of the Leased Property or any portion thereof, (3) because of any judgment, decree or award for injury or damage to the Leased Property or (4) under any title insurance policy or otherwise as a result of any title defect or claimed title defect with respect to the Leased Property; provided, however, in determining "Escrowed Proceeds" there shall be deducted all expenses and costs of every type, kind and nature (including Attorneys' Fees) incurred by Landlord to collect such proceeds; and provided, further, "Escrowed Proceeds" shall not include any payment to Landlord by a Participant or an Affiliate of Landlord that is made to compensate Landlord for the Participant's or Affiliate's share of any Losses Landlord may incur as a result of any of the events described in the preceding clauses (1) through (4). "Escrowed Proceeds" shall include only such proceeds as are held by Landlord (A) pursuant to Paragraph 4 for the payment to Tenant for the restoration or repair of the Leased Property or (B) for application (generally, on the next following Advance Date or Base Rent Date which is at least three (3) Business Days following Landlord's receipt of such proceeds) as a Qualified Payment or as reimbursement of costs incurred in connection with a Qualified Payment. "Escrowed Proceeds" shall not include any proceeds that have been applied as a Qualified Payment or to pay any costs incurred in connection with a Qualified Payment. Until Escrowed Proceeds are paid to Tenant pursuant to Paragraph 4 below or applied as a Qualified Payment or as reimbursement for costs incurred in connection with a Qualified Payment, Landlord shall keep the same deposited in an interest bearing account, and all interest earned on such account shall be added to and made a part of Escrowed Proceeds. (as) Eurocurrency Liabilities. "Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. (at) Eurodollar Rate Reserve Percentage. "Eurodollar Rate Reserve Percentage" means, for purposes of determining the Effective Rate for any Period, the reserve percentage applicable two Business Days before the first day of such period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with deposits exceeding One Billion Dollars with respect to liabilities or deposits consisting of or including Eurocurrency Liabilities (or with respect to any other category or liabilities by reference to which LIBOR is determined) having a term comparable to such period. (au) Event of Default. "Event of Default" shall have the meaning assigned to it in subparagraph 14.(a) below. (av) Excluded Taxes. "Excluded Taxes" shall mean (1) all federal, state and local income taxes upon the Base Rent, the Upfront Fee, the Commitment Fee, Administrative Fees and any interest paid to Landlord pursuant to subparagraph 3.(f), (2) any taxes imposed by any governmental authority outside the United States, and (3) any transfer or change of ownership taxes assessed because of Landlord's transfer or conveyance to any third party of any rights or interest in this Lease, the Purchase Documents, or the Leased Property, but excluding any such taxes assessed because of any Permitted Transfer. (aw) Fair Market Value. "Fair Market Value" shall have the meaning assigned to it in the Purchase Agreement. (ax) Fed Funds Rate. "Fed Funds Rate" means, for any period, a fluctuating interest rate (expressed as a per annum rate and rounded upwards, if necessary, to the next 1/16 of 1%) equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rates are not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Landlord's Parent from three Federal funds brokers of recognized standing selected by Landlord's Parent. All determinations of the Fed Funds Rate by Landlord's Parent shall, in the absence of clear and demonstrable error, be binding and conclusive upon Landlord and Tenant. (ay) Funding Advances. "Funding Advances" means (1) advances (equal in the aggregate to the Initial Investment) made on or prior to the date hereof by Landlord's Parent and other Participants to or on behalf of Landlord to permit Landlord to acquire or maintain its investment in the Leased Property and to allow Landlord to provide the advance described in the definition of Closing Costs in subparagraph 1.(s), (2) future advances (which, together with the Funding Advances described in the preceding clauses (1), are expected to total $83,600,000) made by Landlord's Parent or any Participant to or on behalf of Landlord to allow Landlord to provide Construction Advances hereunder and to cover Carrying Costs, and (3) future advances made by Landlord's Parent or any Participant to or on behalf of Landlord in replacement of or renewal and extension of other Funding Advances. For example, if after the date hereof a new Participant advances funds on behalf of Landlord to Landlord's Parent or another then existing Participant in repayment of all or part of Funding Advances previously made by Landlord's Parent or the other Participant, such advance of funds by the new Participant shall constitute a Funding Advance hereunder, and the prior Funding Advances so repaid to Landlord's Parent or the other Participant shall thereupon cease to constitute Funding Advances for purposes of this Lease. (az) GAAP. "GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time, applied on a basis consistent with those used in the preparation of the financial statements referred to in subparagraph 9.(w) (except for changes concurred in by Tenant's independent public accountants). (ba) Hazardous Substance. "Hazardous Substance" means (i) any chemical, compound, material, mixture or substance that is now or hereafter defined or listed in, regulated under, or otherwise classified pursuant to, any Environmental Laws as a "hazardous substance," "hazardous material," "hazardous waste," "extremely hazardous waste," "infectious waste," "toxic substance," "toxic pollutant," or any other formulation intended to define, list or classify substances by reason of deleterious properties, including, without limitation, ignitability, corrosiveness, reactivity, carcinogenicity, toxicity or reproductive toxicity; (ii) petroleum, any fraction of petroleum, natural gas, natural gas liquids, liquified natural gas, synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas), and ash produced by a resource recovery facility utilizing a municipal solid waste stream, and drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (iii) asbestos and any asbestos containing material; (iv) "waste" as defined in section 13050(d) of the California Water Code; and (v) any other material that, because of its quantity, concentration or physical or chemical characteristics, poses a significant present or potential hazard to human health or safety or to the environment if released into the workplace or the environment. (bb) Hazardous Substance Activity. "Hazardous Substance Activity" means any actual, proposed or threatened use, storage, holding, existence, location, release (including, without limitation, any spilling, leaking, leaching, pumping, pouring, emitting, emptying, dumping, disposing into the environment, and the continuing migration into or through soil, surface water, groundwater or any body of water), discharge, deposit, placement, generation, processing, construction, treatment, abatement, removal, disposal, disposition, handling or transportation of any Hazardous Substance from, under, in, into or on the Leased Property, including, without limitation, the movement or migration of any Hazardous Substance from surrounding property, surface water, groundwater or any body of water under, in, into or onto the Leased Property and any residual Hazardous Substance contamination in, on or under the Leased Property. (bc) Impositions. "Impositions" shall have the meaning assigned to it in subparagraph 9.(p) below. (bd) Improvements. "Improvements," as defined in the recitals at the beginning of this Lease, shall include not only existing improvements to the Land as of the date hereof, if any, but also any new improvements or changes to existing improvements made by Tenant. Accordingly, any and all new improvements made to the Leased Property by Tenant using the Construction Allowance as contemplated in this Lease shall constitute Improvements as that term is used herein. (be) Indemnified Party. "Indemnified Party" means each of (1) Landlord and any of Landlord's successors and assigns as to all or any portion of the Leased Property or any interest therein (but excluding Tenant or any Applicable Purchaser under the Purchase Agreement or any Person that claims its interest in the Leased Property through or under Tenant or through or under an assignment from Landlord that does not constitute a Permitted Transfer), (2) the Participants, and (3) any Affiliate, officer, agent, director, employee or servant of any of the parties described in clause (1) or (2) preceding. (bf) Initial Investment. "Initial Investment" means $10,200,000, being equal to the $10,000,000 "Stipulated Loss Value" under and as defined in the Original Lease, plus the advance described in the definition of Closing Costs in subparagraph 1.(s) above. (bg) Landlord's Parent. "Landlord's Parent" means Landlord's Affiliate, Banque Nationale de Paris, a bank organized and existing under the laws of France, together with any Affiliates of such bank that directly or indirectly provided or hereafter during the Term provide or maintain any Funding Advances, and any successors of such bank and such Affiliates. (bh) Last Advance Date. "Last Advance Date" means the earlier of (1) the Completion Deadline (or - if the Completion Deadline is not an Advance Date, which could occur if Tenant exercises its rights hereunder to accelerate the Carrying Costs Accrual Termination Date and to thereafter designate a LIBOR Period Election of more than one month - then the latest Advance Date prior to the Completion Deadline), (2) the first Advance Date that occurs at least ten (10) days after Landlord has received a Completion Notice or a Notice of Last Advance, or (3) the Designated Sale Date. (bi) LIBOR. "LIBOR" means, for purposes of determining the Effective Rate for each Period, the rate determined by Landlord's Parent to be the average rate of interest per annum (rounded upwards, if necessary, to the next 1/16 of 1%) of the rates at which deposits of dollars are offered or available to Landlord's Parent in the London interbank market at approximately 11:00 a.m. (London time) on the second Business Day preceding the first day of such period. Landlord shall instruct Landlord's Parent to consider deposits, for purposes of making the determination described in the preceding sentence, that are offered: (i) for delivery on the first day of such Period, (ii) in an amount equal or comparable to the total (projected on the applicable date of determination by Landlord's Parent) Stipulated Loss Value on the first day of such Period, and (iii) for a period of time equal or comparable to the appropriate Period. If Landlord's Parent so chooses, it may determine LIBOR for any period by reference to the rate reported by the British Banker's Association on Page 3750 of the Telerate Service at approximately 11:00 a.m. (London time) on the second Business Day preceding the first day of such period; provided, however, Tenant may notify Landlord that Tenant objects to any future determination of LIBOR in the manner provided by this sentence, in which case any determination of LIBOR required more than three Business Days after Landlord's receipt of such notice shall be made as if this sentence had been struck from this Lease. If for any reason Landlord's Parent determines that it is impossible or unreasonably difficult to determine LIBOR with respect to a given Period in accordance with the preceding sentences, or if Landlord's Parent shall determine that it is unlawful (or any central bank or governmental authority shall assert that it is unlawful) for Landlord, Landlord's Parent or any other Participant to provide or maintain any Funding Advances hereunder during any Period for which Base Rent is computed by reference to LIBOR, then "LIBOR" for that Period shall equal the rate which is fifty basis points (50/100 of 1%) above the Fed Funds Rate for that period. All determinations of LIBOR by Landlord's Parent shall, in the absence of clear and demonstrable error, be binding and conclusive upon Landlord and Tenant. (bj) LIBOR Period Election. "LIBOR Period Election" for any Base Rent Period means a period of one month, two months, three months or six months as designated by Tenant at least ten Business Days prior to the commencement of such Base Rent Period by a notice given to Landlord in the form of Exhibit M attached to this Lease. (For purposes of this Lease a LIBOR Period Election for any Base Rent Period shall also be considered the LIBOR Period Election in effect on (1) the date [whether the Carrying Costs Accrual Termination Date or a Base Rent Date] upon which such Base Rent Period begins and (2) subsequent Base Rent Dates, if any, which occur before the date upon which such Base Rent Period ends.) Any LIBOR Period Election shall remain in effect not only for the entire first Base Rent Period for which it is designated or becomes effective, but also for subsequent Base Rent Periods until a new designation by Tenant becomes effective in accordance with the provisions set forth in this definition. Notwithstanding the foregoing, however: (1) any LIBOR Period Election that would cause a Base Rent Period to extend beyond the end of the scheduled Term will be shortened as necessary to cause such Base Rent Period to end when the scheduled Term ends; (2) changes in the LIBOR Period Election shall become effective only upon the commencement of a new Base Rent Period; (3) until such time as Tenant designates another LIBOR Period Election consistent with the foregoing requirements, Tenant will be considered to have designated a LIBOR Period Election of one month; and (4) if an Event of Default shall have occurred and be continuing on the third Business Day preceding the commencement of any Base Rent Period, the LIBOR Period Election for such Base Rent Period shall be one month. (bk) Lien. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any agreement to sell receivables with recourse, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction). Customary bankers' rights of set-off arising by operation of law or by contract (however styled, if the contract grants rights no greater than those arising by operation of law) in connection with working capital facilities, lines of credit, term loans and letter of credit facilities and other contractual arrangements entered into with banks in the ordinary course of business are not "Liens" for the purposes of this Lease. (bl) Losses. "Losses" means any and all losses, liabilities, damages (whether actual, consequential, punitive or otherwise denominated), demands, claims, actions, judgments, causes of action, assessments, fines, penalties, costs, and out-of-pocket expenses (including, without limitation, Attorneys' Fees and the fees of outside accountants and environmental consultants), of any and every kind or character, foreseeable and unforeseeable, liquidated and contingent, proximate and remote, known and unknown. (bm) Maximum Construction Allowance. "Maximum Construction Allowance" means $83,600,000, minus the Initial Investment. (bn) Notice of Last Advance. "Notice of Last Advance" means any notice given by Tenant to Landlord stating that Tenant irrevocably elects not to request or accept any further Construction Advances which Tenant might be entitled to but for such election. It is understood that Tenant may, but shall not be required, to give a Notice of Last Advance in order to accelerate the Last Advance Date and to thereby accelerate the date upon which Commitment Fees shall cease to accrue. (bo) Ordinary Negligence. "Ordinary Negligence" of an Indemnified Party means any negligent acts or omissions of such party that does not for any reason constitute Active Negligence as defined in this Lease. (bp) Outstanding Construction Allowance. "Outstanding Construction Allowance" means at any time the amount equal to (1) the total Construction Advances made by Landlord, PLUS (2) all Carrying Costs added to the Outstanding Construction Allowance under subparagraph 6.(a)(ii) on or prior to the date in question, LESS (3) the amount (if any) of Qualified Payments paid to Landlord and applied to the Outstanding Construction Allowance on or prior to such date, and LESS (4) any payments previously made by Tenant to Landlord pursuant to subparagraph 3.(i). (bq) Participant. "Participant" means any Person, including Landlord's Parent, that agrees with Landlord or another Participant to participate in all or some of the risks and rewards to Landlord of this Lease and the Purchase Documents. As of the effective date hereof, the only Participants are those which have executed the Participation Agreement, but such Participants and Landlord may agree to share in risks and rewards of this Lease and the Purchase Documents with other Participants in the future. However, no Person other than Landlord's Parent and the Approved Participants shall qualify as a Participant for purposes of this Lease, the Purchase Documents or any other agreement to which Tenant is a party unless, with Tenant's prior written approval or when an Event of Default had occurred and was continuing, such Person became a party to the Pledge Agreement and to the Participation Agreement by executing supplements to those agreements as contemplated therein. (br) Participation Agreement. "Participation Agreement" means the Participation Agreement dated the date hereof among Landlord, Landlord's Parent, and the Participants named therein, pursuant to which Landlord's Parent and such Participants have agreed to participate in certain risks and rewards to Landlord of this Lease and the Purchase Agreement, as such Participation Agreement may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. (bs) Period. "Period" means a Construction Period or a Base Rent Period, as the context requires. (bt) Permitted Encumbrances. "Permitted Encumbrances" means (i) the encumbrances and other matters affecting the Leased Property that are set forth in Exhibit B attached hereto and made a part hereof, and (ii) any provisions of the Existing Contract or any other agreement described therein that survived closing thereunder (but not any deed of trust, mortgage or other agreement given to secure the repayment of borrowed funds), and (iii) any easement agreement or other document affecting title to the Leased Property executed by Landlord at the request of or with the consent of Tenant. (bu) Permitted Hazardous Substance Use. "Permitted Hazardous Substance Use" means the use, storage and offsite disposal of Permitted Hazardous Substances in strict accordance with applicable Environmental Laws and with due care given the nature of the Hazardous Substances involved; provided, the scope and nature of such use, storage and disposal shall not include the use of underground storage tanks for any purpose other than the storage of water for fire control, nor shall such scope and nature: (1) exceed that reasonably required for the construction of Improvements permitted by this Lease and for the operation of the Leased Property for the purposes expressly permitted under subparagraph 8.(a); or (2) include any disposal, discharge or other release of Hazardous Substances from operations on the Leased Property in any manner that might allow such substances to reach the San Francisco Bay, surface water or groundwater, except (i) through a lawful and properly authorized discharge (A) to a publicly owned treatment works or (B) with rainwater or storm water runoff in accordance with Applicable Laws and any permits obtained by Tenant that govern such runoff; or (ii) any such disposal, discharge or other release of Hazardous Substances for which no permits are required and which are not otherwise regulated under applicable Environmental Laws. Further, notwithstanding anything to the contrary herein contained, Permitted Hazardous Substance Use shall not include any use of the Leased Property as a treatment, storage or disposal facility (as defined by federal Environmental Laws) for Hazardous Substances, including but not limited to a landfill, incinerator or other waste disposal facility. (bv) Permitted Hazardous Substances. "Permitted Hazardous Substances" means Hazardous Substances used and reasonably required for Tenant's operation of the Leased Property for the purposes expressly permitted by subparagraph 8.(a) in strict compliance with all Environmental Laws and with due care given the nature of the Hazardous Substances involved. Without limiting the generality of the foregoing, Permitted Hazardous Substances shall include, without limitation, usual and customary office and janitorial products, and the materials listed on Exhibit C attached hereto. (bw) Permitted Transfer. "Permitted Transfer" means any one or more of the following: (1) the creation or conveyance of rights and interests under the Participation Agreement in favor of Landlord's Parent or Participants; (2) subject to the last sentence of subparagraph 11.(d), any assignment or conveyance by Landlord of any lien or security interest against the Leased Property (in contrast to a conveyance of Landlord's fee estate in the Leased Property) or of any interest in Rent, payments required by the Purchase Agreement or payments to be generated from the Leased Property after the Term, to any present or future Participant or to any Affiliate of Landlord; (3) any agreement to exercise or refrain from exercising rights or remedies hereunder or under the Purchase Documents or the Environmental Indemnity made by Landlord with any present or future Participant or Affiliate of Landlord; (4) any assignment or conveyance by Landlord requested by Tenant or required by any Permitted Encumbrance, by the Purchase Agreement or by Applicable Laws; (5) any assignment or conveyance by Landlord when an Event of Default shall have occurred and be continuing; or (6) any assignment or conveyance by Landlord after the Designated Sale Date. (bx) Person. "Person" means an individual, a corporation, a partnership, an unincorporated organization, an association, a joint stock company, a joint venture, a trust, an estate, a government or agency or political subdivision thereof or other entity, whether acting in an individual, fiduciary or other capacity. (by) Plan. "Plan" means at any time an employee pension benefit plan which is covered under Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (i) maintained by Tenant or any Subsidiary for employees of Tenant or any Subsidiary or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which Tenant or any Subsidiary is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions. (bz) Pledge Agreement. "Pledge Agreement" means the Pledge Agreement dated as of the date hereof between Landlord and Tenant, pursuant to which Tenant may pledge certificates of deposit and/or securities as security for Tenant's obligations under the Purchase Agreement (and for the corresponding obligations of Landlord to the Participants under the Participation Agreement), as such Pledge Agreement may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. (ca) Prime Rate. "Prime Rate" means the prime interest rate or equivalent charged by Landlord's Parent in the United States as announced or published by Landlord's Parent from time to time, which need not be the lowest interest rate charged by Landlord's Parent. If for any reason Landlord's Parent does not announce or publish a prime rate or equivalent, the prime rate or equivalent announced or published by ABN AMRO Bank N.V. or Credit Commercial de France as selected by Landlord shall be used as the Prime Rate. The prime rate or equivalent announced or published by such bank need not be the lowest rate charged by it. The Prime Rate may change from time to time after the date hereof without notice to Tenant as of the effective time of each change in rates described in this definition. (cb) Purchase Agreement. "Purchase Agreement" means the Purchase Agreement dated as of the date hereof between Landlord and Tenant pursuant to which Tenant has agreed to purchase or to arrange for the purchase by a third party of the Leased Property, as such Purchase Agreement may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. (cc) Purchase Documents. "Purchase Documents" means collectively the Purchase Agreement, the Pledge Agreement, and the Custodial Agreement. (cd) Purchase Price. "Purchase Price" shall have the meaning assigned to it in the Purchase Agreement. (ce) Qualified Payments. "Qualified Payments" means all payments received by Landlord from time to time during the Term from any party (1) under any casualty insurance policy as a result of damage to the Leased Property, (2) as compensation for any restriction placed upon the use or development of the Leased Property or for the condemnation of the Leased Property or any portion thereof, (3) because of any judgment, decree or award for injury or damage to the Leased Property or (4) under any title insurance policy or otherwise as a result of any title defect or claimed title defect with respect to the Leased Property; provided, however, that (x) in determining Qualified Payments, there shall be deducted all expenses and costs of every kind, type and nature (including taxes and Attorneys' Fees) incurred by Landlord with respect to the collection of such payments, (y) Qualified Payments shall not include any payment to Landlord by a Participant or an Affiliate of Landlord that is made to compensate Landlord for the Participant's or Affiliate's share of any Losses Landlord may incur as a result of any of the events described in the preceding clauses (1) through (4) and (z) Qualified Payments shall not include any payments received by Landlord that Landlord has paid to Tenant for the restoration or repair of the Leased Property or that Landlord is holding as Escrowed Proceeds. For purposes of computing the total Qualified Payments (and other amounts dependent upon Qualified Payments, such as Stipulated Loss Value and the Outstanding Construction Allowance) paid to or received by Landlord as of any date, payments described in the preceding clauses (1) through (4) will be considered as Escrowed Proceeds, not Qualified Payments, until they are actually applied as Qualified Payments by Landlord, which Landlord will do upon the first Advance Date or Base Rent Date which is at least three (3) Business Days after Landlord's receipt of the same unless postponement of such application is required by other provisions of this Lease or consented to by Tenant in writing. Thus, for example, condemnation proceeds actually received by Landlord in the middle of a Base Rent Period will not be considered as having been received by Landlord for purposes of computing the total Qualified Payments unless and until actually applied by Landlord as a Qualified Payment on a subsequent Base Rent Date in accordance with Paragraph 4 below. (Landlord shall have no obligation to readvance any portion of the Outstanding Construction Allowance reduced by Qualified Payments.) (cf) Qualifying Security Interest. "Qualifying Security Interest" means a first priority perfected security interest under the Pledge Agreement which is sufficient, for purposes of the laws and regulations which govern minimum amounts of capital that Landlord and Participants or their affiliates must maintain, to permit them to assign a risk weighting of no more than twenty percent to a portion of their collective investment in the Leased Property equal to the Value (as defined in and determined in accordance with the Pledge Agreement) of the Collateral encumbered by such an interest. (cg) Remaining Proceeds. "Remaining Proceeds" shall have the meaning assigned to it in subparagraph 4.(a)(ii). (ch) Rent. "Rent" means the Base Rent and all Additional Rent. (ci) Responsible Financial Officer. "Responsible Financial Officer" means the chief financial officer, the controller, the treasurer or the assistant treasurer of Tenant. (cj) Scope Change. A "Scope Change" means a material addition to, deletion from or other modification to the quality, function or capacity of the Designated Improvements as delineated in Exhibit H or in any plans and specifications therefor previously approved by Landlord, but shall not include refinement, correction and detailing by Tenant or Tenant's architects or contractors from time to time. As used in this definition, a "material" change shall mean any change that (a) is reasonably likely to substantially reduce the fair market value of the Leased Property (after completion of the Designated Improvements), or (b) will change the general character of the Designated Improvements from that described in Exhibit H. (ck) Securities Collateral. "Securities Collateral" shall have the meaning assigned to it in the Pledge Agreement. (cl) Securities Collateral Percentage. "Securities Collateral Percentage" for each Period means the Securities Collateral Percentage for such Period (as defined in and determined in accordance with the Pledge Agreement); provided, however, for purposes of this Lease, the Securities Collateral Percentage: (i) for any Period ending on or prior to the Last Advance Date shall be zero; and (ii) for any Period ending after the Last Advance Date shall not exceed the lesser of (A) one minus the Certificate of Deposit Collateral Percentage for such Period, or (B) a fraction, the numerator of which fraction shall equal the Value (as defined below) of all Securities Collateral that is, on the first day of such Period, held by the Custodian under the Custodial Agreement, subject to a Qualifying Security Interest and free from claims or security interests held or asserted by any third party, and the denominator of which fraction shall equal the Stipulated Loss Value on the first day of such Period (computed after the subtraction of any Qualified Payments applied on such first day). "Value" means, for purposes of determining the Securities Collateral Percentage under this definition for each Period, the Value (as defined in and determined in accordance with the Pledge Agreement) on the Valuation Date (as defined in the Custodial Agreement) upon which such Period commences or, if such Period does not commence upon a Valuation Date, on the most recent Valuation Date prior to the commencement of such Period. (cm) Spread. The "Spread" on any date will depend upon a computation involving (a) the rating by Standard and Poor's Corporation (the "S&P Rating") or the rating by Moody's Investor Service, Inc. (the "Moody's Ratings"), whichever rating is higher, of Tenant's senior, unsecured debt on that date (whether such ratings are express or published, implied ratings), and (b) the Debt to Capital Ratio (as defined below) on that date, such computation to be as follows: (i) If (1) there is no S&P Rating for the senior, unsecured debt of Tenant (express or published, implied) or the S&P Rating is below BBB-, AND (2) there is no Moody's Rating for senior, unsecured debt of Tenant (express or published, implied) or the Moody's Rating is below Baa3, AND (3) the Debt to Capital Ratio is greater than 0.30, then the Spread will be sixty basis points (.600%). (ii) If (1) the S&P Rating is BBB-, OR (2) the Moody's Rating is Baa3, OR (3) the Debt to Capital Ratio is equal to or less than 0.30 and more than 0.15, and if Tenant does not qualify for a lower Spread pursuant to clause (iii), (iv) or (v) below, then the Spread will be forty- five basis points (.450%). (iii) If (1) the S&P Rating is BBB, OR (2) the Moody's Rating is Baa2, OR (3) the Debt to Capital Ratio is equal to or less than 0.15, and if Tenant does not qualify for a lower Spread pursuant to clause (iv) or (v) below, then the Spread will be thirty-seven and one-half basis points (.375%). (iv) If (1) the S&P Rating is BBB+, OR (2) the Moody's Rating is Baa1, and if Tenant does not qualify for a lower Spread pursuant to clause (v) below, then the Spread will be thirty basis points (.300%). (v) If (1) the S&P Rating is above BBB+, OR (2) the Moody's Rating is above Baa1, then the Spread will be twenty-seven and one-half basis points (.275%). For purposes of calculating the Spread, "Debt to Capital Ratio" means the quotient determined by dividing (A) funded Senior Debt (as defined in subparagraph 9.(ac)(ii)), by (B) the total Capitalization (as defined in subparagraph 9.(ac)(ii)), including Subordinated Debt (as defined in subparagraph 9.(ac)(ii)). The parties believe it improbable that the ratings systems used by Standard and Poor's Corporation and by Moody's Investor Service, Inc. will be discontinued or changed, but if such ratings systems are discontinued or changed, Landlord shall be entitled to select and use a comparable ratings systems as a substitute for the S&P Rating or the Moody Rating, as the case may be, for purposes of determining the Spread. All determinations of the Spread by Landlord shall, in the absence of clear and demonstrable error, be binding and conclusive for purposes of this Lease. Further Landlord may, but shall not be required, to rely on the determination of the Spread set forth in any certificate delivered by Tenant pursuant to subparagraph 9.(w)(iv) below, and no reduction in the Spread will be effective because of an improvement in the S&P Rating, the Moody's Rating or the Debt to Capital Ratio before Tenant has notified Landlord thereof by delivery of such a certificate. (cn) Stipulated Loss Value. "Stipulated Loss Value" means at any time the amount equal to (1) the Initial Investment PLUS (2) the Outstanding Construction Allowance at such time, LESS (3) the aggregate amount (if any) of Qualified Payments paid to Landlord in excess of any Qualified Payments deducted in the computation of such Outstanding Construction Allowance. Under no circumstances will any payment of Base Rent, the Upfront Fee, Commitment Fees or Administrative Fees reduce Stipulated Loss Value. (co) Subsidiary. "Subsidiary" means any corporation of which Tenant and/or its other Subsidiaries own, directly or indirectly, such number of outstanding shares as have more than 50% of the ordinary voting power for the election of directors. (cp) Tenant's Knowledge. "Tenant's knowledge," "to the knowledge of Tenant" and words of like effect means the actual knowledge (with due investigation) of any of the following employees of Tenant: Alan Groves, Vice President and Corporate Controller; Christopher B. Paisley, Chief Financial Officer; Abe Darwish, Vice President of Worldwide Real Estate and Site Services; and Paul Murray, Director of Worldwide Safety and Environmental Health. However, to the extent Tenant's knowledge after the date hereof may become relevant hereunder or under any certificate or other notice provided by Tenant to Landlord in connection with this Lease, "Tenant's knowledge" and words of like effect shall include the then actual knowledge of other employees of Tenant (if any) that have assumed responsibilities of the current employees listed in the preceding sentence or that have replaced such current employees. But none of the employees of Tenant whose knowledge is now or may hereafter be relevant shall be personally liable for the representations of Tenant made herein. (cq) Term. "Term" shall have the meaning assigned to it in Paragraph 2 below. (cr) Unfunded Benefit Liabilities. "Unfunded Benefit Liabilities" means, with respect to any Plan, the amount (if any) by which the present value of all benefit liabilities (within the meaning of Section 4001(a)(16) of ERISA) under the Plan exceeds the fair market value of all Plan assets allocable to such benefit liabilities, as determined on the most recent valuation date of the Plan and in accordance with the provisions of ERISA for calculating the potential liability of Tenant or any ERISA Affiliate of Tenant under Title IV of ERISA. (cs) Upfront Fee. "Upfront Fee" shall have the meaning assigned to it in subparagraph 3.(b). (ct) Voluntary Minimum Pledge Commitment. "Voluntary Minimum Pledge Commitment" means an agreement in form and substance reasonably satisfactory to Landlord and the other parties to the Pledge Agreement which Tenant may elect to execute in connection with a casualty, condemnation or sale in lieu of condemnation affecting the Leased Property and which modifies the Pledge Agreement by establishing a Minimum Collateral Percentage (as defined therein) sufficient to require Tenant to maintain Collateral under the Pledge Agreement with a value of no less than the insurance, condemnation or sale proceeds paid or to be paid because of the casualty, condemnation or sale in lieu of condemnation until Tenant has completed any related repairs or restoration required by this Lease. (cu) Other Terms and References. Words of any gender used in this Lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural and vice versa, unless the context otherwise requires. References herein to Paragraphs, subparagraphs or other subdivisions shall refer to the corresponding Paragraphs, subparagraphs or subdivisions of this Lease, unless specific reference is made to another document or instrument. References herein to any Schedule or Exhibit shall refer to the corresponding Schedule or Exhibit attached hereto, which shall be made a part hereof by such reference. All capitalized terms used in this Lease which refer to other documents shall be deemed to refer to such other documents as they may be renewed, extended, supplemented, amended or otherwise modified from time to time, provided such documents are not renewed, extended or modified in breach of any provision contained herein or therein or, in the case of any other document to which Landlord is a party or of which Landlord is an intended beneficiary, without the consent of Landlord. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. The words "this Lease", "herein", "hereof", "hereby", "hereunder" and words of similar import refer to this Lease as a whole and not to any particular subdivision unless expressly so limited. The phrases "this Paragraph" and "this subparagraph" and similar phrases refer only to the Paragraphs or subparagraphs hereof in which the phrase occurs. Unless required by the context in which it is used, the word "or" is not exclusive. Other capitalized terms are defined in the provisions that follow. 2. Term. The term of this Lease (herein called the "Term") shall commence on and include the effective date hereof, and end at 8:00 A.M. on the first Business Day of August, 2002, unless extended or sooner terminated as herein provided. Notwithstanding any other provision of this Lease which may expressly restrict the early termination hereof, and provided that Tenant is still in possession of the Leased Property and has not breached its obligation to make or have made any payment required by Paragraph 2 of the Purchase Agreement on any prior Designated Sale Date, Tenant may notify Landlord of Tenant's election to terminate this Lease before the first Business Day of August, 2002, by giving Landlord an irrevocable notice of such election and of the effective date of the termination, which notice must be given (if at all) at least sixty (60) days prior to the effective date of the termination. If Tenant elects to so terminate this Lease, then on the date on which this Lease is to be terminated, not only must Tenant pay all unpaid Rent, Tenant must also pay any Breakage Costs resulting from the termination and must satisfy its obligations under the Purchase Agreement. The payment of any unpaid Rent and Breakage Costs and the satisfaction of Tenant's obligations under the Purchase Agreement shall be conditions precedent to the effectiveness of any early termination of this Lease by Tenant. The Term may be extended at the option of Tenant for two successive periods of five (5) years each; provided, however, that prior to any such extension the following conditions must have been satisfied: (A) at least one hundred eighty (180) days prior to the commencement of any such extension, Landlord and Tenant must have agreed in writing upon, and received the written consent and approval of Landlord's Parent and all other Participants to (1) a corresponding extension of the date specified in clause (iii) of the definition of Designated Sale Date in the Purchase Agreement, and (2) an adjustment to the Rent that Tenant will be required to pay for the extension, it being expected that the Rent for the extension may be different than the Rent required for the original Term, and it being understood that the Rent for any extension must in all events be satisfactory to both Landlord and Tenant, each in its sole and absolute discretion; (B) there must be no Event of Default continuing hereunder at the time of Tenant's exercise of its option to extend; and (C) immediately prior to any such extension, this Lease must remain in effect. With respect to the condition that Landlord and Tenant must have agreed upon the Rent required for any extension of the Term, neither Tenant nor Landlord is willing to submit itself to a risk of liability or loss of rights hereunder for being judged unreasonable. Accordingly, both Tenant and Landlord hereby disclaim any obligation express or implied to be reasonable in negotiating the Rent for any such extension. Subject to the changes to the Rent payable during any extension of the Term as provided in this Paragraph, if Tenant exercises its option to extend the Term as provided in this Paragraph, this Lease shall continue in full force and effect, and the leasehold estate hereby granted to Tenant shall continue without interruption and without any loss of priority over other interests in or claims against the Leased Property that may be created or arise after the date hereof and before the extension. 3. Rental. (a) Base Rent. Tenant shall pay Landlord rent (herein called "Base Rent") in arrears, in currency that at the time of payment is legal tender for public and private debts in the United States of America, in installments on each Base Rent Date through the end of the Term. Each payment of Base Rent must be received by Landlord no later than 12:00 noon (San Francisco time) on the date it becomes due; if received after 12:00 noon it will be considered for purposes of this Lease as received on the next following Business Day. Each installment of Base Rent shall represent rent allocable to the Base Rent Period (or portion thereof) ending on the date on which the installment is due. Landlord shall notify Tenant in writing of the Base Rent due for each Base Rent Period at least fifteen (15) days prior to the Base Rent Date on which such period ends. Any failure by Landlord to so notify Tenant shall not constitute a waiver of Landlord's right to payment, but absent such notice Tenant shall not be in default for any underpayment resulting therefrom if Tenant, in good faith, reasonably estimates the payment required, makes a timely payment of the amount so estimated and corrects any underpayment within three (3) Business Days after being notified by Landlord of the underpayment. For all Base Rent Periods subject to a LIBOR Period Election of one month, two months or three months, Base Rent shall be due in one installment on the Base Rent Date upon which the Base Rent Period ends. For Base Rent Periods subject to a LIBOR Period Election of six months, Base Rent shall be payable in two installments, with the first installment becoming due on the Base Rent Date that occurs on the first Business Day of the third calendar month following the commencement of such Base Rent Period, and with the second installment becoming due on the Base Rent Date upon which the Base Rent Period ends. Notwithstanding the foregoing, if Tenant or any Applicable Purchaser purchases Landlord's interest in the Property pursuant to the Purchase Agreement, any accrued unpaid Base Rent and all outstanding Additional Rent shall be due on the date of purchase in addition to the purchase price and other sums due Landlord under the Purchase Agreement. The Base Rent for each Base Rent Period shall equal the sum of: (1) (A) Stipulated Loss Value on the first day of such Base Rent Period, times (B) one minus the sum of the Certificate of Deposit Collateral Percentage for such Base Rent Period and the Securities Collateral Percentage for such Base Rent Period, times (C) the sum of (i) the Effective Rate for such Base Rent Period and (ii) the Spread calculated on the tenth (10th) Business Day prior to the day upon which such Base Rent Period commences, times (D) the number of days in such Base Rent Period, divided by (E) three hundred sixty (360); PLUS (2) (A) Stipulated Loss Value on the first day of such Base Rent Period, times (B) the Certificate of Deposit Collateral Percentage for such Base Rent Period, times (C) twenty-two and one-half basis points (22.5/100 of 1%), times (D) the number of days in such Base Rent Period, divided by (E) three hundred sixty (360); PLUS (3) (A) Stipulated Loss Value on the first day of such Base Rent Period, times (B) the Securities Collateral Percentage for such Base Rent Period, times (C) the sum of (i) the Effective Rate for such Base Rent Period and (ii) twenty-two and one-half basis points (22.5/100 of 1%), times (D) the number of days in such Base Rent Period, divided by (E) three hundred sixty (360). To ease the administrative burden of this Lease and the Pledge Agreement, clause (2) in the formula above for calculating Base Rent reflects a reduction in the Base Rent equal to the interest that would accrue on any Cash Collateral required by the Pledge Agreement from time to time if the Accounts (as defined in the Pledge Agreement) bore interest at the Effective Rate. Landlord has agreed to such reduction in the Base Rent to provide Tenant with the economic equivalent of interest on such Cash Collateral, and in return Tenant has agreed to the provisions of the Pledge Agreement that excuse the actual payment of interest on the Accounts. By incorporating such reduction of Base Rent into the formula above, and by providing for noninterest bearing Accounts in the Pledge Agreement, the parties will avoid an unnecessary and cumbersome periodic exchange of equal payments. It is not, however, the intent of Landlord or Tenant to understate Base Rent or interest for financial reporting purposes. Accordingly, for purposes of determining Tenant's compliance with the affirmative financial covenants set forth in subparagraph 9.(ac), and for purposes of any financial reports that this Lease requires of Tenant from time to time, Tenant may report Base Rent as if there had been no such reduction and as if the Cash Collateral from time to time required by the Pledge Agreement had been maintained in Accounts bearing interest at the Effective Rate. Assume, only for the purpose of illustration of the calculation of Base Rent: that after the Carrying Costs Accrual Termination Date, a hypothetical Base Rent Period contains exactly ninety (90) days; that, after taking into account all Qualified Payments, the Stipulated Loss Value on the first day of such Base Rent Period is $50,000,000; that the Certificate of Deposit Collateral Percentage for such Base Rent Period is twenty percent (20%); that the Securities Collateral Percentage for such Base Rent Period is thirty percent (30%); that the Effective Rate for the applicable Base Rent Period is 5.5%; and that the Spread for the applicable Base Rent Period is 0.5%. Under such assumptions, the Base Rent for the hypothetical Base Rent Period will equal: $50,000,000 x 50% x (5.5% + 0.5%) x 90/360, or $375,000, PLUS $50,000,000 x 20% x .225% x 90/360, or $5,625, PLUS $50,000,000 x 30% x (5.5% + .225%) x 90/360, or $214,687.5, = $595,312.5 (b) Upfront Fee. Upon execution and delivery of this Lease by Landlord, Tenant shall pay Landlord an upfront fee (the "Upfront Fee") as provided in the letter dated July 10, 1997 from Landlord to Tenant, which Tenant executed and returned to Landlord to indicate (among other things) Tenant's willingness to proceed with negotiations for this Lease (the "Nonbinding Term Sheet"). (Tenant shall, however, be entitled to an appropriate credit against the Upfront Fee for the deposit already paid by Tenant as provided in the Nonbinding Term Sheet, as well as a credit equal to the Upfront Fee paid under and as defined in the Original Lease.) The Upfront Fee shall represent Additional Rent for the first Base Rent Period. (c) Commitment Fees. For each Construction Period, Tenant shall pay Landlord a fee (herein called a "Commitment Fee") equal to (1) twelve and one-half basis points (12.5/100 of 1%), times (2) the difference at the end of the first day of such Construction Period between (A) the Maximum Construction Allowance and (B) the sum (computed without deduction for any Qualified Payments) of all Construction Advances made by or on behalf of Landlord under this Lease and all Carrying Costs that have been added to and made a part of the Outstanding Construction Allowance, times (3) the number of days in such Construction Period, divided by (4) three hundred sixty (360). Tenant shall pay Commitment Fees in arrears on the first Business Day of February, May, August and November of each calendar year, beginning with the first Business Day in November, 1997 and continuing regularly thereafter to and including the first of such Business Days to fall on or after the Last Advance Date; provided that if any of such dates does not fall on a Business Day, the payment of Commitment Fees otherwise then due shall become due on the next following Business Day; and provided, further, if any Commitment Fees shall have accrued and remain unpaid on the Designated Sale Date, such accrued unpaid Commitment Fees shall be due on the Designated Sale Date. (d) Administrative Agency Fees. Upon execution and delivery of this Lease by Landlord, and again on each anniversary of the date hereof, Tenant shall pay to Landlord an administrative agency fee (an "Administrative Fee") in the amount equal to one third of the total per annum administrative agency fees specified in the Nonbinding Term Sheet. Each Administrative Fee shall represent Additional Rent for the Construction Period or Base Rent Period during which it is paid. (e) Additional Rent. All amounts which Tenant is required to pay to or on behalf of Landlord pursuant to this Lease, together with every charge, premium, interest and cost set forth herein which may be added for nonpayment or late payment thereof, shall constitute rent (all such amounts, other than Base Rent, are herein called "Additional Rent"). (f) Interest and Order of Application. All Rent shall bear interest, if not paid when first due, at the Default Rate in effect from time to time from the date due until paid; provided, that nothing herein contained will be construed as permitting the charging or collection of interest at a rate exceeding the maximum rate permitted under Applicable Laws. Landlord shall be entitled to apply any amounts paid by or on behalf of Tenant hereunder against any Rent then past due in the order the same became due or in such other order as Landlord may elect. (g) Net Lease. It is the intention of Landlord and Tenant that the Base Rent and all other payments herein specified shall be absolutely net to Landlord. Tenant shall pay all costs, expenses and obligations of every kind relating to the Leased Property or this Lease which may arise or become due, including, without limitation: (i) Impositions, including any taxes payable by virtue of Landlord's receipt of amounts paid to or on behalf of Landlord in accordance with this subparagraph 3.(g), but not including any Excluded Taxes; (ii) any Capital Adequacy Charges; (iii) any amount for which Landlord is or becomes liable with respect to the Permitted Encumbrances; and (iv) any costs incurred by Landlord (including Attorneys' Fees) because of Landlord's acquisition or ownership of the Leased Property or because of this Lease or the transactions contemplated herein. (h) No Demand or Setoff. The Base Rent and all Additional Rent shall be paid without notice or demand and without abatement, counterclaim, deduction, setoff or defense, except as expressly provided herein. (i) Overdrawn Allowance. On any Advance Date on which (1) the Outstanding Construction Allowance (including any Carrying Costs added thereto on such Advance Date), plus any Qualified Payments that have been applied to reduce the Outstanding Construction Allowance on or prior to such Advance Date, exceed (2) the Maximum Construction Allowance, Tenant shall pay to Landlord the amount of such excess. Each payment required by this subparagraph must be received by Landlord no later than 12:00 noon (San Francisco time) on the Advance Date it becomes due; if received after 12:00 noon it will be considered for purposes of this Lease as received on the next following Business Day. Landlord shall notify Tenant in writing of any payment due pursuant to this subparagraph at least fifteen (15) days prior to the Advance Date upon which it becomes due. Any failure by Landlord to so notify Tenant shall not constitute a waiver of Landlord's right to payment, but absent such notice Tenant shall not be in default for any underpayment resulting therefrom if Tenant, in good faith, reasonably estimates the payment required, makes a timely payment of the amount so estimated and corrects any underpayment within three (3) Business Days after being notified by Landlord of the underpayment. Nothing in this subparagraph shall be construed to require Landlord to make Construction Advances which could result in payments required by this subparagraph. 4. Insurance and Condemnation Proceeds. (a) Subject to Landlord's rights under this Paragraph 4, and so long as no Event of Default shall have occurred and be continuing, Tenant shall be entitled to use all casualty insurance and condemnation proceeds payable with respect to the Leased Property during the Term for the restoration and repair of the Leased Property or any remaining portion thereof. Except as provided in the last sentence of subparagraph 9.(r) and the last sentence of subparagraph 9.(s), all insurance and condemnation proceeds received with respect to the Leased Property (including proceeds payable under any insurance policy covering the Leased Property which is maintained by Tenant) shall be paid to Landlord and applied as follows: (i) First, such proceeds shall be used to reimburse Landlord for any costs and expenses, including Attorneys' Fees, incurred in connection with the collection of such proceeds. (ii) Second, the remainder of such proceeds (the "Remaining Proceeds"), shall be held by Landlord as Escrowed Proceeds and applied to reimburse Tenant for the actual cost of the repair, restoration or replacement of the Leased Property. However, any Remaining Proceeds not needed for such purpose shall be applied by Landlord as Qualified Payments after Tenant notifies Landlord that they are not needed for repairs, restoration or replacement. Notwithstanding the foregoing, if an Event of Default shall have occurred and be continuing, then Landlord shall be entitled to receive and collect insurance or condemnation proceeds payable with respect to the Leased Property, and either, at the discretion of Landlord, (A) hold such proceeds as Escrowed Proceeds until paid to Tenant as reimbursement for the actual and reasonable cost of repairing, restoring or replacing the Leased Property when Tenant has completed such repair, restoration or replacement, or (B) apply such proceeds (net of the deductions described in clause (i) above) as Qualified Payments. (b) Any Remaining Proceeds held by Landlord as Escrowed Proceeds shall be deposited by Landlord in an interest bearing account as provided in the definition of Escrowed Proceeds and shall be paid to Tenant upon completion of the applicable repair, restoration or replacement and upon compliance by Tenant with such terms, conditions and requirements as may be reasonably imposed by Landlord, but in no event shall Landlord be required to pay any Escrowed Proceeds to Tenant in excess of the actual cost to Tenant of the applicable repair, restoration or replacement, it being understood that Landlord may retain any such excess as a Qualified Payment. In any event, Tenant will not be entitled to any abatement or reduction of the Base Rent or any other amount due hereunder except to the extent that such excess Remaining Proceeds result in Qualified Payments which reduce Stipulated Loss Value (and thus payments computed on the basis of Stipulated Loss Value) as provided in the definitions set out above. Further, notwithstanding the inadequacy of the Remaining Proceeds held by Landlord as Escrowed Proceeds, if any, or anything herein to the contrary, Tenant must, after any taking of less than all or substantially all of the Leased Property by condemnation and after any damage to the Leased Property by fire or other casualty, restore or improve the Leased Property or the remainder thereof to a value no less than Stipulated Loss Value (computed after the application of any Remaining Proceeds as a Qualified Payment) and to a safe and sightly condition. Any taking of so much of the Leased Property as, in Landlord's reasonable judgment, makes it impracticable to restore or improve the remainder thereof as required by the preceding sentence shall be considered a taking of substantially all the Leased Property for purposes of this Paragraph 4. (c) In the event of any taking of all or substantially all of the Leased Property, Landlord shall be entitled to apply all Remaining Proceeds as a Qualified Payment, notwithstanding the foregoing. In addition, if Stipulated Loss Value immediately prior to any taking of all or substantially all of the Leased Property by condemnation exceeds the sum of the Remaining Proceeds resulting from such condemnation, then Landlord shall be entitled to recover the excess from Tenant upon demand as an additional Qualified Payment, whereupon this Lease shall terminate. (d) Nothing herein contained shall be construed to prevent Tenant from obtaining and applying as it deems appropriate any separate award from any condemning authority or from any insurer for a taking of or damage to Tenant's personal property not included in the Leased Property or for moving expenses or business interruption, provided, such award is not combined with and does not reduce the award for any taking of the Leased Property, including Tenant's interest therein. Further, notwithstanding anything to the contrary herein contained, if Remaining Proceeds held by Landlord during the term of this Lease shall exceed Stipulated Loss Value and any Rent payable by Tenant, then Tenant may get the excess by terminating this Lease in accordance with Paragraph 2 and purchasing such excess (which will then be held by Landlord as Escrowed Proceeds), together with any remaining interest of Landlord in the Leased Property, pursuant to the Purchase Agreement. (e) Landlord and Tenant each waive any right of recovery against the other, and the other's agents, officers or employees, for any damage to the Leased Property or to the personal property situated from time to time in or on the Leased Property resulting from fire or other casualty covered by a valid and collectible insurance policy; provided, however, that the waiver set forth in this subparagraph 4.(e) shall be effective insofar, but only insofar, as compensation for such damage or loss is actually recovered by the waiving party (net of costs of collection) under the policy notwithstanding the waivers set out in this paragraph. Tenant shall cause the insurance policies required of Tenant by this Lease to be properly endorsed, if necessary, to prevent any loss of coverage because of the waivers set forth in this paragraph. If such endorsements are not available, the waivers set forth in this paragraph shall be ineffective to the extent that such waivers would cause required insurance with respect to the Leased Property to be impaired. 5. No Lease Termination. (a) Status of Lease. Except as expressly provided herein, this Lease shall not terminate, nor shall Tenant have any right to terminate this Lease, nor shall Tenant be entitled to any abatement of the Rent, nor shall the obligations of Tenant under this Lease be excused, for any reason whatsoever, including without limitation any of the following: (i) any damage to or the destruction of all or any part of the Leased Property from whatever cause, (ii) the taking of the Leased Property or any portion thereof by eminent domain or otherwise for any reason, (iii) the prohibition, limitation or restriction of Tenant's use of all or any portion of the Leased Property or any interference with such use by governmental action or otherwise, (iv) any eviction of Tenant or of anyone claiming through or under Tenant by paramount title or otherwise (provided, if Tenant is wrongfully evicted by Landlord or by any third party lawfully claiming through or under Landlord, other than Tenant or a third party claiming through or under Tenant, then Tenant will have the remedies described in Paragraph 15 below), (v) any default on the part of Landlord under this Lease or under any other agreement to which Landlord and Tenant are parties, (vi) the inadequacy in any way whatsoever of the design or construction of any improvements included in the Leased Property, it being understood that Landlord has not made and will not make any representation express or implied as to the adequacy thereof, or (vii) any other cause whether similar or dissimilar to the foregoing, any existing or future law to the contrary notwithstanding. It is the intention of the parties hereto that the obligations of Tenant hereunder shall be separate and independent of the covenants and agreements of Landlord, that the Base Rent and all other sums payable by Tenant hereunder shall continue to be payable in all events and that the obligations of Tenant hereunder shall continue unaffected, unless the requirement to pay or perform the same shall have been terminated or limited pursuant to an express provision of this Lease. However, nothing in this Paragraph shall be construed as a waiver by Tenant of any right Tenant may have at law or in equity to (i) recover monetary damages for any default under this Lease by Landlord that Landlord fails to cure within the period provided in Paragraph 15, (ii) injunctive relief in case of the violation, or attempted or threatened violation, by Landlord of any of the express covenants, agreements, conditions or provisions of this Lease, or (iii) a decree compelling performance of any of the express covenants, agreements, conditions or provisions of this Lease. (b) Waiver By Tenant. Without limiting the foregoing, Tenant waives to the extent permitted by Applicable Laws, except as otherwise expressly provided herein, all rights to which Tenant may now or hereafter be entitled by law (including any such rights arising because of any implied "warranty of suitability" or other warranty under Applicable Laws) (i) to quit, terminate or surrender this Lease or the Leased Property or any part thereof or (ii) to any abatement, suspension, deferment or reduction of the Base Rent or any other sums payable under this Lease. 6. Construction Allowance. (a) Advances; Outstanding Construction Allowance. (i) Subject to the conditions set forth below, Landlord shall make advances (herein called "Construction Advances") on Advance Dates from time to time as requested by Tenant to reimburse Tenant for the actual cost of making the Designated Improvements to the Leased Property and for any property taxes or assessments payable prior to the Last Advance Date with respect to the Leased Property. In no event will Construction Advances which may be required of Landlord, when added to Carrying Costs accrued or projected by Landlord to accrue prior to the Carrying Costs Accrual Termination Date as described below, exceed the Maximum Construction Allowance. Notwithstanding the foregoing, if for any reason Stipulated Loss Value (and thus the Outstanding Construction Allowance included as a component thereof) must be determined under this Lease as of any date between Advance Dates, the Outstanding Construction Allowance determined on such date shall equal the Outstanding Construction Allowance on the immediately preceding Advance Date computed in accordance with the preceding sentence, plus Carrying Costs accruing on and after such preceding Advance Date to but not including the date in question. (ii) Charges (herein collectively called "Carrying Costs") shall accrue as described below for each Construction Period ending on or prior to the Carrying Costs Accrual Termination Date, and will be added to (and thereafter be included in) the Outstanding Construction Allowance on the last day of such Construction Period (i.e., generally on the Advance Date upon which such Construction Period ends). (iii) For the first short Construction Period ending August 1, 1997, Carrying Costs shall equal the sum of Carrying Costs for all days during such period, and the Carrying Costs accruing for each day during such period shall equal (A) the Initial Investment, times (B) the sum of (i) the Effective Rate for such day and (ii) the Spread calculated on the date of this Lease, divided by (C) three hundred sixty (360). For each Construction Period after the first short Construction Period and prior to or ending on the Carrying Costs Accrual Termination Date, Carrying Costs shall equal: (1)(A) Stipulated Loss Value as of the first day of such Construction Period, times (B) one minus the Certificate of Deposit Collateral Percentage in effect during such Construction Period, times (C) the sum of (i) the Effective Rate in effect during such Construction Period and (ii) the Spread calculated on the tenth (10th) Business Day prior to the day upon which such Construction Period commences, times (D) the number of days in such Construction Period, divided by (E) three hundred sixty (360); PLUS (2)(A) Stipulated Loss Value as of the first day of such Construction Period, times (B) the Certificate of Deposit Collateral Percentage in effect during such Construction Period, times (C) twenty-two and one-half basis points (22.5/100 of 1%), times (D) the number of days in such Construction Period, divided by (E) three hundred sixty (360). (iv) To ease the administrative burden of this Lease and the Pledge Agreement, clause (2)(A) in the formula set forth in the preceding clause 6.(a)(iii) for calculating Carrying Costs reflects a reduction in the Carrying Costs equal to the interest that would accrue on any Cash Collateral required by the Pledge Agreement from time to time if the Accounts (as defined in the Pledge Agreement) bore interest at the Effective Rate. Landlord has agreed to such reduction in the Carrying Costs to provide Tenant with the economic equivalent of interest on such Cash Collateral, and in return Tenant has agreed to the provisions of the Pledge Agreement that excuse the actual payment of interest on the Accounts. By incorporating such reduction of Carrying Costs into the formula above, and by providing for noninterest bearing Accounts in the Pledge Agreement, the parties will avoid an unnecessary and cumbersome periodic exchange of equal payments. It is not, however, the intent of Landlord or Tenant to understate Carrying Costs or interest for financial reporting purposes. Accordingly, for purposes of determining Tenant's compliance with the affirmative financial covenants set forth in subparagraph 9.(ac), and for purposes of any financial reports that this Lease requires of Tenant from time to time, Tenant may report its financial statements as if there had been no such reduction and as if the Cash Collateral from time to time required by the Pledge Agreement had been maintained in Accounts bearing interest at the Effective Rate. (b) Designated Improvements. (i) Responsibility for Construction. Tenant shall construct all Designated Improvements in a good and workmanlike manner, in accordance with (1) the descriptions and renderings attached as Exhibit H, (2) any Construction Documents for which Tenant has requested and obtained the written approval of Landlord or which Landlord has executed at the request of Tenant pursuant to Paragraph 10.(b) (though this clause (2) shall not be construed to require Tenant to get such approval or execution of Construction Documents by Landlord), (3) Applicable Laws, and (4) the other provisions of this Lease. Further, except for building foundations, driveways, parking lots, sidewalks and other improvements which would not suffer damage by being submerged under flood waters, all Designated Improvements shall be constructed by Tenant above the elevation that the U.S. Army Corp of Engineers or any other governmental authority estimates as the highest elevation that 100 year flood waters could be expected to reach. Tenant shall have sole responsibility for contracting for and administering the construction of Designated Improvements, it being understood that Landlord's obligation with respect to the Designated Improvements shall be limited to the making of advances under and subject to the conditions set forth in this Paragraph 6. No contractor or other third party shall be entitled to enforce Landlord's obligations to make advances as a third party beneficiary. Notwithstanding delays beyond Tenant's control, and even if the Construction Allowance is not sufficient to pay for completion of Designated Improvements, Tenant warrants that it shall cause all Designated Improvements with respect to which it receives any Construction Advances to be completed on or prior to the Completion Deadline. (ii) Scope Changes. Before making any Scope Change to the Designated Improvements contemplated in Exhibit H, Tenant shall provide to Landlord a reasonably detailed written description of the Scope Change and a revised construction budget, all of which must be approved in writing by Landlord (or by any construction representative appointed by Landlord from time to time) before the Scope Change is implemented. (iii) Value Added. The Designated Improvements, upon completion and taken as a whole, must enhance the value of the Leased Property by an amount commensurate with the total Construction Allowance used by Tenant; however, this requirement will not preclude Tenant from obtaining Construction Advances for soft costs (such as architectural fees), demolition costs or other costs that do not, individually, add value to the Leased Property but that are incurred in connection with the construction of Designated Improvements which will in the aggregate satisfy this requirement. For purposes hereof, the Designated Improvements will be deemed to have added value "commensurate" with the Construction Allowance used by Tenant if, when the Designated Improvements are substantially complete, the Leased Property has a fair market value with the Designated Improvements that exceeds the fair market value which the Leased Property would have without the Designated Improvements by an amount equal to no less than fifty percent (50%) of the Carrying Costs and Construction Advances added to the Outstanding Construction Allowance. (iv) Estoppel Letters Required. If requested by Landlord prior to the substantial completion of the Designated Improvements, Tenant shall cause the contractor under each significant general construction contract for the Designated Improvements to execute and deliver to Landlord an estoppel letter in the form of Exhibit I attached hereto. Similarly, if requested by Landlord prior to the substantial completion of the Designated Improvements, Tenant shall also cause the architect and engineer under any material architectural or engineering contract for the Designated Improvements to execute and deliver to Landlord an estoppel letter in the form of Exhibit J attached hereto; provided, that no such estoppel letter shall be required from any architect or engineer who has assigned his plans and specifications for the Designated Improvements to Tenant without restricting Tenant's right to further assign or allow other to use the same. Tenant hereby grants to Landlord (and Landlord's successors and assigns through any Permitted Transfer) a license to copy and use any such plans and specifications as Landlord shall deem appropriate. (v) Advances Not a Waiver. No funding of Construction Advances and no failure of Landlord to object to Designated Improvements proposed or constructed by Tenant shall constitute a waiver by Landlord of the requirements contained in this subparagraph 6.(b). (c) Conditions to Construction Advances. Landlord's obligation to make Construction Advances from time to time under this Paragraph 6 shall be subject to the following terms and conditions, all of which are intended for the sole benefit of Landlord: (i) Prior Notice. Tenant must make a request in substantially the form attached to this Lease as Exhibit K for any Construction Advance at least ten (10) Business Days prior to the Advance Date upon which the advance is to be paid. Landlord shall consider in good faith any changes to the Construction Advance request forms attached hereto that Tenant may reasonably request, provided the requested changes do not impair Landlord's rights or create or increase any liability Landlord may have in connection with the Designated Improvements. (ii) Amount of the Advances. No Construction Advance shall exceed the lesser of: a) the Maximum Construction Allowance, less the sum of (1) all prior Construction Advances and all Carrying Costs accruing through the date of such advance, and (2) the Carrying Costs then projected by Landlord to be added to the Construction Allowance on and after the date of the advance; or b) (1) the actual costs and expenses previously incurred and paid by Tenant for the Designated Improvements, including "soft costs," and for property taxes or assessments assessed against the Leased Property after the date hereof and prior to the Last Advance Date, less (2) the sum of all previous Construction Advances made under this Paragraph 6 to Tenant as reimbursement for such costs and expenses. Further, no Construction Advance shall be required that would cause the cost of completing all Designated Improvements then contemplated as estimated by Landlord to exceed the difference computed by subtracting (1) the Carrying Costs then projected by Landlord to be added to the Outstanding Construction Allowance, from (2) the Construction Allowance remaining to be advanced. Tenant shall not request any Construction Advance (other than the final Construction Advance) for an amount less than $500,000. (iii) Insurance. Tenant shall have obtained and provided certificates (or, in the case of clause a) below, title policies or binders) reasonably satisfactory to Landlord evidencing insurance covering the Leased Property as follows (in addition to the liability insurance required under subparagraph 9.(z) below): a) Title Insurance. An owner's title insurance policy (or binder committing the applicable title insurer to issue an owner's title insurance policy, without the payment of further premiums) in an amount, form and substance and written by one or more title insurance companies reasonably satisfactory to Landlord and insuring Landlord's ownership of fee title to the Leased Property, including any new Improvements constructed by Tenant, in the amount no less than Stipulated Loss Value plus any remaining portion of the Construction Allowance to be advanced under this Lease; and b) Builder's Risk Insurance. Builder's risk and such other hazard insurance as Landlord may reasonably require against all risks of physical loss (including collapse and transit coverage, but not including earthquake or flood coverage) with deductibles not to exceed $1,000,000 (or such other amount as Landlord and Tenant may agree upon in writing from time to time), such insurance to be in amounts sufficient to cover the total value of any Improvements under construction and to be maintained in full force and effect at all times until completion of the Designated Improvements. (iv) Progress of Construction. Construction of the Designated Improvements shall be progressing in a good and workmanlike manner and in accordance with the requirements of this Lease without any continuing significant interruption, other than interruptions beyond the reasonable control of Tenant that are not likely to cause the cost of such construction (and Carrying Costs and construction period and property taxes and assessments) to exceed the Maximum Construction Allowance. Also, Tenant shall have corrected or caused the correction promptly of any significant defect in such construction. (v) Evidence of Costs to be Reimbursed. To the extent contemplated by the Construction Advance request forms attached as Exhibit K and described in subparagraph 6.(c)(i), or otherwise required by Landlord at the time a Construction Advance is to be made, Tenant shall have submitted invoices, requests for payment from contractors, certifications from Tenant's architect or construction manager, lien releases and other evidence satisfactory to Landlord that (A) all costs for which Tenant requests reimbursement constitute actual costs incurred by Tenant for the construction of the Designated Improvements or constitute property taxes or assessments assessed against the Leased Property and paid by Tenant prior to the Last Advance Date with respect to the Leased Property and (B) general contractors and all parties that have filed a statutory Preliminary Notice which would give them the right to assert a mechanic's or materialman's lien against the Leased Property (collectively, "Potential Lien Claimants") have been paid all sums for which prior Construction Advances have been advanced under this Lease or the Original Lease. Without limiting the foregoing, Landlord may decline to advance any amount that would result in an excess of $5,000,000 or more of (1) the total cost of work with respect to which Potential Lien Claimants could have asserted a lien against the Leased Property and for which Construction Advances have been advanced by Landlord, over (2) the cost of such work for which Tenant has provided to Landlord unconditional statutory lien releases from all Potential Lien Claimants in form and substance reasonably satisfactory to Landlord. (vi) No Event of Default or Change of Control Event. No Event of Default shall have occurred and be continuing under this Lease and no Change of Control Event shall have occurred. (vii) No Sale of Landlord's Interest. No sale of Landlord's interest in the Leased Property shall have occurred pursuant to the Purchase Agreement. (viii) Certificate of No Default. Landlord shall have received, together with the notice requesting the Construction Advance described in clause (i) above, a current certificate of a Responsible Financial Officer of Tenant in the form attached as Exhibit F. (ix) Removal of Open Space Restrictions. With respect to any advance requested after the Outstanding Construction Allowance exceeds $10,000,000, Landlord shall have received confirmation in form and substance reasonably satisfactory to it that any restrictions against construction contemplated herein on the Land in the Permitted Encumbrances have been formally released. (In this regard, responding to a concern of Landlord over restrictions in the Permitted Encumbrances referenced in item 4 of Exhibit B, which requires the use of the Land as "open space," Tenant has advised Landlord that Tenant already has informal assurances that the open space requirement will be released. Tenant covenants to obtain such a release prior to any Designated Sale Date on which neither Tenant nor any Applicable Purchaser purchases the Leased Property pursuant to the Purchase Agreement for a price to Landlord (when taken together with any additional payments made by Tenant pursuant to Paragraph 2(a)(ii) of the Purchase Agreement, in the case of a purchase by an Applicable Purchaser) of not less than the Purchase Price.) If requested by Tenant, Landlord will confirm in writing whether Tenant has satisfied this condition. (x) Payments by Approved Participants. None of the Approved Participants (other than Landlord's Parent) shall have failed to advance to Landlord their respective percentage shares of the Construction Advance being requested as required by Section 3.2 of the Participation Agreement. However, any such failure shall excuse Landlord's obligation to provide the Construction Advance requested only to the extent of the funds that the applicable Defaulting Participant or Participants should have advanced (but did not advance) to Landlord. Moreover, in the event of any such failure: a) Landlord will, to the extent possible, postpone reductions of Construction Advances because of the failure by any one or more Defaulting Participants to make required advances under Section 3.2 of the Participation Agreement by adjusting (and readjusting from time to time, as required) the funding "Percentages" of other Participants, and by requesting the other Participants to make advances to Landlord on the basis of such adjusted Percentages, in each case as provided in Section 4 of the Participation Agreement; however, so long as a Defaulting Participant's failure to make required advances continues, no Construction Advance shall be required that would cause the Outstanding Construction Allowance (plus Carrying Costs to accrue thereafter as projected by BNPLC) to exceed (a) the Maximum Construction Allowance available under this Lease, less (b) all amounts that should have been, but have not been, advanced by a Defaulting Participant as required by Section 3.2 of the Participation Agreement. b) Tenant may exercise its rights under Section 3.1.3 of the Pledge Agreement to require Landlord to attempt in good faith, on and subject to the terms and conditions set forth in that Section, to assist Tenant in identifying one or more new Participants to replace the Defaulting Participants. (d) Completion Notice. Tenant shall provide a notice to Landlord (the "Completion Notice") promptly after construction of the Designated Improvements is substantially complete and more than fifty percent (50%) of the Designated Improvements are being occupied by Tenant or any subtenant permitted by Paragraph 11.(a). 7. Purchase Documents and Environmental Indemnity. Tenant acknowledges and agrees that nothing contained in this Lease shall limit, modify or otherwise affect any of Tenant's obligations under the Purchase Documents or Environmental Indemnity, which obligations are intended to be separate, independent and in addition to, and not in lieu of, the obligations established by this Lease. In the event of any inconsistency between the terms and provisions of the Purchase Documents or Environmental Indemnity and the terms and provisions of this Lease, the terms and provisions of the Purchase Documents or Environmental Indemnity (as the case may be) shall control. 8. Use and Condition of Leased Property. (a) Use. Subject to the Permitted Encumbrances and the terms hereof, Tenant may use and occupy the Leased Property so long as no Event of Default occurs hereunder, but only for the following purposes and other lawful purposes (including parking) incidental thereto: (i) research and development of computer-related and other electronic products; and (ii) administrative and office space; and (iii) distribution and warehouse storage of computer-related and other electronic products; and (iv) assembly of computer-related and other electronic products using components manufactured elsewhere, but not including the manufacture of computer chips on-site; and (v) cafeteria, library, fitness center and other support function uses that Tenant may provide to its employees; and (vi) a data center. Although the term "electronic products" in this subparagraph may include products designed to detect, monitor, neutralize, handle or process Hazardous Substances, the use of the Leased Property by Tenant shall not include bringing Hazardous Substances onto the Leased Property for the purpose of researching, testing or demonstrating any such products. (b) Condition. Tenant accepts the Leased Property (and will accept the same upon any purchase of the Landlord's interest therein) in its present state, AS IS, and without any representation or warranty, express or implied, as to the condition of such property or as to the use which may be made thereof. Tenant also accepts the Leased Property without any representation or warranty, express or implied, by Landlord regarding the title thereto or the rights of any parties in possession of any part thereof, except as set forth in subparagraph 10.(a). Landlord shall not be responsible for any latent or other defect or change of condition in the Land, Improvements, fixtures and personal property forming a part of the Leased Property, and the Rent hereunder shall in no case be withheld or diminished because of any latent or other defect in such property, any change in the condition thereof or the existence with respect thereto of any violations of Applicable Laws. Nor shall Landlord be required to furnish to Tenant any facilities or service of any kind, such as, but not limited to, water, steam, heat, gas, hot water, electricity, light or power. (c) Consideration of and Scope of Waiver. The provisions of subparagraph 8.(b) above have been negotiated by the Landlord and Tenant after due consideration for the Rent payable hereunder and are intended to be a complete exclusion and negation of any representations or warranties of the Landlord, express or implied, with respect to the Leased Property that may arise pursuant to any law now or hereafter in effect, or otherwise. However, such exclusion of representations and warranties by Landlord is not intended to impair any representations or warranties made by other parties, including Seller, the benefit of which is to pass to Tenant during the Term because of the definition of Personal Property and Leased Property above. 9. Other Representations, Warranties and Covenants of Tenant. Tenant represents, warrants and covenants as follows: (a) Financial Matters. Tenant is solvent and has no outstanding liens, suits, garnishments or court actions which could render Tenant insolvent. There has not been filed by or, to Tenant's knowledge, against Tenant a petition in bankruptcy or a petition or answer seeking an assignment for the benefit of creditors, the appointment of a receiver, trustee, custodian or liquidator with respect to Tenant or any significant portion of Tenant's property, reorganization, arrangement, rearrangement, composition, extension, liquidation or dissolution or similar relief under the federal Bankruptcy Code or any state law. The financial statements and all financial data heretofore delivered to Landlord relating to Tenant have been prepared in accordance with GAAP in all material respects. No material adverse change has occurred in the financial position of Tenant as reflected in Tenant's financial statements covering the fiscal period ended May 31, 1997. (b) Existing Contract. Except to the extent required of Landlord under subparagraph 10.(b), Tenant shall satisfy all surviving obligations of Tenant under the Existing Contract and under other agreements described therein. Tenant agrees to indemnify, defend and hold Landlord harmless from and against any and all Losses imposed on or asserted against or incurred by Landlord at any time and from time to time by reason of, in connection with or arising out of any obligations imposed by the Existing Contract or the other agreements described therein. THE INDEMNITY SET OUT IN THIS SUBPARAGRAPH SHALL APPLY EVEN IF THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE ORDINARY NEGLIGENCE (AS DEFINED ABOVE) OF LANDLORD; provided, such indemnity shall not apply to Losses proximately caused by (and attributed by any applicable principles of comparative fault to) the Active Negligence, gross negligence or willful misconduct of Landlord. Because Tenant hereby assumes and agrees to satisfy all surviving obligations of Tenant under the Existing Contract and the other agreements described therein, no failure by Landlord to take any action required by the Existing Contract or such other agreements (save and except any actions required of Landlord under subparagraph 10.(b)) shall, for the purposes of this indemnity, be deemed to be caused by the Active Negligence, gross negligence or willful misconduct of Landlord. The foregoing indemnity is in addition to the other indemnities set out herein and shall not terminate upon the closing of any sale of Landlord's interest in the Leased Property pursuant to the provisions of the Purchase Agreement or the termination of this Lease. (c) No Default or Violation. The execution, delivery and performance by Tenant of this Lease, the Purchase Documents and the Environmental Indemnity do not and will not constitute a breach or default under any other material agreement or contract to which Tenant is a party or by which Tenant is bound or which affects the Leased Property or Tenant's use, occupancy or operation of the Leased Property or any part thereof and do not, to the knowledge of Tenant, violate or contravene any law, order, decree, rule or regulation to which Tenant is subject, and such execution, delivery and performance by Tenant will not result in the creation or imposition of (or the obligation to create or impose) any lien, charge or encumbrance on, or security interest in, Tenant's property pursuant to the provisions of any of the foregoing. (d) Compliance with Covenants and Laws. The intended use of the Leased Property by Tenant complies, or will comply after Tenant obtains readily available permits, in all material respects with all applicable restrictive covenants, zoning ordinances and building codes, flood disaster laws, applicable health, safety and environmental laws and regulations, the Americans with Disabilities Act and other laws pertaining to disabled persons, and all other applicable laws, statutes, ordinances, rules, permits, regulations, orders, determinations and court decisions (all of the foregoing are herein sometimes collectively called "Applicable Laws"). Tenant has obtained or will promptly obtain all utility, building, health and operating permits as may be required for Tenant's use of the Leased Property by any governmental authority or municipality having jurisdiction over the Leased Property. (e) Environmental Representations. To Tenant's knowledge and except as otherwise disclosed in the Environmental Report, as of the date hereof: (i) no Hazardous Substances Activity has occurred prior to the date of this Lease; (iii) neither Tenant nor any prior owner or operator of the Leased Property or any surrounding property has reported or been required to report any release of any Hazardous Substances on or from the Leased Property or the surrounding property pursuant to any Environmental Law; (iv) neither Tenant nor any prior owner or operator of the Leased Property or any surrounding property has received any warning, citation, notice of violation or other communication regarding a suspected or known release or discharge of Hazardous Substances on or from the Leased Property or regarding a suspected or known violation of Environmental Laws concerning the Leased Property from any federal, state or local agency; and (v) none of the following are located on the Leased Property: asbestos; urea formaldehyde foam insulation; transformers or other equipment which contain dielectric fluid containing levels of polychlorinated biphenyls in excess of fifty (50) parts per million; any other Hazardous Substances other than Permitted Hazardous Substances; or any underground storage tank or tanks. Further, Tenant represents that to its knowledge the Environmental Report is not misleading or inaccurate in any material respect. (f) No Suits. There are no judicial or administrative actions, suits, proceedings or investigations pending or, to Tenant's knowledge, threatened that will affect Tenant's intended use of the Leased Property or the validity, enforceability or priority of this Lease, or Tenant's use, occupancy and operation of the Leased Property or any part thereof, and Tenant is not in default with respect to any order, writ, injunction, decree or demand of any court or other governmental or regulatory authority that could materially and adversely affect the business or assets of Tenant and its Subsidiaries taken as a whole or Tenant's use, occupancy or operation of the Leased Property. No condemnation or other like proceedings are pending or, to Tenant's knowledge, threatened against the Leased Property. (g) Condition of Property. The Land as described in Exhibit A is shown on the plat included as part of the A.L.T.A. Survey prepared by Kier & Wright, last revised June 5, 1997, certification dated June 5, 1997, Job No. 96112, which was delivered to Landlord at the request of Tenant. All material improvements on the Land as of the date hereof are as shown on that survey, and except as shown on that survey there are no easements or encroachments visible or apparent from an inspection of the Real Property. Adequate provision has been made for the Leased Property to be served by electric, gas, storm and sanitary sewers, sanitary water supply, telephone and other utilities required for the use thereof. All streets, alleys and easements necessary to serve the Leased Property have been completed and are serviceable. The Leased Property is in a condition satisfactory for its use and occupancy. Tenant is not aware of any latent or patent material defects or deficiencies in the Real Property that, either individually or in the aggregate, could materially and adversely affect Tenant's use or occupancy or could reasonably be anticipated to endanger life or limb. (h) Organization. Tenant is duly incorporated and legally existing under the laws of the State of Delaware. Tenant has all requisite power and has procured or will procure on a timely basis all governmental certificates of authority, licenses, permits, qualifications and other documentation required to lease and operate the Leased Property. Tenant has the corporate power and adequate authority, rights and franchises to own Tenant's property and to carry on Tenant's business as now conducted and is duly qualified and in good standing in each state in which the character of Tenant's business makes such qualification necessary (including, without limitation, the State of California) or, if it is not so qualified in a state other than California, such failure does not have a material adverse effect on the properties, assets, operations or businesses of Tenant and its Subsidiaries, taken as a whole. (i) Enforceability. The execution, delivery and performance of this Lease, the Purchase Documents, and the Environmental Indemnity are duly authorized and do not require the consent or approval of any governmental body or other regulatory authority that has not heretofore been obtained and are not in contravention of or conflict with any Applicable Laws or any term or provision of Tenant's articles of incorporation or bylaws. This Lease, the Purchase Documents, and the Environmental Indemnity are valid, binding and legally enforceable obligations of Tenant in accordance with their terms, except as such enforcement is affected by bankruptcy, insolvency and similar laws affecting the rights of creditors, generally, and equitable principles of general application. (j) Not a Foreign Person. Tenant is not a "foreign person" within the meaning Sections 1445 and 7701 of the Code (i.e., Tenant is not a non-resident alien, foreign corporation, foreign partnership, foreign trust or foreign estate as those terms are defined in the Code and regulations promulgated thereunder). (k) Omissions. To Tenant's knowledge, none of Tenant's representations or warranties contained in this Lease or any document, certificate or written statement furnished to Landlord by or on behalf of Tenant contains any untrue statement of a material fact or omits a material fact necessary in order to make the statements contained herein or therein (when taken in their entireties) not misleading. (l) Existence. Tenant shall continuously maintain its corporate existence, and Tenant shall continuously maintain its qualification to do business in the State of California. (m) Tenant Taxes. Tenant shall comply with all applicable tax laws and pay before the same become delinquent all taxes imposed upon it or upon its property where the failure to so comply or so pay would have a material adverse effect on the financial condition or operations of Tenant; except that Tenant may in good faith by appropriate proceedings contest the validity, applicability or amount of any such taxes and pending such contest Tenant shall not be deemed in default under this subparagraph if (1) Tenant diligently prosecutes such contest to completion in an appropriate manner, and (2) Tenant promptly causes to be paid any tax adjudged by a court of competent jurisdiction to be due, with all costs, penalties, and interest thereon, promptly after such judgment becomes final; provided, however, in any event such contest shall be concluded and the tax, penalties, interest and costs shall be paid prior to the date any writ or order is issued under which any of Tenant's property that is material to the business of Tenant and its Subsidiaries taken as a whole may be seized or sold because of the nonpayment thereof. (n) Operation of Property. Tenant shall operate the Leased Property in a good and workmanlike manner and in compliance with all Applicable Laws and will pay all fees or charges of any kind in connection therewith. Tenant shall not use or occupy, or allow the use or occupancy of, the Leased Property in any manner which violates any Applicable Law or which constitutes a public or private nuisance or which makes void, voidable or cancelable any insurance then in force with respect thereto. To the extent that any of the following would, individually or in the aggregate, materially and adversely affect the value of the Leased Property or Tenant's use, occupancy or operations on the Leased Property, Tenant shall not: (i) initiate or permit any zoning reclassification of the Leased Property; (ii) seek any variance under existing zoning ordinances applicable to the Leased Property; (iii) use or permit the use of the Leased Property in a manner that would result in such use becoming a nonconforming use under applicable zoning ordinances or similar laws, rules or regulations; (iv) execute or file any subdivision plat affecting the Leased Property; or (v) consent to the annexation of the Leased Property to any municipality. If a change in the zoning or other Applicable Laws affecting the permitted use or development of the Leased Property shall occur that Landlord determines will materially reduce the then-current market value of the Leased Property, and if after such reduction the Stipulated Loss Value shall substantially exceed the then- current market value of the Leased Property in the reasonable judgment of Landlord, then Tenant shall pay Landlord an amount equal to such excess for application as a Qualified Payment. Tenant shall make any payment required by the preceding sentence within one hundred eighty (180) days after it is requested by Landlord, and in any event shall make any such payment before the end of the Term. Tenant shall not impose any restrictive covenants or encumbrances upon the Leased Property without the prior written consent of the Landlord; provided, that such consent shall not be unreasonably withheld for any encumbrance or restriction that is made expressly subject to this Lease, as modified from time to time, and subordinate to Landlord's interest in the Leased Property by an agreement in form satisfactory to Landlord. Tenant shall not cause or permit any drilling or exploration for, or extraction, removal or production of, minerals from the surface or subsurface of the Leased Property. Tenant shall not do any act whereby the market value of the Leased Property may be materially lessened. Tenant shall allow Landlord or its authorized representative to enter the Leased Property at any reasonable time to inspect the Leased Property and, after reasonable notice, to inspect Tenant's books and records pertaining thereto, and Tenant shall assist Landlord or Landlord's representative in whatever way reasonably necessary to make such inspections. If Tenant receives a written notice or claim from any federal, state or other governmental entity that the Leased Property is not in compliance in any material respect with any Applicable Law, or that any action may be taken against the owner of the Leased Property because the Leased Property does not comply with Applicable Law, Tenant shall promptly furnish a copy of such notice or claim to Landlord. Notwithstanding the foregoing, Tenant may in good faith, by appropriate proceedings, contest the validity and applicability of any Applicable Law with respect to the Leased Property, and pending such contest Tenant shall not be deemed in default hereunder because of a violation of such Applicable Law, if Tenant diligently prosecutes such contest to completion in a manner reasonably satisfactory to Landlord, and if Tenant promptly causes the Leased Property to comply with any such Applicable Law upon a final determination by a court of competent jurisdiction that the same is valid and applicable to the Leased Property; provided, that in any event such contest shall be concluded and the violation of such Applicable Law must be corrected and any claims asserted against Landlord or the Leased Property because of such violation must be paid by Tenant, all prior to the date that (i) any criminal charges may be brought against Landlord or any of its directors, officers or employees because of such violation or (ii) any action may be taken by any governmental authority against Landlord or any property owned by Landlord (including the Leased Property) because of such violation. (o) Debts for Construction. Tenant shall cause all debts and liabilities incurred in the construction, maintenance, operation and development of the Leased Property, including without limitation all debts and liabilities for labor, material and equipment and all debts and charges for utilities servicing the Leased Property, to be promptly paid. Notwithstanding the foregoing, Tenant may in good faith by appropriate proceedings contest the validity, applicability or amount of any asserted mechanic's or materialmen's lien and pending such contest Tenant shall not be deemed in default under this subparagraph (or subparagraphs 9.(t) or 9.(u)) because of the contested lien if (1) within sixty (60) days after being asked to do so by Landlord, Tenant bonds over to Landlord's satisfaction any contested liens alleged to secure an amount in excess of $3,000,000 (individually or in the aggregate), (2) Tenant diligently prosecutes such contest to completion in a manner reasonably satisfactory to Landlord, and (3) Tenant promptly causes to be paid any amount adjudged by a court of competent jurisdiction to be due, with all costs and interest thereon, promptly after such judgment becomes final; provided, however, that in any event each such contest shall be concluded and the lien, interest and costs shall be paid prior to the date (i) any criminal action may be instituted against Landlord or its directors, officers or employees because of the nonpayment thereof or (ii) any writ or order is issued under which any property owned by Landlord (including the Leased Property) may be seized or sold or any other action may be taken against Landlord or any property owned by Landlord because of the nonpayment thereof. (p) Impositions. Tenant shall reimburse Landlord for (or, if requested by Landlord, will pay or cause to be paid prior to delinquency) all sales, excise, ad valorem, gross receipts, business, transfer, stamp, occupancy, rental and other taxes, levies, fees, charges, surcharges, assessments or penalties which arise out of or are attributable to this Lease or which are imposed upon Landlord or the Leased Property because of the ownership, leasing, occupancy, sale or operation of the Leased Property, or any part thereof, or relating to or required to be paid by the terms of any of the Permitted Encumbrances (collectively, herein called the "Impositions"), excluding only Excluded Taxes. If Landlord requires Tenant to pay any Impositions directly to the applicable taxing authority or other party entitled to collect the same, Tenant shall furnish Landlord with receipts showing payment of such Impositions and other amounts prior to delinquency; except that Tenant may in good faith by appropriate proceedings contest the validity, applicability or amount of any asserted Imposition, and pending such contest Tenant shall not be deemed in default of this subparagraph (or subparagraphs 9.(t) or 9.(u)) because of the contested Imposition if (1) within sixty (60) days after being asked to do so by Landlord, Tenant bonds over to the satisfaction of Landlord any lien asserted against the Leased Property and alleged to secure an amount in excess of $1,000,000 because of the contested Imposition, (2) Tenant diligently prosecutes such contest to completion in a manner reasonably satisfactory to Landlord, and (3) Tenant promptly causes to be paid any amount adjudged by a court of competent jurisdiction to be due, with all costs, penalties and interest thereon, promptly after such judgment becomes final; provided, however, that in any event each such contest shall be concluded and the Impositions, penalties, interest and costs shall be paid prior to the date (i) any criminal action may be instituted against Landlord or its directors, officers or employees because of the nonpayment thereof or (ii) any writ or order is issued under which any property owned by Landlord (including the Leased Property) may be seized or sold or any other action may be taken against Landlord or any property owned by Landlord because of the nonpayment thereof. (q) Repair, Maintenance, Alterations and Additions. Tenant shall keep the Leased Property in good order, repair, operating condition and appearance (ordinary wear and tear excepted), causing all necessary repairs, renewals, replacements, additions and improvements to be promptly made, and will not allow any of the Leased Property to be materially misused, abused or wasted or to deteriorate. Tenant shall promptly replace any worn-out fixtures included within the Leased Property with fixtures comparable to the replaced fixtures when new and repair any damage caused by the removal of such fixtures. Further, Tenant shall not, without the prior written consent of Landlord, (i) remove from the Leased Property any fixtures of significant value, except such as are replaced by Tenant by articles of equal value, free and clear of any Lien (and for purposes of this clause "significant value" will mean any fixture that has a value of more than $500,000 or that, when considered together with all other fixtures removed and not replaced by Tenant by articles of equal suitability and value, has an aggregate value of $1,000,000 or more) or (ii) make any alteration to any Improvements which significantly reduce the fair market value or change the general character of the Leased Property, taken as a whole, or which impair in any significant manner the useful life or utility of the Improvements, taken as whole. Upon request of Landlord made at any time when an Event of Default shall have occurred and be continuing, Tenant shall deliver to Landlord an inventory describing and showing the make, model, serial number and location of all fixtures and personalty, if any, included in the Leased Property with a certification by Tenant that such inventory is a true and complete schedule of all such fixtures and personalty and that all items specified in the inventory are covered hereby free and clear of any Lien other than the Permitted Encumbrances described in Exhibit B. (r) Insurance and Casualty. Throughout the Term, Tenant will keep all Improvements (including all alterations, additions and changes made to the Improvements) which are located within the Leased Property insured under an all-risk property insurance policy (excluding from coverage damage by flood or earthquake, but not excluding other perils normally included within the definitions of extended coverage, vandalism and malicious mischief) in the amount of one hundred percent (100%) of the replacement value with endorsements for contingent liability from operation of building laws, increased cost of construction and demolition costs which may be necessary to comply with building laws. Tenant will be responsible for determining the amount of property insurance to be maintained, but such coverage will be on an agreed value basis to eliminate the effects of coinsurance. Such insurance shall be issued by an insurance company or companies rated by the A.M. Best Company of Oldwick, New Jersey as having a policyholder's rating of A or better and a reported financial information rating of X or better. Any deductible applicable to such insurance shall not exceed $1,000,000 (or such other amount as Landlord and Tenant may agree upon in writing from time to time). Such insurance shall cover not only the value of Tenant's interest in the Improvements, but also the interest of Landlord, and such insurance shall include provisions that Landlord must be notified at least ten (10) days prior to any cancellation or reduction of insurance coverage. With this Lease Tenant shall deliver to Landlord a certificate from the applicable insurer or its authorized agent evidencing the insurance required by this subparagraph and any additional insurance which shall be taken out upon any part of the Leased Property. Thereafter, Tenant shall deliver to Landlord certificates from the applicable insurer or its authorized agent of renewals or replacements of all such policies of insurance at least five (5) days before any such insurance shall expire. Tenant further agrees that all such policies shall provide that proceeds thereunder will be payable to Landlord as Landlord's interest may appear. If Tenant fails to obtain any insurance required by this Lease or to provide confirmation of any such insurance as required by this Lease, Landlord shall be entitled (but not required) to obtain the insurance that Tenant has failed to obtain or for which Tenant has not provided the required confirmation and, without limiting Landlord's other remedies under the circumstances, Landlord may require Tenant to reimburse Landlord for the cost of such insurance and to pay interest thereon computed at the Default Rate from the date such cost was paid by Landlord until the date of reimbursement by Tenant. In the event any of the Leased Property is destroyed or damaged by fire, explosion, windstorm, hail or by any other casualty against which insurance shall have been required hereunder, (i) Landlord may, but shall not be obligated to, make proof of loss if not made promptly by Tenant, (ii) each insurance company concerned is hereby authorized and directed to make payment for such loss directly to Landlord for application as required by Paragraph 4, and (iii) Landlord's consent must be obtained for any settlement, adjustment or compromise of any claims for loss, damage or destruction under any policy or policies of insurance (provided, that if any such claim is for less than $2,000,000 and no Event of Default shall have occurred and be continuing, Tenant alone shall have the right to settle, adjust or compromise the claim as Tenant deems appropriate; and, provided further, that any disagreement between Landlord and Tenant about the amount for which any such claim should be settled shall, at the request of either party, be resolved as provided in Exhibit D, unless an Event of Default shall have occurred and be continuing, in which case Landlord alone shall have the right to settle, adjust or compromise the claim as Landlord deems appropriate). If any casualty shall result in damage to or loss or destruction of the Leased Property in excess of $3,000,000, Tenant shall give immediate notice thereof to Landlord and Paragraph 4 shall apply. Notwithstanding the foregoing provisions of this subparagraph 9.(r), following any fire or other casualty involving the Leased Property, if insurance proceeds totaling not more than $2,000,000 are to be recovered as a result thereof, or if in connection therewith Tenant shall have executed a Voluntary Minimum Pledge Commitment and delivered any additional Collateral required to satisfy such Voluntary Minimum Pledge Commitment, Tenant shall be entitled to receive directly and hold such insurance proceeds, so long as no Event of Default shall have occurred and be continuing and so long as Tenant applies such proceeds towards the restoration, replacement and repair of the Leased Property as required by subparagraph 4.(b). (s) Condemnation. Immediately upon obtaining knowledge of the institution of any proceedings for the condemnation of the Leased Property or any portion thereof, or any other similar governmental or quasi-governmental proceedings arising out of injury or damage to the Leased Property or any portion thereof, Tenant shall notify Landlord of the pendency of such proceedings. Tenant shall, at its expense, diligently prosecute any such proceedings and shall consult with Landlord, its attorneys and experts and cooperate with them as reasonably requested in the carrying on or defense of any such proceedings. All proceeds of condemnation awards or proceeds of sale in lieu of condemnation with respect to the Leased Property and all judgments, decrees and awards for injury or damage to the Leased Property shall be paid to Landlord and applied as provided in Paragraph 4 above. Landlord is hereby authorized, in the name of Tenant, to execute and deliver valid acquittances for, and to appeal from, any such judgment, decree or award concerning condemnation of any of the Leased Property. Landlord shall not be, in any event or circumstances, liable or responsible for failure to collect, or to exercise diligence in the collection of, any such proceeds, judgments, decrees or awards. Notwithstanding the foregoing provisions of this subparagraph 9.(s), following any condemnation or sale in lieu of condemnation involving the Leased Property, if condemnation or sale proceeds totaling not more than $2,000,000 are to be recovered as a result thereof, or if in connection therewith Tenant shall have executed a Voluntary Minimum Pledge Commitment and delivered any additional Collateral required to satisfy such Voluntary Minimum Pledge Commitment, Tenant shall be entitled to receive directly and hold such condemnation or sale proceeds, so long as no Event of Default shall have occurred and be continuing and so long as Tenant applies such proceeds towards the restoration, replacement and repair of the remainder of the Leased Property as required by subparagraph 4.(b). (t) Protection and Defense of Title. If any encumbrance or title defect whatsoever affecting Landlord's fee interest in the Leased Property is claimed or discovered (excluding Permitted Encumbrances, this Lease and any other encumbrance which is claimed by Landlord or lawfully claimed through or under Landlord and which is not claimed by, through or under Tenant) or if any legal proceedings are instituted with respect to title to the Leased Property, Tenant shall give prompt written notice thereof to Landlord and at Tenant's own cost and expense will promptly cause the removal of any such encumbrance and cure any such defect and will take all necessary and proper steps for the defense of any such legal proceedings, including but not limited to the employment of counsel, the prosecution or defense of litigation and the release or discharge of all adverse claims. If Tenant fails to promptly remove any such encumbrance or title defect (other than a Lien Tenant is contesting as expressly permitted by and in accordance with subparagraph 9.(o) or subparagraph 9.(p)), Landlord (whether or not named as a party to legal proceedings with respect thereto) shall be entitled to take such additional steps as in its judgment may be necessary or proper to remove such encumbrance or cure such defect or for the defense of any such attack or legal proceedings or the protection of Landlord's fee interest in the Leased Property, including but not limited to the employment of counsel, the prosecution or defense of litigation, the compromise or discharge of any adverse claims made with respect to the Leased Property, the removal of prior liens or security interests, and all expenses (including Attorneys' Fees) so incurred of every kind and character shall be a demand obligation owing by Tenant. For purposes of this subparagraph 9.(t), Tenant shall be deemed to be acting promptly to remove any encumbrance or to cure any title defect, other than a Lien which Tenant has itself granted or authorized, so long as Tenant (or a title insurance company obligated to do so) is in good faith by appropriate proceedings contesting the validity and applicability of the encumbrance or defect, and pending such contest Tenant shall not be deemed in default under this subparagraph because of the encumbrance or defect; provided, with respect to a contest of any encumbrance or title defect which is the subject of subparagraphs 9.(o) or 9.(p), Tenant (or the applicable title insurance company) must satisfy the conditions and requirements for a permitted contest set forth in those subparagraphs, and with respect to a contest of any other encumbrance or title defect, Tenant (or the applicable title insurance company) must: (1) diligently prosecute the contest to completion in a manner reasonably satisfactory to Landlord; (2) immediately remove the encumbrance or cure the defect, as and to the extent reasonably required to preserve Landlord's indefeasible fee estate in the Leased Property and to prevent any significant adverse impact the encumbrance or defect may have on the value of the Leased Property, upon a final determination by a court of competent jurisdiction that the encumbrance or defect is valid and applicable to the Leased Property; and (3) in any event conclude the contest and remove the encumbrance or cure the defect and pay any claims asserted against Landlord or the Leased Property because of such encumbrance or defect, all prior to (i) any Designated Sale Date on which neither Tenant nor any Applicable Purchaser purchases the Leased Property pursuant to the Purchase Agreement for a price to Landlord (when taken together with any additional payments made by Tenant pursuant to Paragraph 2(a)(ii) of the Purchase Agreement, in the case of a purchase by an Applicable Purchaser) of not less than the Purchase Price, (ii) the date any criminal charges may be brought against Landlord or any of its directors, officers or employees because of such encumbrance or defect or (iii) the date any action may be taken against Landlord or any property owned by Landlord (including the Leased Property) by any governmental authority or any other Person who has or claims rights superior to Landlord because of the encumbrance or defect. (u) No Liens on the Leased Property. Tenant shall not, without the prior written consent of Landlord, create, place or permit to be created or placed, or through any act or failure to act, acquiesce in the placing of, or allow to remain, any Lien (except Permitted Encumbrances, the lien for property taxes or assessments assessed against the Leased Property which are not delinquent and any Lien Tenant is contesting as expressly permitted by and in accordance with subparagraph 9.(o) or subparagraph 9.(p)), against or covering the Leased Property or any part thereof (other than any Lien which is lawfully claimed through or under Landlord and which is not claimed by, through or under Tenant) regardless of whether the same are expressly or otherwise subordinate to this Lease or Landlord's interest in the Leased Property, and should any prohibited Lien exist or become attached hereafter in any manner to any part of the Leased Property without the prior written consent of Landlord, Tenant shall cause the same to be promptly discharged and released to the satisfaction of Landlord. (v) Books and Records. Tenant shall keep books and records that are accurate and complete in all material respects for the construction and maintenance of the Leased Property and will permit all such books and records (including without limitation all contracts, statements, invoices, bills and claims for labor, materials and services supplied for the construction and operation of any Improvements) to be inspected and copied by Landlord and its duly accredited representatives at all times during reasonable business hours; provided that so long as Tenant remains in possession of the Leased Property, Landlord or Landlord's representative will, before making any such inspection or copying any such documents, if then requested to do so by Tenant to maintain Tenant's security: (i) sign in at Tenant's security or information desk if Tenant has such a desk on the premises, (ii) wear a visitor's badge or other reasonable identification provided by Tenant when Landlord or Landlord's representative first arrives at the Leased Property, (iii) permit an employee of Tenant to observe such inspection or work, and (iv) comply with other similar reasonable nondiscriminatory security requirements of Tenant that do not, individually or in the aggregate, interfere with or delay inspections or copying by Landlord authorized by this subparagraph.. This subparagraph shall not be construed as requiring Tenant to regularly maintain separate books and records relating exclusively to the Leased Property; provided, however, that if requested by Landlord at any time when an Event of Default shall have occurred and be continuing, Tenant shall construct or abstract from its regularly maintained books and records information required by this subparagraph relating to the Leased Property. (w) Financial Statements; Required Notices; Certificates as to Default. Tenant shall deliver to Landlord and to each Participant of which Tenant has been notified: (i) as soon as available and in any event within one hundred twenty (120) days after the end of each fiscal year of Tenant, a consolidated balance sheet of Tenant and its consolidated Subsidiaries as of the end of such fiscal year and a consolidated income statement and statement of cash flows of Tenant and its consolidated Subsidiaries for such fiscal year, all in reasonable detail and all prepared in accordance with GAAP and accompanied by a report and opinion of accountants of national standing selected by Tenant, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any qualifications or exceptions as to the scope of the audit nor to any qualification or exception which Landlord determines, in Landlord's reasonable discretion, is unacceptable; provided that notwithstanding the foregoing, for so long as Tenant is a company subject to the periodic reporting requirements of Section 12 of the Securities Exchange Act of 1934, as amended, Tenant shall be deemed to have satisfied its obligations under this clause (i) so long as Tenant delivers to Landlord the same annual report and report and opinion of accountants that Tenant delivers to its shareholders; (ii) as soon as available and in any event within sixty (60) days after the end of each of the first three quarters of each fiscal year of Tenant, the consolidated balance sheet of Tenant and its consolidated Subsidiaries as of the end of such quarter and the consolidated income statement and the consolidated statement of cash flows of Tenant and its consolidated Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, all in reasonable detail and all prepared in accordance with GAAP and certified by a Responsible Financial Officer of Tenant (subject to year-end adjustments); provided that notwithstanding the foregoing, for so long as Tenant is a company subject to the periodic reporting requirements of Section 12 of the Securities Exchange Act of 1934, as amended, Tenant shall be deemed to have satisfied its obligations under this clause (ii) so long as Tenant delivers to Landlord the same quarterly reports, certified by a Responsible Financial Officer of Tenant (subject to year-end adjustments), that Tenant delivers to its shareholders; (iii) together with the financial statements furnished in accordance with subparagraph 9.(w)(ii) and 9.(w)(i), a certificate of a Responsible Financial Officer of Tenant in substantially the form attached hereto as Exhibit E: (i) certifying that to the knowledge of Tenant no Default or Event of Default under this Lease has occurred and is continuing or, if a Default or Event of Default has occurred and is continuing, a brief statement as to the nature thereof and the action which is proposed to be taken with respect thereto, (ii) certifying that the representations of Tenant set forth in Paragraph 9 of this Lease are true and correct in all material respects as of the date thereof as though made on and as of the date thereof or, if not then true and correct, a brief statement as to why such representations are no longer true and correct, and (iii) with computations demonstrating compliance with the financial covenants contained in subparagraph 9.(ac); (iv) promptly after any change in the rating of Tenant's senior, unsecured debt by Standard and Poor's Corporation or Moody's Investor Service, Inc. or in Tenant's Debt to Capital Ratio (as defined in subparagraph 1.(cm)), which will result in a change in the Spread (as defined in subparagraph 1.(cm)), a certificate of a Responsible Financial Officer of Tenant in substantially the form attached hereto as Exhibit F with computations evidencing Tenant's calculation of the Spread after giving effect to such changes; (v) promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports which Tenant sends to Tenant's stockholders, and copies of all regular, periodic and special reports, and all registration statements (other than registration statements on Form S-8 or any form substituted therefor) which Tenant files with the Securities and Exchange Commission or any governmental authority which may be substituted therefor, or with any national securities exchange; (vi) as soon as possible and in any event within five (5) Business Days after a Responsible Financial Officer of Tenant becomes aware of the occurrence of each Default or Event of Default with respect to the Affirmative Financial Covenants described in subparagraph 9.(ae) or the Negative Covenants described in subparagraph 9.(af), a statement of a Responsible Financial Officer of Tenant setting forth details of such Default or Event of Default and the action which Tenant has taken and proposes to take with respect thereto; (vii) upon request by Landlord, a statement in writing certifying that this Lease is unmodified and in full effect (or, if there have been modifications, that this Lease is in full effect as modified, and setting forth such modifications) and the dates to which the Base Rent has been paid and either stating that to the knowledge of Tenant no Default or Event of Default under this Lease has occurred and is continuing or, if a Default or Event of Default under this Lease has occurred and is continuing, a brief statement as to the nature thereof; it being intended that any such statement by Tenant may be relied upon by any prospective purchaser or mortgagee of the Leased Property and by any Participant; and (viii) such other information respecting the condition or operations, financial or otherwise, of Tenant, of any of its Subsidiaries or of the Leased Property as Landlord or any Participant through Landlord may from time to time reasonably request. Landlord is hereby authorized to deliver a copy of any information or certificate delivered to it pursuant to this subparagraph 9.(w) to any Participant and to any regulatory body having jurisdiction over Landlord that requires or requests it. (x) Further Assurances. Tenant shall, on request of Landlord, (i) promptly correct any defect, error or omission which may be discovered in the contents of this Lease or in any other instrument executed in connection herewith or in the execution or acknowledgment thereof; (ii) execute, acknowledge, deliver and record or file such further instruments and do such further acts as may be necessary, desirable or proper to carry out more effectively the purposes of this Lease and to subject to this Lease any property intended by the terms hereof to be covered hereby including specifically, but without limitation, any renewals, additions, substitutions, replacements or appurtenances to the Leased Property; (iii) execute, acknowledge, deliver, procure and record or file any document or instrument deemed advisable by Landlord to protect its rights in and to the Leased Property against the rights or interests of third persons; and (iv) provide such certificates, documents, reports, information, affidavits and other instruments and do such further acts as may be necessary, desirable or proper in the reasonable determination of Landlord to enable Landlord, Landlord's Parent and other Participants to comply with the requirements or requests of any agency or authority having jurisdiction over them. (y) Fees and Expenses; General Indemnification; Increased Costs; and Capital Adequacy Charges. (i) Except for any costs paid by Landlord with the proceeds of the advance described in subparagraph 1.(s) as part of the Closing Costs, Tenant shall pay (and shall indemnify and hold harmless Landlord, Landlord's Parent and any Person claiming through Landlord by reason of a Permitted Transfer from and against) all Losses incurred by Landlord or Landlord's Parent or any Person claiming through Landlord through a Permitted Transfer in connection with or because of (A) the ownership of any interest in or operation of the Leased Property, (B) the negotiation or administration of this Lease, the Purchase Documents, the Environmental Indemnity or the Participation Agreement, (C) the making of Funding Advances, including Attorneys' Fees or other costs incurred to evaluate lien releases and other information submitted by Tenant with requests for Construction Advances, (D) the construction of the Designated Improvements, whether such Losses are incurred at the time of execution of this Lease or at any time during the Term, or (E) Tenant's request for assistance in identifying any new Participant pursuant to Paragraph 18 of the Purchase Agreement, whether such Losses are incurred at the time of execution of this Lease or at any time during the Term. Costs and expenses included in such Losses may include, without limitation, all appraisal fees, filing and recording fees, inspection fees, survey fees, taxes (other than Excluded Taxes), brokerage fees and commissions, abstract fees, title policy fees, Uniform Commercial Code search fees, escrow fees, Attorneys' Fees and environmental consulting fees incurred by Landlord with respect to the Leased Property. If Landlord pays or reimburses Landlord's Parent for any such Losses, Tenant shall reimburse Landlord for the same notwithstanding that Landlord may have already received any payment from any other Participant on account of such Losses, it being understood that the other Participant may expect repayment from Landlord when Landlord does collect the required reimbursement from Tenant. (ii) Tenant shall also pay (and indemnify and hold harmless Landlord, Landlord's Parent and any Person claiming through Landlord by reason of a Permitted Transfer from and against) all Losses, including Attorneys' Fees, incurred or expended by Landlord or Landlord's Parent or any Person claiming through Landlord through a Permitted Transfer or in connection with (A) the breach by Tenant of any covenant of Tenant herein or in any other instrument executed in connection herewith or (B) Landlord's exercise in a lawful manner of any of Landlord's remedies hereunder or under Applicable Law or Landlord's protection of the Leased Property and Landlord's interest therein as permitted hereunder or under Applicable Law. (However, the indemnity in the preceding sentence shall not be construed to make Tenant liable to both Landlord and any Participant or other party claiming through Landlord for the same damages. For example, so long as Landlord remains entitled to recover any past due Base Rent from Tenant, no Participant shall be entitled to collect a percentage of the same Base Rent from Tenant.) Tenant shall further indemnify and hold harmless Landlord and all other Indemnified Parties against, and reimburse them for, all Losses which may be imposed upon, asserted against or incurred or paid by them by reason of, on account of or in connection with any bodily injury or death or damage to the property of third parties occurring in or upon or in the vicinity of the Leased Property through any cause whatsoever. THE FOREGOING INDEMNITY FOR INJURY, DEATH OR PROPERTY DAMAGE SHALL APPLY EVEN WHEN INJURY, DEATH OR PROPERTY DAMAGE IN, ON OR IN THE VICINITY OF THE LEASED PROPERTY RESULTS IN WHOLE OR IN PART FROM THE ORDINARY NEGLIGENCE (AS DEFINED ABOVE) OF AN INDEMNIFIED PARTY; provided, such indemnity shall not apply to Losses suffered by an Indemnified Party that were proximately caused by (and attributed by any applicable principles of comparative fault to) the Active Negligence, gross negligence or wilful misconduct of such Indemnified Party. (iii) If, after the date hereof, due to either (A) the introduction of or any change (other than any change by way of imposition or increase of reserve requirements included in the Eurodollar Rate Reserve Percentage) in or in the interpretation of any law or regulation or (B) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to Landlord's Parent or any other Participant of agreeing to make or making, funding or maintaining advances to Landlord in connection with the Leased Property, then Tenant shall from time to time, upon demand by Landlord pay to Landlord for the account of Landlord's Parent or such other Participant, as the case may be, additional amounts sufficient to compensate Landlord's Parent or the Participant for such increased cost. An increase in costs resulting from any imposition or increase of reserve requirements applicable to Collateral held from time to time by Landlord's Parent or other Participants pursuant to the Pledge Agreement would be an increase covered by the preceding sentence. A certificate as to the amount of any increased cost covered by this subparagraph, submitted to Landlord and Tenant by Landlord's Parent or the other Participant, shall be conclusive and binding for purposes of determining Tenant's obligations hereunder, absent clear and demonstrable error. (iv) Landlord's Parent or any other Participant may demand additional payments (herein called "Capital Adequacy Charges") if Landlord's Parent or the other Participant determines that any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects the amount of capital to be maintained by it and that the amount of such capital is increased by or based upon the existence of Funding Advances made or to be made to Landlord to permit Landlord to maintain Landlord's investment in the Leased Property or to make Construction Advances. To the extent that Landlord's Parent or the other Participant demands Capital Adequacy Charges as compensation for the additional capital requirements reasonably allocable to such advances, Tenant shall pay to Landlord for the account of Landlord's Parent or the other Participant, as the case may be, the amount so demanded. (v) Any amount to be paid to Landlord, Landlord's Parent or any other Indemnified Party under this subparagraph 9.(y) shall be a demand obligation owing by Tenant. Tenant's indemnities and obligations under this subparagraph 9.(y) shall survive the termination or expiration of this Lease with respect to any circumstance or event existing or occurring prior to such termination or expiration. (z) Liability Insurance. Tenant shall maintain one or more policies of commercial general liability insurance against claims for bodily injury or death and property damage occurring or resulting from any occurrence in or upon the Leased Property, in standard form and with an insurance company or companies rated by the A.M. Best Company of Oldwick, New Jersey as having a policyholder's rating of A or better and a reported financial information rating of X or better, such insurance to afford immediate protection, to the aggregate limit of not less than $10,000,000 combined single limit for bodily injury and property damage in respect of any one accident or occurrence, with not more than $1,000,000 (or such other amount as Landlord and Tenant may agree upon in writing from time to time) self-insured retention. Such commercial general liability insurance shall include blanket contractual liability coverage which insures contractual liability under the indemnifications set forth in this Lease (other than the indemnifications set forth in Paragraph 12 concerning environmental matters), but such coverage or the amount thereof shall in no way limit such indemnifications. The policy evidencing such insurance shall name as additional insureds Landlord and all Participants of which Tenant has been notified (including Landlord's Parent and the Participants). Tenant shall maintain with respect to each policy or agreement evidencing such commercial general liability insurance such endorsements as may be reasonably required by Landlord and shall at all times deliver and maintain with Landlord written confirmation (in form satisfactory to Landlord) with respect to such insurance from the applicable insurer or its authorized agent, which confirmation must provide that insurance coverage will not be canceled or reduced without at least ten (10) days notice to Landlord. Not less than five (5) days prior to the expiration date of each policy of insurance required of Tenant pursuant to this subparagraph, Tenant shall deliver to Landlord a certificate evidencing a paid renewal policy or policies. (aa) Permitted Encumbrances. Except to the extent expressly required of Landlord by subparagraph 10.(b), Tenant shall comply with and will cause to be performed all of the covenants, agreements and obligations imposed upon the owner of the Leased Property in the Permitted Encumbrances in accordance with their respective terms and provisions. Tenant shall not, without the prior written consent of Landlord, modify or permit any modification of any Permitted Encumbrance in any manner that could impose significant monetary obligations upon Landlord or any subsequent owner of the Leased Property, could significantly and adversely affect the value of the Leased Property, could impose any lien to secure payment or performance obligations against any part of the Leased Property or would otherwise be material and adverse to Landlord. (ab) Environmental. (i) Environmental Covenants. Tenant covenants: a) not to cause or permit the Leased Property to be in violation of, or do anything or permit anything to be done which will subject the Leased Property to any remedial obligations under, any Environmental Laws, including without limitation CERCLA and RCRA, assuming disclosure to the applicable governmental authorities of all relevant facts, conditions and circumstances pertaining to the Leased Property; b) not to conduct or authorize others to conduct Hazardous Substance Activities on the Leased Property, except Permitted Hazardous Substance Use; c) to the extent required by Environmental Laws, to remove Hazardous Substances from the Leased Property (or if removal is prohibited by law, to take whatever action is required by law) promptly upon discovery; and d) not to discharge or authorize the discharge of anything (including Permitted Hazardous Substances) from the Leased Property into groundwater or surface water that would require any permit under applicable Environmental Laws, other than storm water runoff. If Tenant's failure to cure any breach of the covenants listed above in this subparagraph (i) continues beyond the Environmental Cure Period (as defined below), Landlord may, in addition to any other remedies available to it, after notifying Tenant of the remediation efforts Landlord believes are needed, cause the Leased Property to be freed from all Hazardous Substances (or if removal is prohibited by law, to take whatever action is required by law), and the cost of the removal shall be a demand obligation owing by Tenant to Landlord. Further, subject to the provisions of subparagraph 12.(c) below, Tenant agrees to indemnify Landlord against all Losses incurred by or asserted or proven against Landlord in connection therewith. As used in this subparagraph, "Environmental Cure Period" means the period ending on the earlier of: (1) one hundred and eighty days (180) after Tenant is notified of the breach which must be cured within such period, or such longer period as is reasonably required for any cure that Tenant pursues with diligence pursuant to and in accordance with an Approved Plan (as defined below), (2) the date any writ or order is issued for the levy or sale of any property owned by Landlord (including the Leased Property) or any criminal action is instituted against Landlord or any of its directors, officers or employees because of the breach which must be cured within such period, (3) the end of the Term. As used in this subparagraph, an "Approved Plan" means a plan of remediation of a violation of Environmental Laws for which Tenant has obtained, within one hundred and eighty days (180) after Tenant is notified of the applicable breach of the covenants listed above in this subparagraph (i), the written approval of the governmental authority with primary jurisdiction over the violation and with respect to which no other governmental authority asserting jurisdiction has claimed such plan is inadequate. (ii) Environmental Inspections and Reviews. Landlord reserves the right to retain an independent professional consultant to review any report prepared by Tenant or to conduct Landlord's own investigation to confirm whether Hazardous Substances Activities or the discharge of anything into groundwater or surface water has occurred in violation of the preceding subparagraph (i), but Landlord's right to reimbursement for the fees of such consultant shall be limited to the following circumstances: (1) an Event of Default shall have occurred; (2) Landlord shall have retained the consultant to establish the condition of the Leased Property just prior to any conveyance thereof pursuant to the Purchase Agreement or just prior to the expiration of this Lease; (3) Landlord shall have retained the consultant to satisfy any regulatory requirements applicable to Landlord or its Affiliates; or (4) Landlord shall have retained the consultant because Landlord has been notified of a violation of Environmental Laws concerning the Leased Property or Landlord otherwise reasonably believes that Tenant has not complied with the preceding subparagraph (i). Tenant grants to Landlord and to Landlord's agents, employees, consultants and contractors the right during reasonable business hours and after reasonable notice to enter upon the Leased Property to inspect the Leased Property and to perform such tests as are reasonably necessary or appropriate to conduct a review or investigation of Hazardous Substances on, or any discharge into groundwater or surface water from, the Leased Property. Without limiting the generality of the foregoing, Tenant agrees that Landlord will have the same right, power and authority to enter and inspect the Leased Property as is granted to a secured lender under Section 2929.5 of the California Civil Code. Tenant shall promptly reimburse Landlord for the cost of any such inspections and tests, but only when the inspections and tests are (1) ordered by Landlord after an Event of Default; (2) ordered by Landlord to establish the condition of the Leased Property just prior to any conveyance thereof pursuant to the Purchase Agreement or just prior to the expiration of this Lease; (3) ordered by Landlord to satisfy any regulatory requirements applicable to Landlord or its Affiliates; or (4) ordered because Landlord has been notified of a violation of Environmental Laws concerning the Leased Property or Landlord otherwise reasonably believes that Tenant has not complied with the preceding subparagraph (i). (iii) Notice of Environmental Problems. Tenant shall immediately advise Landlord of (i) any discovery of any event or circumstance which would render any of the representations contained in subparagraph 9.(e) inaccurate in any material respect if made at the time of such discovery, (ii) any remedial action taken by Tenant in response to any (A) discovery of any Hazardous Substances other than Permitted Hazardous Substances on, under or about the Leased Property or (B) any claim for damages resulting from Hazardous Substance Activities, (iii) Tenant's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Leased Property which could cause the Leased Property or any part thereof to be subject to any ownership, occupancy, transferability or use restrictions under Environmental Laws, or (iv) any investigation or inquiry affecting the Leased Property by any governmental authority in connection with any Environmental Laws. In such event, Tenant shall deliver to Landlord within thirty (30) days after Landlord's request, a preliminary written environmental plan setting forth a general description of the action that Tenant proposes to take with respect thereto, if any, to bring the Leased Property into compliance with Environmental Laws or to correct any breach by Tenant of the covenants listed above in subparagraph (i), including, without limitation, any proposed corrective work, the estimated cost and time of completion, the name of the contractor and a copy of the construction contract, if any, and such additional data, instruments, documents, agreements or other materials or information as Landlord may reasonably request. (ac) Affirmative Financial Covenants. (i) Quick Ratio. Tenant shall maintain a ratio of (A) Quick Assets of Tenant and its Subsidiaries (determined on a consolidated basis) to (B) the sum of Current Liabilities of Tenant and its Subsidiaries (determined on a consolidated basis), of not less than 1.00 to 1.00. As used in this subparagraph 9.(ac), "Quick Assets" means the sum (without duplication of any item) of the Collateral held and pledged under the Pledge Agreement, plus unencumbered cash, plus unencumbered short term cash investments, plus other unencumbered marketable securities which are classified as short term investments according to GAAP, plus the fair market value of unencumbered Long-Term Investments, plus unencumbered current net accounts receivable. For purposes of determining Quick Assets, assets will be deemed to be "unencumbered" if they are actually unencumbered or if they are encumbered only by Liens, from which, at the time of the applicable determination of Quick Assets, Tenant is entitled to a release of such assets upon no more than ninety days' notice, without any payment (other than the payment of ministerial fees and costs), without subjecting other assets to any Lien and without otherwise satisfying any condition that is beyond Tenant's control. As used herein "Long-Term Investments" means those investments described below (to the extent that they are not classified as short term investments in accordance with GAAP), provided that such investments shall have maturities of not longer than two years, and shall be rated not less than A- by Standard & Poor's Corporation or less than A by Moody's Investors Service, Inc.: (1) Securities issued or fully guaranteed or fully insured by the United States government or any agency thereof and backed by the full faith and credit of the United States; (2) Certificates of deposit, time deposits, eurodollar time deposits, repurchase agreements, or banker's acceptances that are issued by either one of the 50 largest (in assets) banks in the United States or by one of the 100 largest (in assets) banks in the world; and (3) Notes and municipal bonds. As used in this subparagraph 9.(ac), "Current Liabilities" means, with respect to any Person, all liabilities of such Person treated as current liabilities in accordance with GAAP, including without limitation (a) all obligations payable on demand or within one year after the date in which the determination is made and (b) installment and sinking fund payments required to be made within one year after the date on which determination is made, but excluding all such liabilities or obligations which are renewable or extendable at the option of such Person to a date more than one year from the date of determination. (ii) Maximum Senior Debt to Capitalization. Throughout the Term Tenant shall maintain a ratio of Senior Debt to Capitalization of not more than 0.35 to 1.00. As used in this subparagraph 9.(ac): "Senior Debt" means the outstanding Debt of Tenant and its Subsidiaries (determined on a consolidated basis), minus the aggregate principal amount of the Subordinated Debt. "Capitalization" means the sum of the Debt of Tenant and its Subsidiaries (determined on a consolidated basis), including the aggregate principal amount of the Subordinated Debt, plus Consolidated Tangible Net Worth of Tenant and its Subsidiaries (determined on a consolidated basis). "Subordinated Debt" means the following unsecured Debt of Tenant: (i) unsecured Debt in respect of the $110,000,000 aggregate principal amount at maturity of 10 1/14% Convertible Subordinated Notes due 2001 issued pursuant to the Indenture (in this definition called the "Existing Subordinated Notes") but only so long as such unsecured Debt remains expressly and unconditionally subordinated to the payment and performance obligations of Tenant in transactions of the type and structure contemplated by this Lease and the Purchase Agreement; (ii) other unsecured Debt of Tenant which is expressly and unconditionally subordinated to the obligations of Tenant under this Lease and the Purchase Agreement on the same terms as the Existing Subordinated Notes or on other terms approved by the Majority, as defined in the Participation Agreement (such approval not to be unreasonably withheld), which together with the Existing Subordinated Notes, does not exceed at any time an aggregate amount equal to fifteen percent (15%) of Tenant's Consolidated Tangible Net Worth at such time; and (iii) other unsecured Debt of Tenant in an amount approved in writing by the Majority and which is expressly and unconditionally subordinated to the obligations of Tenant under this Lease and the Purchase Agreement on terms approved in writing by the Majority, in each case in its sole discretion. "Consolidated Tangible Net Worth" means, at any date of determination thereof, the excess determined in accordance with GAAP of consolidated total assets on such date over consolidated total liabilities on such date; provided, however, that Intangible Assets on such date shall be excluded from any determination of consolidated total assets on such date. "Intangible Assets" means, as of the date of any determination thereof, the total amount of all assets of Tenant and its consolidated Subsidiaries that are properly classified as "intangible assets" in accordance with GAAP and, in any event, shall include, without limitation, goodwill, patents, trade names, trademarks, copyrights, franchises, experimental expense, organization expense, unamortized debt discount and expense, and deferred charges other than prepaid insurance and prepaid taxes and current deferred taxes which are classified on the balance sheet of Tenant and its consolidated Subsidiaries as a current asset in accordance with GAAP and in which classification Tenant's independent public accountants concur. "Indenture" means the Indenture dated as of November 1, 1994 by and between Tenant and the First National Bank of Boston, as trustee. (iii) Minimum Tangible Net Worth. Tenant shall not permit its Consolidated Tangible Net Worth, on a consolidated basis, at the end of any fiscal quarter to be less than the sum of: (A) eighty percent (80%) of Consolidated Tangible Net Worth of Tenant as of May 31, 1997 (restated to give effect to Tenant's subsequent merger with U.S. Robotics, such that "Consolidated Tangible Net Worth" as used in this clause (A) reflects not only Tenant's May 31, 1997 Consolidated Tangible Net Worth as reported prior to the merger, but also the March 30, 1997 Consolidated Tangible Net Worth of U.S. Robotics reported prior to the merger); plus (B) fifty percent (50%) of Tenant's net income (but without deducting any net losses for any period) earned in each fiscal quarter, starting with the quarter ended August 31, 1997, and ending with the quarter which, at such time, is the most recently ended fiscal quarter; less (C) the amount of write-offs resulting from acquisitions after May 31, 1997, such amount not to exceed an aggregate, cumulative amount of $550,000,000. (iv) Fixed Charge Ratio. Throughout the Term Tenant shall maintain as of the last day of each fiscal quarter of Tenant a ratio of (A) Adjusted EBIT of Tenant and its Subsidiaries (determined on a consolidated basis) for the twelve (12) month period ending on such date, to (B) Fixed Charges of Tenant and its Subsidiaries (determined on a consolidated basis) for the twelve (12) month period ending on such date, of not less than 2.00 to 1.00. As used in this clause (iv), "Adjusted EBIT" means, for any accounting period, net income (or net loss), plus the amounts (if any) which, in the determination of net income (or net loss) for such period, have been deducted for (a) gross interest expense, (b) income tax expense (c) rent expense under leases of property (excluding rent expense payable under any "Minor Lease", which shall mean a lease under which rent is less than $1,000,000 per annum), (d) depreciation, and (e) non- recurring charges taken in connection with acquisitions, in each case determined in accordance with GAAP. As used in this clause (iv), "Fixed Charges" means, for any accounting period, the sum of (a) gross interest expense, plus (b) amortization of principal or debt discount in respect of all Debt during such period, plus (c) rent payable under all leases of property during such period (excluding rent payable under any Minor Lease), plus (d) taxes payable during such period. EX-10 4 (ad) Negative Covenants. Without the prior written consent of Landlord in each case, neither Tenant nor any of its Subsidiaries shall: (i) Liens. Create, incur, assume or suffer to exist any Lien, upon or with respect to any of its properties, now owned or hereafter acquired; provided, however, that the following shall be permitted except to the extent that they would encumber any interest in the Leased Property in violation of other provisions of this Lease or would encumber Collateral covered by the Pledge Agreement: a) Liens for taxes or assessments or other government charges or levies if not yet due and payable or if they are being contested in good faith by appropriate proceedings and for which appropriate reserves are maintained; b) Liens that secure obligations incurred in the ordinary course of business, that are not past due for more than thirty (30) days (or that are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established) and that: (1) are imposed by law, such as mechanic's, materialmen's, landlord's, warehousemen's and carrier's Liens, and other similar Liens; or (2) encumber only equipment or other tangible personal property and any proceeds thereof (including Liens created by equipment leases) and are imposed to secure the payment of the purchase price or other direct costs of acquiring the equipment or other tangible personal property they encumber; c) Liens under workmen's compensation, unemployment insurance, social security or similar legislation (other than ERISA); d) Liens, deposits or pledges to secure the performance of bids, tenders, contracts (other than contracts for the payment of money), leases, public or statutory obligations, surety, stay, appeal, indemnity, performance or other similar bonds, or other similar obligations arising in the ordinary course of business; e) judgment and other similar Liens arising in connection with court proceedings; provided that the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings; f) easements, rights-of-way, restrictions and other similar encumbrances which, in the aggregate, do not materially interfere with the occupation, use and enjoyment by Tenant or any such Subsidiary of the property or assets encumbered thereby in the normal course of its business or materially impair the value of the property subject thereto; g) Liens securing obligations of such a Subsidiary to Tenant or to another such Subsidiary; h) Liens incurred after the date of this Lease given to secure the payment of the purchase price or other direct costs incurred in connection with the acquisition, construction, improvement or rehabilitation of assets, including Liens existing on such assets at the time of acquisition thereof or at the time of acquisition by Tenant or a Subsidiary of any business entity (including a Subsidiary) then owning such assets, whether or not such existing Liens were given to secure the payment of the purchase price of the assets to which they attach, provided that (i) except in the case of Liens existing on assets at the time of acquisition of a Subsidiary then owning such assets, the Lien shall be created within six (6) months of the later of the acquisition of, or the completion of the construction or improvement in respect of, such assets and shall attach solely to such assets, and (ii) except in the case of Liens existing on assets at the time of acquisition of a Subsidiary then owning such assets, at the time such Liens are imposed, the aggregate amount remaining unpaid on all Debt secured by Liens on such assets whether or not assumed by Tenant or a Subsidiary shall not exceed an amount equal to seventy-five percent (75%) of the lesser of the total purchase price or fair market value, at the time such Debt is incurred, of such assets; i) existing mortgages and deeds of trust as of the date of this Lease; j) Liens created by any real property lease (including this Lease), or related documents (including the Purchase Agreement and other separate purchase agreements), that require Tenant or its Subsidiaries to purchase or cause another to purchase any interest in the property covered thereby and thus guarantee a minimum residual value of the property to the landlord; provided, that the value of all such leases (including this Lease) shall not exceed an aggregate, cumulative amount of $700,000,000 (for purposes of this Section (ad)(i), the "value" of a lease means the amount, determined as of the date the lease became effective, equal to the greater of (1) the present value of rentals and other minimum lease payments required in connection with such lease [calculated in accordance with FASB Statement 13 and other GAAP relevant to the determination of the whether such lease must be accounted for as capital leases, and calculated under the assumption that any allowance for construction to be provided by the landlord will be fully funded] or (2) the fair value of the property covered thereby); k) Liens imposed to secure Debt incurred to finance the acquisition of property which has been leased or sold by Tenant or one of its Subsidiaries to another Person (other than Tenant or a Subsidiary of Tenant) pursuant to a lease or sales agreement providing for payments sufficient to pay such Debt in full, provided such Debt is not a general obligation of Tenant or its Subsidiaries, but rather is payable only from the rentals or other sums payable under the lease or sales agreement or from the property sold or leased thereunder; l) Liens not otherwise permitted by this subparagraph 9.(ad)(i) (and not encumbering the Leased Property or any Collateral) which secure the payment of Debt, provided that (i) at no time does the sum of the aggregate amount of all outstanding Debt secured by such Liens exceed $50,000,000, and (i) such Liens do not constitute Liens against Tenant's interest in any material Subsidiary or blanket Liens against all or substantially all of the inventory, receivables, general intangibles or equipment of Tenant or of any material Subsidiary of Tenant (for purposes of this clause, a "material Subsidiary" means any subsidiary whose assets represent a substantial part of the total assets of Tenant and its Subsidiaries, determined on a consolidated basis in accordance with GAAP); and m) Liens incurred in connection with any renewals, extensions or refundings of any Debt secured by Liens described in the other clauses of this subparagraph 9.(ad)(i), provided that there is no increase in the aggregate principal amount of Debt secured thereby from that which was outstanding as of the date of such renewal, extension or refunding and no additional property is encumbered. (ii) Transactions with Affiliates. Enter into any transactions that individually or in the aggregate are material to Tenant (including, without limitation, the purchase, sale or exchange of property or the rendering of any service) with any Affiliates, except upon fair and reasonable terms no less favorable to Tenant than would be obtained in a comparable arm's length transaction with a Person not an Affiliate. (iii) Mergers; Sales of Assets. a) Except to the extent permitted by the last sentence of this subparagraph 9.(ad), liquidate or dissolve, or merge, consolidate with or into, or convey, transfer, lease, or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired), to any Person, or enter into any joint venture, partnership or other combination which involves the investment, sale, lease, loan, or other disposition of the business or all of the assets of Tenant and its Subsidiaries or so much thereof as, in the reasonable opinion of Landlord, constitutes a substantial portion of such business or assets. b) Except to the extent permitted by the last sentence of this subparagraph 9.(ad), acquire the assets or business of any Person, other than in the ordinary course of Tenant's business as presently conducted. (iv) Sale of Receivables. Sell for less than the full face value of, or otherwise sell for consideration other than cash, any of its notes or accounts receivable. However, this subparagraph (iv) shall not prohibit: a) a sale of receivables for cash at a discount which is less than fifteen percent (15%) of the face value of all receivables then outstanding on the books of Tenant and its consolidated Subsidiaries, if such sale and all other discounted sales of receivables permitted by this clause a) during the same fiscal year of Tenant do not affect more than fifteen percent (15%) of the individual accounts (excluding intercompany accounts) comprising the receivables of Tenant and its Subsidiaries; b) any license or sale of products or services in the ordinary course of business where payment for such transactions is made by credit card, provided that the fees and discounts incurred by the Tenant or the Subsidiary in connection therewith shall not exceed the normal and customary fees and discounts incurred for general credit card transactions through major credit card issuers; or c) the delivery and endorsement to banks in the ordinary course of business by Tenant or any of its Subsidiaries of promissory notes received in payment of trade receivables, where delivery and endorsement are made prior to the date of maturity of such promissory notes, and the retention by such banks of normal and customary fees and discounts therefor, provided such practice is usual and customary in the country where such activity occurs. (v) Change of Business. Permit any significant change in the nature of the business of Tenant and its Subsidiaries, taken as whole, from that presently conducted. Notwithstanding any contrary provisions of subparagraph 9.(ad)(iii), Tenant may engage in any of the following transactions, provided that immediately prior to and immediately after giving effect thereto, no Default or Event of Default exists or would exist: (i) merge with another entity if Tenant is the corporation surviving the merger; (ii) enter into joint ventures; (iii) acquire the assets or business of another Person; or (iv) liquidate or dissolve Subsidiaries to the extent that such liquidations and dissolutions would not, in the aggregate, result in a material adverse effect on the properties, assets, operations or businesses of Tenant and its Subsidiaries, taken as a whole. (ae) ERISA. (i) Each Plan is in compliance in all material respects with, and has been administered in all material respects in compliance with, the applicable provisions of ERISA, the Code and any other applicable Federal or state law, and as of the date hereof no event or condition is occurring or exists which would require a notice from Tenant under clause 9.(ae)(ii). (ii) Tenant shall provide a notice to Landlord as soon as possible after, and in any event within ten (10) days after Tenant becomes aware that, any of the following has occurred, with respect to which the potential aggregate liability to Tenant relating thereto is $2,000,000 or more, and such notice shall include a statement signed by a senior financial officer of Tenant setting forth details of the following and the response, if any, which Tenant or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to Pension Benefit Guaranty Corporation by Tenant or an ERISA Affiliate with respect to any of the following or the events or conditions leading up it): (A) the assertion, to secure any Unfunded Benefit Liabilities, of any Lien against the assets of Tenant, against the assets of any Plan of Tenant or any ERISA Affiliate of Tenant or against any interest of Landlord or Tenant in the Leased Property or the Collateral covered by the Pledge Agreement, or (B) the taking of any action by the Pension Benefit Guaranty Corporation or any other governmental authority action against Tenant to terminate any Plan of Tenant or any ERISA Affiliate of Tenant or to cause the appointment of a trustee or receiver to administer any such Plan. 10. Representations, Warranties and Covenants of Landlord. Landlord represents, warrants and covenants as follows: (a) Title Claims By, Through or Under Landlord. Except by a Permitted Transfer, Landlord shall not assign, transfer, mortgage, pledge, encumber or hypothecate this Lease or any interest of Landlord in and to the Leased Property during the Term without the prior written consent of Tenant. Landlord further agrees that if any encumbrance or title defect affecting the Leased Property is lawfully claimed through or under Landlord, including any judgment lien lawfully filed against Landlord, Landlord will at its own cost and expense remove any such encumbrance and cure any such defect; provided, however, Landlord shall not be responsible for (i) any Permitted Encumbrances (regardless of whether claimed through or under Landlord) or any other encumbrances not lawfully claimed through or under Landlord, (ii) any encumbrances or title defects claimed by, through or under Tenant, an Approved Participant, or any other Participant (other than Landlord's Parent) which Tenant shall have approved, or (iii) any encumbrance or title defect arising because of Landlord's compliance with subparagraph 10.(b) or any request made by Tenant. (b) Actions Required of the Title Holder. So long as no Event of Default shall have occurred and be continuing, Landlord shall take any and all action required of Landlord by the Permitted Encumbrances or otherwise required of Landlord by Applicable Laws or reasonably requested by Tenant (including granting any utility easements required in connection with construction of Improvements); provided that (i) actions Tenant may require of Landlord under this subparagraph shall be limited to actions that can only be taken by Landlord as the owner of the Leased Property, as opposed to any action that can be taken by Tenant or any third party (and the payment of any monetary obligation shall not be an action required of Landlord under this subparagraph unless Landlord shall first have received funds from Tenant, in excess of any other amounts due from Tenant hereunder, sufficient to pay such monetary obligations), (ii) Tenant requests the action to be taken by Landlord (which request must be specific and in writing, if required by Landlord at the time the request is made) and (iii) the action to be taken will not constitute a violation of any Applicable Laws or compromise or constitute a waiver of Landlord's rights hereunder or under the Purchase Documents, or Environmental Indemnity or otherwise be reasonably objectionable to Landlord. Any Losses incurred by Landlord because of any action taken pursuant to this subparagraph shall be covered by the indemnification set forth in subparagraph 9.(y). Further, for purposes of such indemnification, any action taken by Landlord will be deemed to have been made at the request of Tenant if made pursuant to any request of Tenant's counsel or of any officer of Tenant (or with their knowledge, and without their objection) in connection with the closing under the Existing Contract or the execution, administration or enforcement of any Construction Document. (c) No Default or Violation. The execution, delivery and performance of this Lease do not contravene, result in a breach of or constitute a default under any material contract or agreement to which Landlord is a party or by which Landlord is bound and do not, to the knowledge of Landlord, violate or contravene any law, order, decree, rule or regulation to which Landlord is subject. (d) No Suits. To Landlord's knowledge there are no judicial or administrative actions, suits or proceedings involving the validity, enforceability or priority of this Lease, and to Landlord's knowledge no such suits or proceedings are threatened. (e) Organization. Landlord is duly incorporated and legally existing under the laws of Delaware and is or, if necessary, will become duly qualified to do business in the State of California. Landlord has or will obtain, at Tenant's expense pursuant to the other provisions of this Lease, all requisite power and all material governmental certificates of authority, licenses, permits, qualifications and other documentation necessary to own and lease the Leased Property and to perform its obligations under this Lease. (f) Enforceability. The execution, delivery and performance of this Lease and the Purchase Documents by Landlord are duly authorized, are not in contravention of or conflict with any term or provision of Landlord's articles of incorporation or bylaws and do not, to Landlord's knowledge, require the consent or approval of any governmental body or other regulatory authority that has not heretofore been obtained or conflict with any Applicable Laws. This Lease and the Purchase Documents are valid, binding and legally enforceable obligations of Landlord except as such enforcement is affected by bankruptcy, insolvency and similar laws affecting the rights of creditors, generally, and equitable principles of general application; provided, Landlord makes no representation or warranty that conditions imposed by any state or local Applicable Laws to the purchase, ownership, lease or operation of the Leased Property have been satisfied. (g) Existence. Landlord will continuously maintain its existence and, after qualifying to do business in the State of California if Landlord has not already done so, Landlord will continuously maintain its right to do business in that state to the extent necessary for the performance of Landlord's obligations hereunder. (h) Not a Foreign Person. Landlord is not a "foreign person" within the meaning of the Sections 1445 and 7701 of the Code (i.e., Landlord is not a non-resident alien, foreign corporation, foreign partnership, foreign trust or foreign estate as those terms are defined in the Code and regulations promulgated thereunder), and Landlord is not subject to withholding under California Revenue and Taxation Code Sections 18805, 18815, and 26131. 11. Assignment and Subletting. (a) Consent Required. During the term of this Lease, without the prior written consent of Landlord first had and received, Tenant shall not assign, transfer, mortgage, pledge or hypothecate this Lease or any interest of Tenant hereunder and shall not sublet all or any part of the Leased Property, by operation of law or otherwise; provided, that, so long as no Event of Default has occurred and is continuing, Tenant shall be entitled without the consent of Landlord to sublet all or any portion of the space in any then completed Improvements if: (i) any sublease by Tenant is made expressly subject and subordinate to the terms hereof; (ii) no sublease has a term longer than the remainder of the then effective term of this Lease; (iii) the use permitted by such sublease is expressly limited to general office use or other uses approved in advance by Landlord as uses that will not present extraordinary risks of uninsured environmental or other liability; and (iv) no more than forty-five percent (45%) of the total space of completed Improvements shall be subleased without Landlord's prior consent to any Person that is neither (A) an Affiliate of Tenant nor (B) the operator of a business in the subleased space that is related to the operation of Tenant's own business (such as another venturer in a joint venture with Tenant). (b) Standard for Landlord's Consent to Assignments and Certain Other Matters. Consents and approvals of Landlord which are required by this Paragraph 11 will not be unreasonably withheld, but Tenant acknowledges that Landlord's withholding of such consent or approval shall be reasonable if Landlord determines in good faith that (1) giving the approval may increase Landlord's risk of liability for any existing or future environmental problem, (2) giving the approval is likely to substantially increase Landlord's administrative burden of complying with or monitoring Tenant's compliance with the requirements of this Lease, or (3) any transaction for which Tenant has requested the consent or approval would negate Tenant's representations in this Lease regarding ERISA or cause this Lease or the other documents referenced herein to constitute a violation of any provision of ERISA. (c) Consent Not a Waiver. No consent by Landlord to a sale, assignment, transfer, mortgage, pledge or hypothecation of this Lease or Tenant's interest hereunder, and no assignment or subletting of the Leased Property or any part thereof in accordance with this Lease or otherwise with Landlord's consent, shall release Tenant from liability hereunder; and any such consent shall apply only to the specific transaction thereby authorized and shall not relieve Tenant from any requirement of obtaining the prior written consent of Landlord to any further sale, assignment, transfer, mortgage, pledge or hypothecation of this Lease or any interest of Tenant hereunder. (d) Landlord's Assignment. Landlord shall have the right to transfer, assign and convey, in whole or in part, the Leased Property and any and all of its rights under this Lease by any conveyance that constitutes a Permitted Transfer. (However, any Permitted Transfer shall be subject to all of the provisions of each and every agreement concerning the Leased Property then existing between Landlord and Tenant, including without limitation this Lease and the Purchase Agreement.) If Landlord sells or otherwise transfers the Leased Property and assigns its rights under this Lease and the Purchase Documents pursuant to a Permitted Transfer, then to the extent Landlord's successor in interest confirms its liability for the obligations imposed upon Landlord by this Lease and the Purchase Documents on and subject to the express terms and conditions set out herein and therein, the original Landlord shall thereby be released from any obligations thereafter arising under this Lease and the Purchase Documents, and Tenant will look solely to each successor in interest of Landlord for performance of such obligations. However, notwithstanding anything to the contrary herein contained, if withholding taxes are imposed on the rents and other amounts payable to Landlord hereunder because of Landlord's assignment of this Lease to any citizen of, or any corporation or other entity formed under the laws of, a country other than the United States, Tenant shall not be required to compensate such assignee for the withholding tax. Further, during the Term and so long as no Event of Default has occurred and is continuing, Landlord shall not decrease the aggregate of its and Landlord's Parent's Percentages under and as defined in the Participation Agreement below the minimum percentage require by paragraph 14.2 of the Participation Agreement. 12. Environmental Indemnification. (a) Indemnity. Tenant hereby agrees to assume liability for and to pay, indemnify, defend, and hold harmless each and every Indemnified Party from and against any and all Environmental Losses, subject only to the provisions of subparagraph 12.(c) below. (b) Assumption of Defense. (i) If an Indemnified Party notifies Tenant of any claim, demand, action, administrative or legal proceeding, investigation or allegation as to which the indemnity provided for in this Paragraph 12 applies, Tenant shall assume on behalf of the Indemnified Party and conduct with due diligence and in good faith the investigation and defense thereof and the response thereto with counsel selected by Tenant but reasonably satisfactory to the Indemnified Party; provided, that the Indemnified Party shall have the right to be represented by advisory counsel of its own selection and at its own expense; and provided further, that if any such claim, demand, action, proceeding, investigation or allegation involves both Tenant and the Indemnified Party and the Indemnified Party shall have been advised in writing by counsel that there may be legal defenses available to it which are inconsistent with those available to Tenant, then the Indemnified Party shall have the right to select separate counsel to participate in the investigation and defense of and response to such claim, demand, action, proceeding, investigation or allegation on its own behalf, and Tenant shall pay or reimburse the Indemnified Party for all Attorney's Fees incurred by the Indemnified Party because of the selection of such separate counsel. (ii) If any claim, demand, action, proceeding, investigation or allegation arises as to which the indemnity provided for in this Paragraph 12 applies, and Tenant fails to assume promptly (and in any event within fifteen (15) days after being notified of the claim, demand, action, proceeding, investigation or allegation) the defense of the Indemnified Party, then the Indemnified Party may contest (or settle, with the prior written consent of Tenant, which consent will not be unreasonably withheld) the claim, demand, action, proceeding, investigation or allegation at Tenant's expense using counsel selected by the Indemnified Party; provided, that if any such failure by Tenant continues for thirty (30) days or more after Tenant is notified thereof, no such contest need be made by the Indemnified Party and settlement or full payment of any claim may be made by the Indemnified Party without Tenant's consent and without releasing Tenant from any obligations to the Indemnified Party under this Paragraph 12 so long as, in the written opinion of reputable counsel to the Indemnified Party, the settlement or payment in full is clearly advisable. (c) Notice of Environmental Losses. If an Indemnified Party receives a written notice of Environmental Losses that such Indemnified Party believes are covered by this Paragraph 12, then such Indemnified Party will be expected to promptly furnish a copy of such notice to Tenant. The failure to so provide a copy of the notice to Tenant shall not excuse Tenant from its obligations under this Paragraph 12; provided, that if Tenant is unaware of the matters described in the notice and such failure renders unavailable defenses that Tenant might otherwise assert, or precludes actions that Tenant might otherwise take, to minimize its obligations hereunder, then Tenant shall be excused from its obligation to indemnify such Indemnified Party (and any Affiliate of such Indemnified Party) against Environmental Losses, if any, which would not have been incurred but for such failure. For example, if Landlord fails to provide Tenant with a copy of a notice of an obligation covered by the indemnity set out in subparagraph 12.(a) and Tenant is not otherwise already aware of such obligation, and if as a result of such failure Landlord becomes liable for penalties and interest covered by the indemnity in excess of the penalties and interest that would have accrued if Tenant had been promptly provided with a copy of the notice, then Tenant will be excused from any obligation to Landlord (or any Affiliate of Landlord) to pay the excess. (d) Rights Cumulative. The rights of each Indemnified Party under this Paragraph 12 shall be in addition to any other rights and remedies of such Indemnified Party against Tenant under the other provisions of this Lease or under any other document or instrument now or hereafter executed by Tenant, or at law or in equity (including, without limitation, any right of reimbursement or contribution pursuant to CERCLA). (e) Survival of the Indemnity. Tenant's obligations under this Paragraph 12 shall survive the termination or expiration of this Lease. All obligations of Tenant under this Paragraph 12 shall be payable upon demand, and any amount due upon demand to any Indemnified Party by Tenant which is not paid shall bear interest from the date of such demand at a floating interest rate equal to the Default Rate, but in no event in excess of the maximum rate permitted by law. 13. Landlord's Right of Access. (a) Landlord and Landlord's representatives may enter the Leased Property, after five (5) Business Days advance written notice to Tenant (except in the event of an emergency, when no advance notice will be required), for the purpose of making inspections or performing any work Landlord is authorized to undertake by the next subparagraph. So long as Tenant remains in possession of the Leased Property, Landlord or Landlord's representative will, before making any such inspection or performing any such work on the Leased Property, if then requested to do so by Tenant to maintain Tenant's security: (i) sign in at Tenant's security or information desk if Tenant has such a desk on the premises, (ii) wear a visitor's badge or other reasonable identification provided by Tenant when Landlord or Landlord's representative first arrives at the Leased Property, (iii) permit an employee of Tenant to observe such inspection or work, and (iv) comply with other similar reasonable nondiscriminatory security requirements of Tenant that do not, individually or in the aggregate, interfere with or delay inspections or work of Landlord authorized by this Lease. (b) If Tenant fails to perform any act or to take any action which hereunder Tenant is required to perform or take, or to pay any money which hereunder Tenant is required to pay, and if such failure or action constitutes an Event of Default or renders Landlord or any director, officer, employee or Affiliate of Landlord at risk of criminal prosecution or renders Landlord's interest in the Leased Property or any part thereof at risk of forfeiture by forced sale or otherwise, then in addition to any other remedies specified herein or otherwise available, Landlord may, in Tenant's name or in Landlord's own name, perform or cause to be performed such act or take such action or pay such money. Any expenses so incurred by Landlord, and any money so paid by Landlord, shall be a demand obligation owing by Tenant to Landlord. Further, Landlord, upon making such payment, shall be subrogated to all of the rights of the person, corporation or body politic receiving such payment. But nothing herein shall imply any duty upon the part of Landlord to do any work which under any provision of this Lease Tenant may be required to perform, and the performance thereof by Landlord shall not constitute a waiver of Tenant's default. Landlord may during the progress of any such work permitted by Landlord hereunder on or in the Leased Property keep and store upon the Leased Property all necessary materials, tools, and equipment. Landlord shall not in any event be liable for inconvenience, annoyance, disturbance, loss of business, or other damage to Tenant or the subtenants of Tenant by reason of making such repairs or the performance of any such work on or in the Leased Property, or on account of bringing materials, supplies and equipment into or through the Leased Property during the course of such work (except for liability in connection with death or injury or damage to the property of third parties caused by the Active Negligence, gross negligence or wilful misconduct of Landlord or its officers, employees, or agents in connection therewith), and the obligations of Tenant under this Lease shall not thereby be affected in any manner. 14. Events of Default. (a) Definition of Event of Default. Each of the following events shall be deemed to be an "Event of Default" by Tenant under this Lease: (i) Tenant shall fail to pay when due any installment of Rent due hereunder and such failure shall continue for three (3) Business Days after Tenant is notified thereof. (ii) Tenant shall fail to cause any representation or warranty of Tenant contained herein that is false or misleading in any material respect when made to be made true and not misleading (other than as described in the other clauses of this subparagraph 14.(a)), or Tenant shall fail to comply with any term, provision or covenant of this Lease (other than as described in the other clauses of this subparagraph 14.(a)), and in either case shall not cure such failure prior to the earlier of (A) thirty (30) days after written notice thereof is sent to Tenant or (B) the date any writ or order is issued for the levy or sale of any property owned by Landlord (including the Leased Property) or any criminal action is instituted against Landlord or any of its directors, officers or employees because of such failure; provided, however, that so long as no such writ or order is issued and no such criminal action is instituted, if such failure is susceptible of cure but cannot with reasonable diligence be cured within such thirty day period, and if Tenant shall promptly have commenced to cure the same and shall thereafter prosecute the curing thereof with reasonable diligence, the period within which such failure may be cured shall be extended for such further period (not to exceed an additional sixty (60) days) as shall be necessary for the curing thereof with reasonable diligence. (iii) Tenant shall fail to comply with any term, provision or condition of the Purchase Documents and, if any Purchase Document expressly provides a time within which Tenant may cure such failure, Tenant shall not cure the failure within such time. (iv) Tenant shall abandon the Leased Property. (v) Tenant shall fail to make any payment or payments of principal, premium or interest, on any Debt of Tenant described in the next sentence when due (taking into consideration the time Tenant may have to cure such failure, if any, under the documents governing such Debt). As used in this clause 14.(a)(v), "Debt" shall mean only a Debt of Tenant now existing or arising in the future, (A) payable to Landlord or any Participant or any Affiliate of Landlord or any Participant, the outstanding balance of which has become due by reason of acceleration or maturity, or (B) payable to any Person, with respect to which $20,000,000 or more is actually due and payable because of acceleration or otherwise. (vi) Tenant or any of its Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against Tenant or any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of thirty (30) consecutive days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or Tenant or any of its Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this clause (vi). (vii) Any order, judgment or decree is entered in any proceedings against Tenant or any Subsidiary decreeing the dissolution of Tenant or such Subsidiary and such order, judgment or decree remains unstayed and in effect for more than sixty (60) days. (viii) Any order, judgment or decree is entered in any proceedings against Tenant or any Subsidiary decreeing a split-up of Tenant or such Subsidiary which requires the divestiture of assets representing a substantial part, or the divestiture of the stock of a Subsidiary whose assets represent a substantial part, of the consolidated assets of Tenant and its Subsidiaries (determined in accordance with GAAP) or which requires the divestiture of assets, or stock of a Subsidiary, which shall have contributed a substantial part of the consolidated net income of Tenant and its Subsidiaries (determined in accordance with GAAP) for any of the three fiscal years then most recently ended, and such order, judgment or decree remains unstayed and in effect for more than sixty (60) days. (ix) One or more non-interlocutory judgments, non- interlocutory orders, decrees, or arbitration awards is entered against Tenant or any of its Subsidiaries involving in the aggregate a liability (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage) as to any single or related series of transactions, incidents, or conditions, of $20,000,000 or more, and the same shall remain unvacated and unstayed pending appeal for a period of ten days after the entry thereof; (x) Any ERISA Termination Event that Landlord determines might constitute grounds for the termination of any Plan or for the appointment by the appropriate United States district court of a trustee to administer any Plan shall have occurred and be continuing thirty (30) days after written notice to such effect shall have been given to Tenant by Landlord, or any Plan shall be terminated, or a trustee shall be appointed by an appropriate United States district court to administer any Plan, or the Pension Benefit Guaranty Corporation shall institute proceedings to terminate any Plan or to appoint a trustee to administer any Plan. (xi) A Change of Control Event not approved in advance by Landlord shall occur. (xii) The subordination provisions of the Indenture (as defined in subparagraph 9.(ac)(ii) of this Lease) or any other agreement or instrument governing the Subordinated Debt (as defined in subparagraph 9.(ac)(ii) of this Lease) shall be for any reason revoked or invalidated, or otherwise cease to be in full force and effect; or the Tenant or any of its Subsidiaries shall contest in any manner the validity or enforceability of such subordination provisions or shall deny that it has any further liability or obligation thereunder; or the obligations of Tenant hereunder or under the Purchase Documents shall be for any reason subordinated to such Subordinated Debt or shall not have the priority over such Subordinated Debt as contemplated by this Lease or by the Indenture or by such subordination provisions. Notwithstanding the foregoing, any Default that could become an Event of Default under clause 14.(a)(ii) may be cured within the earlier of the periods described in clauses (A) and (B) thereof by Tenant's delivery to Landlord of a written notice irrevocably exercising Tenant's option under the Purchase Agreement to purchase Landlord's interest in the Leased Property and designating as the Designated Sale Date the next following date which is an Advance Date or Base Rent Date and which is at least ten (10) days after the date of such notice; provided, however, Tenant must, as a condition to the effectiveness of its cure, on the date so designated as the Designated Sale Date tender to Landlord the full purchase price required by the Purchase Agreement and all Rent and all other amounts then due or accrued and unpaid hereunder (including reimbursement for any costs incurred by Landlord in connection with the applicable Default hereunder, regardless of whether Landlord shall have been reimbursed for such costs in whole or in part by any Participants) and Tenant must also furnish written confirmation that all indemnities set forth herein (including specifically, but without limitation, the general indemnity set forth in subparagraph 9.(y) and the environmental indemnity set forth in Paragraph 12 shall survive the payment of such amounts by Tenant to Landlord and the conveyance of Landlord's interest in the Leased Property to Tenant. (b) Remedies. Upon the occurrence of an Event of Default which is not cured within any applicable period expressly permitted by subparagraph 14.(a), at Landlord's option and without limiting Landlord in the exercise of any other right or remedy Landlord may have on account of such default, and without any further demand or notice except as expressly described in this subparagraph 14.(b): (i) By notice to Tenant, Landlord may terminate Tenant's right to possession of the Leased Property. A notice given in connection with unlawful detainer proceedings specifying a time within which to cure a default shall terminate Tenant's right to possession if Tenant fails to cure the default within the time specified in the notice. (ii) Upon termination of Tenant's right to possession and without further demand or notice, Landlord may re-enter the Leased Property and take possession of all improvements, additions, alterations, equipment and fixtures thereon and remove any persons in possession thereof. Any property in the Leased Property may be removed and stored in a warehouse or elsewhere at the expense and risk of and for the account of Tenant. (iii) Upon termination of Tenant's right to possession, this Lease shall terminate and Landlord may recover from Tenant: a) The worth at the time of award of the unpaid Rent which had been earned at the time of termination; b) The worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; c) The worth at the time of award of the amount by which the unpaid Rent for the balance of the scheduled Term after the time of award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; and d) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform Tenant's obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including, but not limited to, the costs and expenses (including Attorneys' Fees, advertising costs and brokers' commissions) of recovering possession of the Leased Property, removing persons or property therefrom, placing the Leased Property in good order, condition, and repair, preparing and altering the Leased Property for reletting, all other costs and expenses of reletting, and any loss incurred by Landlord as a result of Tenant's failure to perform Tenant's obligations under the Purchase Agreement. The "worth at the time of award" of the amounts referred to in subparagraph 14.(b)(iii)a) and subparagraph 14.(b)(iii)b) shall be computed by allowing interest at ten percent (10%) per annum or such other rate as may be the maximum interest rate then permitted to be charged under California law at the time of computation. The "worth at the time of award" of the amount referred to in subparagraph 14.(b)(iii)c) shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). e) Such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable California law. (iv) The Landlord shall have the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in force even after lessee's breach and abandonment and recover rent as it becomes due, if lessee has right to sublet or assign, subject only to reasonable limitations). Accordingly, even though Tenant has breached this Lease and abandoned the Leased Property, this Lease shall continue in effect for so long as Landlord does not terminate Tenant's right to possession, and Landlord may enforce all of Landlord's rights and remedies under this Lease, including the right to recover the Rent as it becomes due under this Lease. Tenant's right to possession shall not be deemed to have been terminated by Landlord except pursuant to subparagraph 14.(b)(i) hereof. The following shall not constitute a termination of Tenant's right to possession: a) Acts of maintenance or preservation or efforts to relet the Leased Property; b) The appointment of a receiver upon the initiative of Landlord to protect Landlord's interest under this Lease; or c) Reasonable withholding of consent to an assignment or subletting, or terminating a subletting or assignment by Tenant. (c) Enforceability. This Paragraph shall be enforceable to the maximum extent not prohibited by Applicable Law, and the unenforceability of any provision in this Paragraph shall not render any other provision unenforceable. (d) Remedies Cumulative. No right or remedy herein conferred upon or reserved to Landlord is intended to be exclusive of any other right or remedy, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing under Applicable Law or in equity. In addition to other remedies provided in this Lease, Landlord shall be entitled, to the extent permitted by Applicable Law, to injunctive relief in case of the violation, or attempted or threatened violation, of any of the covenants, agreements, conditions or provisions of this Lease to be performed by Tenant, or to a decree compelling performance of any of the other covenants, agreements, conditions or provisions of this Lease to be performed by Tenant, or to any other remedy allowed to Landlord under Applicable Law or in equity. Nothing contained in this Lease shall limit or prejudice the right of Landlord to prove for and obtain in proceedings for bankruptcy or insolvency of Tenant by reason of the termination of this Lease, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, the damages are to be proved, whether or not the amount be greater, equal to, or less than the amount of the loss or damages referred to above. Without limiting the generality of the foregoing, nothing contained herein shall modify, limit or impair any of the rights and remedies of Landlord under the Purchase Documents or the Environmental Indemnity. (e) Waiver by Tenant. To the extent permitted by law, Tenant hereby waives and surrenders for itself and all claiming by, through and under it, including creditors of all kinds, (i) any right and privilege which it or any of them may have under any present or future constitution, statute or rule of law to have a continuance of this Lease for the term hereby demised after termination of Tenant's right of occupancy by order or judgment of any court or by any legal process or writ, or under the terms of this Lease, or after the termination of this Lease as herein provided, and (ii) the benefits of any present or future constitution, or statute or rule of law which exempts property from liability for debt or for distress for rent, and (iii) the provisions of law relating to notice and/or delay in levy of execution in case of eviction of a lessee for nonpayment of rent. (f) No Implied Waiver. The failure of Landlord to insist at any time upon the strict performance of any covenant or agreement or to exercise any option, right, power or remedy contained in this Lease shall not be construed as a waiver or a relinquishment thereof for the future. The waiver of or redress for any violation by Tenant of any term, covenant, agreement or condition contained in this Lease shall not prevent a similar subsequent act from constituting a violation. Any express waiver shall affect only the term or condition specified in such waiver and only for the time and in the manner specifically stated therein. A receipt by Landlord of any Base Rent or other payment hereunder with knowledge of the breach of any covenant or agreement contained in this Lease shall not be deemed a waiver of such breach, and no waiver by Landlord of any provision of this Lease shall be deemed to have been made unless expressed in writing and signed by Landlord. 15. Default by Landlord. If Landlord should default in the performance of any of its obligations under this Lease, Landlord shall have the time reasonably required, but in no event less than thirty (30) days, to cure such default after receipt of written notice from Tenant specifying such default and specifying what action Tenant believes is necessary to cure the default. If Tenant prevails in any litigation brought against Landlord because of Landlord's failure to cure a default within the time required by the preceding sentence, then Tenant shall be entitled to an award against Landlord for the damages proximately caused to Tenant by such default. 16. Quiet Enjoyment. Provided no Event of Default has occurred and is continuing, Landlord shall not during the Term disturb Tenant's peaceable and quiet enjoyment of the Leased Property; however, such enjoyment shall be subject to the terms, provisions, covenants, agreements and conditions of this Lease and the Permitted Encumbrances and any other claims or encumbrances not lawfully made through or under Landlord, to which this Lease is subject and subordinate as hereinabove set forth. Any breach by Landlord of the foregoing covenant of quiet enjoyment shall, subject to the other provisions of this Lease, render Landlord liable to Tenant for any monetary damages proximately caused thereby, but as more specifically provided in Paragraph 5 above, no such breach shall entitle Tenant to terminate this Lease or excuse Tenant from its obligation to pay Base Rent and other amounts hereunder. 17. Surrender Upon Termination. Unless Tenant or an Applicable Purchaser purchases Landlord's entire interest in the Leased Property pursuant to the terms of the Purchase Agreement, Tenant shall, upon the termination of Tenant's right to occupancy, surrender to Landlord the Leased Property, including any buildings, alterations, improvements, replacements or additions constructed by Tenant, with all fixtures and furnishings included in the Leased Property, but not including movable furniture and movable personal property not covered by this Lease, free of all Hazardous Substances (including Permitted Hazardous Substances) and tenancies and, to the extent required by Landlord, with all Improvements in the same condition as of the date hereof, excepting only (i) ordinary wear and tear (provided that the Leased Property shall have been maintained as required by the other provisions hereof) and (ii) alterations and additions which are expressly permitted by the terms of this Lease and which have been completed by Tenant in a good and workmanlike manner in accordance with all Applicable Laws. Any movable furniture or movable personal property belonging to Tenant or any party claiming under Tenant, if not removed at the time of such termination and if Landlord shall so elect, shall be deemed abandoned and become the property of Landlord without any payment or offset therefor. If Landlord shall not so elect, Landlord may remove such property from the Leased Property and store it at Tenant's risk and expense. Tenant shall bear the expense of repairing any damage to the Leased Property caused by such removal by Landlord or Tenant. 18. Holding Over by Tenant. Should Tenant not purchase Landlord's right, title and interest in the Leased Property as provided in the Purchase Agreement, but nonetheless continue to hold the Leased Property after the termination of this Lease without Landlord's written consent, whether such termination occurs by lapse of time or otherwise, such holding over shall constitute and be construed as a tenancy from day to day only, at a daily Base Rent equal to: (i) the unpaid Purchase Price on the day in question, times (ii) the Holdover Rate (as defined below) for such day, divided by (iii) 360; subject, however, to all of the terms, provisions, covenants and agreements on the part of Tenant hereunder. No payments of money by Tenant to Landlord after the termination of this Lease shall reinstate, continue or extend the Term of this Lease and no extension of this Lease after the termination thereof shall be valid unless and until the same shall be reduced to writing and signed by both Landlord and Tenant; provided, however, following any breach by Landlord of its obligations to tender a deed and other documents on the Designated Sale Date as provided in the Purchase Agreement, Tenant may at its option continue its possession and use of the Leased Property pursuant to this Lease, as if the Term had been extended, for a period not to exceed 180 days after the Designated Sale Date or such longer time as may be proscribed by Applicable Law. As used herein, the "Holdover Rate" means: (1) for any day prior to the date on which Landlord tenders a deed and other documents as required by the Purchase Agreement (or is excused from its obligation to tender by Tenant's breach or anticipatory repudiation of the Purchase Agreement), a rate equal to the Fed Funds Rate on that day plus one hundred basis points; (2) for any day on which or within ninety days after Landlord tenders a deed and other documents as required by the Purchase Agreement (or is excused from its obligation to tender by Tenant's breach or anticipatory repudiation of the Purchase Agreement), the per annum Prime Rate in effect for such day; and (3) for any day after the ninety days described in the preceding clause, a rate which is three percent (3%) above the per annum Prime Rate. 19. Miscellaneous. (a) Notices. Each provision of this Lease, or of any Applicable Laws with reference to the sending, mailing or delivery of any notice or with reference to the making of any payment by Tenant to Landlord, shall be deemed to be complied with when and if the following steps are taken: (i) All Rent required to be paid by Tenant to Landlord hereunder shall be paid to Landlord in immediately available funds by wire transfer to: Federal Reserve Bank of San Francisco Account: Banque Nationale de Paris ABA #: 121027234 Reference: 3COM - Phase III or at such other place and in such other manner as Landlord may designate in a notice to Tenant (provided Landlord will not unreasonably designate a method of payment other than wire transfer). Time is of the essence as to all payments and other obligations of Tenant under this Lease. (ii) All Construction Advances required to be paid to Tenant by Landlord hereunder shall be paid to Tenant in immediately available funds by wire transfer to: Account Name: 3Com Corporation Account Number: 14848-01985 ABA #: 121000358 Reference: Construction Advance/3COM - Phase III or at such other place and in such other manner as Tenant may designate in a notice to Landlord (provided Tenant will not unreasonably designate a method of payment other than wire transfer). Time is of the essence as to the payment of all Construction Advances required of Landlord under this Lease. (iii) All notices, demands and other communications to be made hereunder to the parties hereto shall be in writing (at the addresses set forth below, or in the case of communications to Participants, at the addresses for notice established by the Participation Agreement) and shall be given by any of the following means: (A) personal service, with proof of delivery or attempted delivery retained; (B) electronic communication, whether by telex, telegram or telecopying (if confirmed in writing sent by United States first class mail, return receipt requested); or (C) registered or certified first class mail, return receipt requested. Such addresses may be changed by notice to the other parties given in the same manner as provided above. Any notice or other communication sent pursuant to clause (A) or (C) hereof shall be deemed received (whether or not actually received) upon first attempted delivery at the proper notice address on any Business Day between 9:00 A.M. and 5:00 P.M., and any notice or other communication sent pursuant to clause (B) hereof shall be deemed received upon dispatch by electronic means. Address of Landlord: BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd Cox Telecopy: (214) 969-0060 With a copy to: Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Jennifer Cho or Will La Herran Telecopy: (415) 296-8954 And with a copy to: Clint Shouse Thompson & Knight, P.C. 1700 Pacific Avenue Suite 3300 Dallas, Texas 75201 Telecopy: (214) 969-1550 Address of Tenant: 3Com Corporation 5400 Bayfront Plaza Santa Clara, California 95052 Attn: Legal Dept. MS - 1308 Telecopy: (408) 764-6434 With copies to: 3Com Corporation 5400 Bayfront Plaza Santa Clara, California 95052 Attn: Real Estate Dept. MS - 1220 Telecopy: (408) 764-5718; and 3Com Corporation 5400 Bayfront Plaza Santa Clara, California 95052 Attn: Treasury Dept. MS - 1307 Telecopy: (408) 764-8403; and Gray Cary Ware & Freidenrich 400 Hamilton Avenue Palo Alto, California 94301 Attn: Jonathan E. Rattner, Esq. Telecopy: (415) 328-3029 (b) Severability. If any term or provision of this Lease or the application thereof shall to any extent be held by a court of competent jurisdiction to be invalid and unenforceable, the remainder of this Lease, or the application of such term or provision other than to the extent to which it is invalid or unenforceable, shall not be affected thereby. (c) No Merger. There shall be no merger of this Lease or of the leasehold estate hereby created with the fee estate in the Leased Property or any part thereof by reason of the fact that the same person may acquire or hold, directly or indirectly, this Lease or the leasehold estate hereby created or any interest in this Lease or in such leasehold estate as well as the fee estate in the Leased Property or any interest in such fee estate, unless all Persons with an interest in the Leased Property that would be adversely affected by any such merger specifically agree in writing that such a merger shall occur. (d) NO IMPLIED REPRESENTATIONS BY LANDLORD. LANDLORD AND LANDLORD'S AGENTS HAVE MADE NO REPRESENTATIONS OR PROMISES WITH RESPECT TO THE LEASED PROPERTY EXCEPT AS EXPRESSLY SET FORTH HEREIN, AND NO RIGHTS, EASEMENTS OR LICENSES ARE ACQUIRED BY TENANT BY IMPLICATION OR OTHERWISE EXCEPT AS EXPRESSLY SET FORTH IN THE PROVISIONS OF THIS LEASE, AND THE PURCHASE DOCUMENTS. (e) Entire Agreement. This Lease and the instruments referred to herein supersede any prior negotiations and agreements between the parties concerning the Leased Property and no amendment or modification of this Lease shall be binding or valid unless expressed in a writing executed by both parties hereto. (f) Binding Effect. All of the covenants, agreements, terms and conditions to be observed and performed by the parties hereto shall be applicable to and binding upon their respective successors and, to the extent assignment is permitted hereunder, their respective assigns. (g) Time is of the Essence. Time is of the essence as to all obligations of Tenant and all notices required of Tenant under this Lease, but this paragraph shall not limit Tenant's opportunity to prevent an Event of Default by curing any breach within the cure period (if any) applicable under subparagraph 14.(a). (h) Termination of Prior Rights. Without limiting the rights and obligations of Tenant under this Lease, Tenant acknowledges that any and all rights or interest of Tenant in and to the Land, the improvements to the Land and to any other property included in the Leased Property (except under this Lease and the Purchase Agreement) are hereby superseded. Tenant quitclaims unto Landlord any rights or interests Tenant has in or to the Land, the improvements to the Land and to any other property included in the Leased Property other than the rights and interests created by this Lease and the Purchase Agreement. (i) Governing Law. This Lease shall be governed by and construed in accordance with the laws of the State of California. (j) Waiver of a Jury Trial. LANDLORD AND TENANT EACH HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS LEASE OR ANY OTHER DOCUMENT OR DEALINGS BETWEEN THEM RELATING TO THIS LEASE OR THE LEASED PROPERTY. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including, without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Tenant and Landlord each acknowledge that this waiver is a material inducement to enter into a business relationship, that each has already relied on the waiver in entering into this Lease and the other documents referred to herein, and that each will continue to rely on the waiver in their related future dealings. Tenant and Landlord each further warrants and represents that it has reviewed this waiver with its legal counsel, and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LEASE OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS LEASE OR THE LEASED PROPERTY. In the event of litigation, this Lease may be filed as a written consent to a trial by the court. (k) Not a Partnership, Etc. NOTHING IN THIS LEASE IS INTENDED TO BE OR TO CREATE ANY PARTNERSHIP, JOINT VENTURE, OR OTHER JOINT ENTERPRISE BETWEEN LANDLORD AND TENANT. NEITHER THE EXECUTION OF THIS LEASE NOR THE ADMINISTRATION OF THIS LEASE OR OTHER DOCUMENTS REFERENCED HEREIN BY LANDLORD, NOR ANY OTHER RIGHT, DUTY OR OBLIGATION OF LANDLORD UNDER OR PURSUANT TO THIS LEASE OR SUCH DOCUMENTS IS INTENDED TO BE OR TO CREATE ANY FIDUCIARY OBLIGATIONS OF LANDLORD TO TENANT. (l) Tax Reporting. Landlord and Tenant shall report this Lease and the Purchase Agreement for federal income tax purposes as a conditional sale unless prohibited from doing so by the Internal Revenue Service. Similarly, Tenant shall report all interest earned on Escrowed Proceeds or the Collateral as Tenant's income for federal and state income tax purposes. If the Internal Revenue Service shall challenge Landlord's characterization of this Lease and the Purchase Agreement as a conditional sale for federal income tax reporting purposes, Landlord shall notify Tenant in writing of such challenge and consider in good faith any reasonable suggestions by Tenant about an appropriate response. In any event, Tenant shall indemnify and hold harmless Landlord from and against all liabilities, costs, additional taxes and other expenses that may arise or become due because of such challenge or because of any resulting recharacterization required by the Internal Revenue Service, including any additional taxes that may become due upon any sale under the Purchase Agreement to the extent (if any) that such additional taxes are not offset by tax savings resulting from additional depreciation deductions or other tax benefits to Landlord of the recharacterization. [Remainder of page intentionally left blank.] IN WITNESS WHEREOF, this Lease is hereby executed in multiple originals as of July 25, 1997. "Landlord" BNP LEASING CORPORATION, a Delaware corporation By: /s/ Lloyd G. Cox ---------------------------- Lloyd G. Cox, Vice President [Continuation of signature pages to Lease Agreement dated to be effective July 25, 1997] "Tenant" 3COM CORPORATION, a Delaware corporation By: /s/ Mark D. Michael ------------------------------------- Name: Mark D. Michael ------------------------------- Title:SVP, Gen. Counsel & Secretary ------------------------------- Exhibit A Legal Description All that real property, situate in the City of Santa Clara, County of Santa Clara, State of California, being a portion of the lands of the City of Santa Clara Land Fill Corporation and the City of Santa Clara described as Parcel B in that Deed of Gift recorded August 30, 1967 in Book 7840 at Page 204, Official Records of Santa Clara County and being a portion of the lands of the City of Santa Clara as described in the deed recorded in Book 9458 at page 115, Official Records of Santa Clara County, said real property being more particularly described as follows: Beginning at the brass pin monument located at the intersection of the monument line of Great America Parkway (125 feet wide) and the centerline Old Mountain View - Alviso Road (60 feet wide) as shown on that Parcel Map filed for record in Book 602 of Maps at Page 34, Santa Clara County Records; Thence along the centerline of Old Mountain View - Alviso Road, North 89 47'24" West 259.00 feet to the Southerly prolongation of the Easterly line of the lands of Santa Clara Valley Water District, described as Parcel 1 in the Grant Deed recorded in Book D928 at Page 706, Official Records of Santa Clara County; Thence along said prolongated line, North 10 57'34" West 30.58 feet to the Southeasterly corner of said lands of Santa Clara Valley Water District and the True Point of Beginning, said point being on the Northerly line of said Old Mt. View - Alviso Road as shown on that Parcel Map filed for record in Book 413 of Maps at Page 13, Santa Clara County Records; Thence along the Easterly line of San Tomas Aquino Creek, conveyed to the Santa Clara Valley Water District as Parcel 1 in that Grant Deed recorded in Book D928 at Page 706, Official Records of Santa Clara County, and in that Quitclaim recorded in Book D928 at Page 716, Official Records of Santa Clara County, North 10 57'34" West 1325.72 feet to the Southerly corner of that parcel described in the Grant Deed from the City of Santa Clara to the Santa Clara Valley Water District, recorded February 14, 1997, Document 13613165, Official Records of Santa Clara County; Thence along the Southeasterly line of said parcel, North 19 14'15" East 105.25 feet to the Southeasterly line of that parcel described as Parcel 1 in that Grant Deed from the City of Santa Clara to the State of California, recorded February 10, 1997, Document 13607858, Official Records of Santa Clara County; Thence along the general Southerly boundary of the last said parcel the following six (6) courses: North 63 34'28" East 51.54 feet; North 62 02'11" East 153.02 feet; North 61 29'12" East 230.90 feet; Easterly and Southeasterly along a tangent curve to the right, having a radius of 32.00 feet, through a central angle of 100 07'12", an arc length of 55.92 feet to a point of compound curvature; Southerly along a tangent curve to the right, having a radius of 282.00 feet, through a central angle of 18 23'50", an arc length of 90.55 feet; South 00 00'14" West 55.36 feet to the Westerly line of said Great America Parkway, shown as "Proposed Great America Parkway" on that Record of Survey filed for record in Book 34 of Maps at Pages 1 through 8, Santa Clara County Records; Thence along said Westerly line, South 01 05'29" West 1395.20 feet; Thence along a tangent curve to the right, having a radius of 50.00 feet, through a central angle of 89 07'07", for an arc length of 77.77 feet to a point of tangency on said Northerly line of Old Mt. View - Alviso Road; Thence along said Northerly line, North 89 47'24" West 150.14 feet to said True Point of Beginning. Exhibit B Permitted Encumbrances 1. PROPERTY TAXES, including any assessments collected with taxes, for the fiscal year 1996-1997, a lien not yet due or payable. 2. THE LIEN of supplemental taxes arising as the result of an event or occurrence on or after the date of this Policy assessed pursuant to Chapter 3.5 commencing with Section 75 of the California Revenue and Taxation Code. No supplemental taxes now due and payable. 3. EASEMENT for the purposes stated herein and incidents thereto Purpose : Gas pipe line Granted to : Pacific Gas and Electric Company, a California corporation Recorded : January 9, 1932 in Book 598, page 183, Official Records of Santa Clara County, California Affects : As follows: The Route of said pipe line shall be as follows: Beginning at a point in the Westerly boundary line of said premises, distant thereon 35.0 feet Southerly from said iron pipe marking the Northwest corner of said premises, and running thence South 89 46' East 552.2 feet, thence North 50 5 1/2' East 500 feet more or less, to the point in the Easterly boundary line of said premises. The width of said easement is not disclosed of record. 4. The Effect of the Redevelopment Plan for the North Bayshore Project and contains the provisions permitted by Section 33670 of the Health and Safety Code of the State of California, recorded December 31, 1973 in Book 0708, Page 585, Official Records of Santa Clara County, California. 5. A Resolution Dedicating Land of the City of Santa Clara to Particular Public Uses recorded October 1, 1974 in Book B111, page 1 of Official Records of Santa Clara County, California and described as follows: An easement for slope purposes described as follows: Beginning at a point on the Westerly line of said Proposed Great America Parkway distant thereon N 1 05'37" E 1836.01 feet from the intersection of said Westerly line with the Southerly line of the lands described in the Deed recorded in Book 9458 of Official Records of Santa Clara County at page 115, thence from said Point of Beginning leaving said Westerly line N. 0 35'28" W. 170.07 feet; thence N 0 39'04" E 927.68 feet to a point on the Westerly line of said Proposed Mission College Boulevard; thence Southeasterly and Southerly along last said line from a tangent that bears S 58 01'04" E along the arc of a curve to the right having a radius of 25.00 feet and a central angle of 59 06'41", an arc distance of 25.79 feet and tangent to the preceding curve S 1 05'37" W 1076.20 feet to the Point of Beginning. 6. ANY RIGHTS, interests, or claims adverse to those of the vestee herein which may exist or arise by reason of the following facts shown on a survey plat entitled "ALTA/ACSM LAND TITLE SURVEY", dated August 21,1996, last revised June 5, 1997, prepared by Kier & Wright, Job No. 96112. a) The fact that various drains empty onto this property along the Easterly boundary. b) The fact that an overhead line and poles exist on said land. 7. EASEMENT for the purposes stated herein and incidents thereto Purpose : Slope Purposes Granted to : State of California Recorded : February 10, 1997 under Series No. 13607858, Official Records of Santa Clara County, California Affects : as follows Beginning at the most Northerly comer of that certain 3.709 acre tract of land described in the Quitclaim Deed from the City of Santa Clara to the Santa Clara Valley Water District recorded July 23, 1979 in Book E245 of Official Records at page 470, Santa Clara County Records; thence from said point of beginning along the Easterly line of said 3.709 acre tract, the following course: S. 10 04'48" E.109.99 feet; S. 79 55'12" W. 25.00 feet; and S. 10 04'48" W. 154.82 feet; thence leaving said Easterly line N. 65 31'00" E. 7.36 feet; thence N. 84 16'00" E. 45.94 feet to the true point of beginning for this description; thence from said true point of beginning N. 64 27'28" E. 51.54 feet; thence N. 62 55'11" E. 153.01 feet; thence N. 62 22'12" E. 230.89 feet; thence along a tangent curve to the right, with a radius of 32.00 feet, through a central angle of 100 07'12" for an arc distance of 55.92 feet to a point of compound curvature; thence along a tangent curve to the right, with a radius of 282.00 feet through a central angle of 18 23'50" for an arc distance of 90.55 feet; thence S. 0 53'14" W. 55.36 feet; thence N. 88 01'31" W. 15.00 feet; thence parallel with above said course having a length of 55.36 feet, N. 0 53'14" E. 55.08 feet; thence concentric with and distant 15.00 feet Westerly, measured radially, from above said course having a length of 90.55 feet along a tangent curve to the left, with a radius of 267.00 feet, through a central angle of 18 41'22" for an arc length of 87.09 feet; thence leaving said parallel line N. 81 17'26" W. 23.55 feet; thence S. 61 32'45" W. 229.43 feet; thence S. 63 33'03" W. 227.87 feet; thence N. 20 07'00" E. 32.19 feet to the true point of beginning. 8. LACK OF ABUTTER'S RIGHTS to and from Rte.237, lying adjacent to the Northerly line of said land, said rights having been relinquished in the Deed To : State of California Recorded : February 10,1997 under Series No. 13607858, Official Records of Santa Clara County, California. 9. Certificate of Compliance executed by the City of Santa Clara which confirms that this property is a legal parcel under the California Subdivision Map Act, recorded in the Official Records of Santa Clara County, California on June 12, 1997 as Document No. 13739108. 10. Development Agreement executed by the City of Santa Clara and 3Com Corporation, recorded in the Official Records of Santa Clara County, California on June 12, 1997 as Document No. 13739112. Exhibit C PERMITTED HAZARDOUS SUBSTANCES (NOT a Comprehensive List) It is anticipated that the following Hazardous Substances, and others necessary for the use, occupancy, and operation of the Leased Property in accordance with the terms and conditions of this Lease, will be used by Tenant at the Leased Property: Description C.A.S.# Solder bars (lead) 7439-92-1 Solder paste Lead 7439-91-1 Tin 7440-31-5 Solder paste remover Sodium hydroxide 1310-73-2 Isopropyl alcohol Isopropanol 67-63-0 S32-10M Isopropanol 67-63-0 Methanol 67-56-1 Exhibit D RESOLUTION OF DISPUTED INSURANCE CLAIMS If Landlord and Tenant cannot agree upon the amount for which any insurance claim against an insurer should be settled after damage to the Leased Property by fire or other casualty, and so long as neither Tenant nor Landlord is authorized to determine such amount without the consent of the other pursuant to subparagraph 9.(r), then either party may require that the amount be determined as follows: 1. Landlord and Tenant shall each appoint an experienced architect who is familiar with construction costs for comparable properties in the vicinity of the Leased Property. Each party will make the appointment no later than 10 days after receipt of notice from the other party that the dispute resolution process described in this Exhibit has been invoked. The agreement of the two architects as to the appropriate amount of the insurance settlement will be binding upon Landlord and Tenant. If the two architects cannot agree upon the settlement amount within 30 days following their appointment, they shall within another 10 days agree upon a third architect. Immediately thereafter, each of the first two architects will submit his best estimate of the appropriate settlement amount (together with a written report supporting such estimate) to the third architect and the third architect will choose between the two estimates. The estimate chosen by the third architect as the closest to the amount needed to repair and restore the Leased Property will be binding upon Landlord and Tenant as the amount for which the applicable insurance claim should be settled. (However, no such estimate and nothing contained in this Exhibit will limit Tenant's liability under other provisions of this Lease for the repair and restoration of the Leased Property.) Notification in writing of the estimate chosen by the third architect shall be made to Landlord and Tenant within 15 days following the selection of the third architect. 2. If architects must be selected under the procedure set out above and either Tenant or Landlord fails to appoint an architect or fails to notify the other party of such appointment within 10 days after receipt of notice that the prescribed time for appointing the architects has passed, then the other party's architect will determine the appropriate settlement amount. All architects selected for the dispute resolution process set out in this Exhibit will be disinterested, reputable, qualified architects with at least 15 years experience designing and overseeing the construction of properties comparable to the Leased Property. 3. If a third architect must be chosen under the procedure set out above, he will be chosen on the basis of objectivity and competence, not on the basis of his relationship with the other architects or the parties to this Lease, and the first two architects will be so advised. Although the first two architects will be instructed to attempt in good faith to agree upon the third architect, if for any reason they cannot agree within the prescribed time, either Landlord or Tenant may require the first two architects to immediately submit its top choice for the third architect to the then highest ranking officer of the San Francisco Bar Association who will agree to help and who has no attorney/client or other significant relationship to either Landlord or Tenant. Such officer will have complete discretion to select the most objective and competent third architect from between the choice of each of the first two architects, and will do so within 20 days after such choices are submitted to him. 4. Either Landlord or Tenant may notify the architect selected by the other party to demand the submission of an estimate of the appropriate settlement amount or a choice of a third architect as required under the procedure described above; and if the submission of such an estimate or choice is required but the other party's architect fails to comply with the demand within 5 days after receipt of such notice, then the settlement amount or choice of the third architect, as the case may be, selected by the other architect (i.e., the notifying party's architect) will be binding upon Landlord and Tenant. 5. For the purposes of this Exhibit, "appropriate settlement amount" and words of like effect means the amount required to restore the Leased Property, less any insurance deductible that clearly applies under the policy of insurance which provides the coverage to be settled; and all architects and other persons involved in the determination of the settlement amount will be so advised. Exhibit E FINANCIAL COVENANT COMPLIANCE CERTIFICATE BNP Leasing Corporation c/o Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Jennifer Cho or Will La Herran Re: 3Com Lease Agreement Gentlemen: I, the undersigned, the [chief financial officer, controller, treasurer or the assistant treasurer] of 3Com Corporation, do hereby certify, represent and warrant that: 1. This Certificate is furnished pursuant to subparagraph 9.(w)(iii) of that certain Lease Agreement dated as of July 25, 1997 (the "Lease Agreement," the terms defined therein being used herein as therein defined) between 3Com Corporation (the "Tenant"), and you. 2. Annex 1 attached hereto sets forth financial data and computations evidencing the Tenant's compliance with certain covenants of the Lease Agreement, all of which data and computations are complete, true and correct. 3. To the knowledge of Tenant no Default or Event of Default under the Lease Agreement has occurred and is continuing. 4. The representations of Tenant set forth in the Lease Agreement are true and correct in all material respects as of the date hereof as though made on and as of the date hereof. Executed this _____ day of ______________, ____. 3Com Corporation Name:_________________________ Title:________________________ [cc all Participants] Annex 1 To Compliance Certificate For the _________________ Ended ________________, ____ I. PARAGRAPH 9.(ac)(i): Quick Ratio A. Unencumbered Cash and Cash Equivalents and other "Quick Assets" as defined in Paragraph 9.(ac)(i) of the Lease: $_____________ B. "Current Liabilities" as defined in Paragraph 9.(ac)(i) of the Lease: $_____________ C. Ratio of A to B: _____ to 1.00 F. Minimum ratio computed as provided in Paragraph 9.(ac)(i) of the Lease: 1.00 to 1.00 II. PARAGRAPH 9.(ac)(ii): Maximum Senior Debt to Capitalization A. Total "Debt" as defined in Paragraph 1.(ad) of Tenant and its consolidated Subsidiaries: $_____________ B. "Subordinated Debt" as defined in Paragraph 9.(ac)(ii) of the Lease: $_____________ C. "Senior Debt" as defined in Paragraph 9.(ac)(ii) of the Lease (A - B): $_____________ D. Consolidated Tangible Net Worth (from calculation below): $_____________ E. Capitalization as defined in Paragraph 9.(ac)(ii) of the Lease (A + D): $_____________ F. Ratio of B to E: _____ to 1.00 D. Maximum ratio: 0.35 to 1.00 III. PARAGRAPH 9.(ac)(iii): Minimum Tangible Net Worth A. Reported stockholders equity: $_____________ B. "Intangible Assets" as defined in Paragraph 9.(ac)(iii) of the Lease: $_____________ D. Consolidated Tangible Net Worth (A - B): $_____________ E. Minimum computed as provided in Paragraph 9.(ac)(iii) of the Lease: $_____________ IV. PARAGRAPH 9.(ac)(iv): Fixed Charge Ratio A. "Adjusted EBIT" as defined in Paragraph 9.(ac)(iv) of the Lease: $_____________ B. "Fixed Charges" as defined in Paragraph 9.(ac)(iv) of the Lease: $_____________ C. Ratio of A to B: _____ to 1.00 D. Minimum ratio: 2.00 to 1.00 Exhibit F CERTIFICATE OF TENANT'S CALCULATION OF THE SPREAD BNP Leasing Corporation c/o Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Jennifer Cho or Will La Herran Re: 3Com Lease Agreement Gentlemen: I, the undersigned, the [chief financial officer, controller, treasurer or the assistant treasurer] of 3Com Corporation, do hereby certify, represent and warrant that: 1. This Certificate is furnished pursuant to subparagraph 9.(w)(iv) of that certain Lease Agreement dated as of July 25, 1997 (the "Lease Agreement," the terms defined therein being used herein as therein defined) between 3Com Corporation, and you. 2. Annex 1 attached hereto sets forth financial data and computations evidencing the Tenant's computation of the Spread, all of which data and computations are complete, true and correct. Executed this _____ day of ______________, ____. 3Com Corporation Name:_________________________ Title:________________________ [cc all Participants] Annex 1 To Certificate of Tenant's Calculation of the Spread As of the ________________, ____ I. S&P'S RATING OF TENANT'S SENIOR UNSECURED DEBT: _____________ II. MOODY'S RATING OF TENANT'S SENIOR UNSECURED DEBT: _____________ III. CALCULATION OF TENANT'S DEBT TO CAPITAL RATIO: _____________ A. Funded "Senior Debt" as defined in Paragraph 9.(ac)(ii) of the Lease: $_____________ B. Other outstanding Debt as defined in Paragraph 1.(ad) of the Lease: $_____________ C. Outstanding "Subordinated Debt" as defined in Paragraph 9.(ac)(ii) of the Lease: $_____________ D. Debt for purposes of this ratio (A + B - C): $_____________ E. Reported stockholders equity: $_____________ F. "Intangible Assets" as defined in Paragraph 9.(ac)(iii) of the Lease: $_____________ G. Consolidated Tangible Net Worth (E - F): $_____________ H. Capital for purposes of this test (A + B + G): $_____________ I. D divided by H: _____________ III. SPREAD AS DEFINED IN PARAGRAPH 1.(cm) OF THE LEASE: _____________ Exhibit G LIST OF ENVIRONMENTAL REPORTS As used in this Lease, "Environmental Report" means, collectively, the following reports provided to Landlord by 3COM or acquired by Landlord from its own consultants: 1. Phase I Environmental Site Assessment for the former Policeman's Athletic League, Motocross Site, Great America Parkway and Old Mountain View-Alviso Road, Santa Clara, CA, September 22, 1995. 2. Phase II Investigation Results of the former Policeman's Athletic League, Motocross Site, Great America Parkway and Old Mountain View-Alviso Road, Santa Clara, CA, November 15, 1995. Exhibit H DESCRIPTION OF RENDERINGS OF THE DESIGNATED IMPROVEMENTS Designated Improvements to the Leased Property will consist of the following improvements: (1) three new buildings to be used as a corporate office, electronics research and development facility, data center and cafeteria; (2) an 350 foot span elevated walkway between such buildings and Tenant's corporate campus. For a better description of the Designated Improvements, reference is made to the Entitlements Package dated 03.05.97 for 3COM's PAL Site, which includes elevations and a conceptual site plan among other information, and which was delivered to Landlord's counsel by 3COM's counsel contemporaneously with the execution and delivery of this Lease. Exhibit I Estoppel From Contractors _________, 199__ BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd Cox Re: Assignment of Construction Contract Ladies and Gentlemen: The undersigned hereby confirms, warrants and represents to BNP Leasing Corporation, a Delaware corporation ("BNP"), and covenants with BNP as follows: 1. The undersigned has entered into that certain [Construction Contract] (the "Construction Contract") by and between the undersigned and 3Com Corporation ("Tenant") dated ____________________, 199___ for the construction of the multiuse complex to be constructed on the campus leased by Tenant (the "Improvements") located on the land described in Exhibit A attached hereto and made a part hereof for all purposes (the "Land" and, together with the Improvements and any other improvements now on or constructed in the future on the Land, being herein collectively referred to as the "Project"). 2. The undersigned has been advised that BNP owns the Land. 3. The undersigned has also received a copy of the Lease Agreement dated as of July 25, 1997 (the "Lease"), pursuant to which BNP is leasing the Project to Tenant, and BNP has agreed, subject to the terms and conditions of the Lease, to provide a construction allowance for Tenant's construction of the Improvements. The Lease also requires Tenant to fulfill all obligations of the ["Owner"] under the Construction Contract and related documents and to indemnify BNP against any liability arising thereunder, all as more particularly provided in the Lease, reference to which is hereby made for all purposes. 4. A complete and correct copy of the Construction Contract is attached to this letter. The Construction Contract is in full force and effect and has not been modified or amended. 5. The undersigned has not sent to Tenant or received from Tenant any notice of default or any other notice for the purpose of terminating the Construction Contract, nor is there any existing circumstance or event which, but for the elapse of time or otherwise, would constitute a default by the undersigned or the ["Owner"] under the Construction Contract. The undersigned acknowledges and agrees that: a) BNP shall not be held liable for, and the undersigned shall not assert, any claims, demands or liabilities against BNP or, except for any statutory lien rights, against the Project arising under or in any way relating to the Construction Contract; provided, this paragraph will not prohibit the undersigned from asserting any claims or making demands under the Construction Contract if BNP elects in writing, pursuant to Paragraph b) below, to assume the Construction Contract in the event Tenant's right to possession of the Land is terminated, in which event BNP shall be liable thereunder for (but only for) any acts or omissions on the part of BNP occurring after the date on which BNP notifies the undersigned of BNP's election to assume the Construction Contract. b) Upon any termination of Tenant's right to possession of the Project under the Lease, including but not limited to any eviction of Tenant resulting from an Event of Default (as defined in the Lease), BNP may, by notice to the undersigned and without the necessity of the execution of any other document, assume Tenant's rights and obligations under the Construction Contract, cure any defaults by Tenant thereunder and enforce the Construction Contract and all rights of the ["Owner"] thereunder. Within ten (10) days of receiving notice from BNP that Tenant's right to possession has been terminated, the undersigned shall send to BNP a written estoppel letter stating: (i) that the undersigned has not performed any act or executed any other instrument which invalidates or modifies the Construction Contract in whole or in part (or, if so, the nature of such modification); (ii) that the Construction Contract is valid and subsisting and in full force and effect; (iii) that there are no defaults or events of default then existing under the Construction Contract and no event has occurred which with the passage of time or the giving of notice, or both, would constitute such a default or event of default (or, if there is a default, the nature of such default in detail); (iv) that the construction contemplated by the Construction Contract is proceeding in a satisfactory manner in all material respects (or if not, a detailed description of all significant problems with the progress of construction); (v) a reasonably detailed report of the then critical dates projected by the undersigned for work and deliveries required to complete the construction project; (vi) the total amount paid for construction through the date of the letter; (vii) the estimated total cost of completing such construction as of the date of the letter, together with a current draw schedule; and (viii) any other information BNP may request to allow it to decide whether to assume the Construction Contract. BNP shall have thirty (30) days from receipt of such written certificate containing all such requested information to decide whether to assume the Construction Contract. If BNP fails to assume the Construction Contract within such time, the undersigned agrees that BNP shall not be liable for (and the undersigned shall not assert or bring any action against BNP or, except for any statutory lien rights not waived, against the Land or improvements thereon for) any damages or other amounts resulting from the breach or termination of the Construction Contract or under any other theory of liability of any kind or nature, but rather the undersigned shall look solely to Tenant and any statutory lien rights not waived for the recovery of any such damages or other amounts. c) If BNP notifies the undersigned that BNP shall not assume the Construction Contract pursuant to the preceding paragraph following the termination of Tenant's right to possession of the Project under the Lease, the undersigned shall immediately discontinue the work under the Construction Contract and remove its personnel from the Project, and BNP shall be entitled to take exclusive possession of the Project and all or any part of the equipment and materials delivered or en route to the Project. The undersigned shall also, upon request by BNP, deliver and assign to BNP all plans and specifications and other contract documents previously delivered to the undersigned (except that the undersigned may keep an original set of the Construction Contract and other contract documents executed by Tenant), all other material relating to the work which belongs to BNP or Tenant, and all papers and documents relating to governmental permits, orders placed, bills and invoices, lien releases and financial management under the Construction Contract. Notwithstanding the undersigned's receipt of any notice from BNP that BNP declines to assume the Construction Contract, the undersigned shall for a period not to exceed fifteen (15) days after receipt of such notice take such steps, at BNP's expense, as are reasonably necessary to preserve and protect work completed and in progress and to protect materials, equipment and supplies at the site or in transit. d) No action taken by BNP or the undersigned with respect to the Construction Contract shall prejudice any other rights or remedies of BNP or the undersigned provided by law, by the Lease, by the Construction Contract or otherwise against Tenant. e) The undersigned agrees promptly to notify BNP of any material default or claimed material default by Tenant under the Construction Contract, describing with particularity the default and the action the undersigned believes is necessary to cure the same. The undersigned will send any such notice to BNP prominently marked "URGENT - NOTICE OF TENANT'S DEFAULT UNDER CONSTRUCTION AGREEMENT WITH 3COM CORPORATION - SANTA CLARA CALIFORNIA" at the address specified for notice below (or at such other addresses as BNP shall designate in notice sent to the undersigned), by certified or registered mail, return receipt requested. Following receipt of such notice, the undersigned will permit BNP or its designee to cure any such default within the time period reasonably required for such cure, but in no event less than thirty (30) days. If it is necessary or helpful to take possession of all or any portion of the Project to cure a default by Tenant under the Construction Contract, the time permitted by the undersigned for cure by BNP will include the time necessary to terminate Tenant's right to possession of the Project and evict Tenant, provided that BNP commences the steps required to exercise such right within sixty (60) days after it is entitled to do so under the terms of the Lease and applicable law. If the undersigned incurs additional costs due to the extension of the aforementioned cure period, the undersigned shall be entitled to an equitable adjustment to the price of the Construction Contract for such additional costs. f) Any notice or communication required or permitted hereunder shall be given in writing, sent by (a) personal delivery or (b) expedited delivery service with proof of delivery or (c) United States mail, postage prepaid, registered or certified mail or (d) telegram, telex or telecopy, addressed as follows: To the undersigned: ______________________________ ______________________________ ______________________________ To BNP: BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 g) The undersigned acknowledges that it has all requisite authority to execute this letter. The undersigned further acknowledges that BNP has requested this letter, and is relying on the truth and accuracy of the representations made herein, in connection with BNP's decision to advance funds for construction under the Lease with Tenant. Very truly yours, _________________________________ By:______________________________ Name:_________________________ Title:________________________ Tenant joins in the execution of this letter solely for the purpose of evidencing its consent hereto, including its consent to the provisions that would allow, but not require, BNP to assume the Construction Contract in the event Tenant is evicted from the Project. 3Com Corporation By:______________________________ Name:_________________________ Title:________________________ Exhibit J Estoppel From Architects/Engineers _________, 199__ BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd Cox Re: Assignment of Construction Contract Ladies and Gentlemen: The undersigned hereby confirms, warrants and represents to BNP Leasing Corporation, a Delaware corporation ("BNP"), and covenants with BNP as follows: 1. The undersigned has entered into that certain [Architect's/Engineer's Agreement] (the "Agreement") by and between the undersigned and 3Com Corporation ("Tenant") dated ____________________, 199___ for the [design] of the multiuse complex to be constructed on the Santa Clara campus leased by Tenant (the "Improvements") located on the land described in Exhibit A attached hereto and made a part hereof for all purposes (the "Land" and, together with the Improvements and any other improvements now on or constructed in the future on the Land, being herein collectively referred to as the "Project"). 2. The undersigned has been advised that BNP owns the Land. 3. The undersigned has also received a copy of the Lease Agreement dated as of July 25, 1997 (the "Lease"), pursuant to which BNP is leasing the Project to Tenant, and BNP has agreed, subject to the terms and conditions of the Lease, to provide a construction allowance for Tenant's construction of the Improvements. The Lease also requires Tenant to fulfill all obligations of the ["Owner"] under the Agreement and related documents and to indemnify BNP against any liability arising thereunder, all as more particularly provided in the Lease, reference to which is hereby made for all purposes. 4. A complete and correct copy of the Agreement is attached to this letter. The Agreement is in full force and effect and has not been modified or amended. 5. The undersigned has not sent to Tenant or received from Tenant any notice of default or any other notice for the purpose of terminating the Agreement, nor is there any existing circumstance or event which, HEADER FOLLOWS THIS COMMENT BOX -- MOVE TO FIT PAGE NUMBERINGbut for the elapse of time or otherwise, would constitute a default by the undersigned or the ["Owner"] under the Agreement. The undersigned acknowledges and agrees that: a) BNP shall not be held liable for, and the undersigned shall not assert, any claims, demands or liabilities against BNP or, except for any statutory lien rights, against the Project arising under or in any way relating to the Agreement; provided, this paragraph will not prohibit the undersigned from asserting any claims or making demands under the Agreement if BNP elects in writing, pursuant to Paragraph b) below, to assume the Agreement in the event Tenant's right to possession of the Land is terminated, in which event BNP shall be liable thereunder for (but only for) any acts or omissions on the part of BNP occurring after the date on which BNP notifies the undersigned of BNP's election to assume the Agreement. b) Upon any termination of Tenant's right to possession of the Project under the Lease, including but not limited to any eviction of Tenant resulting from an Event of Default (as defined in the Lease), BNP may, by notice to the undersigned and without the necessity of the execution of any other document, assume Tenant's rights and obligations under the Agreement, cure any defaults by Tenant thereunder and enforce the Agreement and all rights of the ["Owner"] thereunder. Within ten (10) days of receiving notice from BNP that Tenant's right to possession has been terminated, the undersigned shall send to BNP a written estoppel letter stating: (i) that the undersigned has not performed any act or executed any other instrument which invalidates or modifies the Agreement in whole or in part (or, if so, the nature of such modification); (ii) that the Agreement is valid and subsisting and in full force and effect; (iii) that there are no defaults or events of default then existing under the Agreement and no event has occurred which with the passage of time or the giving of notice, or both, would constitute such a default or event of default (or, if there is a default, the nature of such default in detail); (iv) that the construction contemplated by the Agreement is proceeding in a satisfactory manner in all material respects (or if not, a detailed description of all significant problems with the progress of construction); (v) a reasonably detailed report of the then critical dates projected by the undersigned for work and deliveries required to complete the Project; (vi) the total amount paid for construction through the date of the letter; (vii) the estimated total cost of completing such construction as of the date of the letter, together with a current draw schedule; and (viii) any other information BNP may request to allow it to decide whether to assume the Agreement. BNP shall have thirty (30) days from receipt of such written certificate containing all such requested information to decide whether to assume the Agreement. If BNP fails to assume the Agreement within such time, the undersigned agrees that BNP shall not be liable for (and the undersigned shall not assert or bring any action against BNP or, except for any statutory lien rights not waived, against the Land or improvements thereon for) any damages or other amounts resulting from the breach or termination of the Agreement or under any other theory of liability of any kind or nature, but rather the undersigned shall look solely to Tenant and any statutory lien rights not waived for the recovery of any such damages or other amounts. c) If BNP notifies the undersigned that BNP shall not assume the Agreement pursuant to the preceding paragraph following the termination of Tenant's right to possession of the Project under the Lease, the undersigned shall immediately discontinue the work under the Agreement and remove its personnel from the Project, and BNP shall be entitled to take exclusive possession of the Project and all or any part of the equipment and materials delivered or en route to the Project. The undersigned shall also, upon request by BNP, deliver and assign to BNP all plans and specifications and other contract documents previously delivered to the undersigned (except that the undersigned may keep an original set of the Agreement and other contract documents executed by Tenant), all other material relating to the work which belongs to BNP or Tenant, and all papers and documents relating to governmental permits, orders placed, bills and invoices, lien releases and financial management under the Agreement. Notwithstanding the undersigned's receipt of any notice from BNP that BNP declines to assume the Agreement, the undersigned shall for a period not to exceed fifteen (15) days after receipt of such notice take such steps, at BNP's expense, as are reasonably necessary to preserve and protect work completed and in progress and to protect materials, equipment and supplies at the site or in transit. d) No action taken by BNP or the undersigned with respect to the Agreement shall prejudice any other rights or remedies of BNP or the undersigned provided by law, by the Lease, by the Agreement or otherwise against Tenant. e) The undersigned agrees promptly to notify BNP of any material default or claimed material default by Tenant under the Agreement, describing with particularity the default and the action the undersigned believes is necessary to cure the same. The undersigned will send any such notice to BNP prominently marked "URGENT - NOTICE OF TENANT'S DEFAULT UNDER AGREEMENT WITH 3COM CORPORATION - SANTA CLARA CALIFORNIA" at the address specified for notice below (or at such other addresses as BNP shall designate in notice sent to the undersigned), by certified or registered mail, return receipt requested. Following receipt of such notice, the undersigned will permit BNP or its designee to cure any such default within the time period reasonably required for such cure, but in no event less than thirty (30) days. If it is necessary or helpful to take possession of all or any portion of the Project to cure a default by Tenant under the Agreement, the time permitted by the undersigned for cure by BNP will include the time necessary to terminate Tenant's right to possession of the Project and evict Tenant, provided that BNP commences the steps required to exercise such right within sixty (60) days after it is entitled to do so under the terms of the Lease and applicable law. f) Any notice or communication required or permitted hereunder shall be given in writing, sent by (a) personal delivery or (b) expedited delivery service with proof of delivery or (c) United States mail, postage prepaid, registered or certified mail or (d) telegram, telex or telecopy, addressed as follows: To the undersigned: _____________________________ ______________________________ ______________________________ To BNP: BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 g) The undersigned acknowledges that it has all requisite authority to execute this letter. The undersigned further acknowledges that BNP has requested this letter, and is relying on the truth and accuracy of the representations made herein, in connection with BNP's decision to advance funds for construction under the Lease with Tenant. Very truly yours, _________________________________ By:______________________________ Name:_________________________ Title:________________________ Tenant joins in the execution of this letter solely for the purpose of evidencing its consent hereto, including its consent to the provisions that would allow, but not require, BNP to assume the Agreement in the event Tenant is evicted from the Project. 3Com Corporation By:______________________________ Name:_________________________ Title:________________________ Exhibit K Draw Request Forms ________, 199__ BNP Leasing Corporation c/o Banque Nationale de Paris 180 Montgomery Street San Francisco, California 94104 Attention: Ms. Jennifer Cho Re: Construction Advance Request No. __________ by 3Com Corporation Ladies and Gentlemen: Reference is made to the Lease Agreement between BNP Leasing Corporation (herein "Landlord") and 3Com Corporation (herein "Tenant") dated as of July 25, 1997 (herein "the Lease"). Capitalized terms defined in the Lease and used but not defined in this letter are intended to have the meanings assigned to them in the Lease. Tenant hereby makes request for a Construction Advance in the amount of $________________ (herein the "Current Advance"). Included herewith are: 1. An Application and Certificate for Payment based on AIA Form G702 (herein the "Contractor's Application") from Tenant's general contractor, attached to which is a schedule of values listing all subcontractors, suppliers and other parties to whom the general contractor has or will make payments from the draw requested in the Contractor's Application. The Contractor's Application evidences an obligation incurred by (and previously paid by) Tenant for construction of Improvements and for which Tenant is entitled to reimbursement from the Current Advance. 2. A list of any costs paid by Tenant, other than to the general contractor, for which Tenant is entitled to reimbursement from the proceeds of the Current Advance (herein the "Other Costs List"). 3. Invoices and requests for payments from the subcontractors and others entitled to payment from the general contractor for construction and related work covered by the Contractor's Application; excluding, however, invoices or requests from some or all subcontractors and others that, according to the Contractor's Application, are to be paid less than $300,000 from the draw requested in Contractor's Application. Such invoices and requests for payments are consistent with the detail shown in the schedule of values attached to the Contractor's Application. 4. Invoices or other evidence of the costs (if any) included in the Other Costs List. 5. A list of any "checks on hold" (i.e., payments withheld from subcontractors or suppliers by Tenant's general contractor because of some defect or deficiency in the payee's request for payment or in the work or materials provided by the payee) in excess of $50,000. 6. An up-to-date list of the names and addresses of any subcontractors that have actually filed a claim of lien against the Leased Property, together with, to the extent not already provided with a prior request for a Construction Advance, a copy of the claim of lien filed. 7. A certification of an officer of Tenant as required by Paragraph 6.(c)(viii) of the Lease. We hereby confirm that Landlord will not be responsible for the application of any funds advanced to Tenant or to any other party at our request. Sincerely, 3Com Corporation By:______________________________ Name:_________________________ Title:________________________ cc: BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd Cox Clint Shouse Thompson & Knight, a Professional Corporation 3300 First City Center 1700 Pacific Avenue Dallas, Texas 75201 Construction Advance Certificate Pursuant to Paragraph 6.(c)(viii) of the Lease dated as of July 25, 1997 (the "Lease") between 3Com Corporation ("Tenant") and BNP Leasing Corporation ("Landlord"), Tenant does hereby represent, warrant and certify to Landlord in connection with Tenant's request for Construction Advance No. __________ that: a) no Event of Default has occurred and is continuing, b) the representations and warranties of Tenant contained in the Lease are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof, subject only to the following exceptions: [LIST EXCEPTIONS HERE, OR IF THERE ARE NO EXCEPTIONS, INSERT "NONE"] c) Construction of the Designated Improvements has commenced and is progressing without any significant continuing interruption in a good and workmanlike manner and substantially in accordance with the requirements of the Lease and all Applicable Laws and Tenant has corrected or is diligently pursuing the correction of any significant defect in such construction, d) all costs and expenses for which Tenant is requesting reimbursement by the Construction Advance referenced above constitute actual costs and expenses incurred by Tenant for the Designated Improvements or for property taxes or assessments assessed against and paid with respect to the Leased Property, and e) Potential Lien Claimants have been paid all sums for which prior Construction Advances have been advanced, and the advance being requested will not result in an excess of $3,000,000 or more of (1) the total cost of work with respect to which Potential Lien Claimants could have asserted a lien against the Leased Property and for which Construction Advances have been advanced by Landlord, over (2) the cost of such work for which Tenant has provided to Landlord unconditional statutory lien releases from all Potential Lien Claimants. Capitalized terms used herein which are defined in the Lease but not in this Certificate shall have the meanings assigned to them in the Lease. In witness whereof, this Certificate is executed by an officer of 3Com Corporation as of ______________, 19___. 3Com Corporation By:______________________________ Name:_________________________ Title:________________________ List of Liens For Which a Claim of Lien Has Actually Been Filed (Construction Advance Request No. ________) Liens for which a claim of lien has actually been filed are as follows: 1. 2. 3. Other Costs List (Construction Advance Request No. ________) Costs paid - other than to Tenant's general contractor - by Tenant and for which Tenant is entitled to reimbursement from the Current Advance being requested are as follows: 1. 2. 3. Exhibit L Notice to Accelerate the Carrying Costs Accrual Termination Date BNP Leasing Corporation c/o Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Jennifer Cho or Will La Herran Re: Lease Agreement/3COM Phase III Gentlemen: This notice is furnished pursuant to subparagraph 1.(p) of that certain Lease Agreement dated as of July 25, 1997 (the "Lease Agreement," the terms defined therein being used herein as therein defined) between 3Com Corporation and you. I, the undersigned, the [chief financial officer, controller, treasurer or the assistant treasurer] of 3Com Corporation, do hereby notify you that 3COM Corporation irrevocably elects to accelerate the Carrying Costs Accrual Termination Date and thereby accelerate the commencement of Base Rent accruals and the termination of accruals of Carrying Costs. Because of this notice, the Carrying Costs Accrual Termination Date will occur on the next following Advance Date that is at least ten (10) days after the date you receive this notice. Executed this _____ day of ______________, ____. 3Com Corporation Name:_________________________ Title:________________________ [cc all Participants] Exhibit M Notice of LIBOR Period Election BNP Leasing Corporation c/o Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Jennifer Cho or Will La Herran Re: Lease Agreement dated as of July 25, 1997, between 3COM Corporation, as tenant, and BNP Leasing Corporation, as landlord Gentlemen: Capitalized terms used in this letter are intended to have the meanings assigned to them in the Lease referenced above. This letter constitutes notice to you that the LIBOR Period Election under the Lease shall be: ________________ month(s), beginning with the first Base Rent Period that commences on or after: ______________, ____. NOTE: YOU SHALL BE ENTITLED TO DISREGARD THIS NOTICE IF THE NUMBER OF MONTHS SPECIFIED ABOVE IS NOT A PERMITTED NUMBER UNDER THE DEFINITION OF "LIBOR PERIOD ELECTION" IN THE LIST OF DEFINED TERMS ATTACHED TO THE LEASE, OR IF THE DATE SPECIFIED ABOVE CONCERNING THE COMMENCEMENT OF THE LIBOR PERIOD ELECTION IS LESS THAN TEN BUSINESS DAYS AFTER YOUR RECEIPT OF THIS NOTICE. HOWEVER, WE ASK THAT YOU NOTIFY US IMMEDIATELY IF FOR ANY REASON YOU BELIEVE THIS NOTICE IS DEFECTIVE. Executed this _____ day of ______________, 19___. 3COM CORPORATION Name:______________________________ Title:________________________ [cc all Participants] Schedule 1 LIST OF APPROVED PARTICIPANTS "Approved Participants" as used in this Lease will include the existing Participants, Banque Nationale de Paris and ABN Amro Bank N.V., and the following prospective participants, to the extent that any one or more of the following may at the request of Landlord become parties to the Participation Agreement and the Pledge Agreement by executing supplements to those agreements as therein provided: Credit Suisse First Boston Industrial Bank of Japan, Limited Mellon Bank, N.A. Societe Generale The Toronto-Dominion Bank The Bank of Nova Scotia Union Bank of California EX-10 5 EXHIBIT 10.18 The transactions contemplated in this Purchase Agreement have been made possible by the following banks, acting in the capacities indicated: Banque Nationale de Paris, ABN Amro Bank N.V., as Administrative/Documentation as Syndication Agent and Agent and Arranger Co-Arranger $83,600,000 PURCHASE AGREEMENT BETWEEN BNP LEASING CORPORATION, AS SELLER AND 3COM CORPORATION, AS PURCHASER EFFECTIVE AS OF JULY 25, 1997 (Pal Site - Phase III) This Purchase Agreement amends, restates and replaces the Purchase Agreement between the Seller and Purchaser dated June 12, 1997, covering the Land (as described in Exhibit A attached hereto). PURCHASE AGREEMENT This PURCHASE AGREEMENT (this "Agreement") is made as of July 25, 1997, by 3COM CORPORATION, a Delaware corporation ("3COM") and BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"). R E C I T A L S --------------- A. BNPLC acquired the land described in Exhibit A attached hereto and the improvements and fixtures located thereon, if any, and has leased the same to 3COM pursuant to that certain Lease Agreement (as from time to time supplemented, amended or restated, the "Original Lease") between 3COM Corporation, a California corporation, the predecessor in interest to 3Com, and BNPLC dated as June 12, 1997. B. By a Lease Agreement dated of even date herewith (as from time to time supplemented, amended or restated, the "Lease"), BNPLC and 3Com have amended, restated and replaced the Original Lease. (The land described in Exhibit A and any and all other real or personal property from time to time covered by the Lease and included within the "Leased Property" as defined therein are hereinafter collectively referred to as the "Property".) C. BNPLC is also concurrently herewith receiving a separate environmental indemnity from 3COM pursuant to an Environmental Indemnity Agreement (as from time to time supplemented, amended or restated, the "Environmental Indemnity") between 3COM and BNPLC dated as of the date hereof. D. 3COM has requested an option to purchase the Property, which BNPLC is willing to provide on and subject to the terms and conditions set out herein. NOW, THEREFORE, in consideration of the above recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Definitions. As used herein, the terms "3COM", "BNPLC", "Original Lease", "Lease", "Leased Property", "Property", and "Environmental Indemnity" shall have the meanings indicated above; terms with initial capitals defined in the Lease and used but not defined herein shall have the meanings assigned to them in the Lease; and the terms listed immediately below shall have the following meanings: "Applicable Purchaser" means any third party designated by 3COM to purchase the interest of BNPLC in the Property as provided in Paragraph 2(a)(ii) below. "Deposit Taker" shall have the meaning assigned to it in the Pledge Agreement. "Deposit Taker Losses" shall have the meaning assigned to it in the Pledge Agreement. "Designated Sale Date" means the earlier of: (1) the effective date of any termination of the Lease by 3COM pursuant to Paragraph 2 thereof; (2) any date designated by BNPLC in a written notice given by BNPLC to 3COM when an Event of Default by 3COM is continuing, provided the notice of the date so designated is given by BNPLC at least thirty (30) days before the date so designated; or (3) the first Business Day in August, 2002. "Direct Payments to Participants" means the amounts paid or required to be paid directly to Participants on the Designated Sale Date as provided in Section 6.2 of the Pledge Agreement at the direction of and for 3COM by the collateral agent appointed pursuant to the Pledge Agreement from all or any part of the Collateral described therein. "Fair Market Value" means the fair market value of the Property on or about the Designated Sale Date (calculated under the assumptions, whether or not then accurate, that 3COM has maintained the Property in compliance with all Applicable Laws [including Environmental Laws]; that 3COM has completed the construction of any Improvements which was commenced prior to the Designated Sale Date; that all such Improvements are self-sufficient in the sense that any easements or offsite facilities needed for their use will be available at no additional cost to the owner of the Improvements; that 3COM has repaired and restored the Property after any damage following fire or other casualty; that 3COM has restored the remainder of the Property after any partial taking by eminent domain; that 3COM has completed any contests of and paid any taxes due [other than Excluded Taxes] or other amounts secured by or allegedly secured by a lien against the Property other than Prohibited Encumbrances; that no conditions or circumstances on or about the Property [such as the presence of an endangered species] is discovered that will impede the use or any development of the Property permitted by the Lease; that any use or development of the Property as permitted by the Lease will not be hindered or delayed because of the limited availability of utilities or water; that without undue cost or delay any purchaser paying fair market value for the Property can obtain any necessary permits or licenses needed to use the Property for the purposes permitted by the Lease; and that 3COM has cured any title defects affecting the Property other than Prohibited Encumbrances, all in accordance with the standards and requirements of the Lease as though the Lease were continuing in force) as determined by an independent MAI appraiser selected by BNPLC, which appraiser must have five (5) years or more experience appraising similar properties in northern California. "Qualified Deposit Taker" means one of the fifty largest (measured by total assets) U.S. banks, or one of the one hundred largest (measured by total assets) banks in the world, with debt ratings of at least (i) A- (in the case of long term debt) and A-1 (in the case of short term debt) or the equivalent thereof by Standard and Poor's Corporation, and (ii) A (in the case of long term debt) and P-1 (in the case of short term debt) or the equivalent thereof by Moody's Investor Service, Inc. The parties believe it improbable that the ratings systems used by Standard and Poor's Corporation and by Moody's Investor Service, Inc. will be discontinued or changed, but if such ratings systems are discontinued or changed, 3COM shall be entitled to select and use a comparable ratings systems as a substitute for the S&P Rating or the Moody Rating, as the case may be, for purposes of determining the status of any bank as a Qualified Deposit Taker. "Purchase Price" means an amount equal to Stipulated Loss Value outstanding on the Designated Sale Date, plus all costs and expenses (including appraisal costs, withholding taxes (if any) and reasonable Attorneys' Fees, as defined in the Lease) incurred in connection with any sale of the Property by BNPLC hereunder or in connection with collecting sales proceeds due hereunder, less the aggregate amounts (if any) of Direct Payments to Participants and Deposit Taker Losses. "Prohibited Encumbrance" means any lien or other title defect encumbering the Property that is claimed by BNPLC itself or lawfully claimed by a third party through or under BNPLC, including any judgment lien lawfully filed against BNPLC and including any tax lien assessed because of BNPLC's failure to pay Excluded Taxes, but excluding the Lease and any lien or other title defect that (i) is a Permitted Encumbrance (as defined in the Lease), regardless of whether claimed by, through or under BNPLC, (ii) is claimed by, through or under 3COM or any of the Participants approved by 3COM (other than Landlord's Parent), or (iii) exists because of any breach by 3COM of the Lease, because of anything done or not done by BNPLC in an effort to satisfy subparagraph 9(b) of the Lease, or because of anything done or not done by BNPLC at the request of 3COM. "Remarketing Notice" shall have the meaning assigned to it in Paragraph 2(b)(1) below. "Required Documents" means the grant deed and other documents that BNPLC must tender pursuant to Paragraph 3 below. "Shortage Amount" means any amount payable to BNPLC by 3COM, rather than by the Applicable Purchaser, pursuant to clause 2(a)(ii) below. 2. 3COM's Options and Obligations on the Designated Sale Date. (a) Choices. On the Designated Sale Date 3COM shall have the right and the obligation to either: (i) purchase BNPLC's interest in the Property and in Escrowed Proceeds, if any, for a net cash price equal to the Purchase Price; or (ii) cause the Applicable Purchaser to purchase BNPLC's interest in the Property and in Escrowed Proceeds, if any, for a net cash price not less than the lesser of (a) the Fair Market Value of the Property, (b) fifteen percent (15%) of Stipulated Loss Value outstanding immediately prior to the purchase or (c) the Purchase Price. If, however, the Fair Market Value is less than fifteen percent (15%) of Stipulated Loss Value and less than the Purchase Price, BNPLC may elect to keep the Property and any Escrowed Proceeds rather than sell to the Applicable Purchaser, in which case 3COM shall pay BNPLC an amount equal to (A) eighty-five percent (85%) of Stipulated Loss Value, less (B) the sum of (x) any Escrowed Proceeds then held and to be retained by BNPLC, (y) any Direct Payments to Participants and (z) any Deposit Taker Losses. Unless BNPLC elects to keep the Property pursuant to the preceding sentence, 3COM must make a supplemental payment to BNPLC on the Designated Sale Date equal to the excess (if any) of the Purchase Price over the net cash price actually paid to BNPLC on the Designated Sale Date by the Applicable Purchaser for BNPLC's interest in the Property and in Escrowed Proceeds, if any. However, provided no Event of Default has occurred and is continuing under the Lease, and provided further that neither 3COM nor any Applicable Purchaser has failed to pay any amount required to be paid by this Agreement on the date such amount first became due, any supplemental payment required by the preceding sentence shall not exceed (1) eighty-five percent (85%) of Stipulated Loss Value on the Designated Sale Date, less (2) any Direct Payments to Participants and any Deposit Taker Losses. Any supplemental payment payable to BNPLC by 3COM, rather than by the Applicable Purchaser, pursuant to this clause (ii) is hereinafter referred to as the "Shortage Amount." If the net cash price actually paid by the Applicable Purchaser to BNPLC exceeds the Purchase Price and all other sums that are then due from 3COM to BNPLC, 3COM shall be entitled to such excess. If any amount payable to BNPLC pursuant to this subparagraph 2(a) is not actually paid to BNPLC on the Designated Sale Date, 3COM shall pay interest on the past due amount computed at the Default Rate from the Designated Sale Date. However, 3Com shall be entitled to a reduction of the interest required by the preceding sentence equal to the Base Rent, if any, paid by 3Com as provided in Paragraph 17 of the Lease for any holdover period after the Designated Sale Date. (b) Election by 3COM. 3COM shall have the right to elect whether it will satisfy the obligations set out in clause (i) or (ii) of the preceding Paragraph 2(a); provided, however, that the following conditions are satisfied: (1) To give BNPLC the opportunity to have the Fair Market Value determined by an appraiser as provided in the definition of Fair Market Value above before the Designated Sale Date, 3COM must, unless 3COM concedes that Fair Market Value will not be less than fifteen percent (15%) of Stipulated Loss Value on the Designated Sale Date, provide BNPLC with a Remarketing Notice. "Remarketing Notice" means a notice given by 3COM to BNPLC (and to each of the Participants) no earlier than one hundred eighty (180) days before the Designated Sale Date and no later than ninety (90) days before the Designated Sale Date, specifying that 3COM does not concede that the Fair Market Value is equal to or greater than fifteen percent (15%) of the Stipulated Loss Value. A Remarketing Notice will be required only if 3COM does not concede that Fair Market Value will equal or exceed fifteen percent (15%) of Stipulated Loss Value on the Designated Sale Date. But if for any reason (including but not limited to any acceleration of the Designated Sale Date pursuant to clause (2) of the definition of Designated Sale Date above) 3COM fails to provide a Remarketing Notice within the time periods specified in the definition of Remarketing Notice above, Fair Market Value shall, for purposes of this Agreement, be deemed to be no less than fifteen percent (15%) of Stipulated Loss Value on the Designated Sale Date. (2) To give BNPLC the opportunity to prepare the Required Documents before the Designated Sale Date, 3COM must, if it is to elect to satisfy the obligations set forth in clause (ii) of Paragraph 2(a), irrevocably specify an Applicable Purchaser in notice to BNPLC given at least seven (7) days prior to the Designated Sale Date. If for any reason 3COM fails to so specify an Applicable Purchaser, 3COM shall be deemed to have irrevocably elected to satisfy the obligations set forth in clause (i) of Paragraph 2(a). (c) Termination of 3COM's Option To Purchase. Without limiting BNPLC's right to require 3COM to satisfy the obligations imposed by Paragraph 2(a), 3COM shall have no further option hereunder to purchase the Property if either: (1) 3COM shall have elected to satisfy its obligations under clause (ii) of Paragraph 2(a) on a Designated Sale Date and BNPLC shall have elected to keep the Property on such Designated Sale Date in accordance with clause (ii) of Paragraph 2(a); or (2) 3COM shall have failed on a Designated Sale Date to make or cause to be made all payments to BNPLC required by this Agreement or by the Lease and such failure shall have continued beyond the thirty (30) day period for tender specified in the next sentence. If BNPLC does not receive all payments due under the Lease and all payments required hereunder on a Designated Sale Date, 3COM may nonetheless tender to BNPLC the full Purchase Price and all amounts then due under the Lease, together with interest on the total Purchase Price computed at the Default Rate from the Designated Sale Date to the date of tender, and if presented with such a tender within thirty (30) days after the applicable Designated Sale Date, BNPLC must accept it and promptly thereafter deliver any Escrowed Proceeds and a deed and all other Required Documents listed in Paragraph 3. (d) Payment to BNPLC. All amounts payable under the preceding Paragraphs 2(a) or 2(c) by 3COM and, if applicable, by the Applicable Purchaser must be paid directly to BNPLC, and no payment to any other party shall be effective for the purposes of this Agreement. In addition to the payments required under Paragraph 2(a) hereunder, on the Designated Sale Date 3COM must pay all amounts then due to BNPLC under the Lease. BNPLC will remit any excess amounts due 3COM pursuant to the last sentence of clause (ii) of Paragraph 2(a) promptly after BNPLC's receipt of the same and in no event later than thirty (30) days thereafter. (e) Effect of Options on Subsequent Title Encumbrances. It is the intent of BNPLC and 3COM that any conveyance of the Property to 3COM or any Applicable Purchaser pursuant to this Agreement shall cut off and terminate any interest in the Property claimed by, through or under BNPLC, including the Participants (but not any unsatisfied obligations to BNPLC under the Lease, the Environmental Indemnity or this Agreement), including but not limited to any Prohibited Encumbrances and any leasehold or other interests conveyed by BNPLC in the ordinary course of BNPLC's business. Anyone accepting or taking any interest in the Property by or through BNPLC after the date of this Agreement shall acquire such interest subject to the rights and options granted 3COM hereby. Further, 3COM and any Applicable Purchaser shall be entitled to pay any payment required by this Agreement for the purchase of the Property directly to BNPLC notwithstanding any prior conveyance or assignment by BNPLC, voluntary or otherwise, of any right or interest in this Agreement or the Property, and neither 3COM nor any Applicable Purchaser shall be responsible for the proper distribution or application of any such payments by BNPLC. 3. Terms of Conveyance Upon Purchase. Immediately after receipt of all payments to BNPLC required pursuant to the preceding Paragraph 2, BNPLC must, unless it is to keep the Property as permitted by Paragraph 2(a)(ii), deliver all Escrowed Proceeds, if any, and convey all of its right, title and interest in the Property by grant deed to 3COM or the Applicable Purchaser, as the case may be, subject only to the Permitted Encumbrances (as defined in the Lease) and any other encumbrances that do not constitute Prohibited Encumbrances. However, such conveyance shall not include the right to receive any payment under the Lease then due BNPLC or that may become due thereafter because of any expense or liability incurred by BNPLC resulting in whole or in part from events or circumstances occurring before such conveyance. All costs of such purchase and conveyance of every kind whatsoever, both foreseen and unforeseen, shall be the responsibility of the purchaser, and the form of grant deed used to accomplish such conveyance shall be substantially in the form attached as Exhibit B. With such grant deed, BNPLC shall also tender to 3COM or the Applicable Purchaser, as the case may be, the following, each fully executed and, where appropriate, acknowledged on BNPLC's behalf by an officer of BNPLC: (1) a Preliminary Change of Ownership Report in the form attached as Exhibit C, (2) a Bill of Sale and Assignment of Contract Rights and Intangible Assets in the form attached as Exhibit D, (3) an Acknowledgment of Disclaimer of Representations and Warranties, in the form attached as Exhibit E, which 3COM or the Applicable Purchaser must execute and return to BNPLC, (5) a Documentary Transfer Tax Request in the form attached as Exhibit F, (6) a Secretary's Certificate in the form attached as Exhibit G, (7) a letter to the title insurance company insuring title to the Property in the form attached as Exhibit H, and (8) a certificate concerning tax withholding in the form attached as Exhibit I. 4. Survival of 3COM's Obligations. (a) Status of this Agreement. Except as expressly provided in the last sentence of this subparagraph and elsewhere herein, this Agreement shall not terminate, nor shall 3COM have any right to terminate this Agreement, nor shall 3COM be entitled to any reduction of the Purchase Price hereunder, nor shall the obligations of 3COM to BNPLC under Paragraph 2 be affected by reason of (i) any damage to or the destruction of all or any part of the Property from whatever cause, (ii) the taking of or damage to the Property or any portion thereof under the power of eminent domain or otherwise for any reason, (iii) the prohibition, limitation or restriction of 3COM's use of all or any portion of the Property or any interference with such use by governmental action or otherwise, (iv) any eviction of 3COM or any party claiming under 3COM by paramount title or otherwise, (v) 3COM's prior acquisition or ownership of any interest in the Property, (vi) any default on the part of BNPLC under this Agreement, the Lease or any other agreement to which BNPLC is a party, or (vii) any other cause, whether similar or dissimilar to the foregoing, any existing or future law to the contrary notwithstanding. It is the intention of the parties hereto that the obligations of 3COM hereunder (including 3COM's obligation to make payments under - and, if applicable, to cause the Applicable Purchaser to make payments under - Paragraph 2) shall be separate and independent of the covenants and agreements of BNPLC. Accordingly, the Purchase Price and the Shortage Amount, as the case may be under Paragraph 2, shall continue to be payable in all events, and the obligations of 3COM hereunder shall continue unaffected by any breach of this Agreement by BNPLC. However, nothing in this subparagraph, nor the performance without objection by 3COM of its obligations hereunder, shall be construed as a waiver by 3COM of any right 3COM may have at law or in equity, following any failure by BNPLC to tender a grant deed and the other Required Documents as required by Paragraph 3 upon the tender by 3COM and/or the Applicable Purchaser of the payments required by Paragraph 2 and of the other documents to be executed in favor of BNPLC at the closing of the sale hereunder, to (i) recover monetary damages proximately caused by such failure of BNPLC if BNPLC does not cure the failure within thirty (30) days after 3COM demands a cure by written notice to BNPLC, or (ii) a decree compelling performance of BNPLC's obligation to so tender a grant deed and the Required Documents. (b) Remedies Under the Lease and the Environmental Indemnity. No repossession of or re-entering upon the Property or exercise of any other remedies available under the Lease or the Environmental Indemnity shall relieve 3COM of its liabilities and obligations hereunder, all of which shall survive the exercise of remedies under the Lease and Environmental Indemnity. 3COM acknowledges that the consideration for this Agreement is separate and independent of the consideration for the Lease and the Environmental Indemnity, and 3COM's obligations hereunder shall not be affected or impaired by any event or circumstance that would excuse 3COM from performance of its obligations under the Lease or the Environmental Indemnity. 5. Remedies Cumulative. No right or remedy herein conferred upon or reserved to BNPLC is intended to be exclusive of any other right or remedy BNPLC has with respect to the Property, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity or by statute. In addition to other remedies available under this Agreement, either party shall be entitled, to the extent permitted by applicable law, to a decree compelling performance of any of the other party's agreements hereunder. 6. No Implied Waiver. The failure of either party to this Agreement to insist at any time upon the strict performance of any covenant or agreement of the other party or to exercise any remedy contained in this Agreement shall not be construed as a waiver or a relinquishment thereof for the future. The waiver by either party of or redress for any violation of any term, covenant, agreement or condition contained in this Agreement shall not prevent a subsequent act, which would have originally constituted a violation, from having all the force and effect of an original violation. No express waiver by either party shall affect any condition other than the one specified in such waiver and that one only for the time and in the manner specifically stated. A receipt by BNPLC of any payment hereunder with knowledge of the breach of this Agreement shall not be deemed a waiver of such breach, and no waiver by either party of any provision of this Agreement shall be deemed to have been made unless expressed in writing and signed by the waiving party. 7. Attorneys' Fees and Legal Expenses. If either party commences any legal action or other proceeding to enforce any of the terms of this Agreement or the documents and agreements referred to herein, or because of any breach by the other party or dispute hereunder or thereunder, the successful or prevailing party, shall be entitled to recover from the nonprevailing party all Attorneys' Fees incurred in connection therewith, whether or not such controversy, claim or dispute is prosecuted to a final judgment. Any such Attorneys' Fees incurred by either party in enforcing a judgment in its favor under this Agreement shall be recoverable separately from such judgment, and the obligation for such Attorneys' Fees is intended to be severable from other provisions of this Agreement and not to be merged into any such judgment. 8. Estoppel Certificate. 3COM and BNPLC will each, upon not less than twenty (20) days' prior written request by the other, execute, acknowledge and deliver to the requesting party a written statement certifying that this Agreement is unmodified and in full effect (or, if there have been modifications, that this Agreement is in full effect as modified, and setting forth such modification) and either stating that no default exists hereunder or specifying each such default of which the signer may have knowledge. Any such statement may be relied upon by any Participant or prospective purchaser or assignee of BNPLC with respect to the Property. Neither 3COM nor BNPLC shall be required to provide such a certificate more frequently than once in any six month period; provided, however, that if either party determines that there is a significant business reason for requiring a current certificate, including, without limitation, the need to provide such a certificate to a prospective purchaser or assignee, the other shall provide a certificate upon request whether or not it had provided a certificate within the prior six month period. 9. Notices. Each provision of this Agreement referring to the sending, mailing or delivery of any notice or referring to the making of any payment to BNPLC, shall be deemed to be complied with when and if the following steps are taken: (a) All payments required to be made by 3COM or the Applicable Purchaser to BNPLC hereunder shall be paid to BNPLC in immediately available funds by wire transfer to: Federal Reserve Bank of San Francisco Account: Banque Nationale de Paris ABA #: 121027234 Reference: 3COM (Phase III Site) or at such other place and in such other manner as BNPLC may designate in a notice to 3COM (provided BNPLC will not unreasonably designate a method of payment other than wire transfer). Time is of the essence as to all payments to BNPLC under this Agreement. Any payments required to be made by BNPLC to 3COM pursuant to the last sentence of clause (ii) of Paragraph 2(a) shall be paid to 3COM in immediately available funds at the address of 3COM set forth below or as 3COM may otherwise direct by written notice sent in accordance herewith. (b) All notices, demands and other communications to be made hereunder to the parties hereto shall be in writing (at the addresses set forth below) and shall be given by any of the following means: (A) personal service, with proof of delivery or attempted delivery retained; (B) electronic communication, whether by telex, telegram or telecopying (if confirmed in writing sent by United States first class mail, return receipt requested); or (C) registered or certified first class mail, return receipt requested. Such addresses may be changed by notice to the other parties given in the same manner as provided above. Any notice or other communication sent pursuant to clause (A) or (C) hereof shall be deemed received (whether or not actually received) upon first attempted delivery at the proper notice address on any Business Day between 9:00 A.M. and 5:00 P.M., and any notice or other communication sent pursuant to clause (B) hereof shall be deemed received upon dispatch by electronic means. Address of BNPLC: BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd Cox Telecopy: (214) 969-0060 With a copy to: Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention:Jennifer Cho or William J. La Herran Telecopy: (415) 296-8954 And with a copy to: Clint Shouse Thompson & Knight, P.C. 1700 Pacific Avenue Suite 3300 Dallas, Texas 75201 Telecopy: (214) 969-1550 Address of 3COM: 3Com Corporation 5400 Bayfront Plaza Santa Clara, California 95052 Attn: Legal Dept. Mail Stop 1308 Telecopy: (408) 764-6434 With copies to: 3Com Corporation 5400 Bayfront Plaza Santa Clara, California 95052 Attn: Real Estate Dept. Mail Stop 1220 Telecopy: (408) 764-5718; and 3Com Corporation 5400 Bayfront Plaza Santa Clara, California 95052 Attn: Treasury Dept. Mail Stop 1307 Telecopy: (408) 764-8403; and Gray Cary Ware & Freidenrich 400 Hamilton Avenue Palo Alto, California 94301 Attn: Jonathan E. Rattner, Esq. Telecopy: (415) 328-3029 10. Severability. Each and every covenant and agreement of 3COM contained in this Agreement is, and shall be construed to be, a separate and independent covenant and agreement. If any term or provision of this Agreement or the application thereof to any person or circumstances shall to any extent be invalid and unenforceable, the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby. Further, the obligations of 3COM hereunder, to the maximum extent possible, shall be deemed to be separate, independent and in addition to, not in lieu of, the obligations of 3COM under the Lease. In the event of any inconsistency between the terms of this Agreement and the terms and provisions of the Lease, the terms and provisions of this Agreement shall control. 11. Entire Agreement. This Agreement and the documents and agreements referred to herein set forth the entire agreement between the parties concerning the subject matter hereof and no amendment or modification of this Agreement shall be binding or valid unless expressed in a writing executed by both parties hereto. 12. Paragraph Headings. The paragraph headings contained in this Agreement are for convenience only and shall in no way enlarge or limit the scope or meaning of the various and several paragraphs hereof. 13. Gender and Number. Within this Agreement, words of any gender shall be held and construed to include any other gender and words in the singular number shall be held and construed to include the plural, unless the context otherwise requires. 14. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE UNDER AND SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA. 15. Successors and Assigns. The terms, provisions, covenants and conditions hereof shall be binding upon 3COM and BNPLC and their respective permitted successors and assigns and shall inure to the benefit of 3COM and BNPLC and all permitted transferees, mortgagees, successors and assignees of 3COM and BNPLC with respect to the Property; provided, that the rights of BNPLC hereunder shall not pass to 3COM or any Applicable Purchaser or any subsequent owner claiming through them. Prior to the Designated Sale Date BNPLC may transfer, assign and convey, in whole or in part, the Property and any and all of its rights under this Agreement (subject to the terms of this Agreement) by any conveyance that constitutes a Permitted Transfer, but not otherwise. If BNPLC sells or otherwise transfers the Property and assigns its rights under this Agreement and the Lease pursuant to a Permitted Transfer, then to the extent BNPLC's successor in interest confirms its liability for the obligations imposed upon BNPLC by this Agreement and the Lease on and subject to the express terms set out herein and therein, BNPLC shall thereby be released from any further obligations thereafter arising under this Agreement and the Lease, and 3COM will look solely to each successor in interest of BNPLC for performance of such obligations. 16. WAIVER OF JURY TRIAL. BNPLC AND 3COM EACH HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THE LEASE, THIS AGREEMENT OR ANY OTHER DOCUMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION AND THE RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. 3COM and BNPLC each acknowledge that this waiver is a material inducement to enter into a business relationship, that each has already relied on the waiver in entering into this Agreement and the other documents referred to herein, and that each will continue to rely on the waiver in their related future dealings. 3COM and BNPLC each further warrant and represent that it has reviewed this waiver with its legal counsel, and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LEASE, THIS AGREEMENT OR THE ENVIRONMENTAL INDEMNITY. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. 17. Security for 3COM's Obligations. 3COM's obligations under this Agreement are secured by the Pledge Agreement, reference to which is hereby made for a description of the Collateral covered thereby and the rights and remedies provided to BNPLC thereby. Although the collateral agent appointed for BNPLC as provided in the Pledge Agreement shall be entitled to hold all Collateral as security for the full and faithful performance by 3COM of 3COM's covenants and obligations under this Agreement, the Collateral shall not be considered an advance payment of the Purchase Price or any Shortage Amount or a measure of BNPLC's damages should 3COM breach this Agreement. If 3COM does breach this Agreement and fails to cure the same within any time specified herein for the cure, BNPLC may, from time to time, without prejudice to any other remedy and without notice to 3COM, require the collateral agent to immediately apply the proceeds of any disposition of the Collateral (and any cash included in the Collateral) to amounts then due hereunder from 3COM. If BNPLC assigns its interest in the Property before the Designated Sale Date, BNPLC may also assign BNPLC's interest in the Collateral to the assignee. 18. Replacement of Participants Proposed by 3COM. So long as no Event of Default has occurred and is continuing, BNPLC shall not unreasonably withhold its approval for a substitution under the Participation Agreement of a new Participant proposed by 3COM for any Participant, the Deposit Taker for whom has ceased to be a Qualified Deposit Taker; provided, however, that (A) the proposed substitution can be accomplished without a release or breach by BNPLC of its rights and obligations under the Participation Agreement or the "Underlying Documents" described therein (including this Purchase Agreement); (B) the new Participant will agree (by executing Supplements to the Participation Agreement and Pledge Agreement as therein contemplated and by other agreements as may be reasonably required by BNPLC and 3COM) to become a party to the Participation Agreement and to the Pledge Agreement, to designate a Qualified Deposit Taker as the Deposit Taker for it under the Pledge Agreement and to accept a Percentage under the Participation Agreement equal to the Percentage of the Participant to be replaced; (C) the new Participant (or 3COM) will provide the funds required to pay the termination fee by Section 6.4 of the Participation Agreement to accomplish the substitution; (D) 3COM (or the new Participant) agrees in writing to indemnify and defend BNPLC for any and all Losses incurred by BNPLC in connection with or because of the substitution, including the cost of preparing supplements to the Participation Agreement and the Pledge Agreement and including any cost of defending and paying any claim asserted by the Participant to be replaced because of the substitution (but not including any liability of BNPLC to such Participant for damages caused by BNPLC's bad faith or gross negligence in the performance of BNPLC's obligations under the Participation Agreement prior to the substitution); and (E) the new Participant shall be a reputable financial institution having a net worth of no less than seven and one half percent (7.5%) of total assets and total assets of no less than $10,000,000,000.00 (all according to then recent audited financial statements). BNPLC shall attempt in good faith to assist (and cause its Affiliate, Banque Nationale de Paris, to attempt in good faith to assist) 3COM in identifying a new Participant that 3COM may propose to substitute for an existing Participant pursuant to this Paragraph, as 3COM may reasonably request from time to time. However, in no event shall BNPLC itself, or any of its Affiliates, be required to take the Percentage of any Participant to be replaced. 19. Security for BNPLC's Obligations. To secure 3COM's right to recover any damages caused by a breach of Paragraph 3 by BNPLC, including any such breach caused by a rejection or termination of this Agreement in any bankruptcy or insolvency proceeding instituted by or against BNPLC, as debtor, BNPLC does hereby grant to 3COM a lien and security interest against all rights, title and interests of BNPLC from time to time in and to the Property. 3COM may enforce such lien and security interest judicially after any such breach by BNPLC, but not otherwise. 3COM waives any right it has to seek a deficiency judgement against BNPLC in any action brought for a judicial foreclosure of such lien and security interest, and in connection therewith, BNPLC hereby acknowledges that it shall have no right of redemption following any such judicial foreclosure pursuant to Cal. Code Civ. Procedure Section 729. Contemporaneously with the execution of this Agreement, 3COM and BNPLC will execute a memorandum of this Agreement which is in recordable form and which specifically references the lien granted in this Paragraph, and 3COM shall be entitled to record such memorandum at any time prior to the Designated Sale Date. 20. Not a Partnership, Etc. NOTHING IN THIS PURCHASE AGREEMENT IS INTENDED TO BE OR TO CREATE ANY PARTNERSHIP, JOINT VENTURE, OR OTHER JOINT ENTERPRISE BETWEEN BNPLC AND 3COM. NEITHER THE EXECUTION OF THIS PURCHASE AGREEMENT NOR THE ADMINISTRATION OF THIS PURCHASE AGREEMENT OR OTHER DOCUMENTS REFERENCED HEREIN BY BNPLC, NOR ANY OTHER RIGHT, DUTY OR OBLIGATION OF BNPLC UNDER OR PURSUANT TO THIS PURCHASE AGREEMENT OR SUCH DOCUMENTS IS INTENDED TO BE OR TO CREATE ANY FIDUCIARY OBLIGATIONS OF BNPLC TO 3COM. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties have executed this Purchase Agreement as of July 25, 1997. "BNPLC" BNP LEASING CORPORATION, a Delaware corporation By: /s/ Lloyd G. Cox ---------------------------- Lloyd G. Cox, Vice President [Continuation of signature pages to Purchase Agreement dated to be effective July 25, 1997] "3COM" 3COM CORPORATION, a Delaware corporation By: /s/ Mark D. Michael ------------------------------------- Name: Mark D. Michael Title: Sr. VP, General Counsel & Sec. Exhibit A Legal Description All that real property, situate in the City of Santa Clara, County of Santa Clara, State of California, being a portion of the lands of the City of Santa Clara Land Fill Corporation and the City of Santa Clara described as Parcel B in that Deed of Gift recorded August 30, 1967 in Book 7840 at Page 204, Official Records of Santa Clara County and being a portion of the lands of the City of Santa Clara as described in the deed recorded in Book 9458 at page 115, Official Records of Santa Clara County, said real property being more particularly described as follows: Beginning at the brass pin monument located at the intersection of the monument line of Great America Parkway (125 feet wide) and the centerline Old Mountain View - Alviso Road (60 feet wide) as shown on that Parcel Map filed for record in Book 602 of Maps at Page 34, Santa Clara County Records; Thence along the centerline of Old Mountain View - Alviso Road, North 89 47'24" West 259.00 feet to the Southerly prolongation of the Easterly line of the lands of Santa Clara Valley Water District, described as Parcel 1 in the Grant Deed recorded in Book D928 at Page 706, Official Records of Santa Clara County; Thence along said prolongated line, North 10 57'34" West 30.58 feet to the Southeasterly corner of said lands of Santa Clara Valley Water District and the True Point of Beginning, said point being on the Northerly line of said Old Mt. View - Alviso Road as shown on that Parcel Map filed for record in Book 413 of Maps at Page 13, Santa Clara County Records; Thence along the Easterly line of San Tomas Aquino Creek, conveyed to the Santa Clara Valley Water District as Parcel 1 in that Grant Deed recorded in Book D928 at Page 706, Official Records of Santa Clara County, and in that Quitclaim recorded in Book D928 at Page 716, Official Records of Santa Clara County, North 10 57'34" West 1325.72 feet to the Southerly corner of that parcel described in the Grant Deed from the City of Santa Clara to the Santa Clara Valley Water District, recorded February 14, 1997, Document 13613165, Official Records of Santa Clara County; Thence along the Southeasterly line of said parcel, North 19 14'15" East 105.25 feet to the Southeasterly line of that parcel described as Parcel 1 in that Grant Deed from the City of Santa Clara to the State of California, recorded February 10, 1997, Document 13607858, Official Records of Santa Clara County; Thence along the general Southerly boundary of the last said parcel the following six (6) courses: North 63 34'28" East 51.54 feet; North 62 02'11" East 153.02 feet; North 61 29'12" East 230.90 feet; Easterly and Southeasterly along a tangent curve to the right, having a radius of 32.00 feet, through a central angle of 100 07'12", an arc length of 55.92 feet to a point of compound curvature; Southerly along a tangent curve to the right, having a radius of 282.00 feet, through a central angle of 18 23'50", an arc length of 90.55 feet; South 00 00'14" West 55.36 feet to the Westerly line of said Great America Parkway, shown as "Proposed Great America Parkway" on that Record of Survey filed for record in Book 34 of Maps at Pages 1 through 8, Santa Clara County Records; Thence along said Westerly line, South 01 05'29" West 1395.20 feet; Thence along a tangent curve to the right, having a radius of 50.00 feet, through a central angle of 89 07'07", for an arc length of 77.77 feet to a point of tangency on said Northerly line of Old Mt. View - Alviso Road; Thence along said Northerly line, North 89 47'24" West 150.14 feet to said True Point of Beginning. Exhibit B CORPORATION GRANT DEED RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: NAME: [3Com Corporation or the Applicable Purchaser] ADDRESS: ___________________ ATTN: ___________________ CITY: ___________________ STATE: ___________________ Zip: ___________________ MAIL TAX STATEMENTS TO: NAME: [3Com Corporation or the Applicable Purchaser] ADDRESS: ___________________ ATTN: ___________________ CITY: ___________________ STATE: ___________________ Zip: ___________________ CORPORATION GRANT DEED FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"), hereby grants to [3COM or the Applicable Purchaser] all of BNPLC's interest in the land situated in the County of Santa Clara, State of California, described on Annex A attached hereto and hereby made a part hereof, together with the improvements currently located on such land and any easements, rights-of-way, privileges, appurtenances and other rights pertaining to such land; provided, however, that this grant is subject to the following, as well as the Permitted Encumbrances described on Annex B: 1. Real Estate Taxes not yet due and payable; 2. General or Special Assessments due and payable after the date hereof; and 3. Encroachments, variations in area or in measurements, boundary line disputes, roadways and other matters not of record which would be disclosed by a survey and inspection of the property conveyed hereby. BNP LEASING CORPORATION Date: As of ____________ By:______________________________ Its: Vice President Attest:__________________________ Its: Assistant Secretary STATE OF TEXAS ) ) SS COUNTY OF DALLAS ) On ___________________ before me, ____________________________, personally appeared ______________________ and _______________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the person, or the entity upon behalf of which the persons acted, executed the instrument. WITNESS my hand and official seal. Signature ______________________________ Annex A LEGAL DESCRIPTION All that real property, situate in the City of Santa Clara, County of Santa Clara, State of California, being a portion of the lands of the City of Santa Clara Land Fill Corporation and the City of Santa Clara described as Parcel B in that Deed of Gift recorded August 30, 1967 in Book 7840 at Page 204, Official Records of Santa Clara County and being a portion of the lands of the City of Santa Clara as described in the deed recorded in Book 9458 at page 115, Official Records of Santa Clara County, said real property being more particularly described as follows: Beginning at the brass pin monument located at the intersection of the monument line of Great America Parkway (125 feet wide) and the centerline Old Mountain View - Alviso Road (60 feet wide) as shown on that Parcel Map filed for record in Book 602 of Maps at Page 34, Santa Clara County Records; Thence along the centerline of Old Mountain View - Alviso Road, North 89 47'24" West 259.00 feet to the Southerly prolongation of the Easterly line of the lands of Santa Clara Valley Water District, described as Parcel 1 in the Grant Deed recorded in Book D928 at Page 706, Official Records of Santa Clara County; Thence along said prolongated line, North 10 57'34" West 30.58 feet to the Southeasterly corner of said lands of Santa Clara Valley Water District and the True Point of Beginning, said point being on the Northerly line of said Old Mt. View - Alviso Road as shown on that Parcel Map filed for record in Book 413 of Maps at Page 13, Santa Clara County Records; Thence along the Easterly line of San Tomas Aquino Creek, conveyed to the Santa Clara Valley Water District as Parcel 1 in that Grant Deed recorded in Book D928 at Page 706, Official Records of Santa Clara County, and in that Quitclaim recorded in Book D928 at Page 716, Official Records of Santa Clara County, North 10 57'34" West 1325.72 feet to the Southerly corner of that parcel described in the Grant Deed from the City of Santa Clara to the Santa Clara Valley Water District, recorded February 14, 1997, Document 13613165, Official Records of Santa Clara County; Thence along the Southeasterly line of said parcel, North 19 14'15" East 105.25 feet to the Southeasterly line of that parcel described as Parcel 1 in that Grant Deed from the City of Santa Clara to the State of California, recorded February 10, 1997, Document 13607858, Official Records of Santa Clara County; Thence along the general Southerly boundary of the last said parcel the following six (6) courses: North 63 34'28" East 51.54 feet; North 62 02'11" East 153.02 feet; North 61 29'12" East 230.90 feet; Easterly and Southeasterly along a tangent curve to the right, having a radius of 32.00 feet, through a central angle of 100 07'12", an arc length of 55.92 feet to a point of compound curvature; Southerly along a tangent curve to the right, having a radius of 282.00 feet, through a central angle of 18 23'50", an arc length of 90.55 feet; South 00 00'14" West 55.36 feet to the Westerly line of said Great America Parkway, shown as "Proposed Great America Parkway" on that Record of Survey filed for record in Book 34 of Maps at Pages 1 through 8, Santa Clara County Records; Thence along said Westerly line, South 01 05'29" West 1395.20 feet; Thence along a tangent curve to the right, having a radius of 50.00 feet, through a central angle of 89 07'07", for an arc length of 77.77 feet to a point of tangency on said Northerly line of Old Mt. View - Alviso Road; Thence along said Northerly line, North 89 47'24" West 150.14 feet to said True Point of Beginning. Annex B Permitted Encumbrances [NOTE: TO THE EXTENT THAT SPECIFIC ENCUMBRANCES (OTHER THAN "PROHIBITED LIENS") ARE IDENTIFIED IN ADDITION TO THOSE DESCRIBED BELOW, SUCH ADDITIONAL ENCUMBRANCES WILL BE ADDED TO THE LIST BELOW AND THIS "NOTE" WILL BE DELETED BEFORE THIS DEED IS ACTUALLY EXECUTED AND DELIVERED BY BNPLC. SUCH ADDITIONAL ENCUMBRANCES WOULD INCLUDE ANY NEW ENCUMBRANCES APPROVED BY BNPLC AS "PERMITTED ENCUMBRANCES" FROM TIME TO TIME BECAUSE OF 3COM'S REQUEST FOR BNPLC'S CONSENT OR APPROVAL TO AN ADJUSTMENT AS PROVIDED IN THE LEASE.] This conveyance is subject to any encumbrances that do not constitute "Prohibited Encumbrances" (as defined in the Purchase Agreement pursuant to which this Deed is being delivered), including County and city taxes for the Fiscal Year 1997, a lien not yet due or payable, and including the following matters to the extent the same are still valid and in force: 1. PROPERTY TAXES, including any assessments collected with taxes, for the fiscal year 1996-1997, a lien not yet due or payable. 2. THE LIEN of supplemental taxes arising as the result of an event or occurrence on or after the date of this Policy assessed pursuant to Chapter 3.5 commencing with Section 75 of the California Revenue and Taxation Code. No supplemental taxes now due and payable. 3. EASEMENT for the purposes stated herein and incidents thereto Purpose : Gas pipe line Granted to : Pacific Gas and Electric Company, a California corporation Recorded : January 9, 1932 in Book 598, page 183, Official Records of Santa Clara County, California Affects : As follows: The Route of said pipe line shall be as follows: Beginning at a point in the Westerly boundary line of said premises, distant thereon 35.0 feet Southerly from said iron pipe marking the Northwest corner of said premises, and running thence South 89 46' East 552.2 feet, thence North 50 5 1/2' East 500 feet more or less, to the point in the Easterly boundary line of said premises. The width of said easement is not disclosed of record. 4. The Effect of the Redevelopment Plan for the North Bayshore Project and contains the provisions permitted by Section 33670 of the Health and Safety Code of the State of California, recorded December 31, 1973 in Book 0708, Page 585, Official Records of Santa Clara County, California. 5. A Resolution Dedicating Land of the City of Santa Clara to Particular Public Uses recorded October 1, 1974 in Book B111, page 1 of Official Records of Santa Clara County, California and described as follows: An easement for slope purposes described as follows: Beginning at a point on the Westerly line of said Proposed Great America Parkway distant thereon N 1 05'37" E 1836.01 feet from the intersection of said Westerly line with the Southerly line of the lands described in the Deed recorded in Book 9458 of Official Records of Santa Clara County at page 115, thence from said Point of Beginning leaving said Westerly line N. 0 35'28" W. 170.07 feet; thence N 0 39'04" E 927.68 feet to a point on the Westerly line of said Proposed Mission College Boulevard; thence Southeasterly and Southerly along last said line from a tangent that bears S 58 01'04" E along the arc of a curve to the right having a radius of 25.00 feet and a central angle of 59 06'41", an arc distance of 25.79 feet and tangent to the preceding curve S 1 05'37" W 1076.20 feet to the Point of Beginning. 6. ANY RIGHTS, interests, or claims adverse to those of the vestee herein which may exist or arise by reason of the following facts shown on a survey plat entitled "ALTA/ACSM LAND TITLE SURVEY", dated August 21, 1996, last revised June 5, 1997, prepared by Kier & Wright, Job No. 96112. a) The fact that various drains empty onto this property along the Easterly boundary. b) The fact that an overhead line and poles exist on said land. 7. EASEMENT for the purposes stated herein and incidents thereto Purpose : Slope Purposes Granted to : State of California Recorded : February 10, 1997 under Series No. 13607858, Official Records of Santa Clara County, California Affects : as follows Beginning at the most Northerly comer of that certain 3.709 acre tract of land described in the Quitclaim Deed from the City of Santa Clara to the Santa Clara Valley Water District recorded July 23, 1979 in Book E245 of Official Records at page 470, Santa Clara County Records; thence from said point of beginning along the Easterly line of said 3.709 acre tract, the following course: S. 10 04'48" E.109.99 feet; S. 79 55'12" W. 25.00 feet; and S. 10 04'48" W. 154.82 feet; thence leaving said Easterly line N. 65 31'00" E. 7.36 feet; thence N. 84 16'00" E. 45.94 feet to the true point of beginning for this description; thence from said true point of beginning N. 64 27'28" E. 51.54 feet; thence N. 62 55'11" E. 153.01 feet; thence N. 62 22'12" E. 230.89 feet; thence along a tangent curve to the right, with a radius of 32.00 feet, through a central angle of 100 07'12" for an arc distance of 55.92 feet to a point of compound curvature; thence along a tangent curve to the right, with a radius of 282.00 feet through a central angle of 18 23'50" for an arc distance of 90.55 feet; thence S. 0 53'14" W. 55.36 feet; thence N. 88 01'31" W. 15.00 feet; thence parallel with above said course having a length of 55.36 feet, N. 0 53'14" E. 55.08 feet; thence concentric with and distant 15.00 feet Westerly, measured radially, from above said course having a length of 90.55 feet along a tangent curve to the left, with a radius of 267.00 feet, through a central angle of 18 41'22" for an arc length of 87.09 feet; thence leaving said parallel line N. 81 17'26" W. 23.55 feet; thence S. 61 32'45" W. 229.43 feet; thence S. 63 33'03" W. 227.87 feet; thence N. 20 07'00" E. 32.19 feet to the true point of beginning. 8. LACK OF ABUTTER'S RIGHTS to and from Rte.237, lying adjacent to the Northerly line of said land, said rights having been relinquished in the Deed To : State of California Recorded : February 10,1997 under Series No. 13607858, Official Records of Santa Clara County, California. 9. Certificate of Compliance executed by the City of Santa Clara which confirms that this property is a legal parcel under the California Subdivisions Map Act, recorded in the Official Records of Santa Clara County, California on June 12, 1997 as Document No. 13739108. 10. Development Agreement executed by the City of Santa Clara and 3Com Corporation, recorded in the Official Records of Santa Clara County, California on June 12, 1997 as Document No. 13739112. EXHIBIT C PRELIMINARY CHANGE OF OWNERSHIP REPORT THIS REPORT IS NOT A PUBLIC DOCUMENT (To be completed by transferee (buyer) THIS SPACE FOR RECORDER'S USE prior to transfer of the subject property in accordance with Section 480.3 of the Revenue and Taxation Code.) SELLER/TRANSFEROR: SELLER RECORDING DATE: DOCUMENT NO. BUYER/TRANSFEREE: ASSESSOR'S IDENTIFICATION NUMBER(S) LA ______ Page Parcel PROPERTY ADDRESS OR LOCATION: No Street City State Zip Code MAIL TAX INFORMATION TO: NAME: ADDRESS: Street No City State Zip Code FOR ASSESSOR'S USE ONLY Cluster OC1____________ OC2____________ DT_____________ INT____________ RC_____________ SP$____________ DTT $__________ # Pcl._________ A Preliminary Change in Ownership Report must be filed with each conveyance in the County Recorder's office for the county where the property is located; this particular form may be used in all 58 counties of California. NOTICE: A lien for property taxes applies to your property on March 1 of each year for the taxes owing in the following fiscal year, July 1 through June 30. One-half of those taxes is due November 1 and one- half is due February 1. The first installment becomes delinquent on December 10 and the second installment becomes delinquent on April 10. One tax bill is mailed before November 1 to the owner of record. IF THIS TRANSFER OCCURS AFTER MARCH 1 AND ON OR BEFORE DECEMBER 31, YOU MAY BE RESPONSIBLE FOR THE SECOND INSTALLMENT OF TAXES ON FEBRUARY 1. The property which you acquired may be subject to a supplemental tax assessment in an amount to be determined by the Santa Clara County Assessor. For further information on your supplemental roll obligation, please call the Santa Clara County Assessor at (___) ___- ____. PART I: TRANSFER INFORMATION Please answer all questions. YES NO A. Is this transfer solely between husband and wife (Addition of a spouse, death of a spouse, divorce settlement, etc.)? B. Is this transaction only a correction of the name(s) of the person(s) holding title to the property (For example, a name change upon marriage)? C. Is this document recorded to create, terminate, or reconvey a lender's interest in the property? D. Is this transaction recorded only to create, terminate, or reconvey a security interest (e.g., cosigner)? E. Is this document recorded to substitute a trustee under a deed of trust, mortgage, or other similar document? F. Did this transfer result in the creation of a joint tenancy in which the seller (transferor) remains as one of the joint tenants? G. Does this transfer return property to the person who created the joint tenancy (original transferor)? H. Is this transfer of property: 1. to a trust for the benefit of the grantor, or grantor's spouse? 2. to a trust revocable by the transferor? 3. to a trust from which the property reverts to the grantor within 12 years? I. If this property is subject to a lease, is the remaining lease term 35 years or more including written options? J. Is this a transfer from parents to children or from children to parents? K. Is this transaction to replace a principal residence by a person 55 years of age or older? L. Is this transaction to replace a principal residence by a person who is severely disabled as defined by Revenue and Taxation Code Section 69.5? If you checked yes to J, K or L, an applicable claim form must be filed with the County Assessor. Please provide any other information that would help the Assessor to understand the nature of the transfer. IF YOU HAVE ANSWERED "YES" TO ANY OF THE ABOVE QUESTIONS EXCEPT J, K, OR L, PLEASE SIGN AND DATE. OTHERWISE COMPLETE BALANCE OF THE FORM. PART II: OTHER TRANSFER INFORMATION A. Date of transfer if other than recording date.____________________ B. Type of transfer. Please check appropriate box. ___ Purchase ___ Foreclosure ___ Gift ___ Trade or Exchange ___ Merger, Stock or Partnership Acquisition ___ Contract of Sale - Date of Contract____________________ ___ Inheritance - Date of Contract_________________________ ___ Other: Please explain:________________________________ ___ Creation of a lease: ___ Assignment of a lease; ___ Termination of a lease ___ Date lease began___________________________________ ___ Original term in years (including written options) ___________________________________________________ ___ Remaining term in years (including written options) ___________________________________________________ C. Was only a partial interest in the property transferred? ___ Yes ___ No If yes, indicate the percentage transferred ______% Please answer, to the best of your knowledge, all applicable questions, sign and date. If a question does not apply, indicate with "N/A". PART III.: PURCHASE PRICE & TERMS OF SALE A. CASH DOWN PAYMENT OR Value of Trade or Exchange (excluding closing cost) Amount $__________ B. FIRST DEED OF TRUST @ ______% interest for ____ years. Pymts./Mo. = $____________ (Prin. & Int. only) Amount $__________ ___ FHA ___ Fixed Rate ___ New Loan ___ Conventional ___ Variable Rate ___ Assumed Existing Loan Balance ___ VA ___ All Inclusive D.T. ($__________ Wrapped) ___ Bank or Savings & Loan ___ Cal-Vet ___ Loan Carried by Seller ___ Finance Company Balloon Payment ___ Yes ___ No Due Date____________________ Amount $__________ C. SECOND DEED OF TRUST @ ______% interest for ______ years. Pymts./Mo. = $__________ (Prin. & Int. only) Amount $_________ ___ Bank or Savings & Loan ___ Fixed Rate ___ New Loan ___ Loan Carried by Seller ___ Variable Rate ___ Assumed Existing Loan Balance ___ Balloon Payment ___ Yes ___ No Due Date ____________ Amount $__________ D. OTHER FINANCING: Is other financing involved not covered in (b) or (c) above? ___ Yes ___ No Amount $__________ Type__________ @ ______% interest for ______ years. Pymts./Mo. = $__________ (Prin. & Int. only) ___ Bank or Savings & Loan ___ Fixed Rate ___ New Loan ___ Loan Carried by Seller ___ Variable Rate ___ Assumed Existing Loan Balance Balloon Payment ___ Yes ___ No Due Date________________ Amount $__________ E. IMPROVEMENT BOND ___ Yes ___ No Outstanding Balance: Amount $__________ F. TOTAL PURCHASE PRICE: (or acquisition price, if traded or exchanged, include real estate $ commission if paid.) Total items A through E G. PROPERTY PURCHASED: ___ Through a broker; ___ Direct form seller; ___ Other (Explain)________________________________ If purchased through a broker, provide broker's name and phone no.:_________________________ Please explain any special terms or financing and many other information that would help the Assessor understand the purchase price and terms of sale. PART IV.: PROPERTY INFORMATION A. IS PERSONAL PROPERTY INCLUDED IN THE PURCHASE PRICE (other than a mobilehome subject to local property tax)? ___ Yes ___ No If yes, enter the value of the personal property included in the purchase price $____________ (Attach itemized list of personal property) B. IS THIS PROPERTY INTENDED AS YOUR PRINCIPAL RESIDENCE? ___ Yes ___ No If yes, enter date of occupancy __________ (Month) / ______ (Day) /, 19____ or intended occupancy __________ (Month) / ______ (Day)/, 19____ C. TYPE OF PROPERTY TRANSFERRED: ___ Single-Family residence ___ Agricultural ___ Timeshare ___ Multiple-Family residence (no. of units:____) ___ Coop/ Own-your-own ___ Mobilehome ___ Commercial/Industrial ___ Condominium ___ Unimproved lot ___ Other (Description: _________________________________________) D. DOES THE PROPERTY PRODUCE INCOME? ___ Yes ___ No E. IF THE ANSWER TO QUESTION D IS YES, IS THE INCOME FROM: ___ Lease/Rent ___ Contract ___ Mineral rights ___ Other - explain______________________________________________ F. WHAT WAS THE CONDITION OF THE PROPERTY AT THE TIME OF SALE? ___ Good ___ Average ___ Fair ___ Poor Enter here, or on an attached sheet, any other information that would assist the Assessor in determining value of the property such as the physical condition of the property, restrictions, etc. _________________________________________________________________ _________________________________________________________________ I certify that the foregoing is true, correct and complete to the best of my knowledge and belief. Signed__________________________________ Date___________________ (New Owner/Corporate Officer) Please Print Name of New Owner/Corporate Officer Phone No. where you are available from 8:00 a.m. - 5:00 p.m. (____) _______________________ (Note: The Assessor may contact you for further information) If a document evidencing a change of ownership is presented to the recorder for recordation without the concurrent filing of a PRELIMINARY CHANGE OF OWNERSHIP REPORT, the recorder may charge an additional recording fee of twenty dollars ($20). Exhibit D BILL OF SALE, ASSIGNMENT OF CONTRACT RIGHTS AND INTANGIBLE ASSETS Reference is made to that certain Offer to Purchase Real Property and Agreement for the Sale of Real Property Located in the City of Santa Clara dated April 19, 1996 (as amended, the "Agreement") between 3Com Corporation, a California corporation (predecessor in interest to 3Com Corporation, a Delaware corporation) and the City of Santa Clara, California, a chartered municipal corporation ("Seller"), pursuant to which 3Com Corporation named BNP LEASING CORPORATION ("Assignor") as its designee and Seller conveyed to Assignor the real property described in Annex A attached hereto (the "Property"). Assignor hereby sells, transfers and assigns unto [3COM OR THE APPLICABLE PURCHASER, AS THE CASE MAY BE], a _____________ ("Assignee"), all of Assignor's right, title and interest in and to the following property, if any, to the extent such property is assignable: (a) any warranties, guaranties, indemnities and claims Assignor may have under the Agreement or under any document delivered by Seller thereunder to the extent related to the Property; (b) all licenses, permits or similar consents (excluding any prepaid utility reservations) from third parties to the extent related to the Property; (c) any pending or future award made because of any condemnation affecting the Property or because of any conveyance to be made in lieu thereof, and any unpaid award for damage to the Property and any unpaid proceeds of insurance or claim or cause of action for damage, loss or injury to the Property; (d) any goods, equipment, furnishings, furniture, chattels and personal property of whatever nature that are located on or about the Property; and (e) any general intangibles, permits, licenses, franchises, certificates, and other rights and privileges owned by Assignor and used solely in connection with, or relating solely to, the Property, including any such rights and privileges conveyed to Assignor pursuant to the Agreement; but excluding any rights or privileges of Assignor under (i) the Environmental Indemnity, as defined in that certain Purchase Agreement between Assignor and 3Com Corporation dated as of July 25, 2997 (the "Purchase Agreement") (pursuant to which this document is being delivered), (ii) the Lease, as defined in the Purchase Agreement, to the extent rights under the Lease relate to the period ending on the date hereof, whether such rights are presently known or unknown, including rights of the Assignor to be indemnified against claims of third parties as provided in the Lease which may not presently be known, and including rights to recover any accrued unpaid rent under the Lease which may be outstanding as of the date hereof, (iii) agreements between Assignor and Participants, as defined in the Lease, or any modification or extension thereof, and (iv) any other instrument being delivered to Assignor contemporaneously herewith pursuant to the Purchase Agreement. Assignor does for itself and its heirs, executors and administrators, covenant and agree to warrant and defend the title to the property assigned herein against the just and lawful claims and demands of any person claiming under or through Assignor, but not otherwise; excluding, however, any claim or demand arising by, through or under [3COM]. Assignee hereby assumes and agrees to keep, perform and fulfill Assignor's obligations, if any, relating to any permits or contracts, under which Assignor has rights being assigned herein. Executed: ______________, _____. ASSIGNOR: BNP LEASING CORPORATION a Delaware corporation By:______________________________ Its:_____________________________ ASSIGNEE [3COM, OR THE APPLICABLE PURCHASER], a _________ corporation By:______________________________ Its:_____________________________ Annex A Legal Description All that real property, situate in the City of Santa Clara, County of Santa Clara, State of California, being a portion of the lands of the City of Santa Clara Land Fill Corporation and the City of Santa Clara described as Parcel B in that Deed of Gift recorded August 30, 1967 in Book 7840 at Page 204, Official Records of Santa Clara County and being a portion of the lands of the City of Santa Clara as described in the deed recorded in Book 9458 at page 115, Official Records of Santa Clara County, said real property being more particularly described as follows: Beginning at the brass pin monument located at the intersection of the monument line of Great America Parkway (125 feet wide) and the centerline Old Mountain View - Alviso Road (60 feet wide) as shown on that Parcel Map filed for record in Book 602 of Maps at Page 34, Santa Clara County Records; Thence along the centerline of Old Mountain View - Alviso Road, North 89 47'24" West 259.00 feet to the Southerly prolongation of the Easterly line of the lands of Santa Clara Valley Water District, described as Parcel 1 in the Grant Deed recorded in Book D928 at Page 706, Official Records of Santa Clara County; Thence along said prolongated line, North 10 57'34" West 30.58 feet to the Southeasterly corner of said lands of Santa Clara Valley Water District and the True Point of Beginning, said point being on the Northerly line of said Old Mt. View - Alviso Road as shown on that Parcel Map filed for record in Book 413 of Maps at Page 13, Santa Clara County Records; Thence along the Easterly line of San Tomas Aquino Creek, conveyed to the Santa Clara Valley Water District as Parcel 1 in that Grant Deed recorded in Book D928 at Page 706, Official Records of Santa Clara County, and in that Quitclaim recorded in Book D928 at Page 716, Official Records of Santa Clara County, North 10 57'34" West 1325.72 feet to the Southerly corner of that parcel described in the Grant Deed from the City of Santa Clara to the Santa Clara Valley Water District, recorded February 14, 1997, Document 13613165, Official Records of Santa Clara County; Thence along the Southeasterly line of said parcel, North 19 14'15" East 105.25 feet to the Southeasterly line of that parcel described as Parcel 1 in that Grant Deed from the City of Santa Clara to the State of California, recorded February 10, 1997, Document 13607858, Official Records of Santa Clara County; Thence along the general Southerly boundary of the last said parcel the following six (6) courses: North 63 34'28" East 51.54 feet; North 62 02'11" East 153.02 feet; North 61 29'12" East 230.90 feet; Easterly and Southeasterly along a tangent curve to the right, having a radius of 32.00 feet, through a central angle of 100 07'12", an arc length of 55.92 feet to a point of compound curvature; Southerly along a tangent curve to the right, having a radius of 282.00 feet, through a central angle of 18 23'50", an arc length of 90.55 feet; South 00 00'14" West 55.36 feet to the Westerly line of said Great America Parkway, shown as "Proposed Great America Parkway" on that Record of Survey filed for record in Book 34 of Maps at Pages 1 through 8, Santa Clara County Records; Thence along said Westerly line, South 01 05'29" West 1395.20 feet; Thence along a tangent curve to the right, having a radius of 50.00 feet, through a central angle of 89 07'07", for an arc length of 77.77 feet to a point of tangency on said Northerly line of Old Mt. View - Alviso Road; Thence along said Northerly line, North 89 47'24" West 150.14 feet to said True Point of Beginning. Exhibit E Acknowledgment of Disclaimer of Representations and Warranties THIS ACKNOWLEDGMENT OF DISCLAIMER OF REPRESENTATIONS AND WARRANTIES (this "Certificate") is made as of ___________________, ____, by [3COM or the Applicable Purchaser, as the case may be], a ___________________ ("Grantee"). Contemporaneously with the execution of this Certificate, BNP Leasing Corporation, a Delaware corporation ("BNPLC"), is executing and delivering to Grantee (1) a Corporation Grant Deed and (2) a Bill of Sale, Assignment of Contract Rights and Intangible Assets (the foregoing documents and any other documents to be executed in connection therewith are herein called the "Conveyancing Documents" and any of the properties, rights or other matters assigned, transferred or conveyed pursuant thereto are herein collectively called the "Subject Property"). Notwithstanding any provision contained in the Conveyancing Documents to the contrary, Grantee acknowledges that BNPLC makes no representations or warranties of any nature or kind, whether statutory, express or implied, with respect to environmental matters or the physical condition of the Subject Property, and Grantee, by acceptance of the Conveyancing Documents, accepts the Subject Property "AS IS," "WHERE IS," "WITH ALL FAULTS" and without any such representation or warranty by Grantor as to environmental matters, the physical condition of the Subject Property, compliance with subdivision or platting requirements or construction of any improvements. Without limiting the generality of the foregoing, Grantee hereby further acknowledges and agrees that warranties of merchantability and fitness for a particular purpose are excluded from the transaction contemplated by the Conveyancing Documents, as are any warranties arising from a course of dealing or usage of trade. Grantee hereby assumes all risk and liability (and agrees that BNPLC shall not be liable for any special, direct, indirect, consequential, or other damages resulting or arising from or relating to the ownership, use, condition, location, maintenance, repair, or operation of the Subject Property, except for damages proximately caused by (and attributed by any applicable principles of comparative fault to) the wilful misconduct, Active Negligence or gross negligence of BNPLC, its agents or employees. As used in the preceding sentence, "Active Negligence" of a party means, and is limited to, the negligent conduct of activities actually on or about the Property by that party in a manner that proximately causes actual bodily injury or property damage to be incurred. "Active negligence" shall not include (1) any negligent failure of BNPLC to act when the duty to act would not have been imposed but for BNPLC's status as owner of the Subject Property or as a party to the transactions pursuant to which BNPLC is delivering this instrument (the "Applicable Transactions"), (2) any negligent failure of any other party to act when the duty to act would not have been imposed but for such party's contractual or other relationship to BNPLC or participation or facilitation in any manner, directly or indirectly, of the Applicable Transactions, or (3) the exercise in a lawful manner by BNPLC (or any party lawfully claiming through or under BNPLC) of any remedy provided in connection with the Applicable Transactions. The provisions of this Certificate shall be binding on Grantee, its successors and assigns and any other party claiming through Grantee. Grantee hereby acknowledges that BNPLC is entitled to rely and is relying on this Certificate. EXECUTED as of ________________, ____. _________________________ , a ____________________ By:_______________________________________________ Name:__________________________________________ Title:_________________________________________ By: Exhibit F Documentary Transfer Tax Request ACCOUNTABLE FORM #____________ DATE: ------------ To: Santa Clara County Recorder Subject: REQUEST THAT DOCUMENTARY TRANSFER TAX DECLARATION BE MADE IN ACCORDANCE WITH REVENUE CODE 11932. Re: Instrument Title: Corporation Grant Deed Name of Party Conveying Title: BNP Leasing Corporation The Documentary Transfer Tax is declared to be in the amount of $_______________ for the referenced instrument and is: ___ Computed on full value of property conveyed. ___ Computed on full value less liens/encumbrances remaining thereon at time of sale. This separate declaration is made in accordance with _________________________________. It is requested that the amount paid be indicated on the face of the document after the permanent copy has been made. Sincerely, Individual (or his agent) who made, signed or issued instrument PART I RECORDING REFERENCE DATA: Serial #____________ Date Recorded____________________ SEPARATE PAPER AFFIXED TO INSTRUMENT: "Tax paid" indicated on the face of instrument and the separate request (DRA 3-A) was affixed for Recorder by: __________________________________ Date____________________ Documentary Transfer Tax Collector Witnessed by:_____________________ Date____________________ Mail Clerk (Note: Prepare photo for Recorder file.) PART II ACCOUNTABLE FORM #______________ REFERENCE DATA: Title:_______________________________________________ Serial:_________________________ Date:____________________ INSTRUCTIONS: 1. This slip must accompany document. 2. Mail Clerk hand carry document to Tax Collector to indicate the amount of tax paid. Exhibit G SECRETARY'S CERTIFICATE The undersigned, _________________________ Secretary of BNP Leasing Corporation, a Delaware corporation (the "Corporation"), hereby certifies as follows: 1. That he is the duly, elected, qualified and acting Secretary [or Assistant Secretary] of the Corporation and has custody of the corporate records, minutes and corporate seal. 2. That the following named persons have been properly designated, elected and assigned to the office in the Corporation as indicated below; that such persons hold such office at this time and that the specimen signature appearing beside the name of such officer is his or her true and correct signature. [The following blanks must be completed with the names and signatures of the officers who will be signing the deed and other Required Documents on behalf of the Corporation.] Name Title Signature ____________________ ____________________ ____________________ ____________________ ____________________ ____________________ 3. That the resolutions attached hereto and made a part hereof were duly adopted by the Board of Directors of the Corporation in accordance with the Corporation's Articles of Incorporation and Bylaws. Such resolutions have not been amended, modified or rescinded and remain in full force and effect. IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal of the Corporation on this ______, day of ____________, 19____. ______________________________ [signature] CORPORATE RESOLUTIONS OF BNP LEASING CORPORATION WHEREAS, pursuant to that certain Purchase Agreement (herein called the "Purchase Agreement") dated as of July 25, 1997, by and between BNP Leasing Corporation (the "Corporation") and [3COM OR THE APPLICABLE PURCHASER AS THE CASE MAY BE] ("Purchaser"), the Corporation agreed to sell and Purchaser agreed to purchase or cause the Applicable Purchaser (as defined in the Purchase Agreement) to purchase the Corporation's interest in the property (the "Property") located in Santa Clara, California, more particularly described therein. NOW THEREFORE, BE IT RESOLVED, that the Board of Directors of the Corporation, in its best business judgment, deems it in the best interest of the Corporation and its shareholders that the Corporation convey the Property to Purchaser or the Applicable Purchaser pursuant to and in accordance with the terms of the Purchase Agreement. RESOLVED FURTHER, that the proper officers of the Corporation, and each of them, are hereby authorized and directed in the name and on behalf of the Corporation to cause the Corporation to fulfill its obligations under the Purchase Agreement. RESOLVED FURTHER, that the proper officers of the Corporation, and each of them, are hereby authorized and directed to take or cause to be taken any and all actions and to prepare or cause to be prepared and to execute and deliver any and all deeds and other documents, instruments and agreements that shall be necessary, advisable or appropriate, in such officer's sole and absolute discretion, to carry out the intent and to accomplish the purposes of the foregoing resolutions. Exhibit H BNP LEASING CORPORATION 717 N. HARWOOD SUITE 2630 DALLAS, TEXAS 75201 ____________________ , ______ [Title Insurance Company] _________________ _________________ _________________ Re: Recording of Grant Deed to [3COM or the Applicable Purchaser] ("Purchaser") Ladies and Gentlemen: BNP Leasing Corporation has executed and delivered to Purchaser a Grant Deed in the form attached to this letter. You are hereby authorized and directed to record the Grant Deed at the request of Purchaser. Sincerely, Exhibit I FIRPTA STATEMENT Section 1445 of the Internal Revenue Code of 1986, as amended, provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person. Sections 18805, 18815 and 26131 of the California Revenue and Taxation Code, as amended, provide that a transferee of a California real property interest must withhold income tax if the transferor is a nonresident seller. To inform [3COM or the Applicable Purchaser] (the "Transferee") that withholding of tax is not required upon the disposition of a California real property interest by transferor, BNP Leasing Corporation (the "Seller"), the undersigned hereby certifies the following on behalf of the Seller: 1. The Seller is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations); 2. The United States employer identification number for the Seller is _____________________; 3. The office address of the Seller is ______________ __________________________________________. [Note: BNPLC MUST INCLUDE EITHER ONE, BUT ONLY ONE, OF THE FOLLOWING REPRESENTATIONS IN THE FIRPTA STATEMENT, BUT IF THE ONE INCLUDED STATES THAT BNPLC IS DEEMED EXEMPT FROM CALIFORNIA INCOME AND FRANCHISE TAX, THEN BNPLC MUST ALSO ATTACH A WITHHOLDING CERTIFICATE FROM THE CALIFORNIA FRANCHISE TAX BOARD EVIDENCING THE SAME: 4. The Seller is qualified to do business in California. OR 4. The Seller is deemed to be exempt from the withholding requirement of California Revenue and Taxation Code Section 26131(e), as evidenced by the withholding certificate from the California Franchise Tax Board which is attached.] The Seller understands that this certification may be disclosed to the Internal Revenue Service and/or to the California Franchise Tax Board by the Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both. The Seller understands that the Transferee is relying on this affidavit in determining whether withholding is required upon said transfer. The Seller hereby agrees to indemnify and hold the Transferee harmless from and against any and all obligations, liabilities, claims, losses, actions, causes of action, demands, rights, damages, costs, and expenses (including but not limited to court costs and attorneys' fees) incurred by the Transferee as a result of any false misleading statement contained herein. Under penalties of perjury I declare that I have examined this certification and to the best of my knowledge and belief it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of the Seller. Dated: ___________, ____. By:______________________________ Name:_________________________ Title:________________________ EX-10 6 EXHIBIT 10.19 The transactions contemplated in this Lease Agreement have been made possible by the following banks, acting in the capacities indicated: Banque Nationale de Paris, ABN Amro Bank N.V., as Administrative/Documentation as Syndication Agent and Agent and Arranger Co-Arranger $86,000,000 LEASE AGREEMENT BETWEEN BNP LEASING CORPORATION, AS LANDLORD AND 3COM CORPORATION, AS TENANT EFFECTIVE AS OF JULY 29, 1997 (Marlborough Site) This Lease Agreement amends, restates and replaces the Lease Agreement between the Landlord and Tenant dated January 21, 1997, covering the Land (as described in Exhibit A attached hereto). TABLE OF CONTENTS 1. Definitions (a) Active Negligence (b) Additional Rent (c) Administrative Fee (d) Advance Date (e) Affiliate (f) Applicable Laws (g) Applicable Purchaser (h) Approved Participants (i) Attorneys' Fees (j) Base Rent (k) Base Rent Date (l) Breakage Costs (m) Business Day (n) Capital Adequacy Charges (o) Carrying Costs (p) Carrying Costs Accrual Termination Date (q) Cash Collateral (r) Certificate of Deposit Collateral Percentage (s) Closing Costs (t) Change of Control Event (u) Code (v) Collateral (w) Commitment Fee (x) Completion Deadline (y) Completion Notice (z) Construction Advances (aa) Construction Allowance (ab) Construction Documents (ac) Construction Periods (ac) Custodial Agreement (ad) Debt (ae) Default (af) Default Rate (ag) Defaulting Participant (ah) Designated Improvements (ai) Designated Sale Date (aj) Effective Rate (ak) Environmental Indemnity (al) Environmental Laws (am) Environmental Losses (an) Environmental Report (ao) ERISA (ap) ERISA Affiliate (aq) ERISA Termination Event (ar) Escrowed Proceeds (as) Eurocurrency Liabilities (at) Eurodollar Rate Reserve Percentage (au) Event of Default (av) Excluded Taxes (aw) Fair Market Value (ax) Fed Funds Rate (ay) Funding Advances (az) GAAP (ba) Hazardous Substance (bb) Hazardous Substance Activity (bc) Impositions (bd) Improvements (be) Indemnified Party (bf) Initial Investment (bg) Landlord's Parent (bh) Last Advance Date (bi) LIBOR (bj) LIBOR Period Election (bk) Lien (bl) Losses (bm) Maximum Construction Allowance (bn) Notice of Last Advance (bo) Ordinary Negligence (bp) Outstanding Construction Allowance (bq) Participant (br) Participation Agreement (bs) Period (bt) Permitted Encumbrances (bu) Permitted Hazardous Substance Use (bv) Permitted Hazardous Substances (bw) Permitted Transfer (bx) Person (by) Plan (bz) Pledge Agreement (ca) Prime Rate (cb) Purchase Agreement (cc) Purchase Documents (cd) Purchase Price (ce) Qualified Payments (cf) Qualifying Security Interest (cg) Remaining Proceeds (ch) Rent (ci) Responsible Financial Officer (cj) Scope Change (ck) Securities Collateral (cl) Securities Collateral Percentage (cm) Spread (cn) Stipulated Loss Value (co) Subsidiary (cp) Tenant's Knowledge (cq) Term (cr) Unfunded Benefit Liabilities (cs) Upfront Fee (ct) Voluntary Minimum Pledge Commitment (cu) Other Terms and References 2. Term 3. Rental (a) Base Rent (b) Upfront Fee (c) Commitment Fees (d) Administrative Agency Fees (e) Additional Rent (f) Interest and Order of Application (g) Net Lease (h) No Demand or Setoff (i) Overdrawn Allowance 4. Insurance and Condemnation Proceeds 5. No Lease Termination (a) Status of Lease (b) Waiver By Tenant 6. Construction Allowance (a) Advances; Outstanding Construction Allowance (b) Designated Improvements (i) Responsibility for Construction. (ii) Scope Changes. (iii) Value Added. (iv) Estoppel Letters Required. (v) Advances Not a Waiver. (c) Conditions to Construction Advances (i) Prior Notice (ii) Amount of the Advances (iii) Insurance a) Title Insurance b) Builder's Risk Insurance (iv) Progress of Construction (v) Evidence of Costs to be Reimbursed (vi) No Event of Default or Change of Control Event (vii) No Sale of Landlord's Interest (viii) Certificate of No Default (ix) Payments by Approved Participants (d) Completion Notice 7. Purchase Documents and Environmental Indemnity 8. Use and Condition of Leased Property (a) Use (b) Condition (c) Consideration of and Scope of Waiver 9. Other Representations, Warranties and Covenants of Tenant (a) Financial Matters (b) Existing Contract (c) No Default or Violation (d) Compliance with Covenants and Laws (e) Environmental Representations (f) No Suits (g) Condition of Property (h) Organization (i) Enforceability (j) Not a Foreign Person (k) Omissions (l) Existence (m) Tenant Taxes (n) Operation of Property (o) Debts for Construction (p) Impositions (q) Repair, Maintenance, Alterations and Additions (r) Insurance and Casualty (s) Condemnation (t) Protection and Defense of Title (u) No Liens on the Leased Property (v) Books and Records (w) Financial Statements; Required Notices; Certificates as to Default (x) Further Assurances (y) Fees and Expenses; General Indemnification; Increased Costs; and Capital Adequacy Charges (z) Liability Insurance (aa) Permitted Encumbrances (ab) Environmental (ac) Affirmative Financial Covenants (ad) Negative Covenants (i) Liens (ii) Transactions with Affiliates (iii) Mergers; Sales of Assets (v) Change of Business (ae) ERISA 10. Representations, Warranties and Covenants of Landlord (a) Title Claims By, Through or Under Landlord (b) Actions Required of the Title Holder (c) No Default or Violation (d) No Suits (e) Organization (f) Enforceability (g) Existence (h) Not a Foreign Person 11. Assignment and Subletting (a) Consent Required (b) Standard for Landlord's Consent to Assignments and Certain Other Matters (c) Consent Not a Waiver (d) Landlord's Assignment 12. Environmental Indemnification (a) Indemnity (b) Assumption of Defense (c) Notice of Environmental Losses (d) Rights Cumulative (e) Survival of the Indemnity 13. Landlord's Right of Access 14. Events of Default (a) Definition of Event of Default (b) Remedies (c) Enforceability (d) Remedies Cumulative (e) Waiver by Tenant (f) No Implied Waiver 15. Default by Landlord 16. Quiet Enjoyment 17. Surrender Upon Termination 18. Holding Over by Tenant 19. Miscellaneous (a) Notices (b) Severability (c) No Merger (d) NO IMPLIED REPRESENTATIONS BY LANDLORD (e) Entire Agreement (f) Binding Effect (g) Time is of the Essence (h) Termination of Prior Rights (i) Governing Law (j) Waiver of a Jury Trial (k) Not a Partnership, Etc (l) Tax Reporting Exhibits and Schedules Exhibit A Legal Description Exhibit B Encumbrance List Exhibit C Permitted Hazardous Substances Exhibit D Resolution of Disputed Insurance Claims Exhibit E Covenant Compliance Certificate Exhibit F Certificate Setting Forth the Calculation of the Spread Exhibit G List of Environmental Reports Exhibit H Information Concerning Designated Improvements Exhibit I Contractor's Estoppel Letter Exhibit J Architect's Estoppel Letter Exhibit K Draw Request Forms Exhibit L Notice to Accelerate the Carrying Costs Accrual Termination Date Exhibit M Notice of Libor Period Election Schedule 1 List of Approved Participants LEASE AGREEMENT This LEASE AGREEMENT (hereinafter called this "Lease"), made to be effective as of July 29, 1997 (all references herein to the "date hereof" or words of like effect shall mean such effective date), by and between BNP LEASING CORPORATION, a Delaware corporation (hereinafter called "Landlord"), and 3COM CORPORATION, a Delaware corporation (hereinafter called "Tenant"); W I T N E S E T H T H A T: WHEREAS, pursuant to a Sale Agreement dated December 13, 1996 (as amended, hereinafter called the "Existing Contract") between 3Com Corporation, a California Corporation, the predecessor in interest to Tenant and Metropolitan Life Insurance Company, a New York corporation (hereinafter called "Seller"), concerning the land described in Exhibit A attached hereto (hereinafter called the "Land") and the improvements on such Land, if any, Landlord acquired the Land and improvements (if any) from Seller contemporaneously with the execution of the Original Lease (hereinafter defined); WHEREAS, Tenant assigned its rights under the Existing Contract to Landlord on or about January 21, 1997; Landlord acquired the Land on or about January 21, 1997; and Landlord leased the Land and any improvements thereon to Tenant pursuant to a Lease Agreement between Landlord and Tenant dated as of January 21, 1997 (as supplemented or amended to the date hereof, the "Original Lease"); WHEREAS, by this Lease Landlord and Tenant desire to amend, restate and replace the Original Lease; NOW, THEREFORE, in consideration of the rent to be paid and the covenants and agreements to be performed by Tenant, as hereinafter set forth, Landlord and Tenant hereby amend and restate the Original Lease in its entirety, and Landlord does hereby LEASE, DEMISE and LET unto Tenant for the term hereinafter set forth the Land, together with: (i) Landlord's interest in any and all buildings and improvements now existing or hereafter erected on the Land, including, but not limited to, the fixtures, attachments, appliances, equipment, machinery and other articles attached to such buildings and improvements (hereinafter called the "Improvements"); (ii) all easements and rights-of-way now owned or hereafter acquired by Landlord for use in connection with the Land or Improvements or as a means of access thereto; (iii) all right, title and interest of Landlord, now owned or hereafter acquired, in and to (A) any land lying within the right-of-way of any street, open or proposed, adjoining the Land, (B) any and all sidewalks and alleys adjacent to the Land and (C) any strips and gores between the Land and abutting land (except strips and gores, if any, between the Land and abutting land owned by Landlord, with respect to which this Lease shall cover only the portion thereof to the center line between the Land and the abutting land owned by Landlord). The Land and all of the property described in items (i) through (iii) above are hereinafter referred to collectively as the "Real Property". In addition to conveying the leasehold in the Real Property as described above, Landlord hereby grants and assigns to Tenant for the term of this Lease the right to use and enjoy (and, to the extent the following consist of contract rights, to enforce) any assignable interests or rights in, to or under the following that have been transferred to Landlord by Seller under the Existing Contract: (a) any goods, equipment, furnishings, furniture, chattels and personal property of whatever nature that are located on the Real Property and all renewals or replacements of or substitutions for any of the foregoing; and (b) any general intangibles, permits, licenses, franchises, certificates, and other rights and privileges. All of the property, rights and privileges described above in this paragraph are hereinafter collectively called the "Personal Property". The Real Property and the Personal Property are hereinafter sometimes collectively called the "Leased Property." Provided, however, the leasehold estate conveyed hereby and Tenant's rights hereunder are expressly made subject and subordinate to the Permitted Encumbrances (as hereinafter defined) and to any other claims or encumbrances not asserted by Landlord itself or by third parties lawfully claiming through or under Landlord. The Leased Property is leased by Landlord to Tenant and is accepted and is to be used and possessed by Tenant upon and subject to the following terms, provisions, covenants, agreements and conditions: 1. Definitions. As used herein, the terms "Lease," "Landlord," "Tenant," "Existing Contract," "Seller," "Land," "Improvements," "Real Property," "Personal Property" and "Leased Property" shall have the meanings indicated above and the terms listed immediately below shall have the following meanings: (a) Active Negligence. "Active Negligence" of an Indemnified Party means, and is limited to, the negligent conduct of activities on the Leased Property by the Indemnified Party in a manner that proximately causes actual bodily injury or property damage to occur. "Active Negligence" shall not include (1) any negligent failure of Landlord to act when the duty to act would not have been imposed but for Landlord's status as owner of the Leased Property or as a party to the transactions described in this Lease, (2) any negligent failure of any other Indemnified Party to act when the duty to act would not have been imposed but for such party's contractual or other relationship to Landlord or participation or facilitation in any manner, directly or indirectly, of the transactions described in this Lease, or (3) the exercise in a lawful manner by Landlord (or any party lawfully claiming through or under Landlord) of any remedy provided herein or in the Purchase Documents. (b) Additional Rent. "Additional Rent" shall have the meaning assigned to it in subparagraph 3.(e) below. (c) Administrative Fee. "Administrative Fee" shall have the meaning assigned to it in subparagraph 3.(d) below. (d) Advance Date. "Advance Date" means, regardless of whether any Construction Advance shall actually be made thereon, the first Business Day of every calendar month, beginning with August 1, 1997 and continuing regularly thereafter to and including the Carrying Costs Accrual Termination Date; provided, that if the Carrying Costs Accrual Termination Date occurs before the Last Advance Date (as defined below), then after the Carrying Costs Accrual Termination Date each Base Rent Date upon which commences a new Base Rent Period (and only such Base Rent Dates) through and including the Last Advance Date shall also constitute an "Advance Date" hereunder. In any event, no Advance Date shall occur after the Last Advance Date. (e) Affiliate. "Affiliate" of any Person means any other Person controlling, controlled by or under common control with such Person. For purposes of this definition, the term "control" when used with respect to any Person means the power to direct the management of policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. (f) Applicable Laws. "Applicable Laws" shall have the meaning assigned to it in subparagraph 9.(d) below. (g) Applicable Purchaser. "Applicable Purchaser" means any third party designated by Tenant to purchase the Landlord's interest in the Leased Property and in any Escrowed Proceeds as provided in the Purchase Agreement. (h) Approved Participants. "Approved Participants" means (1) the existing Participants and prospective participants listed on Schedule 1 attached hereto; and (2) any other party which Tenant shall have approved as a Participant, which approval shall not be unreasonably withheld for any party that Landlord proposes as a new Participant to replace, in whole or in part, an Approved Participant under the Participation Agreement and the Pledge Agreement; provided, the party proposed by Landlord as a new Participant is a commercial bank operating in the United States of America having capital and surplus in excess of $500,000,000 or an Affiliate of such a bank; and, provided further, the replacement will not reduce the aggregate Percentages of Landlord and Landlord's Parent under and as defined in the Participation Agreement below the minimum percentage specified in paragraph 14.2 of the Participation Agreement. (i) Attorneys' Fees. "Attorneys' Fees" means the reasonable fees and expenses of counsel to the parties incurring the same, which may include fairly allocated costs of in-house counsel, printing, photostating, duplicating and other expenses, air freight charges, and fees billed for law clerks, paralegals, librarians and others not admitted to the bar but performing services under the supervision of an attorney. Such terms shall also include, without limitation, all such fees and expenses incurred with respect to appeals, arbitrations and bankruptcy proceedings, and whether or not any manner or proceeding is brought with respect to the matter for which such fees and expenses were incurred. (j) Base Rent. "Base Rent" means the rent payable by Tenant pursuant to subparagraph 3.(a) below. (k) Base Rent Date. "Base Rent Date" means a date upon which Base Rent must be paid under the Lease, all of which dates shall be the first Business Day of a calendar month. The first Base Rent Date shall be determined as follows: a) If a LIBOR Period Election of one month is in effect on the Carrying Costs Accrual Termination Date, then the first Business Day of the first calendar month following the Carrying Costs Accrual Termination Date shall be the first Base Rent Date. b) If a LIBOR Period Election of two months is in effect on the Carrying Costs Accrual Termination Date, then the first Business Day of the second calendar month following the Carrying Costs Accrual Termination Date shall be the first Base Rent Date. c) If the LIBOR Period Election in effect on the Carrying Costs Accrual Termination Date is three months or six months, then the first Business Day of the third calendar month following the Carrying Costs Accrual Termination Date shall be the first Base Rent Date. Each successive Base Rent Date after the first Base Rent Date shall be the first Business Day of the first, second or third calendar month following the calendar month which includes the preceding Base Rent Date, determined as follows: (1) If a LIBOR Period Election of one month is in effect on a Base Rent Date, then the first Business Day of the first calendar month following such Base Rent Date shall be the next following Base Rent Date. (2) If a LIBOR Period Election of two months is in effect on a Base Rent Date, then the first Business Day of the second calendar month following such Base Rent Date shall be the next following Base Rent Date. (3) If a LIBOR Period Election of three months or six months is in effect on a Base Rent Date, then the first Business Day of the third calendar month following such Base Rent Date shall be the next following Base Rent Date. Thus, for example, if the Carrying Costs Accrual Termination Date falls on the first Business Day of June, 1999 and a LIBOR Period Election of six months commences on the Carrying Costs Accrual Termination Date, then the first Base Rent Date shall be the first Business Day of September, 1999, and the second Base Rent Date shall be the first Business Day of December, 1999. "Base Rent Period" means a period for which Base Rent must be paid under the Lease, each of which periods shall correspond to the LIBOR Period Election for such period. The first Base Rent Period shall begin on and include the Carrying Costs Accrual Termination Date, and each successive Base Rent Period shall begin on and include the Base Rent Date upon which the preceding Base Rent Period ends. Each Base Rent Period, including the first Base Rent Period, shall end on but not include the first or second Base Rent Date after the Base Rent Date upon which such period began, determined as follows: (1) If the LIBOR Period Election for a Base Rent Period is one month, two months or three months, then such Base Rent Period shall end on the first Base Rent Date after the Base Rent Date upon which such period began. (2) If the LIBOR Period Election for a Base Rent Period is six months, then such Base Rent Period shall end on the second Base Rent Date after the Base Rent Date upon which such period began. The determination of Base Rent Periods can be illustrated by two examples: 1) If Tenant makes a LIBOR Period Election of three months for a hypothetical Base Rent Period beginning on the first Business Day in January, 2000, then such Base Rent Period will end on but not include the first Base Rent Date after it begins; that is, such Base Rent Period will end on the first Business Day in April, 2000, the third calendar month after January, 2000. 2) If, however, Tenant makes a LIBOR Period Election of six months for the hypothetical Base Rent Period beginning the first Business Day in January, 2000, then such Base Rent Period will end on but not include the second Base Rent Date after it begins; that is, the first Business Day in July, 2000. (l) Breakage Costs. "Breakage Costs" means any and all costs, losses or expenses incurred or sustained by Landlord's Parent or any other Participant, for which Landlord's Parent or the other Participant shall expect reimbursement from Landlord, because of the resulting liquidation or redeployment of deposits or other funds used to make Funding Advances upon any termination of this Lease by Tenant pursuant to Paragraph 2 or any sale of the Leased Property pursuant to the Purchase Agreement, if such termination or sale is effective as of any day other than a Base Rent Date. Breakage Costs will include losses attributable to any decline in LIBOR as of the effective date of termination or sale as compared to LIBOR used to determine the Effective Rate then in effect. (However, if Landlord's Parent or another Participant actually receives a profit upon the liquidation or redeployment of deposits or other funds used to make Funding Advances, because of any increase in LIBOR, then such profit will be offset against costs or expenses that would otherwise be charged as Breakage Costs for the account of Landlord's Parent or the applicable Participant under this Lease.) Each determination by Landlord's Parent of Breakage Costs shall, in the absence of clear and demonstrable error, be conclusive and binding upon Landlord and Tenant. (m) Business Day. "Business Day" means any day that is (1) not a Saturday, Sunday or day on which commercial banks are generally closed or required to be closed in New York City, New York or San Francisco, California, and (2) a day on which dealings in deposits of dollars are transacted in the London interbank market; provided that if such dealings are suspended indefinitely for any reason, "Business Day" shall mean any day described in clause (1). (n) Capital Adequacy Charges. "Capital Adequacy Charges" means any additional amounts Landlord's Parent or any other Participant requires Landlord to pay as compensation for an increase in required capital as provided in subparagraph 9.(y)(iv). (o) Carrying Costs. "Carrying Costs" means the charges added to and made a part of the Outstanding Construction Allowance from time to time on and before the Carrying Costs Accrual Termination Date pursuant to and as more particularly described in subparagraph 6.(a)(ii) below. (p) Carrying Costs Accrual Termination Date. "Carrying Costs Accrual Termination Date" means the earlier of (1) the Last Advance Date or (2) the first Advance Date that occurs at least ten (10) days after Landlord has received a notice from Tenant, in the form of Exhibit L attached hereto, stating that Tenant irrevocably elects to accelerate the Carrying Costs Accrual Termination Date and thereby accelerate the commencement of Base Rent accruals and the termination of accruals of Carrying Costs. It is understood that Tenant may, but shall not be required, to give such a notice at any time. (q) Cash Collateral. "Cash Collateral" shall have the meaning assigned to it in the Pledge Agreement. (r) Certificate of Deposit Collateral Percentage. "Certificate of Deposit Collateral Percentage" for each Period means the Certificate of Deposit Collateral Percentage for such Period (as defined in and determined in accordance with the Pledge Agreement); provided, however, for purposes of this Lease, the Certificate of Deposit Collateral Percentage for any Period shall not exceed a fraction, the numerator of which fraction shall equal the Value (as defined in and determined in accordance with the Pledge Agreement) of all Cash Collateral that is, on the first day of such Period, held by the Deposit Takers under (and as defined in) the Pledge Agreement, subject to a Qualifying Security Interest and free from claims or security interests held or asserted by any third party, and the denominator of which fraction shall equal the Stipulated Loss Value on the first day of such Period (computed after the addition of any Construction Advance made on such first day, after the addition of all Carrying Costs for prior Construction Periods, and after the subtraction of any Qualified Payments applied on such first day). (s) Closing Costs. "Closing Costs" means an amount requested by Tenant, not to exceed $200,000, advanced by or on behalf of Landlord on the effective date of this Lease to pay on behalf of Tenant (i) the Upfront Fee, (ii) "Base Rent" and "Breakage Costs" which have accrued and are due under (and as are defined in) the Original Lease, and (iii) expenses incurred in connection with the preparation and negotiation of this Lease, the Purchase Documents, the Environmental Indemnity, the Participation Agreement and related documents. To the extent that Landlord does not itself apply funds advanced as provided in this definition, the remainder thereof will be advanced to Tenant, with the expectation that Tenant shall use any such amount advanced for one or more of the following purposes: (1) the payment of the Upfront Fee and expenses incurred in connection with the preparation and negotiation of this Lease, the Purchase Documents, the Environmental Indemnity, the Participation Agreement and related documents; (2) the payment or reimbursement of other expenses incurred by Tenant in connection with any improvements Tenant may elect to make to the Leased Property in accordance with the requirements and limitations imposed by this Lease, including the planning, design, engineering and permitting of thereof; (3) the maintenance of the Leased Property; or (4) the payment of Rents next due. The advance described in this definition shall constitute part of the Initial Investment, and the amount thereof may be confirmed by Landlord and Tenant in a separate closing certificate. (t) Change of Control Event. "Change of Control Event" means the occurrence of any merger or consolidation or sale of assets involving Tenant that is prohibited by subparagraph 9.(ad)(iii). (u) Code. "Code" means the Internal Revenue Code of 1986, as amended from time to time. (v) Collateral. "Collateral" shall have the meaning assigned to it in the Pledge Agreement. (w) Commitment Fee. "Commitment Fee" shall have the meaning assigned to it in subparagraph 3.(c) below. (x) Completion Deadline. "Completion Deadline" means the first Business Day in August, 1999. (y) Completion Notice. "Completion Notice" shall have the meaning assigned to it in subparagraph 6.(d) below. (z) Construction Advances. "Construction Advances" means actual advances of funds made by or on behalf of Landlord pursuant to Paragraph 6.(a)(i) below for costs incurred to construct the Designated Improvements or for property taxes and assessments assessed against the Leased Property paid prior to the Last Advance Date. (aa) Construction Allowance. "Construction Allowance" means the allowance, consisting of all Construction Advances and Carrying Costs, which is to be provided by Landlord for the construction of the Designated Improvements as more particularly described in Paragraph 6 below. (ab) Construction Documents. "Construction Documents" means all construction contracts, architectural contracts, engineering contracts, drawings, plans, specifications, change orders, budgets, surveys, soils reports, environmental impact studies and other documents executed by or prepared for Tenant with respect to the construction of the Designated Improvements. (ac) Construction Periods. The first "Construction Period" shall be the period beginning on and including the effective date hereof and ending on but not including the first Advance Date. Each successive "Construction Period" after the first Construction Period shall be a period of approximately one (1) month (except Construction Periods, if any, commencing on or after the Carrying Costs Accrual Termination Date, which shall be coterminous with Base Rent Periods) and shall begin on and include the day on which the preceding Construction Period ends and shall end on but not include the next following Advance Date. The last "Construction Period" shall end on but not include the Last Advance Date. (ac) Custodial Agreement. "Custodial Agreement" means the Custodial Agreement dated as of the date hereof between Banque Nationale de Paris, New York Branch, and Tenant pursuant to which such bank will hold securities pledged by Tenant as collateral for Tenant's obligations under the Purchase Agreement, as such Custodial Agreement may be extended, supplemented, amended, restated or otherwise modified from time to time. (ad) Debt. "Debt" of any Person means (i) indebtedness of such Person for borrowed money, (ii) obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) obligations of such Person to pay the deferred purchase price of property or services, (iv) obligations of such Person as lessee under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases, (v) obligations of such Person, contingent or otherwise, under any lease of real property or related documents (including a separate purchase agreement) which provide that such Person must purchase or cause another to purchase any interest in the leased property and thereby guarantee a minimum residual value of the leased property to the lessor; (vi) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (v) above, (vii) liabilities of another Person secured by a Lien on, or payable out of the proceeds of production from, property of such Person even though such obligation shall not be assumed by such Person (but in the case of such liabilities not assumed by such Person, the liabilities shall constitute Debt of such Person only to the extent of the value of such Person's property encumbered by the Lien securing such liabilities) and (viii) Unfunded Benefit Liabilities. (ae) Default. "Default" means any event which, with the passage of time or the giving of notice or both, would (if not cured within any applicable cure period) constitute an Event of Default. (af) Default Rate. "Default Rate" means a floating per annum rate equal to three percent (3%) above the Prime Rate. However, in no event will the Default Rate exceed the maximum interest rate permitted by law. (ag) Defaulting Participant. "Defaulting Participant" means any Approved Participant that shall have breached the Participation Agreement by failing to provide a Funding Advance to Landlord for (or equal to) such Participant's percentage of any Construction Advance requested by Tenant. (For purposes of this Lease a "Participant's percentage" shall mean the percentage that, under the Participation Agreement, is to be multiplied against Construction Advances to compute the amount the Participant must advance to Landlord for (or equal to) a percentage of Construction Advances requested hereunder.) (ah) Designated Improvements. "Designated Improvements" shall mean the improvements on the Land and any furnishings for such improvements which are to be constructed and installed by Tenant using the Construction Allowance as described in Paragraph 6 below. (ai) Designated Sale Date. "Designated Sale Date" shall have the meaning assigned to it in the Purchase Agreement. (aj) Effective Rate. "Effective Rate" means, for each Period, the per annum rate determined by dividing (A) LIBOR for such Period, by (B) 100% minus the Eurodollar Rate Reserve Percentage for such Period; provided, however, for each day during the short first Construction Period ending on August 1, 1997, the Effective Rate will equal the per annum rate which is fifty basis points (50/100 of 1%) above the Fed Funds Rate on that day. If LIBOR or the Eurodollar Rate Reserve Percentage changes from Period to Period, then the Effective Rate shall be automatically increased or decreased, as the case may be, as of the date of the change from Period to Period. If for any reason Landlord's Parent determines that it is impossible or unreasonably difficult to determine the Effective Rate with respect to a given Period in accordance with the preceding sentences, then the "Effective Rate" for that Period shall equal any published index or per annum interest rate determined reasonably and in good faith by Landlord's Parent to be a comparable rate at the beginning of the first day of that period. A comparable interest rate might be, for example, the then existing yield on short term United States Treasury obligations (as compiled by and published in the then most recently published United States Federal Reserve Statistical Release H.15(519) or its successor publication), plus or minus a fixed adjustment based on Landlord's Parent's comparison of past eurodollar market rates to past yields on such Treasury obligations. Any determination by Landlord's Parent of the Effective Rate hereunder shall, in the absence of clear and demonstrable error, be conclusive and binding. (ak) Environmental Indemnity. "Environmental Indemnity" means the separate Environmental Indemnity Agreement dated as of the date hereof executed by Tenant in favor of Landlord covering the Land and certain other property described therein, as such agreement may be extended, supplemented, amended, restated or otherwise modified from time to time. (al) Environmental Laws. "Environmental Laws" means any and all existing and future Applicable Laws pertaining to safety, health or the environment, or to Hazardous Substances or Hazardous Substance Activities, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 (as amended, hereinafter called "CERCLA"), and the Resource Conservation and Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal Act Amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984 (as amended, hereinafter called "RCRA"). (am) Environmental Losses. "Environmental Losses" means Losses suffered or incurred by any Indemnified Party, directly or indirectly, relating to or arising out of, based on or as a result of: (i) any Hazardous Substance Activity; (ii) any violation of Environmental Laws relating to the Leased Property or to the ownership, use, occupancy or operation thereof; (iii) any investigation, inquiry, order, hearing, action, or other proceeding by or before any governmental or quasi-governmental agency or authority in connection with any Hazardous Substance Activity; or (iv) any claim, demand, cause of action or investigation, or any action or other proceeding, whether meritorious or not, brought or asserted against any Indemnified Party which directly or indirectly relates to, arises from, is based on, or results from any of the matters described in clauses (i), (ii), or (iii) of this subparagraph 1.(am), or any allegation of any such matters. ENVIRONMENTAL LOSSES INCURRED BY OR ASSERTED AGAINST A PARTICULAR INDEMNIFIED PARTY SHALL INCLUDE LOSSES RELATING TO OR ARISING OUT OF OR AS A RESULT OF ANY MATTERS LISTED IN THE PRECEDING SENTENCE EVEN WHEN SUCH MATTERS ARE CAUSED BY THE ORDINARY NEGLIGENCE (AS DEFINED BELOW) OF THAT PARTICULAR OR ANY OTHER INDEMNIFIED PARTY. However, Losses incurred by or asserted against a particular Indemnified Party and proximately caused by (and attributed by any applicable principles of comparative fault to) the wilful misconduct, Active Negligence or gross negligence of any Indemnified Party will not constitute Environmental Losses of such Indemnified Party for purposes of this Lease. (an) Environmental Report. "Environmental Report" means, collectively, the reports listed on Exhibit G attached hereto. (ao) ERISA. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, together with all rules and regulations promulgated with respect thereto. (ap) ERISA Affiliate. "ERISA Affiliate" means any Person who for purposes of Title IV of ERISA is a member of Tenant's controlled group, or under common control with Tenant, within the meaning of Section 414 of the Code, and the regulations promulgated and rulings issued thereunder. (aq) ERISA Termination Event. "ERISA Termination Event" means (i) the occurrence with respect to any Plan of a) a reportable event described in Sections 4043(b)(5) or (6) of ERISA or b) any other reportable event described in Section 4043(b) of ERISA other than a reportable event not subject to the provision for 30-day notice to the Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation under Section 4043(a) of ERISA, or (ii) the withdrawal of Tenant or any Affiliate of Tenant from a Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or (iii) the filing of a notice of intent to terminate any Plan or the treatment of any Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate any Plan by the Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or (v) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. (ar) Escrowed Proceeds. "Escrowed Proceeds" shall mean any proceeds that are received by Landlord from time to time during the Term (and any interest earned thereon), which Landlord is holding for the purposes specified in the next sentence, from any party (1) under any casualty insurance policy as a result of damage to the Leased Property, (2) as compensation for any restriction placed upon the use or development of the Leased Property or for the condemnation of the Leased Property or any portion thereof, (3) because of any judgment, decree or award for injury or damage to the Leased Property or (4) under any title insurance policy or otherwise as a result of any title defect or claimed title defect with respect to the Leased Property; provided, however, in determining "Escrowed Proceeds" there shall be deducted all expenses and costs of every type, kind and nature (including Attorneys' Fees) incurred by Landlord to collect such proceeds; and provided, further, "Escrowed Proceeds" shall not include any payment to Landlord by a Participant or an Affiliate of Landlord that is made to compensate Landlord for the Participant's or Affiliate's share of any Losses Landlord may incur as a result of any of the events described in the preceding clauses (1) through (4). "Escrowed Proceeds" shall include only such proceeds as are held by Landlord (A) pursuant to Paragraph 4 for the payment to Tenant for the restoration or repair of the Leased Property or (B) for application (generally, on the next following Advance Date or Base Rent Date which is at least three (3) Business Days following Landlord's receipt of such proceeds) as a Qualified Payment or as reimbursement of costs incurred in connection with a Qualified Payment. "Escrowed Proceeds" shall not include any proceeds that have been applied as a Qualified Payment or to pay any costs incurred in connection with a Qualified Payment. Until Escrowed Proceeds are paid to Tenant pursuant to Paragraph 4 below or applied as a Qualified Payment or as reimbursement for costs incurred in connection with a Qualified Payment, Landlord shall keep the same deposited in an interest bearing account, and all interest earned on such account shall be added to and made a part of Escrowed Proceeds. (as) Eurocurrency Liabilities. "Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. (at) Eurodollar Rate Reserve Percentage. "Eurodollar Rate Reserve Percentage" means, for purposes of determining the Effective Rate for any Period, the reserve percentage applicable two Business Days before the first day of such period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with deposits exceeding One Billion Dollars with respect to liabilities or deposits consisting of or including Eurocurrency Liabilities (or with respect to any other category or liabilities by reference to which LIBOR is determined) having a term comparable to such period. (au) Event of Default. "Event of Default" shall have the meaning assigned to it in subparagraph 14.(a) below. (av) Excluded Taxes. "Excluded Taxes" shall mean (1) all federal, state and local income taxes upon the Base Rent, the Upfront Fee, the Commitment Fee, Administrative Fees and any interest paid to Landlord pursuant to subparagraph 3.(f), (2) any taxes imposed by any governmental authority outside the United States, and (3) any transfer or change of ownership taxes assessed because of Landlord's transfer or conveyance to any third party of any rights or interest in this Lease, the Purchase Documents, or the Leased Property, but excluding any such taxes assessed because of any Permitted Transfer. (aw) Fair Market Value. "Fair Market Value" shall have the meaning assigned to it in the Purchase Agreement. (ax) Fed Funds Rate. "Fed Funds Rate" means, for any period, a fluctuating interest rate (expressed as a per annum rate and rounded upwards, if necessary, to the next 1/16 of 1%) equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rates are not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Landlord's Parent from three Federal funds brokers of recognized standing selected by Landlord's Parent. All determinations of the Fed Funds Rate by Landlord's Parent shall, in the absence of clear and demonstrable error, be binding and conclusive upon Landlord and Tenant. (ay) Funding Advances. "Funding Advances" means (1) advances (equal in the aggregate to the Initial Investment) made on or prior to the date hereof by Landlord's Parent and other Participants to or on behalf of Landlord to permit Landlord to acquire or maintain its investment in the Leased Property and to allow Landlord to provide the advance described in the definition of Closing Costs in subparagraph 1.(s), (2) future advances (which, together with the Funding Advances described in the preceding clauses (1), are expected to total $86,000,000) made by Landlord's Parent or any Participant to or on behalf of Landlord to allow Landlord to provide Construction Advances hereunder and to cover Carrying Costs, and (3) future advances made by Landlord's Parent or any Participant to or on behalf of Landlord in replacement of or renewal and extension of other Funding Advances. For example, if after the date hereof a new Participant advances funds on behalf of Landlord to Landlord's Parent or another then existing Participant in repayment of all or part of Funding Advances previously made by Landlord's Parent or the other Participant, such advance of funds by the new Participant shall constitute a Funding Advance hereunder, and the prior Funding Advances so repaid to Landlord's Parent or the other Participant shall thereupon cease to constitute Funding Advances for purposes of this Lease. (az) GAAP. "GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time, applied on a basis consistent with those used in the preparation of the financial statements referred to in subparagraph 9.(w) (except for changes concurred in by Tenant's independent public accountants). (ba) Hazardous Substance. "Hazardous Substance" means (i) any chemical, compound, material, mixture or substance that is now or hereafter defined or listed in, regulated under, or otherwise classified pursuant to, any Environmental Laws as a "hazardous substance," "hazardous material," "hazardous waste," "extremely hazardous waste," "infectious waste," "toxic substance," "toxic pollutant," or any other formulation intended to define, list or classify substances by reason of deleterious properties, including, without limitation, ignitability, corrosiveness, reactivity, carcinogenicity, toxicity or reproductive toxicity; (ii) petroleum, any fraction of petroleum, natural gas, natural gas liquids, liquified natural gas, synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas), and ash produced by a resource recovery facility utilizing a municipal solid waste stream, and drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (iii) asbestos and any asbestos containing material; and (iv) any other material that, because of its quantity, concentration or physical or chemical characteristics, poses a significant present or potential hazard to human health or safety or to the environment if released into the workplace or the environment. (bb) Hazardous Substance Activity. "Hazardous Substance Activity" means any actual, proposed or threatened use, storage, holding, existence, location, release (including, without limitation, any spilling, leaking, leaching, pumping, pouring, emitting, emptying, dumping, disposing into the environment, and the continuing migration into or through soil, surface water, groundwater or any body of water), discharge, deposit, placement, generation, processing, construction, treatment, abatement, removal, disposal, disposition, handling or transportation of any Hazardous Substance from, under, in, into or on the Leased Property, including, without limitation, the movement or migration of any Hazardous Substance from surrounding property, surface water, groundwater or any body of water under, in, into or onto the Leased Property and any residual Hazardous Substance contamination in, on or under the Leased Property. (bc) Impositions. "Impositions" shall have the meaning assigned to it in subparagraph 9.(p) below. (bd) Improvements. "Improvements," as defined in the recitals at the beginning of this Lease, shall include not only existing improvements to the Land as of the date hereof, if any, but also any new improvements or changes to existing improvements made by Tenant. Accordingly, any and all new improvements made to the Leased Property by Tenant using the Construction Allowance as contemplated in this Lease shall constitute Improvements as that term is used herein. (be) Indemnified Party. "Indemnified Party" means each of (1) Landlord and any of Landlord's successors and assigns as to all or any portion of the Leased Property or any interest therein (but excluding Tenant or any Applicable Purchaser under the Purchase Agreement or any Person that claims its interest in the Leased Property through or under Tenant or through or under an assignment from Landlord that does not constitute a Permitted Transfer), (2) the Participants, and (3) any Affiliate, officer, agent, director, employee or servant of any of the parties described in clause (1) or (2) preceding. (bf) Initial Investment. "Initial Investment" means $10,400,000, being equal to the $10,200,000 "Stipulated Loss Value" under and as defined in the Original Lease, plus the advance described in the definition of Closing Costs in subparagraph 1.(s) above. (bg) Landlord's Parent. "Landlord's Parent" means Landlord's Affiliate, Banque Nationale de Paris, a bank organized and existing under the laws of France, together with any Affiliates of such bank that directly or indirectly provided or hereafter during the Term provide or maintain any Funding Advances, and any successors of such bank and such Affiliates. (bh) Last Advance Date. "Last Advance Date" means the earlier of (1) the Completion Deadline (or - if the Completion Deadline is not an Advance Date, which could occur if Tenant exercises its rights hereunder to accelerate the Carrying Costs Accrual Termination Date and to thereafter designate a LIBOR Period Election of more than one month - then the latest Advance Date prior to the Completion Deadline), (2) the first Advance Date that occurs at least ten (10) days after Landlord has received a Completion Notice or a Notice of Last Advance, or (3) the Designated Sale Date. (bi) LIBOR. "LIBOR" means, for purposes of determining the Effective Rate for each Period, the rate determined by Landlord's Parent to be the average rate of interest per annum (rounded upwards, if necessary, to the next 1/16 of 1%) of the rates at which deposits of dollars are offered or available to Landlord's Parent in the London interbank market at approximately 11:00 a.m. (London time) on the second Business Day preceding the first day of such period. Landlord shall instruct Landlord's Parent to consider deposits, for purposes of making the determination described in the preceding sentence, that are offered: (i) for delivery on the first day of such Period, (ii) in an amount equal or comparable to the total (projected on the applicable date of determination by Landlord's Parent) Stipulated Loss Value on the first day of such Period, and (iii) for a period of time equal or comparable to the appropriate Period. If Landlord's Parent so chooses, it may determine LIBOR for any period by reference to the rate reported by the British Banker's Association on Page 3750 of the Telerate Service at approximately 11:00 a.m. (London time) on the second Business Day preceding the first day of such period; provided, however, Tenant may notify Landlord that Tenant objects to any future determination of LIBOR in the manner provided by this sentence, in which case any determination of LIBOR required more than three Business Days after Landlord's receipt of such notice shall be made as if this sentence had been struck from this Lease. If for any reason Landlord's Parent determines that it is impossible or unreasonably difficult to determine LIBOR with respect to a given Period in accordance with the preceding sentences, or if Landlord's Parent shall determine that it is unlawful (or any central bank or governmental authority shall assert that it is unlawful) for Landlord, Landlord's Parent or any other Participant to provide or maintain any Funding Advances hereunder during any Period for which Base Rent is computed by reference to LIBOR, then "LIBOR" for that Period shall equal the rate which is fifty basis points (50/100 of 1%) above the Fed Funds Rate for that period. All determinations of LIBOR by Landlord's Parent shall, in the absence of clear and demonstrable error, be binding and conclusive upon Landlord and Tenant. (bj) LIBOR Period Election. "LIBOR Period Election" for any Base Rent Period means a period of one month, two months, three months or six months as designated by Tenant at least ten Business Days prior to the commencement of such Base Rent Period by a notice given to Landlord in the form of Exhibit M attached to this Lease. (For purposes of this Lease a LIBOR Period Election for any Base Rent Period shall also be considered the LIBOR Period Election in effect on (1) the date [whether the Carrying Costs Accrual Termination Date or a Base Rent Date] upon which such Base Rent Period begins and (2) subsequent Base Rent Dates, if any, which occur before the date upon which such Base Rent Period ends.) Any LIBOR Period Election shall remain in effect not only for the entire first Base Rent Period for which it is designated or becomes effective, but also for subsequent Base Rent Periods until a new designation by Tenant becomes effective in accordance with the provisions set forth in this definition. Notwithstanding the foregoing, however: (1) any LIBOR Period Election that would cause a Base Rent Period to extend beyond the end of the scheduled Term will be shortened as necessary to cause such Base Rent Period to end when the scheduled Term ends; (2) changes in the LIBOR Period Election shall become effective only upon the commencement of a new Base Rent Period; (3) until such time as Tenant designates another LIBOR Period Election consistent with the foregoing requirements, Tenant will be considered to have designated a LIBOR Period Election of one month; and (4) if an Event of Default shall have occurred and be continuing on the third Business Day preceding the commencement of any Base Rent Period, the LIBOR Period Election for such Base Rent Period shall be one month. (bk) Lien. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any agreement to sell receivables with recourse, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction). Customary bankers' rights of set-off arising by operation of law or by contract (however styled, if the contract grants rights no greater than those arising by operation of law) in connection with working capital facilities, lines of credit, term loans and letter of credit facilities and other contractual arrangements entered into with banks in the ordinary course of business are not "Liens" for the purposes of this Lease. (bl) Losses. "Losses" means any and all losses, liabilities, damages (whether actual, consequential, punitive or otherwise denominated), demands, claims, actions, judgments, causes of action, assessments, fines, penalties, costs, and out-of-pocket expenses (including, without limitation, Attorneys' Fees and the fees of outside accountants and environmental consultants), of any and every kind or character, foreseeable and unforeseeable, liquidated and contingent, proximate and remote, known and unknown. (bm) Maximum Construction Allowance. "Maximum Construction Allowance" means $86,000,000, minus the Initial Investment. (bn) Notice of Last Advance. "Notice of Last Advance" means any notice given by Tenant to Landlord stating that Tenant irrevocably elects not to request or accept any further Construction Advances which Tenant might be entitled to but for such election. It is understood that Tenant may, but shall not be required, to give a Notice of Last Advance in order to accelerate the Last Advance Date and to thereby accelerate the date upon which Commitment Fees shall cease to accrue. (bo) Ordinary Negligence. "Ordinary Negligence" of an Indemnified Party means any negligent acts or omissions of such party that does not for any reason constitute Active Negligence as defined in this Lease. (bp) Outstanding Construction Allowance. "Outstanding Construction Allowance" means at any time the amount equal to (1) the total Construction Advances made by Landlord, PLUS (2) all Carrying Costs added to the Outstanding Construction Allowance under subparagraph 6.(a)(ii) on or prior to the date in question, LESS (3) the amount (if any) of Qualified Payments paid to Landlord and applied to the Outstanding Construction Allowance on or prior to such date, and LESS (4) any payments previously made by Tenant to Landlord pursuant to subparagraph 3.(i). (bq) Participant. "Participant" means any Person, including Landlord's Parent, that agrees with Landlord or another Participant to participate in all or some of the risks and rewards to Landlord of this Lease and the Purchase Documents. As of the effective date hereof, the only Participants are those which have executed the Participation Agreement, but such Participants and Landlord may agree to share in risks and rewards of this Lease and the Purchase Documents with other Participants in the future. However, no Person other than Landlord's Parent and the Approved Participants shall qualify as a Participant for purposes of this Lease, the Purchase Documents or any other agreement to which Tenant is a party unless, with Tenant's prior written approval or when an Event of Default had occurred and was continuing, such Person became a party to the Pledge Agreement and to the Participation Agreement by executing supplements to those agreements as contemplated therein. (br) Participation Agreement. "Participation Agreement" means the Participation Agreement dated the date hereof among Landlord, Landlord's Parent, and the Participants named therein, pursuant to which Landlord's Parent and such Participants have agreed to participate in certain risks and rewards to Landlord of this Lease and the Purchase Agreement, as such Participation Agreement may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. (bs) Period. "Period" means a Construction Period or a Base Rent Period, as the context requires. (bt) Permitted Encumbrances. "Permitted Encumbrances" means (i) the encumbrances and other matters affecting the Leased Property that are set forth in Exhibit B attached hereto and made a part hereof, and (ii) any provisions of the Existing Contract or any other agreement described therein that survived closing thereunder (but not any deed of trust, mortgage or other agreement given to secure the repayment of borrowed funds), and (iii) any easement agreement or other document affecting title to the Leased Property executed by Landlord at the request of or with the consent of Tenant. (bu) Permitted Hazardous Substance Use. "Permitted Hazardous Substance Use" means the use, storage and offsite disposal of Permitted Hazardous Substances in strict accordance with applicable Environmental Laws and with due care given the nature of the Hazardous Substances involved; provided, the scope and nature of such use, storage and disposal shall not include the use of underground storage tanks for any purpose other than the storage of water for fire control, nor shall such scope and nature: (1) exceed that reasonably required for the construction of Improvements permitted by this Lease and for the operation of the Leased Property for the purposes expressly permitted under subparagraph 8.(a); or (2) include any disposal, discharge or other release of Hazardous Substances from operations on the Leased Property in any manner that might allow such substances to reach surface water or groundwater, except (i) through a lawful and properly authorized discharge (A) to a publicly owned treatment works or (B) with rainwater or storm water runoff in accordance with Applicable Laws and any permits obtained by Tenant that govern such runoff; or (ii) any such disposal, discharge or other release of Hazardous Substances for which no permits are required and which are not otherwise regulated under applicable Environmental Laws. Further, notwithstanding anything to the contrary herein contained, Permitted Hazardous Substance Use shall not include any use of the Leased Property as a treatment, storage or disposal facility (as defined by federal Environmental Laws) for Hazardous Substances, including but not limited to a landfill, incinerator or other waste disposal facility. (bv) Permitted Hazardous Substances. "Permitted Hazardous Substances" means Hazardous Substances used and reasonably required for Tenant's operation of the Leased Property for the purposes expressly permitted by subparagraph 8.(a) in strict compliance with all Environmental Laws and with due care given the nature of the Hazardous Substances involved. Without limiting the generality of the foregoing, Permitted Hazardous Substances shall include, without limitation, usual and customary office and janitorial products, and the materials listed on Exhibit C attached hereto. (bw) Permitted Transfer. "Permitted Transfer" means any one or more of the following: (1) the creation or conveyance of rights and interests under the Participation Agreement in favor of Landlord's Parent or Participants; (2) subject to the last sentence of subparagraph 11.(d), any assignment or conveyance by Landlord of any lien or security interest against the Leased Property (in contrast to a conveyance of Landlord's fee estate in the Leased Property) or of any interest in Rent, payments required by the Purchase Agreement or payments to be generated from the Leased Property after the Term, to any present or future Participant or to any Affiliate of Landlord; (3) any agreement to exercise or refrain from exercising rights or remedies hereunder or under the Purchase Documents or the Environmental Indemnity made by Landlord with any present or future Participant or Affiliate of Landlord; (4) any assignment or conveyance by Landlord requested by Tenant or required by any Permitted Encumbrance, by the Purchase Agreement or by Applicable Laws; (5) any assignment or conveyance by Landlord when an Event of Default shall have occurred and be continuing; or (6) any assignment or conveyance by Landlord after the Designated Sale Date. (bx) Person. "Person" means an individual, a corporation, a partnership, an unincorporated organization, an association, a joint stock company, a joint venture, a trust, an estate, a government or agency or political subdivision thereof or other entity, whether acting in an individual, fiduciary or other capacity. (by) Plan. "Plan" means at any time an employee pension benefit plan which is covered under Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (i) maintained by Tenant or any Subsidiary for employees of Tenant or any Subsidiary or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which Tenant or any Subsidiary is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions. (bz) Pledge Agreement. "Pledge Agreement" means the Pledge Agreement dated as of the date hereof between Landlord and Tenant, pursuant to which Tenant may pledge certificates of deposit and/or securities as security for Tenant's obligations under the Purchase Agreement (and for the corresponding obligations of Landlord to the Participants under the Participation Agreement), as such Pledge Agreement may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. (ca) Prime Rate. "Prime Rate" means the prime interest rate or equivalent charged by Landlord's Parent in the United States as announced or published by Landlord's Parent from time to time, which need not be the lowest interest rate charged by Landlord's Parent. If for any reason Landlord's Parent does not announce or publish a prime rate or equivalent, the prime rate or equivalent announced or published by ABN AMRO Bank N.V. or Credit Commercial de France as selected by Landlord shall be used as the Prime Rate. The prime rate or equivalent announced or published by such bank need not be the lowest rate charged by it. The Prime Rate may change from time to time after the date hereof without notice to Tenant as of the effective time of each change in rates described in this definition. (cb) Purchase Agreement. "Purchase Agreement" means the Purchase Agreement dated as of the date hereof between Landlord and Tenant pursuant to which Tenant has agreed to purchase or to arrange for the purchase by a third party of the Leased Property, as such Purchase Agreement may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. (cc) Purchase Documents. "Purchase Documents" means collectively the Purchase Agreement, the Pledge Agreement, and the Custodial Agreement. (cd) Purchase Price. "Purchase Price" shall have the meaning assigned to it in the Purchase Agreement. (ce) Qualified Payments. "Qualified Payments" means all payments received by Landlord from time to time during the Term from any party (1) under any casualty insurance policy as a result of damage to the Leased Property, (2) as compensation for any restriction placed upon the use or development of the Leased Property or for the condemnation of the Leased Property or any portion thereof, (3) because of any judgment, decree or award for injury or damage to the Leased Property or (4) under any title insurance policy or otherwise as a result of any title defect or claimed title defect with respect to the Leased Property; provided, however, that (x) in determining Qualified Payments, there shall be deducted all expenses and costs of every kind, type and nature (including taxes and Attorneys' Fees) incurred by Landlord with respect to the collection of such payments, (y) Qualified Payments shall not include any payment to Landlord by a Participant or an Affiliate of Landlord that is made to compensate Landlord for the Participant's or Affiliate's share of any Losses Landlord may incur as a result of any of the events described in the preceding clauses (1) through (4) and (z) Qualified Payments shall not include any payments received by Landlord that Landlord has paid to Tenant for the restoration or repair of the Leased Property or that Landlord is holding as Escrowed Proceeds. For purposes of computing the total Qualified Payments (and other amounts dependent upon Qualified Payments, such as Stipulated Loss Value and the Outstanding Construction Allowance) paid to or received by Landlord as of any date, payments described in the preceding clauses (1) through (4) will be considered as Escrowed Proceeds, not Qualified Payments, until they are actually applied as Qualified Payments by Landlord, which Landlord will do upon the first Advance Date or Base Rent Date which is at least three (3) Business Days after Landlord's receipt of the same unless postponement of such application is required by other provisions of this Lease or consented to by Tenant in writing. Thus, for example, condemnation proceeds actually received by Landlord in the middle of a Base Rent Period will not be considered as having been received by Landlord for purposes of computing the total Qualified Payments unless and until actually applied by Landlord as a Qualified Payment on a subsequent Base Rent Date in accordance with Paragraph 4 below. (Landlord shall have no obligation to readvance any portion of the Outstanding Construction Allowance reduced by Qualified Payments.) (cf) Qualifying Security Interest. "Qualifying Security Interest" means a first priority perfected security interest under the Pledge Agreement which is sufficient, for purposes of the laws and regulations which govern minimum amounts of capital that Landlord and Participants or their affiliates must maintain, to permit them to assign a risk weighting of no more than twenty percent to a portion of their collective investment in the Leased Property equal to the Value (as defined in and determined in accordance with the Pledge Agreement) of the Collateral encumbered by such an interest. (cg) Remaining Proceeds. "Remaining Proceeds" shall have the meaning assigned to it in subparagraph 4.(a)(ii). (ch) Rent. "Rent" means the Base Rent and all Additional Rent. (ci) Responsible Financial Officer. "Responsible Financial Officer" means the chief financial officer, the controller, the treasurer or the assistant treasurer of Tenant. (cj) Scope Change. A "Scope Change" means a material addition to, deletion from or other modification to the quality, function or capacity of the Designated Improvements as delineated in Exhibit H or in any plans and specifications therefor previously approved by Landlord, but shall not include refinement, correction and detailing by Tenant or Tenant's architects or contractors from time to time. As used in this definition, a "material" change shall mean any change that (a) is reasonably likely to substantially reduce the fair market value of the Leased Property (after completion of the Designated Improvements), or (b) will change the general character of the Designated Improvements from that described in Exhibit H. (ck) Securities Collateral. "Securities Collateral" shall have the meaning assigned to it in the Pledge Agreement. (cl) Securities Collateral Percentage. "Securities Collateral Percentage" for each Period means the Securities Collateral Percentage for such Period (as defined in and determined in accordance with the Pledge Agreement); provided, however, for purposes of this Lease, the Securities Collateral Percentage: (i) for any Period ending on or prior to the Last Advance Date shall be zero; and (ii) for any Period ending after the Last Advance Date shall not exceed the lesser of (A) one minus the Certificate of Deposit Collateral Percentage for such Period, or (B) a fraction, the numerator of which fraction shall equal the Value (as defined below) of all Securities Collateral that is, on the first day of such Period, held by the Custodian under the Custodial Agreement, subject to a Qualifying Security Interest and free from claims or security interests held or asserted by any third party, and the denominator of which fraction shall equal the Stipulated Loss Value on the first day of such Period (computed after the subtraction of any Qualified Payments applied on such first day). "Value" means, for purposes of determining the Securities Collateral Percentage under this definition for each Period, the Value (as defined in and determined in accordance with the Pledge Agreement) on the Valuation Date (as defined in the Custodial Agreement) upon which such Period commences or, if such Period does not commence upon a Valuation Date, on the most recent Valuation Date prior to the commencement of such Period. (cm) Spread. The "Spread" on any date will depend upon a computation involving (a) the rating by Standard and Poor's Corporation (the "S&P Rating") or the rating by Moody's Investor Service, Inc. (the "Moody's Ratings"), whichever rating is higher, of Tenant's senior, unsecured debt on that date (whether such ratings are express or published, implied ratings), and (b) the Debt to Capital Ratio (as defined below) on that date, such computation to be as follows: (i) If (1) there is no S&P Rating for the senior, unsecured debt of Tenant (express or published, implied) or the S&P Rating is below BBB-, AND (2) there is no Moody's Rating for senior, unsecured debt of Tenant (express or published, implied) or the Moody's Rating is below Baa3, AND (3) the Debt to Capital Ratio is greater than 0.30, then the Spread will be sixty basis points (.600%). (ii) If (1) the S&P Rating is BBB-, OR (2) the Moody's Rating is Baa3, OR (3) the Debt to Capital Ratio is equal to or less than 0.30 and more than 0.15, and if Tenant does not qualify for a lower Spread pursuant to clause (iii), (iv) or (v) below, then the Spread will be forty- five basis points (.450%). (iii) If (1) the S&P Rating is BBB, OR (2) the Moody's Rating is Baa2, OR (3) the Debt to Capital Ratio is equal to or less than 0.15, and if Tenant does not qualify for a lower Spread pursuant to clause (iv) or (v) below, then the Spread will be thirty-seven and one-half basis points (.375%). (iv) If (1) the S&P Rating is BBB+, OR (2) the Moody's Rating is Baa1, and if Tenant does not qualify for a lower Spread pursuant to clause (v) below, then the Spread will be thirty basis points (.300%). (v) If (1) the S&P Rating is above BBB+, OR (2) the Moody's Rating is above Baa1, then the Spread will be twenty-seven and one-half basis points (.275%). For purposes of calculating the Spread, "Debt to Capital Ratio" means the quotient determined by dividing (A) funded Senior Debt (as defined in subparagraph 9.(ac)(ii)), by (B) the total Capitalization (as defined in subparagraph 9.(ac)(ii)), including Subordinated Debt (as defined in subparagraph 9.(ac)(ii)). The parties believe it improbable that the ratings systems used by Standard and Poor's Corporation and by Moody's Investor Service, Inc. will be discontinued or changed, but if such ratings systems are discontinued or changed, Landlord shall be entitled to select and use a comparable ratings systems as a substitute for the S&P Rating or the Moody Rating, as the case may be, for purposes of determining the Spread. All determinations of the Spread by Landlord shall, in the absence of clear and demonstrable error, be binding and conclusive for purposes of this Lease. Further Landlord may, but shall not be required, to rely on the determination of the Spread set forth in any certificate delivered by Tenant pursuant to subparagraph 9.(w)(iv) below, and no reduction in the Spread will be effective because of an improvement in the S&P Rating, the Moody's Rating or the Debt to Capital Ratio before Tenant has notified Landlord thereof by delivery of such a certificate. (cn) Stipulated Loss Value. "Stipulated Loss Value" means at any time the amount equal to (1) the Initial Investment PLUS (2) the Outstanding Construction Allowance at such time, LESS (3) the aggregate amount (if any) of Qualified Payments paid to Landlord in excess of any Qualified Payments deducted in the computation of such Outstanding Construction Allowance. Under no circumstances will any payment of Base Rent, the Upfront Fee, Commitment Fees or Administrative Fees reduce Stipulated Loss Value. (co) Subsidiary. "Subsidiary" means any corporation of which Tenant and/or its other Subsidiaries own, directly or indirectly, such number of outstanding shares as have more than 50% of the ordinary voting power for the election of directors. (cp) Tenant's Knowledge. "Tenant's knowledge," "to the knowledge of Tenant" and words of like effect means the actual knowledge (with due investigation) of any of the following employees of Tenant: Alan Groves, Vice President and Corporate Controller; Christopher B. Paisley, Chief Financial Officer; Abe Darwish, Vice President of Worldwide Real Estate and Site Services; and Paul Murray, Director of Worldwide Safety and Environmental Health. However, to the extent Tenant's knowledge after the date hereof may become relevant hereunder or under any certificate or other notice provided by Tenant to Landlord in connection with this Lease, "Tenant's knowledge" and words of like effect shall include the then actual knowledge of other employees of Tenant (if any) that have assumed responsibilities of the current employees listed in the preceding sentence or that have replaced such current employees. But none of the employees of Tenant whose knowledge is now or may hereafter be relevant shall be personally liable for the representations of Tenant made herein. (cq) Term. "Term" shall have the meaning assigned to it in Paragraph 2 below. (cr) Unfunded Benefit Liabilities. "Unfunded Benefit Liabilities" means, with respect to any Plan, the amount (if any) by which the present value of all benefit liabilities (within the meaning of Section 4001(a)(16) of ERISA) under the Plan exceeds the fair market value of all Plan assets allocable to such benefit liabilities, as determined on the most recent valuation date of the Plan and in accordance with the provisions of ERISA for calculating the potential liability of Tenant or any ERISA Affiliate of Tenant under Title IV of ERISA. (cs) Upfront Fee. "Upfront Fee" shall have the meaning assigned to it in subparagraph 3.(b). (ct) Voluntary Minimum Pledge Commitment. "Voluntary Minimum Pledge Commitment" means an agreement in form and substance reasonably satisfactory to Landlord and the other parties to the Pledge Agreement which Tenant may elect to execute in connection with a casualty, condemnation or sale in lieu of condemnation affecting the Leased Property and which modifies the Pledge Agreement by establishing a Minimum Collateral Percentage (as defined therein) sufficient to require Tenant to maintain Collateral under the Pledge Agreement with a value of no less than the insurance, condemnation or sale proceeds paid or to be paid because of the casualty, condemnation or sale in lieu of condemnation until Tenant has completed any related repairs or restoration required by this Lease. (cu) Other Terms and References. Words of any gender used in this Lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural and vice versa, unless the context otherwise requires. References herein to Paragraphs, subparagraphs or other subdivisions shall refer to the corresponding Paragraphs, subparagraphs or subdivisions of this Lease, unless specific reference is made to another document or instrument. References herein to any Schedule or Exhibit shall refer to the corresponding Schedule or Exhibit attached hereto, which shall be made a part hereof by such reference. All capitalized terms used in this Lease which refer to other documents shall be deemed to refer to such other documents as they may be renewed, extended, supplemented, amended or otherwise modified from time to time, provided such documents are not renewed, extended or modified in breach of any provision contained herein or therein or, in the case of any other document to which Landlord is a party or of which Landlord is an intended beneficiary, without the consent of Landlord. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. The words "this Lease", "herein", "hereof", "hereby", "hereunder" and words of similar import refer to this Lease as a whole and not to any particular subdivision unless expressly so limited. The phrases "this Paragraph" and "this subparagraph" and similar phrases refer only to the Paragraphs or subparagraphs hereof in which the phrase occurs. Unless required by the context in which it is used, the word "or" is not exclusive. Other capitalized terms are defined in the provisions that follow. 2. Term. The term of this Lease (herein called the "Term") shall commence on and include the effective date hereof, and end at 8:00 A.M. on the first Business Day of August, 2002, unless extended or sooner terminated as herein provided. Notwithstanding any other provision of this Lease which may expressly restrict the early termination hereof, and provided that Tenant is still in possession of the Leased Property and has not breached its obligation to make or have made any payment required by Paragraph 2 of the Purchase Agreement on any prior Designated Sale Date, Tenant may notify Landlord of Tenant's election to terminate this Lease before the first Business Day of August, 2002, by giving Landlord an irrevocable notice of such election and of the effective date of the termination, which notice must be given (if at all) at least sixty (60) days prior to the effective date of the termination. If Tenant elects to so terminate this Lease, then on the date on which this Lease is to be terminated, not only must Tenant pay all unpaid Rent, Tenant must also pay any Breakage Costs resulting from the termination and must satisfy its obligations under the Purchase Agreement. The payment of any unpaid Rent and Breakage Costs and the satisfaction of Tenant's obligations under the Purchase Agreement shall be conditions precedent to the effectiveness of any early termination of this Lease by Tenant. The Term may be extended at the option of Tenant for two successive periods of five (5) years each; provided, however, that prior to any such extension the following conditions must have been satisfied: (A) at least one hundred eighty (180) days prior to the commencement of any such extension, Landlord and Tenant must have agreed in writing upon, and received the written consent and approval of Landlord's Parent and all other Participants to (1) a corresponding extension of the date specified in clause (iii) of the definition of Designated Sale Date in the Purchase Agreement, and (2) an adjustment to the Rent that Tenant will be required to pay for the extension, it being expected that the Rent for the extension may be different than the Rent required for the original Term, and it being understood that the Rent for any extension must in all events be satisfactory to both Landlord and Tenant, each in its sole and absolute discretion; (B) there must be no Event of Default continuing hereunder at the time of Tenant's exercise of its option to extend; and (C) immediately prior to any such extension, this Lease must remain in effect. With respect to the condition that Landlord and Tenant must have agreed upon the Rent required for any extension of the Term, neither Tenant nor Landlord is willing to submit itself to a risk of liability or loss of rights hereunder for being judged unreasonable. Accordingly, both Tenant and Landlord hereby disclaim any obligation express or implied to be reasonable in negotiating the Rent for any such extension. Subject to the changes to the Rent payable during any extension of the Term as provided in this Paragraph, if Tenant exercises its option to extend the Term as provided in this Paragraph, this Lease shall continue in full force and effect, and the leasehold estate hereby granted to Tenant shall continue without interruption and without any loss of priority over other interests in or claims against the Leased Property that may be created or arise after the date hereof and before the extension. 3. Rental. (a) Base Rent. Tenant shall pay Landlord rent (herein called "Base Rent") in arrears, in currency that at the time of payment is legal tender for public and private debts in the United States of America, in installments on each Base Rent Date through the end of the Term. Each payment of Base Rent must be received by Landlord no later than 12:00 noon (San Francisco time) on the date it becomes due; if received after 12:00 noon it will be considered for purposes of this Lease as received on the next following Business Day. Each installment of Base Rent shall represent rent allocable to the Base Rent Period (or portion thereof) ending on the date on which the installment is due. Landlord shall notify Tenant in writing of the Base Rent due for each Base Rent Period at least fifteen (15) days prior to the Base Rent Date on which such period ends. Any failure by Landlord to so notify Tenant shall not constitute a waiver of Landlord's right to payment, but absent such notice Tenant shall not be in default for any underpayment resulting therefrom if Tenant, in good faith, reasonably estimates the payment required, makes a timely payment of the amount so estimated and corrects any underpayment within three (3) Business Days after being notified by Landlord of the underpayment. For all Base Rent Periods subject to a LIBOR Period Election of one month, two months or three months, Base Rent shall be due in one installment on the Base Rent Date upon which the Base Rent Period ends. For Base Rent Periods subject to a LIBOR Period Election of six months, Base Rent shall be payable in two installments, with the first installment becoming due on the Base Rent Date that occurs on the first Business Day of the third calendar month following the commencement of such Base Rent Period, and with the second installment becoming due on the Base Rent Date upon which the Base Rent Period ends. Notwithstanding the foregoing, if Tenant or any Applicable Purchaser purchases Landlord's interest in the Property pursuant to the Purchase Agreement, any accrued unpaid Base Rent and all outstanding Additional Rent shall be due on the date of purchase in addition to the purchase price and other sums due Landlord under the Purchase Agreement. The Base Rent for each Base Rent Period shall equal the sum of: (1) (A) Stipulated Loss Value on the first day of such Base Rent Period, times (B) one minus the sum of the Certificate of Deposit Collateral Percentage for such Base Rent Period and the Securities Collateral Percentage for such Base Rent Period, times (C) the sum of (i) the Effective Rate for such Base Rent Period and (ii) the Spread calculated on the tenth (10th) Business Day prior to the day upon which such Base Rent Period commences, times (D) the number of days in such Base Rent Period, divided by (E) three hundred sixty (360); PLUS (2) (A) Stipulated Loss Value on the first day of such Base Rent Period, times (B) the Certificate of Deposit Collateral Percentage for such Base Rent Period, times (C) twenty-two and one-half basis points (22.5/100 of 1%), times (D) the number of days in such Base Rent Period, divided by (E) three hundred sixty (360); PLUS (3) (A) Stipulated Loss Value on the first day of such Base Rent Period, times (B) the Securities Collateral Percentage for such Base Rent Period, times (C) the sum of (i) the Effective Rate for such Base Rent Period and (ii) twenty-two and one-half basis points (22.5/100 of 1%), times (D) the number of days in such Base Rent Period, divided by (E) three hundred sixty (360). To ease the administrative burden of this Lease and the Pledge Agreement, clause (2) in the formula above for calculating Base Rent reflects a reduction in the Base Rent equal to the interest that would accrue on any Cash Collateral required by the Pledge Agreement from time to time if the Accounts (as defined in the Pledge Agreement) bore interest at the Effective Rate. Landlord has agreed to such reduction in the Base Rent to provide Tenant with the economic equivalent of interest on such Cash Collateral, and in return Tenant has agreed to the provisions of the Pledge Agreement that excuse the actual payment of interest on the Accounts. By incorporating such reduction of Base Rent into the formula above, and by providing for noninterest bearing Accounts in the Pledge Agreement, the parties will avoid an unnecessary and cumbersome periodic exchange of equal payments. It is not, however, the intent of Landlord or Tenant to understate Base Rent or interest for financial reporting purposes. Accordingly, for purposes of determining Tenant's compliance with the affirmative financial covenants set forth in subparagraph 9.(ac), and for purposes of any financial reports that this Lease requires of Tenant from time to time, Tenant may report Base Rent as if there had been no such reduction and as if the Cash Collateral from time to time required by the Pledge Agreement had been maintained in Accounts bearing interest at the Effective Rate. Assume, only for the purpose of illustration of the calculation of Base Rent: that after the Carrying Costs Accrual Termination Date, a hypothetical Base Rent Period contains exactly ninety (90) days; that, after taking into account all Qualified Payments, the Stipulated Loss Value on the first day of such Base Rent Period is $50,000,000; that the Certificate of Deposit Collateral Percentage for such Base Rent Period is twenty percent (20%); that the Securities Collateral Percentage for such Base Rent Period is thirty percent (30%); that the Effective Rate for the applicable Base Rent Period is 5.5%; and that the Spread for the applicable Base Rent Period is 0.5%. Under such assumptions, the Base Rent for the hypothetical Base Rent Period will equal: $50,000,000 x 50% x (5.5% + 0.5%) x 90/360, or $375,000, PLUS $50,000,000 x 20% x .225% x 90/360, or $5,625, PLUS $50,000,000 x 30% x (5.5% + .225%) x 90/360, or $214,687.5, = $595,312.5 (b) Upfront Fee. Upon execution and delivery of this Lease by Landlord, Tenant shall pay Landlord an upfront fee (the "Upfront Fee") as provided in the letter dated July 10, 1997 from Landlord to Tenant, which Tenant executed and returned to Landlord to indicate (among other things) Tenant's willingness to proceed with negotiations for this Lease (the "Nonbinding Term Sheet"). (Tenant shall, however, be entitled to an appropriate credit against the Upfront Fee for the deposit already paid by Tenant as provided in the Nonbinding Term Sheet.) The Upfront Fee shall represent Additional Rent for the first Base Rent Period. (c) Commitment Fees. For each Construction Period, Tenant shall pay Landlord a fee (herein called a "Commitment Fee") equal to (1) twelve and one-half basis points (12.5/100 of 1%), times (2) the difference at the end of the first day of such Construction Period between (A) the Maximum Construction Allowance and (B) the sum (computed without deduction for any Qualified Payments) of all Construction Advances made by or on behalf of Landlord under this Lease and all Carrying Costs that have been added to and made a part of the Outstanding Construction Allowance, times (3) the number of days in such Construction Period, divided by (4) three hundred sixty (360). Tenant shall pay Commitment Fees in arrears on the first Business Day of February, May, August and November of each calendar year, beginning with the first Business Day in November, 1997 and continuing regularly thereafter to and including the first of such Business Days to fall on or after the Last Advance Date; provided that if any of such dates does not fall on a Business Day, the payment of Commitment Fees otherwise then due shall become due on the next following Business Day; and provided, further, if any Commitment Fees shall have accrued and remain unpaid on the Designated Sale Date, such accrued unpaid Commitment Fees shall be due on the Designated Sale Date. (d) Administrative Agency Fees. Upon execution and delivery of this Lease by Landlord, and again on each anniversary of the date hereof, Tenant shall pay to Landlord an administrative agency fee (an "Administrative Fee") in the amount equal to one third of the total per annum administrative agency fees specified in the Nonbinding Term Sheet. Each Administrative Fee shall represent Additional Rent for the Construction Period or Base Rent Period during which it is paid. (e) Additional Rent. All amounts which Tenant is required to pay to or on behalf of Landlord pursuant to this Lease, together with every charge, premium, interest and cost set forth herein which may be added for nonpayment or late payment thereof, shall constitute rent (all such amounts, other than Base Rent, are herein called "Additional Rent"). (f) Interest and Order of Application. All Rent shall bear interest, if not paid when first due, at the Default Rate in effect from time to time from the date due until paid; provided, that nothing herein contained will be construed as permitting the charging or collection of interest at a rate exceeding the maximum rate permitted under Applicable Laws. Landlord shall be entitled to apply any amounts paid by or on behalf of Tenant hereunder against any Rent then past due in the order the same became due or in such other order as Landlord may elect. (g) Net Lease. It is the intention of Landlord and Tenant that the Base Rent and all other payments herein specified shall be absolutely net to Landlord. Tenant shall pay all costs, expenses and obligations of every kind relating to the Leased Property or this Lease which may arise or become due, including, without limitation: (i) Impositions, including any taxes payable by virtue of Landlord's receipt of amounts paid to or on behalf of Landlord in accordance with this subparagraph 3.(g), but not including any Excluded Taxes; (ii) any Capital Adequacy Charges; (iii) any amount for which Landlord is or becomes liable with respect to the Permitted Encumbrances; and (iv) any costs incurred by Landlord (including Attorneys' Fees) because of Landlord's acquisition or ownership of the Leased Property or because of this Lease or the transactions contemplated herein. (h) No Demand or Setoff. The Base Rent and all Additional Rent shall be paid without notice or demand and without abatement, counterclaim, deduction, setoff or defense, except as expressly provided herein. (i) Overdrawn Allowance. On any Advance Date on which (1) the Outstanding Construction Allowance (including any Carrying Costs added thereto on such Advance Date), plus any Qualified Payments that have been applied to reduce the Outstanding Construction Allowance on or prior to such Advance Date, exceed (2) the Maximum Construction Allowance, Tenant shall pay to Landlord the amount of such excess. Each payment required by this subparagraph must be received by Landlord no later than 12:00 noon (San Francisco time) on the Advance Date it becomes due; if received after 12:00 noon it will be considered for purposes of this Lease as received on the next following Business Day. Landlord shall notify Tenant in writing of any payment due pursuant to this subparagraph at least fifteen (15) days prior to the Advance Date upon which it becomes due. Any failure by Landlord to so notify Tenant shall not constitute a waiver of Landlord's right to payment, but absent such notice Tenant shall not be in default for any underpayment resulting therefrom if Tenant, in good faith, reasonably estimates the payment required, makes a timely payment of the amount so estimated and corrects any underpayment within three (3) Business Days after being notified by Landlord of the underpayment. Nothing in this subparagraph shall be construed to require Landlord to make Construction Advances which could result in payments required by this subparagraph. 4. Insurance and Condemnation Proceeds. (a) Subject to Landlord's rights under this Paragraph 4, and so long as no Event of Default shall have occurred and be continuing, Tenant shall be entitled to use all casualty insurance and condemnation proceeds payable with respect to the Leased Property during the Term for the restoration and repair of the Leased Property or any remaining portion thereof. Except as provided in the last sentence of subparagraph 9.(r) and the last sentence of subparagraph 9.(s), all insurance and condemnation proceeds received with respect to the Leased Property (including proceeds payable under any insurance policy covering the Leased Property which is maintained by Tenant) shall be paid to Landlord and applied as follows: (i) First, such proceeds shall be used to reimburse Landlord for any costs and expenses, including Attorneys' Fees, incurred in connection with the collection of such proceeds. (ii) Second, the remainder of such proceeds (the "Remaining Proceeds"), shall be held by Landlord as Escrowed Proceeds and applied to reimburse Tenant for the actual cost of the repair, restoration or replacement of the Leased Property. However, any Remaining Proceeds not needed for such purpose shall be applied by Landlord as Qualified Payments after Tenant notifies Landlord that they are not needed for repairs, restoration or replacement. Notwithstanding the foregoing, if an Event of Default shall have occurred and be continuing, then Landlord shall be entitled to receive and collect insurance or condemnation proceeds payable with respect to the Leased Property, and either, at the discretion of Landlord, (A) hold such proceeds as Escrowed Proceeds until paid to Tenant as reimbursement for the actual and reasonable cost of repairing, restoring or replacing the Leased Property when Tenant has completed such repair, restoration or replacement, or (B) apply such proceeds (net of the deductions described in clause (i) above) as Qualified Payments. (b) Any Remaining Proceeds held by Landlord as Escrowed Proceeds shall be deposited by Landlord in an interest bearing account as provided in the definition of Escrowed Proceeds and shall be paid to Tenant upon completion of the applicable repair, restoration or replacement and upon compliance by Tenant with such terms, conditions and requirements as may be reasonably imposed by Landlord, but in no event shall Landlord be required to pay any Escrowed Proceeds to Tenant in excess of the actual cost to Tenant of the applicable repair, restoration or replacement, it being understood that Landlord may retain any such excess as a Qualified Payment. In any event, Tenant will not be entitled to any abatement or reduction of the Base Rent or any other amount due hereunder except to the extent that such excess Remaining Proceeds result in Qualified Payments which reduce Stipulated Loss Value (and thus payments computed on the basis of Stipulated Loss Value) as provided in the definitions set out above. Further, notwithstanding the inadequacy of the Remaining Proceeds held by Landlord as Escrowed Proceeds, if any, or anything herein to the contrary, Tenant must, after any taking of less than all or substantially all of the Leased Property by condemnation and after any damage to the Leased Property by fire or other casualty, restore or improve the Leased Property or the remainder thereof to a value no less than Stipulated Loss Value (computed after the application of any Remaining Proceeds as a Qualified Payment) and to a safe and sightly condition. Any taking of so much of the Leased Property as, in Landlord's reasonable judgment, makes it impracticable to restore or improve the remainder thereof as required by the preceding sentence shall be considered a taking of substantially all the Leased Property for purposes of this Paragraph 4. (c) In the event of any taking of all or substantially all of the Leased Property, Landlord shall be entitled to apply all Remaining Proceeds as a Qualified Payment, notwithstanding the foregoing. In addition, if Stipulated Loss Value immediately prior to any taking of all or substantially all of the Leased Property by condemnation exceeds the sum of the Remaining Proceeds resulting from such condemnation, then Landlord shall be entitled to recover the excess from Tenant upon demand as an additional Qualified Payment, whereupon this Lease shall terminate. (d) Nothing herein contained shall be construed to prevent Tenant from obtaining and applying as it deems appropriate any separate award from any condemning authority or from any insurer for a taking of or damage to Tenant's personal property not included in the Leased Property or for moving expenses or business interruption, provided, such award is not combined with and does not reduce the award for any taking of the Leased Property, including Tenant's interest therein. Further, notwithstanding anything to the contrary herein contained, if Remaining Proceeds held by Landlord during the term of this Lease shall exceed Stipulated Loss Value and any Rent payable by Tenant, then Tenant may get the excess by terminating this Lease in accordance with Paragraph 2 and purchasing such excess (which will then be held by Landlord as Escrowed Proceeds), together with any remaining interest of Landlord in the Leased Property, pursuant to the Purchase Agreement. (e) Landlord and Tenant each waive any right of recovery against the other, and the other's agents, officers or employees, for any damage to the Leased Property or to the personal property situated from time to time in or on the Leased Property resulting from fire or other casualty covered by a valid and collectible insurance policy; provided, however, that the waiver set forth in this subparagraph 4.(e) shall be effective insofar, but only insofar, as compensation for such damage or loss is actually recovered by the waiving party (net of costs of collection) under the policy notwithstanding the waivers set out in this paragraph. Tenant shall cause the insurance policies required of Tenant by this Lease to be properly endorsed, if necessary, to prevent any loss of coverage because of the waivers set forth in this paragraph. If such endorsements are not available, the waivers set forth in this paragraph shall be ineffective to the extent that such waivers would cause required insurance with respect to the Leased Property to be impaired. 5. No Lease Termination. (a) Status of Lease. Except as expressly provided herein, this Lease shall not terminate, nor shall Tenant have any right to terminate this Lease, nor shall Tenant be entitled to any abatement of the Rent, nor shall the obligations of Tenant under this Lease be excused, for any reason whatsoever, including without limitation any of the following: (i) any damage to or the destruction of all or any part of the Leased Property from whatever cause, (ii) the taking of the Leased Property or any portion thereof by eminent domain or otherwise for any reason, (iii) the prohibition, limitation or restriction of Tenant's use of all or any portion of the Leased Property or any interference with such use by governmental action or otherwise, (iv) any eviction of Tenant or of anyone claiming through or under Tenant by paramount title or otherwise (provided, if Tenant is wrongfully evicted by Landlord or by any third party lawfully claiming through or under Landlord, other than Tenant or a third party claiming through or under Tenant, then Tenant will have the remedies described in Paragraph 15 below), (v) any default on the part of Landlord under this Lease or under any other agreement to which Landlord and Tenant are parties, (vi) the inadequacy in any way whatsoever of the design or construction of any improvements included in the Leased Property, it being understood that Landlord has not made and will not make any representation express or implied as to the adequacy thereof, or (vii) any other cause whether similar or dissimilar to the foregoing, any existing or future law to the contrary notwithstanding. It is the intention of the parties hereto that the obligations of Tenant hereunder shall be separate and independent of the covenants and agreements of Landlord, that the Base Rent and all other sums payable by Tenant hereunder shall continue to be payable in all events and that the obligations of Tenant hereunder shall continue unaffected, unless the requirement to pay or perform the same shall have been terminated or limited pursuant to an express provision of this Lease. However, nothing in this Paragraph shall be construed as a waiver by Tenant of any right Tenant may have at law or in equity to (i) recover monetary damages for any default under this Lease by Landlord that Landlord fails to cure within the period provided in Paragraph 15, (ii) injunctive relief in case of the violation, or attempted or threatened violation, by Landlord of any of the express covenants, agreements, conditions or provisions of this Lease, or (iii) a decree compelling performance of any of the express covenants, agreements, conditions or provisions of this Lease. (b) Waiver By Tenant. Without limiting the foregoing, Tenant waives to the extent permitted by Applicable Laws, except as otherwise expressly provided herein, all rights to which Tenant may now or hereafter be entitled by law (including any such rights arising because of any implied "warranty of suitability" or other warranty under Applicable Laws) (i) to quit, terminate or surrender this Lease or the Leased Property or any part thereof or (ii) to any abatement, suspension, deferment or reduction of the Base Rent or any other sums payable under this Lease. 6. Construction Allowance. (a) Advances; Outstanding Construction Allowance. (i) Subject to the conditions set forth below, Landlord shall make advances (herein called "Construction Advances") on Advance Dates from time to time as requested by Tenant to reimburse Tenant for the actual cost of making the Designated Improvements to the Leased Property and for any property taxes or assessments payable prior to the Last Advance Date with respect to the Leased Property. In no event will Construction Advances which may be required of Landlord, when added to Carrying Costs accrued or projected by Landlord to accrue prior to the Carrying Costs Accrual Termination Date as described below, exceed the Maximum Construction Allowance. Notwithstanding the foregoing, if for any reason Stipulated Loss Value (and thus the Outstanding Construction Allowance included as a component thereof) must be determined under this Lease as of any date between Advance Dates, the Outstanding Construction Allowance determined on such date shall equal the Outstanding Construction Allowance on the immediately preceding Advance Date computed in accordance with the preceding sentence, plus Carrying Costs accruing on and after such preceding Advance Date to but not including the date in question. (ii) Charges (herein collectively called "Carrying Costs") shall accrue as described below for each Construction Period ending on or prior to the Carrying Costs Accrual Termination Date, and will be added to (and thereafter be included in) the Outstanding Construction Allowance on the last day of such Construction Period (i.e., generally on the Advance Date upon which such Construction Period ends). (iii) For the first short Construction Period ending August 1, 1997, Carrying Costs shall equal the sum of Carrying Costs for all days during such period, and the Carrying Costs accruing for each day during such period shall equal (A) the Initial Investment, times (B) the sum of (i) the Effective Rate for such day and (ii) the Spread calculated on the date of this Lease, divided by (C) three hundred sixty (360). For each Construction Period after the first short Construction Period and prior to or ending on the Carrying Costs Accrual Termination Date, Carrying Costs shall equal: (1)(A) Stipulated Loss Value as of the first day of such Construction Period, times (B) one minus the Certificate of Deposit Collateral Percentage in effect during such Construction Period, times (C) the sum of (i) the Effective Rate in effect during such Construction Period and (ii) the Spread calculated on the tenth (10th) Business Day prior to the day upon which such Construction Period commences, times (D) the number of days in such Construction Period, divided by (E) three hundred sixty (360); PLUS (2)(A) Stipulated Loss Value as of the first day of such Construction Period, times (B) the Certificate of Deposit Collateral Percentage in effect during such Construction Period, times (C) twenty-two and one-half basis points (22.5/100 of 1%), times (D) the number of days in such Construction Period, divided by (E) three hundred sixty (360). (iv) To ease the administrative burden of this Lease and the Pledge Agreement, clause (2)(A) in the formula set forth in the preceding clause 6.(a)(iii) for calculating Carrying Costs reflects a reduction in the Carrying Costs equal to the interest that would accrue on any Cash Collateral required by the Pledge Agreement from time to time if the Accounts (as defined in the Pledge Agreement) bore interest at the Effective Rate. Landlord has agreed to such reduction in the Carrying Costs to provide Tenant with the economic equivalent of interest on such Cash Collateral, and in return Tenant has agreed to the provisions of the Pledge Agreement that excuse the actual payment of interest on the Accounts. By incorporating such reduction of Carrying Costs into the formula above, and by providing for noninterest bearing Accounts in the Pledge Agreement, the parties will avoid an unnecessary and cumbersome periodic exchange of equal payments. It is not, however, the intent of Landlord or Tenant to understate Carrying Costs or interest for financial reporting purposes. Accordingly, for purposes of determining Tenant's compliance with the affirmative financial covenants set forth in subparagraph 9.(ac), and for purposes of any financial reports that this Lease requires of Tenant from time to time, Tenant may report its financial statements as if there had been no such reduction and as if the Cash Collateral from time to time required by the Pledge Agreement had been maintained in Accounts bearing interest at the Effective Rate. (b) Designated Improvements. (i) Responsibility for Construction. Tenant shall construct all Designated Improvements in a good and workmanlike manner, in accordance with (1) the descriptions and renderings attached as Exhibit H, (2) any Construction Documents for which Tenant has requested and obtained the written approval of Landlord or which Landlord has executed at the request of Tenant pursuant to Paragraph 10.(b) (though this clause (2) shall not be construed to require Tenant to get such approval or execution of Construction Documents by Landlord), (3) Applicable Laws, and (4) the other provisions of this Lease. Further, except for building foundations, driveways, parking lots, sidewalks and other improvements which would not suffer damage by being submerged under flood waters, all Designated Improvements shall be constructed by Tenant above the elevation that the U.S. Army Corp of Engineers or any other governmental authority estimates as the highest elevation that 100 year flood waters could be expected to reach. Tenant shall have sole responsibility for contracting for and administering the construction of Designated Improvements, it being understood that Landlord's obligation with respect to the Designated Improvements shall be limited to the making of advances under and subject to the conditions set forth in this Paragraph 6. No contractor or other third party shall be entitled to enforce Landlord's obligations to make advances as a third party beneficiary. Notwithstanding delays beyond Tenant's control, and even if the Construction Allowance is not sufficient to pay for completion of Designated Improvements, Tenant warrants that it shall cause all Designated Improvements with respect to which it receives any Construction Advances to be completed on or prior to the Completion Deadline. (ii) Scope Changes. Before making any Scope Change to the Designated Improvements contemplated in Exhibit H, Tenant shall provide to Landlord a reasonably detailed written description of the Scope Change and a revised construction budget, all of which must be approved in writing by Landlord (or by any construction representative appointed by Landlord from time to time) before the Scope Change is implemented. (iii) Value Added. The Designated Improvements, upon completion and taken as a whole, must enhance the value of the Leased Property by an amount commensurate with the total Construction Allowance used by Tenant; however, this requirement will not preclude Tenant from obtaining Construction Advances for soft costs (such as architectural fees), demolition costs or other costs that do not, individually, add value to the Leased Property but that are incurred in connection with the construction of Designated Improvements which will in the aggregate satisfy this requirement. For purposes hereof, the Designated Improvements will be deemed to have added value "commensurate" with the Construction Allowance used by Tenant if, when the Designated Improvements are substantially complete, the Leased Property has a fair market value with the Designated Improvements that exceeds the fair market value which the Leased Property would have without the Designated Improvements by an amount equal to no less than fifty percent (50%) of the Carrying Costs and Construction Advances added to the Outstanding Construction Allowance. (iv) Estoppel Letters Required. If requested by Landlord prior to the substantial completion of the Designated Improvements, Tenant shall cause the contractor under each significant general construction contract for the Designated Improvements to execute and deliver to Landlord an estoppel letter in the form of Exhibit I attached hereto. Similarly, if requested by Landlord prior to the substantial completion of the Designated Improvements, Tenant shall also cause the architect and engineer under any material architectural or engineering contract for the Designated Improvements to execute and deliver to Landlord an estoppel letter in the form of Exhibit J attached hereto; provided, that no such estoppel letter shall be required from any architect or engineer who has assigned his plans and specifications for the Designated Improvements to Tenant without restricting Tenant's right to further assign or allow other to use the same. Tenant hereby grants to Landlord (and Landlord's successors and assigns through any Permitted Transfer) a license to copy and use any such plans and specifications as Landlord shall deem appropriate. (v) Advances Not a Waiver. No funding of Construction Advances and no failure of Landlord to object to Designated Improvements proposed or constructed by Tenant shall constitute a waiver by Landlord of the requirements contained in this subparagraph 6.(b). (c) Conditions to Construction Advances. Landlord's obligation to make Construction Advances from time to time under this Paragraph 6 shall be subject to the following terms and conditions, all of which are intended for the sole benefit of Landlord: (i) Prior Notice. Tenant must make a request in substantially the form attached to this Lease as Exhibit K for any Construction Advance at least ten (10) Business Days prior to the Advance Date upon which the advance is to be paid. Landlord shall consider in good faith any changes to the Construction Advance request forms attached hereto that Tenant may reasonably request, provided the requested changes do not impair Landlord's rights or create or increase any liability Landlord may have in connection with the Designated Improvements. (ii) Amount of the Advances. No Construction Advance shall exceed the lesser of: a) the Maximum Construction Allowance, less the sum of (1) all prior Construction Advances and all Carrying Costs accruing through the date of such advance, and (2) the Carrying Costs then projected by Landlord to be added to the Construction Allowance on and after the date of the advance; or b) (1) the actual costs and expenses previously incurred and paid by Tenant for the Designated Improvements, including "soft costs," and for property taxes or assessments assessed against the Leased Property after the date hereof and prior to the Last Advance Date, less (2) the sum of all previous Construction Advances made under this Paragraph 6 to Tenant as reimbursement for such costs and expenses. Further, no Construction Advance shall be required that would cause the cost of completing all Designated Improvements then contemplated as estimated by Landlord to exceed the difference computed by subtracting (1) the Carrying Costs then projected by Landlord to be added to the Outstanding Construction Allowance, from (2) the Construction Allowance remaining to be advanced. Tenant shall not request any Construction Advance (other than the final Construction Advance) for an amount less than $500,000. (iii) Insurance. Tenant shall have obtained and provided certificates (or, in the case of clause a) below, title policies or binders) reasonably satisfactory to Landlord evidencing insurance covering the Leased Property as follows (in addition to the liability insurance required under subparagraph 9.(z) below): a) Title Insurance. An owner's title insurance policy (or binder committing the applicable title insurer to issue an owner's title insurance policy, without the payment of further premiums) in an amount, form and substance and written by one or more title insurance companies reasonably satisfactory to Landlord and insuring Landlord's ownership of fee title to the Leased Property, including any new Improvements constructed by Tenant, in the amount no less than Stipulated Loss Value plus any remaining portion of the Construction Allowance to be advanced under this Lease; and b) Builder's Risk Insurance. Builder's risk and such other hazard insurance as Landlord may reasonably require against all risks of physical loss (including collapse and transit coverage, but not including earthquake or flood coverage) with deductibles not to exceed $1,000,000 (or such other amount as Landlord and Tenant may agree upon in writing from time to time), such insurance to be in amounts sufficient to cover the total value of any Improvements under construction and to be maintained in full force and effect at all times until completion of the Designated Improvements. (iv) Progress of Construction. Construction of the Designated Improvements shall be progressing in a good and workmanlike manner and in accordance with the requirements of this Lease without any continuing significant interruption, other than interruptions beyond the reasonable control of Tenant that are not likely to cause the cost of such construction (and Carrying Costs and construction period and property taxes and assessments) to exceed the Maximum Construction Allowance. Also, Tenant shall have corrected or caused the correction promptly of any significant defect in such construction. (v) Evidence of Costs to be Reimbursed. To the extent contemplated by the Construction Advance request forms attached as Exhibit K and described in subparagraph 6.(c)(i), or otherwise required by Landlord at the time a Construction Advance is to be made, Tenant shall have submitted invoices, requests for payment from contractors, certifications from Tenant's architect or construction manager, lien releases and other evidence satisfactory to Landlord that (A) all costs for which Tenant requests reimbursement constitute actual costs incurred by Tenant for the construction of the Designated Improvements or constitute property taxes or assessments assessed against the Leased Property and paid by Tenant prior to the Last Advance Date with respect to the Leased Property and (B) general contractors and all parties that have the right to assert a mechanic's or materialman's lien against the Leased Property for labor performed in connection with the Leased Property or materials delivered to the Leased Property (collectively, "Potential Lien Claimants") have been paid all sums for which prior Construction Advances have been advanced under this Lease or the Original Lease. Without limiting the foregoing, Landlord may decline to advance any amount that would result in an excess of $5,000,000 or more of (1) the total cost of work with respect to which Potential Lien Claimants could have asserted a lien against the Leased Property and for which Construction Advances have been advanced by Landlord, over (2) the cost of such work for which Tenant has provided to Landlord unconditional statutory lien releases from all Potential Lien Claimants in form and substance reasonably satisfactory to Landlord. (vi) No Event of Default or Change of Control Event. No Event of Default shall have occurred and be continuing under this Lease and no Change of Control Event shall have occurred. (vii) No Sale of Landlord's Interest. No sale of Landlord's interest in the Leased Property shall have occurred pursuant to the Purchase Agreement. (viii) Certificate of No Default. Landlord shall have received, together with the notice requesting the Construction Advance described in clause (i) above, a current certificate of a Responsible Financial Officer of Tenant in the form attached as Exhibit F. (ix) Payments by Approved Participants. None of the Approved Participants (other than Landlord's Parent) shall have failed to advance to Landlord their respective percentage shares of the Construction Advance being requested as required by Section 3.2 of the Participation Agreement. However, any such failure shall excuse Landlord's obligation to provide the Construction Advance requested only to the extent of the funds that the applicable Defaulting Participant or Participants should have advanced (but did not advance) to Landlord. Moreover, in the event of any such failure: a) Landlord will, to the extent possible, postpone reductions of Construction Advances because of the failure by any one or more Defaulting Participants to make required advances under Section 3.2 of the Participation Agreement by adjusting (and readjusting from time to time, as required) the funding "Percentages" of other Participants, and by requesting the other Participants to make advances to Landlord on the basis of such adjusted Percentages, in each case as provided in Section 4 of the Participation Agreement; however, so long as a Defaulting Participant's failure to make required advances continues, no Construction Advance shall be required that would cause the Outstanding Construction Allowance (plus Carrying Costs to accrue thereafter as projected by BNPLC) to exceed (a) the Maximum Construction Allowance available under this Lease, less (b) all amounts that should have been, but have not been, advanced by a Defaulting Participant as required by Section 3.2 of the Participation Agreement. b) Tenant may exercise its rights under Section 3.1.3 of the Pledge Agreement to require Landlord to attempt in good faith, on and subject to the terms and conditions set forth in that Section, to assist Tenant in identifying one or more new Participants to replace the Defaulting Participants. (d) Completion Notice. Tenant shall provide a notice to Landlord (the "Completion Notice") promptly after construction of the Designated Improvements is substantially complete and more than fifty percent (50%) of the Designated Improvements are being occupied by Tenant or any subtenant permitted by Paragraph 11.(a). 7. Purchase Documents and Environmental Indemnity. Tenant acknowledges and agrees that nothing contained in this Lease shall limit, modify or otherwise affect any of Tenant's obligations under the Purchase Documents or Environmental Indemnity, which obligations are intended to be separate, independent and in addition to, and not in lieu of, the obligations established by this Lease. In the event of any inconsistency between the terms and provisions of the Purchase Documents or Environmental Indemnity and the terms and provisions of this Lease, the terms and provisions of the Purchase Documents or Environmental Indemnity (as the case may be) shall control. 8. Use and Condition of Leased Property. (a) Use. Subject to the Permitted Encumbrances and the terms hereof, Tenant may use and occupy the Leased Property so long as no Event of Default occurs hereunder, but only for the following purposes and other lawful purposes (including parking) incidental thereto: (i) research and development of computer-related and other electronic products; and (ii) administrative and office space; and (iii) distribution and warehouse storage of computer-related and other electronic products; and (iv) assembly of computer-related and other electronic products using components manufactured elsewhere, and light manufacturing of computer-related and other electronic products, but not including the manufacture of computer chips on-site; and (v) cafeteria, library, fitness center and other support function uses that Tenant may provide to its employees. Although the term "electronic products" in this subparagraph may include products designed to detect, monitor, neutralize, handle or process Hazardous Substances, the use of the Leased Property by Tenant shall not include bringing Hazardous Substances onto the Leased Property for the purpose of researching, testing or demonstrating any such products. (b) Condition. Tenant accepts the Leased Property (and will accept the same upon any purchase of the Landlord's interest therein) in its present state, AS IS, and without any representation or warranty, express or implied, as to the condition of such property or as to the use which may be made thereof. Tenant also accepts the Leased Property without any representation or warranty, express or implied, by Landlord regarding the title thereto or the rights of any parties in possession of any part thereof, except as set forth in subparagraph 10.(a). Landlord shall not be responsible for any latent or other defect or change of condition in the Land, Improvements, fixtures and personal property forming a part of the Leased Property, and the Rent hereunder shall in no case be withheld or diminished because of any latent or other defect in such property, any change in the condition thereof or the existence with respect thereto of any violations of Applicable Laws. Nor shall Landlord be required to furnish to Tenant any facilities or service of any kind, such as, but not limited to, water, steam, heat, gas, hot water, electricity, light or power. (c) Consideration of and Scope of Waiver. The provisions of subparagraph 8.(b) above have been negotiated by the Landlord and Tenant after due consideration for the Rent payable hereunder and are intended to be a complete exclusion and negation of any representations or warranties of the Landlord, express or implied, with respect to the Leased Property that may arise pursuant to any law now or hereafter in effect, or otherwise. However, such exclusion of representations and warranties by Landlord is not intended to impair any representations or warranties made by other parties, including Seller, the benefit of which is to pass to Tenant during the Term because of the definition of Personal Property and Leased Property above. 9. Other Representations, Warranties and Covenants of Tenant. Tenant represents, warrants and covenants as follows: (a) Financial Matters. Tenant is solvent and has no outstanding liens, suits, garnishments or court actions which could render Tenant insolvent. There has not been filed by or, to Tenant's knowledge, against Tenant a petition in bankruptcy or a petition or answer seeking an assignment for the benefit of creditors, the appointment of a receiver, trustee, custodian or liquidator with respect to Tenant or any significant portion of Tenant's property, reorganization, arrangement, rearrangement, composition, extension, liquidation or dissolution or similar relief under the federal Bankruptcy Code or any state law. The financial statements and all financial data heretofore delivered to Landlord relating to Tenant have been prepared in accordance with GAAP in all material respects. No material adverse change has occurred in the financial position of Tenant as reflected in Tenant's financial statements covering the fiscal period ended May 31, 1997. (b) Existing Contract. Except to the extent required of Landlord under subparagraph 10.(b), Tenant shall satisfy all surviving obligations of Tenant under the Existing Contract and under other agreements described therein. Tenant agrees to indemnify, defend and hold Landlord harmless from and against any and all Losses imposed on or asserted against or incurred by Landlord at any time and from time to time by reason of, in connection with or arising out of any obligations imposed by the Existing Contract or the other agreements described therein. THE INDEMNITY SET OUT IN THIS SUBPARAGRAPH SHALL APPLY EVEN IF THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE ORDINARY NEGLIGENCE (AS DEFINED ABOVE) OF LANDLORD; provided, such indemnity shall not apply to Losses proximately caused by (and attributed by any applicable principles of comparative fault to) the Active Negligence, gross negligence or willful misconduct of Landlord. Because Tenant hereby assumes and agrees to satisfy all surviving obligations of Tenant under the Existing Contract and the other agreements described therein, no failure by Landlord to take any action required by the Existing Contract or such other agreements (save and except any actions required of Landlord under subparagraph 10.(b)) shall, for the purposes of this indemnity, be deemed to be caused by the Active Negligence, gross negligence or willful misconduct of Landlord. The foregoing indemnity is in addition to the other indemnities set out herein and shall not terminate upon the closing of any sale of Landlord's interest in the Leased Property pursuant to the provisions of the Purchase Agreement or the termination of this Lease. (c) No Default or Violation. The execution, delivery and performance by Tenant of this Lease, the Purchase Documents and the Environmental Indemnity do not and will not constitute a breach or default under any other material agreement or contract to which Tenant is a party or by which Tenant is bound or which affects the Leased Property or Tenant's use, occupancy or operation of the Leased Property or any part thereof and do not, to the knowledge of Tenant, violate or contravene any law, order, decree, rule or regulation to which Tenant is subject, and such execution, delivery and performance by Tenant will not result in the creation or imposition of (or the obligation to create or impose) any lien, charge or encumbrance on, or security interest in, Tenant's property pursuant to the provisions of any of the foregoing. (d) Compliance with Covenants and Laws. The intended use of the Leased Property by Tenant complies, or will comply after Tenant obtains readily available permits, in all material respects with all applicable restrictive covenants, zoning ordinances and building codes, flood disaster laws, applicable health, safety and environmental laws and regulations, the Americans with Disabilities Act and other laws pertaining to disabled persons, and all other applicable laws, statutes, ordinances, rules, permits, regulations, orders, determinations and court decisions (all of the foregoing are herein sometimes collectively called "Applicable Laws"). Tenant has obtained or will promptly obtain all utility, building, health and operating permits as may be required for Tenant's use of the Leased Property by any governmental authority or municipality having jurisdiction over the Leased Property. (e) Environmental Representations. To Tenant's knowledge and except as otherwise disclosed in the Environmental Report, as of the date hereof: (i) no Hazardous Substances Activity has occurred prior to the date of this Lease; (iii) neither Tenant nor any prior owner or operator of the Leased Property or any surrounding property has reported or been required to report any release of any Hazardous Substances on or from the Leased Property or the surrounding property pursuant to any Environmental Law; (iv) neither Tenant nor any prior owner or operator of the Leased Property or any surrounding property has received any warning, citation, notice of violation or other communication regarding a suspected or known release or discharge of Hazardous Substances on or from the Leased Property or regarding a suspected or known violation of Environmental Laws concerning the Leased Property from any federal, state or local agency; and (v) none of the following are located on the Leased Property: asbestos; urea formaldehyde foam insulation; transformers or other equipment which contain dielectric fluid containing levels of polychlorinated biphenyls in excess of fifty (50) parts per million; any other Hazardous Substances other than Permitted Hazardous Substances; or any underground storage tank or tanks. Further, Tenant represents that to its knowledge the Environmental Report is not misleading or inaccurate in any material respect. (f) No Suits. There are no judicial or administrative actions, suits, proceedings or investigations pending or, to Tenant's knowledge, threatened that will affect Tenant's intended use of the Leased Property or the validity, enforceability or priority of this Lease, or Tenant's use, occupancy and operation of the Leased Property or any part thereof, and Tenant is not in default with respect to any order, writ, injunction, decree or demand of any court or other governmental or regulatory authority that could materially and adversely affect the business or assets of Tenant and its Subsidiaries taken as a whole or Tenant's use, occupancy or operation of the Leased Property. No condemnation or other like proceedings are pending or, to Tenant's knowledge, threatened against the Leased Property. (g) Condition of Property. The Land as described in Exhibit A is shown on the plat included as part of the A.L.T.A. Survey prepared by Guerriere & Halnon, Inc., last revised January 7, 1997, certification dated January 8, 1997, which was delivered to Landlord at the request of Tenant. All material improvements on the Land as of the date hereof are as shown on that survey, and except as shown on that survey there are no easements or encroachments visible or apparent from an inspection of the Real Property. Adequate provision has been made (or can be made at a cost that is reasonable in connection with development of the Land) for the Leased Property to be served by electric, gas, storm and sanitary sewers, sanitary water supply, telephone and other utilities required for the use thereof. All streets, alleys and easements necessary to serve the Leased Property have been completed and are serviceable (or can be completed at a cost that is reasonable in connection with development of the Land). The Leased Property is in a condition satisfactory for its use and occupancy. Tenant is not aware of any latent or patent material defects or deficiencies in the Real Property that, either individually or in the aggregate, could materially and adversely affect Tenant's use or occupancy or could reasonably be anticipated to endanger life or limb. (h) Organization. Tenant is duly incorporated and legally existing under the laws of the State of Delaware. Tenant has all requisite power and has procured or will procure on a timely basis all governmental certificates of authority, licenses, permits, qualifications and other documentation required to lease and operate the Leased Property. Tenant has the corporate power and adequate authority, rights and franchises to own Tenant's property and to carry on Tenant's business as now conducted and is (or has properly applied with all appropriate authorities to become) duly qualified and in good standing in each state in which the character of Tenant's business makes such qualification necessary (including, without limitation, the States of California and Massachusetts) or, if it is not so qualified in a state other than California and Massachusetts, such failure does not have a material adverse effect on the properties, assets, operations or businesses of Tenant and its Subsidiaries, taken as a whole. (i) Enforceability. The execution, delivery and performance of this Lease, the Purchase Documents, and the Environmental Indemnity are duly authorized and do not require the consent or approval of any governmental body or other regulatory authority that has not heretofore been obtained and are not in contravention of or conflict with any Applicable Laws or any term or provision of Tenant's articles of incorporation or bylaws. This Lease, the Purchase Documents, and the Environmental Indemnity are valid, binding and legally enforceable obligations of Tenant in accordance with their terms, except as such enforcement is affected by bankruptcy, insolvency and similar laws affecting the rights of creditors, generally, and equitable principles of general application. (j) Not a Foreign Person. Tenant is not a "foreign person" within the meaning Sections 1445 and 7701 of the Code (i.e., Tenant is not a non-resident alien, foreign corporation, foreign partnership, foreign trust or foreign estate as those terms are defined in the Code and regulations promulgated thereunder). (k) Omissions. To Tenant's knowledge, none of Tenant's representations or warranties contained in this Lease or any document, certificate or written statement furnished to Landlord by or on behalf of Tenant contains any untrue statement of a material fact or omits a material fact necessary in order to make the statements contained herein or therein (when taken in their entireties) not misleading. (l) Existence. Tenant shall continuously maintain its corporate existence, and Tenant shall continuously maintain its qualification to do business in the States of California and Massachusetts. (m) Tenant Taxes. Tenant shall comply with all applicable tax laws and pay before the same become delinquent all taxes imposed upon it or upon its property where the failure to so comply or so pay would have a material adverse effect on the financial condition or operations of Tenant; except that Tenant may in good faith by appropriate proceedings contest the validity, applicability or amount of any such taxes and pending such contest Tenant shall not be deemed in default under this subparagraph if (1) Tenant diligently prosecutes such contest to completion in an appropriate manner, and (2) Tenant promptly causes to be paid any tax adjudged by a court of competent jurisdiction to be due, with all costs, penalties, and interest thereon, promptly after such judgment becomes final; provided, however, in any event such contest shall be concluded and the tax, penalties, interest and costs shall be paid prior to the date any writ or order is issued under which any of Tenant's property that is material to the business of Tenant and its Subsidiaries taken as a whole may be seized or sold because of the nonpayment thereof. (n) Operation of Property. Tenant shall operate the Leased Property in a good and workmanlike manner and in compliance with all Applicable Laws and will pay all fees or charges of any kind in connection therewith. Tenant shall not use or occupy, or allow the use or occupancy of, the Leased Property in any manner which violates any Applicable Law or which constitutes a public or private nuisance or which makes void, voidable or cancelable any insurance then in force with respect thereto. To the extent that any of the following would, individually or in the aggregate, materially and adversely affect the value of the Leased Property or Tenant's use, occupancy or operations on the Leased Property, Tenant shall not: (i) initiate or permit any zoning reclassification of the Leased Property; (ii) seek any variance under existing zoning ordinances applicable to the Leased Property; (iii) use or permit the use of the Leased Property in a manner that would result in such use becoming a nonconforming use under applicable zoning ordinances or similar laws, rules or regulations; (iv) execute or file any subdivision plat affecting the Leased Property; or (v) consent to the annexation of the Leased Property to any municipality. If a change in the zoning or other Applicable Laws affecting the permitted use or development of the Leased Property shall occur that Landlord determines will materially reduce the then-current market value of the Leased Property, and if after such reduction the Stipulated Loss Value shall substantially exceed the then- current market value of the Leased Property in the reasonable judgment of Landlord, then Tenant shall pay Landlord an amount equal to such excess for application as a Qualified Payment. Tenant shall make any payment required by the preceding sentence within one hundred eighty (180) days after it is requested by Landlord, and in any event shall make any such payment before the end of the Term. Tenant shall not impose any restrictive covenants or encumbrances upon the Leased Property without the prior written consent of the Landlord; provided, that such consent shall not be unreasonably withheld for any encumbrance or restriction that is made expressly subject to this Lease, as modified from time to time, and subordinate to Landlord's interest in the Leased Property by an agreement in form satisfactory to Landlord. Tenant shall not cause or permit any drilling or exploration for, or extraction, removal or production of, minerals from the surface or subsurface of the Leased Property. Tenant shall not do any act whereby the market value of the Leased Property may be materially lessened. Tenant shall allow Landlord or its authorized representative to enter the Leased Property at any reasonable time to inspect the Leased Property and, after reasonable notice, to inspect Tenant's books and records pertaining thereto, and Tenant shall assist Landlord or Landlord's representative in whatever way reasonably necessary to make such inspections. If Tenant receives a written notice or claim from any federal, state or other governmental entity that the Leased Property is not in compliance in any material respect with any Applicable Law, or that any action may be taken against the owner of the Leased Property because the Leased Property does not comply with Applicable Law, Tenant shall promptly furnish a copy of such notice or claim to Landlord. Notwithstanding the foregoing, Tenant may in good faith, by appropriate proceedings, contest the validity and applicability of any Applicable Law with respect to the Leased Property, and pending such contest Tenant shall not be deemed in default hereunder because of a violation of such Applicable Law, if Tenant diligently prosecutes such contest to completion in a manner reasonably satisfactory to Landlord, and if Tenant promptly causes the Leased Property to comply with any such Applicable Law upon a final determination by a court of competent jurisdiction that the same is valid and applicable to the Leased Property; provided, that in any event such contest shall be concluded and the violation of such Applicable Law must be corrected and any claims asserted against Landlord or the Leased Property because of such violation must be paid by Tenant, all prior to the date that (i) any criminal charges may be brought against Landlord or any of its directors, officers or employees because of such violation or (ii) any action may be taken by any governmental authority against Landlord or any property owned by Landlord (including the Leased Property) because of such violation. (o) Debts for Construction. Tenant shall cause all debts and liabilities incurred in the construction, maintenance, operation and development of the Leased Property, including without limitation all debts and liabilities for labor, material and equipment and all debts and charges for utilities servicing the Leased Property, to be promptly paid. Notwithstanding the foregoing, Tenant may in good faith by appropriate proceedings contest the validity, applicability or amount of any asserted mechanic's or materialmen's lien and pending such contest Tenant shall not be deemed in default under this subparagraph (or subparagraphs 9.(t) or 9.(u)) because of the contested lien if (1) within sixty (60) days after being asked to do so by Landlord, Tenant bonds over to Landlord's satisfaction any contested liens alleged to secure an amount in excess of $3,000,000 (individually or in the aggregate), (2) Tenant diligently prosecutes such contest to completion in a manner reasonably satisfactory to Landlord, and (3) Tenant promptly causes to be paid any amount adjudged by a court of competent jurisdiction to be due, with all costs and interest thereon, promptly after such judgment becomes final; provided, however, that in any event each such contest shall be concluded and the lien, interest and costs shall be paid prior to the date (i) any criminal action may be instituted against Landlord or its directors, officers or employees because of the nonpayment thereof or (ii) any writ or order is issued under which any property owned by Landlord (including the Leased Property) may be seized or sold or any other action may be taken against Landlord or any property owned by Landlord because of the nonpayment thereof. (p) Impositions. Tenant shall reimburse Landlord for (or, if requested by Landlord, will pay or cause to be paid prior to delinquency) all sales, excise, ad valorem, gross receipts, business, transfer, stamp, occupancy, rental and other taxes, levies, fees, charges, surcharges, assessments or penalties which arise out of or are attributable to this Lease or which are imposed upon Landlord or the Leased Property because of the ownership, leasing, occupancy, sale or operation of the Leased Property, or any part thereof, or relating to or required to be paid by the terms of any of the Permitted Encumbrances (collectively, herein called the "Impositions"), excluding only Excluded Taxes. If Landlord requires Tenant to pay any Impositions directly to the applicable taxing authority or other party entitled to collect the same, Tenant shall furnish Landlord with receipts showing payment of such Impositions and other amounts prior to delinquency; except that Tenant may in good faith by appropriate proceedings contest the validity, applicability or amount of any asserted Imposition, and pending such contest Tenant shall not be deemed in default of this subparagraph (or subparagraphs 9.(t) or 9.(u)) because of the contested Imposition if (1) within sixty (60) days after being asked to do so by Landlord, Tenant bonds over to the satisfaction of Landlord any lien asserted against the Leased Property and alleged to secure an amount in excess of $1,000,000 because of the contested Imposition, (2) Tenant diligently prosecutes such contest to completion in a manner reasonably satisfactory to Landlord, and (3) Tenant promptly causes to be paid any amount adjudged by a court of competent jurisdiction to be due, with all costs, penalties and interest thereon, promptly after such judgment becomes final; provided, however, that in any event each such contest shall be concluded and the Impositions, penalties, interest and costs shall be paid prior to the date (i) any criminal action may be instituted against Landlord or its directors, officers or employees because of the nonpayment thereof or (ii) any writ or order is issued under which any property owned by Landlord (including the Leased Property) may be seized or sold or any other action may be taken against Landlord or any property owned by Landlord because of the nonpayment thereof. (q) Repair, Maintenance, Alterations and Additions. Tenant shall keep the Leased Property in good order, repair, operating condition and appearance (ordinary wear and tear excepted), causing all necessary repairs, renewals, replacements, additions and improvements to be promptly made, and will not allow any of the Leased Property to be materially misused, abused or wasted or to deteriorate. Tenant shall promptly replace any worn-out fixtures included within the Leased Property with fixtures comparable to the replaced fixtures when new and repair any damage caused by the removal of such fixtures. Further, Tenant shall not, without the prior written consent of Landlord, (i) remove from the Leased Property any fixtures of significant value, except such as are replaced by Tenant by articles of equal value, free and clear of any Lien (and for purposes of this clause "significant value" will mean any fixture that has a value of more than $500,000 or that, when considered together with all other fixtures removed and not replaced by Tenant by articles of equal suitability and value, has an aggregate value of $1,000,000 or more) or (ii) make any alteration to any Improvements which significantly reduce the fair market value or change the general character of the Leased Property, taken as a whole, or which impair in any significant manner the useful life or utility of the Improvements, taken as whole. Upon request of Landlord made at any time when an Event of Default shall have occurred and be continuing, Tenant shall deliver to Landlord an inventory describing and showing the make, model, serial number and location of all fixtures and personalty, if any, included in the Leased Property with a certification by Tenant that such inventory is a true and complete schedule of all such fixtures and personalty and that all items specified in the inventory are covered hereby free and clear of any Lien other than the Permitted Encumbrances described in Exhibit B. (r) Insurance and Casualty. Throughout the Term, Tenant will keep all Improvements (including all alterations, additions and changes made to the Improvements) which are located within the Leased Property insured under an all-risk property insurance policy (excluding from coverage damage by flood or earthquake, but not excluding other perils normally included within the definitions of extended coverage, vandalism and malicious mischief) in the amount of one hundred percent (100%) of the replacement value with endorsements for contingent liability from operation of building laws, increased cost of construction and demolition costs which may be necessary to comply with building laws. Tenant will be responsible for determining the amount of property insurance to be maintained, but such coverage will be on an agreed value basis to eliminate the effects of coinsurance. Such insurance shall be issued by an insurance company or companies rated by the A.M. Best Company of Oldwick, New Jersey as having a policyholder's rating of A or better and a reported financial information rating of X or better. Any deductible applicable to such insurance shall not exceed $1,000,000 (or such other amount as Landlord and Tenant may agree upon in writing from time to time). Such insurance shall cover not only the value of Tenant's interest in the Improvements, but also the interest of Landlord, and such insurance shall include provisions that Landlord must be notified at least ten (10) days prior to any cancellation or reduction of insurance coverage. With this Lease Tenant shall deliver to Landlord a certificate from the applicable insurer or its authorized agent evidencing the insurance required by this subparagraph and any additional insurance which shall be taken out upon any part of the Leased Property. Thereafter, Tenant shall deliver to Landlord certificates from the applicable insurer or its authorized agent of renewals or replacements of all such policies of insurance at least five (5) days before any such insurance shall expire. Tenant further agrees that all such policies shall provide that proceeds thereunder will be payable to Landlord as Landlord's interest may appear. If Tenant fails to obtain any insurance required by this Lease or to provide confirmation of any such insurance as required by this Lease, Landlord shall be entitled (but not required) to obtain the insurance that Tenant has failed to obtain or for which Tenant has not provided the required confirmation and, without limiting Landlord's other remedies under the circumstances, Landlord may require Tenant to reimburse Landlord for the cost of such insurance and to pay interest thereon computed at the Default Rate from the date such cost was paid by Landlord until the date of reimbursement by Tenant. In the event any of the Leased Property is destroyed or damaged by fire, explosion, windstorm, hail or by any other casualty against which insurance shall have been required hereunder, (i) Landlord may, but shall not be obligated to, make proof of loss if not made promptly by Tenant, (ii) each insurance company concerned is hereby authorized and directed to make payment for such loss directly to Landlord for application as required by Paragraph 4, and (iii) Landlord's consent must be obtained for any settlement, adjustment or compromise of any claims for loss, damage or destruction under any policy or policies of insurance (provided, that if any such claim is for less than $2,000,000 and no Event of Default shall have occurred and be continuing, Tenant alone shall have the right to settle, adjust or compromise the claim as Tenant deems appropriate; and, provided further, that any disagreement between Landlord and Tenant about the amount for which any such claim should be settled shall, at the request of either party, be resolved as provided in Exhibit D, unless an Event of Default shall have occurred and be continuing, in which case Landlord alone shall have the right to settle, adjust or compromise the claim as Landlord deems appropriate). If any casualty shall result in damage to or loss or destruction of the Leased Property in excess of $3,000,000, Tenant shall give immediate notice thereof to Landlord and Paragraph 4 shall apply. Notwithstanding the foregoing provisions of this subparagraph 9.(r), following any fire or other casualty involving the Leased Property, if insurance proceeds totaling not more than $2,000,000 are to be recovered as a result thereof, or if in connection therewith Tenant shall have executed a Voluntary Minimum Pledge Commitment and delivered any additional Collateral required to satisfy such Voluntary Minimum Pledge Commitment, Tenant shall be entitled to receive directly and hold such insurance proceeds, so long as no Event of Default shall have occurred and be continuing and so long as Tenant applies such proceeds towards the restoration, replacement and repair of the Leased Property as required by subparagraph 4.(b). (s) Condemnation. Immediately upon obtaining knowledge of the institution of any proceedings for the condemnation of the Leased Property or any portion thereof, or any other similar governmental or quasi-governmental proceedings arising out of injury or damage to the Leased Property or any portion thereof, Tenant shall notify Landlord of the pendency of such proceedings. Tenant shall, at its expense, diligently prosecute any such proceedings and shall consult with Landlord, its attorneys and experts and cooperate with them as reasonably requested in the carrying on or defense of any such proceedings. All proceeds of condemnation awards or proceeds of sale in lieu of condemnation with respect to the Leased Property and all judgments, decrees and awards for injury or damage to the Leased Property shall be paid to Landlord and applied as provided in Paragraph 4 above. Landlord is hereby authorized, in the name of Tenant, to execute and deliver valid acquittances for, and to appeal from, any such judgment, decree or award concerning condemnation of any of the Leased Property. Landlord shall not be, in any event or circumstances, liable or responsible for failure to collect, or to exercise diligence in the collection of, any such proceeds, judgments, decrees or awards. Notwithstanding the foregoing provisions of this subparagraph 9.(s), following any condemnation or sale in lieu of condemnation involving the Leased Property, if condemnation or sale proceeds totaling not more than $2,000,000 are to be recovered as a result thereof, or if in connection therewith Tenant shall have executed a Voluntary Minimum Pledge Commitment and delivered any additional Collateral required to satisfy such Voluntary Minimum Pledge Commitment, Tenant shall be entitled to receive directly and hold such condemnation or sale proceeds, so long as no Event of Default shall have occurred and be continuing and so long as Tenant applies such proceeds towards the restoration, replacement and repair of the remainder of the Leased Property as required by subparagraph 4.(b). (t) Protection and Defense of Title. If any encumbrance or title defect whatsoever affecting Landlord's fee interest in the Leased Property is claimed or discovered (excluding Permitted Encumbrances, this Lease and any other encumbrance which is claimed by Landlord or lawfully claimed through or under Landlord and which is not claimed by, through or under Tenant) or if any legal proceedings are instituted with respect to title to the Leased Property, Tenant shall give prompt written notice thereof to Landlord and at Tenant's own cost and expense will promptly cause the removal of any such encumbrance and cure any such defect and will take all necessary and proper steps for the defense of any such legal proceedings, including but not limited to the employment of counsel, the prosecution or defense of litigation and the release or discharge of all adverse claims. If Tenant fails to promptly remove any such encumbrance or title defect (other than a Lien Tenant is contesting as expressly permitted by and in accordance with subparagraph 9.(o) or subparagraph 9.(p)), Landlord (whether or not named as a party to legal proceedings with respect thereto) shall be entitled to take such additional steps as in its judgment may be necessary or proper to remove such encumbrance or cure such defect or for the defense of any such attack or legal proceedings or the protection of Landlord's fee interest in the Leased Property, including but not limited to the employment of counsel, the prosecution or defense of litigation, the compromise or discharge of any adverse claims made with respect to the Leased Property, the removal of prior liens or security interests, and all expenses (including Attorneys' Fees) so incurred of every kind and character shall be a demand obligation owing by Tenant. For purposes of this subparagraph 9.(t), Tenant shall be deemed to be acting promptly to remove any encumbrance or to cure any title defect, other than a Lien which Tenant has itself granted or authorized, so long as Tenant (or a title insurance company obligated to do so) is in good faith by appropriate proceedings contesting the validity and applicability of the encumbrance or defect, and pending such contest Tenant shall not be deemed in default under this subparagraph because of the encumbrance or defect; provided, with respect to a contest of any encumbrance or title defect which is the subject of subparagraphs 9.(o) or 9.(p), Tenant (or the applicable title insurance company) must satisfy the conditions and requirements for a permitted contest set forth in those subparagraphs, and with respect to a contest of any other encumbrance or title defect, Tenant (or the applicable title insurance company) must: (1) diligently prosecute the contest to completion in a manner reasonably satisfactory to Landlord; (2) immediately remove the encumbrance or cure the defect, as and to the extent reasonably required to preserve Landlord's indefeasible fee estate in the Leased Property and to prevent any significant adverse impact the encumbrance or defect may have on the value of the Leased Property, upon a final determination by a court of competent jurisdiction that the encumbrance or defect is valid and applicable to the Leased Property; and (3) in any event conclude the contest and remove the encumbrance or cure the defect and pay any claims asserted against Landlord or the Leased Property because of such encumbrance or defect, all prior to (i) any Designated Sale Date on which neither Tenant nor any Applicable Purchaser purchases the Leased Property pursuant to the Purchase Agreement for a price to Landlord (when taken together with any additional payments made by Tenant pursuant to Paragraph 2(a)(ii) of the Purchase Agreement, in the case of a purchase by an Applicable Purchaser) of not less than the Purchase Price, (ii) the date any criminal charges may be brought against Landlord or any of its directors, officers or employees because of such encumbrance or defect or (iii) the date any action may be taken against Landlord or any property owned by Landlord (including the Leased Property) by any governmental authority or any other Person who has or claims rights superior to Landlord because of the encumbrance or defect. (u) No Liens on the Leased Property. Tenant shall not, without the prior written consent of Landlord, create, place or permit to be created or placed, or through any act or failure to act, acquiesce in the placing of, or allow to remain, any Lien (except Permitted Encumbrances, the lien for property taxes or assessments assessed against the Leased Property which are not delinquent and any Lien Tenant is contesting as expressly permitted by and in accordance with subparagraph 9.(o) or subparagraph 9.(p)), against or covering the Leased Property or any part thereof (other than any Lien which is lawfully claimed through or under Landlord and which is not claimed by, through or under Tenant) regardless of whether the same are expressly or otherwise subordinate to this Lease or Landlord's interest in the Leased Property, and should any prohibited Lien exist or become attached hereafter in any manner to any part of the Leased Property without the prior written consent of Landlord, Tenant shall cause the same to be promptly discharged and released to the satisfaction of Landlord. (v) Books and Records. Tenant shall keep books and records that are accurate and complete in all material respects for the construction and maintenance of the Leased Property and will permit all such books and records (including without limitation all contracts, statements, invoices, bills and claims for labor, materials and services supplied for the construction and operation of any Improvements) to be inspected and copied by Landlord and its duly accredited representatives at all times during reasonable business hours; provided that so long as Tenant remains in possession of the Leased Property, Landlord or Landlord's representative will, before making any such inspection or copying any such documents, if then requested to do so by Tenant to maintain Tenant's security: (i) sign in at Tenant's security or information desk if Tenant has such a desk on the premises, (ii) wear a visitor's badge or other reasonable identification provided by Tenant when Landlord or Landlord's representative first arrives at the Leased Property, (iii) permit an employee of Tenant to observe such inspection or work, and (iv) comply with other similar reasonable nondiscriminatory security requirements of Tenant that do not, individually or in the aggregate, interfere with or delay inspections or copying by Landlord authorized by this subparagraph.. This subparagraph shall not be construed as requiring Tenant to regularly maintain separate books and records relating exclusively to the Leased Property; provided, however, that if requested by Landlord at any time when an Event of Default shall have occurred and be continuing, Tenant shall construct or abstract from its regularly maintained books and records information required by this subparagraph relating to the Leased Property. (w) Financial Statements; Required Notices; Certificates as to Default. Tenant shall deliver to Landlord and to each Participant of which Tenant has been notified: (i) as soon as available and in any event within one hundred twenty (120) days after the end of each fiscal year of Tenant, a consolidated balance sheet of Tenant and its consolidated Subsidiaries as of the end of such fiscal year and a consolidated income statement and statement of cash flows of Tenant and its consolidated Subsidiaries for such fiscal year, all in reasonable detail and all prepared in accordance with GAAP and accompanied by a report and opinion of accountants of national standing selected by Tenant, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any qualifications or exceptions as to the scope of the audit nor to any qualification or exception which Landlord determines, in Landlord's reasonable discretion, is unacceptable; provided that notwithstanding the foregoing, for so long as Tenant is a company subject to the periodic reporting requirements of Section 12 of the Securities Exchange Act of 1934, as amended, Tenant shall be deemed to have satisfied its obligations under this clause (i) so long as Tenant delivers to Landlord the same annual report and report and opinion of accountants that Tenant delivers to its shareholders; (ii) as soon as available and in any event within sixty (60) days after the end of each of the first three quarters of each fiscal year of Tenant, the consolidated balance sheet of Tenant and its consolidated Subsidiaries as of the end of such quarter and the consolidated income statement and the consolidated statement of cash flows of Tenant and its consolidated Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, all in reasonable detail and all prepared in accordance with GAAP and certified by a Responsible Financial Officer of Tenant (subject to year-end adjustments); provided that notwithstanding the foregoing, for so long as Tenant is a company subject to the periodic reporting requirements of Section 12 of the Securities Exchange Act of 1934, as amended, Tenant shall be deemed to have satisfied its obligations under this clause (ii) so long as Tenant delivers to Landlord the same quarterly reports, certified by a Responsible Financial Officer of Tenant (subject to year-end adjustments), that Tenant delivers to its shareholders; (iii) together with the financial statements furnished in accordance with subparagraph 9.(w)(ii) and 9.(w)(i), a certificate of a Responsible Financial Officer of Tenant in substantially the form attached hereto as Exhibit E: (i) certifying that to the knowledge of Tenant no Default or Event of Default under this Lease has occurred and is continuing or, if a Default or Event of Default has occurred and is continuing, a brief statement as to the nature thereof and the action which is proposed to be taken with respect thereto, (ii) certifying that the representations of Tenant set forth in Paragraph 9 of this Lease are true and correct in all material respects as of the date thereof as though made on and as of the date thereof or, if not then true and correct, a brief statement as to why such representations are no longer true and correct, and (iii) with computations demonstrating compliance with the financial covenants contained in subparagraph 9.(ac); (iv) promptly after any change in the rating of Tenant's senior, unsecured debt by Standard and Poor's Corporation or Moody's Investor Service, Inc. or in Tenant's Debt to Capital Ratio (as defined in subparagraph 1.(cm)), which will result in a change in the Spread (as defined in subparagraph 1.(cm)), a certificate of a Responsible Financial Officer of Tenant in substantially the form attached hereto as Exhibit F with computations evidencing Tenant's calculation of the Spread after giving effect to such changes; (v) promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports which Tenant sends to Tenant's stockholders, and copies of all regular, periodic and special reports, and all registration statements (other than registration statements on Form S-8 or any form substituted therefor) which Tenant files with the Securities and Exchange Commission or any governmental authority which may be substituted therefor, or with any national securities exchange; (vi) as soon as possible and in any event within five (5) Business Days after a Responsible Financial Officer of Tenant becomes aware of the occurrence of each Default or Event of Default with respect to the Affirmative Financial Covenants described in subparagraph 9.(ae) or the Negative Covenants described in subparagraph 9.(af), a statement of a Responsible Financial Officer of Tenant setting forth details of such Default or Event of Default and the action which Tenant has taken and proposes to take with respect thereto; (vii) upon request by Landlord, a statement in writing certifying that this Lease is unmodified and in full effect (or, if there have been modifications, that this Lease is in full effect as modified, and setting forth such modifications) and the dates to which the Base Rent has been paid and either stating that to the knowledge of Tenant no Default or Event of Default under this Lease has occurred and is continuing or, if a Default or Event of Default under this Lease has occurred and is continuing, a brief statement as to the nature thereof; it being intended that any such statement by Tenant may be relied upon by any prospective purchaser or mortgagee of the Leased Property and by any Participant; and (viii) such other information respecting the condition or operations, financial or otherwise, of Tenant, of any of its Subsidiaries or of the Leased Property as Landlord or any Participant through Landlord may from time to time reasonably request. Landlord is hereby authorized to deliver a copy of any information or certificate delivered to it pursuant to this subparagraph 9.(w) to any Participant and to any regulatory body having jurisdiction over Landlord that requires or requests it. (x) Further Assurances. Tenant shall, on request of Landlord, (i) promptly correct any defect, error or omission which may be discovered in the contents of this Lease or in any other instrument executed in connection herewith or in the execution or acknowledgment thereof; (ii) execute, acknowledge, deliver and record or file such further instruments and do such further acts as may be necessary, desirable or proper to carry out more effectively the purposes of this Lease and to subject to this Lease any property intended by the terms hereof to be covered hereby including specifically, but without limitation, any renewals, additions, substitutions, replacements or appurtenances to the Leased Property; (iii) execute, acknowledge, deliver, procure and record or file any document or instrument deemed advisable by Landlord to protect its rights in and to the Leased Property against the rights or interests of third persons; and (iv) provide such certificates, documents, reports, information, affidavits and other instruments and do such further acts as may be necessary, desirable or proper in the reasonable determination of Landlord to enable Landlord, Landlord's Parent and other Participants to comply with the requirements or requests of any agency or authority having jurisdiction over them. (y) Fees and Expenses; General Indemnification; Increased Costs; and Capital Adequacy Charges. (i) Except for any costs paid by Landlord with the proceeds of the advance described in subparagraph 1.(s) as part of the Closing Costs, Tenant shall pay (and shall indemnify and hold harmless Landlord, Landlord's Parent and any Person claiming through Landlord by reason of a Permitted Transfer from and against) all Losses incurred by Landlord or Landlord's Parent or any Person claiming through Landlord through a Permitted Transfer in connection with or because of (A) the ownership of any interest in or operation of the Leased Property, (B) the negotiation or administration of this Lease, the Purchase Documents, the Environmental Indemnity or the Participation Agreement, (C) the making of Funding Advances, including Attorneys' Fees or other costs incurred to evaluate lien releases and other information submitted by Tenant with requests for Construction Advances, (D) the construction of the Designated Improvements, whether such Losses are incurred at the time of execution of this Lease or at any time during the Term, or (E) Tenant's request for assistance in identifying any new Participant pursuant to Paragraph 18 of the Purchase Agreement, whether such Losses are incurred at the time of execution of this Lease or at any time during the Term. Costs and expenses included in such Losses may include, without limitation, all appraisal fees, filing and recording fees, inspection fees, survey fees, taxes (other than Excluded Taxes), brokerage fees and commissions, abstract fees, title policy fees, Uniform Commercial Code search fees, escrow fees, Attorneys' Fees and environmental consulting fees incurred by Landlord with respect to the Leased Property. If Landlord pays or reimburses Landlord's Parent for any such Losses, Tenant shall reimburse Landlord for the same notwithstanding that Landlord may have already received any payment from any other Participant on account of such Losses, it being understood that the other Participant may expect repayment from Landlord when Landlord does collect the required reimbursement from Tenant. (ii) Tenant shall also pay (and indemnify and hold harmless Landlord, Landlord's Parent and any Person claiming through Landlord by reason of a Permitted Transfer from and against) all Losses, including Attorneys' Fees, incurred or expended by Landlord or Landlord's Parent or any Person claiming through Landlord through a Permitted Transfer or in connection with (A) the breach by Tenant of any covenant of Tenant herein or in any other instrument executed in connection herewith or (B) Landlord's exercise in a lawful manner of any of Landlord's remedies hereunder or under Applicable Law or Landlord's protection of the Leased Property and Landlord's interest therein as permitted hereunder or under Applicable Law. (However, the indemnity in the preceding sentence shall not be construed to make Tenant liable to both Landlord and any Participant or other party claiming through Landlord for the same damages. For example, so long as Landlord remains entitled to recover any past due Base Rent from Tenant, no Participant shall be entitled to collect a percentage of the same Base Rent from Tenant.) Tenant shall further indemnify and hold harmless Landlord and all other Indemnified Parties against, and reimburse them for, all Losses which may be imposed upon, asserted against or incurred or paid by them by reason of, on account of or in connection with any bodily injury or death or damage to the property of third parties occurring in or upon or in the vicinity of the Leased Property through any cause whatsoever. THE FOREGOING INDEMNITY FOR INJURY, DEATH OR PROPERTY DAMAGE SHALL APPLY EVEN WHEN INJURY, DEATH OR PROPERTY DAMAGE IN, ON OR IN THE VICINITY OF THE LEASED PROPERTY RESULTS IN WHOLE OR IN PART FROM THE ORDINARY NEGLIGENCE (AS DEFINED ABOVE) OF AN INDEMNIFIED PARTY; provided, such indemnity shall not apply to Losses suffered by an Indemnified Party that were proximately caused by (and attributed by any applicable principles of comparative fault to) the Active Negligence, gross negligence or wilful misconduct of such Indemnified Party. (iii) If, after the date hereof, due to either (A) the introduction of or any change (other than any change by way of imposition or increase of reserve requirements included in the Eurodollar Rate Reserve Percentage) in or in the interpretation of any law or regulation or (B) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to Landlord's Parent or any other Participant of agreeing to make or making, funding or maintaining advances to Landlord in connection with the Leased Property, then Tenant shall from time to time, upon demand by Landlord pay to Landlord for the account of Landlord's Parent or such other Participant, as the case may be, additional amounts sufficient to compensate Landlord's Parent or the Participant for such increased cost. An increase in costs resulting from any imposition or increase of reserve requirements applicable to Collateral held from time to time by Landlord's Parent or other Participants pursuant to the Pledge Agreement would be an increase covered by the preceding sentence. A certificate as to the amount of any increased cost covered by this subparagraph, submitted to Landlord and Tenant by Landlord's Parent or the other Participant, shall be conclusive and binding for purposes of determining Tenant's obligations hereunder, absent clear and demonstrable error. (iv) Landlord's Parent or any other Participant may demand additional payments (herein called "Capital Adequacy Charges") if Landlord's Parent or the other Participant determines that any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects the amount of capital to be maintained by it and that the amount of such capital is increased by or based upon the existence of Funding Advances made or to be made to Landlord to permit Landlord to maintain Landlord's investment in the Leased Property or to make Construction Advances. To the extent that Landlord's Parent or the other Participant demands Capital Adequacy Charges as compensation for the additional capital requirements reasonably allocable to such advances, Tenant shall pay to Landlord for the account of Landlord's Parent or the other Participant, as the case may be, the amount so demanded. (v) Any amount to be paid to Landlord, Landlord's Parent or any other Indemnified Party under this subparagraph 9.(y) shall be a demand obligation owing by Tenant. Tenant's indemnities and obligations under this subparagraph 9.(y) shall survive the termination or expiration of this Lease with respect to any circumstance or event existing or occurring prior to such termination or expiration. (z) Liability Insurance. Tenant shall maintain one or more policies of commercial general liability insurance against claims for bodily injury or death and property damage occurring or resulting from any occurrence in or upon the Leased Property, in standard form and with an insurance company or companies rated by the A.M. Best Company of Oldwick, New Jersey as having a policyholder's rating of A or better and a reported financial information rating of X or better, such insurance to afford immediate protection, to the aggregate limit of not less than $10,000,000 combined single limit for bodily injury and property damage in respect of any one accident or occurrence, with not more than $1,000,000 (or such other amount as Landlord and Tenant may agree upon in writing from time to time) self-insured retention. Such commercial general liability insurance shall include blanket contractual liability coverage which insures contractual liability under the indemnifications set forth in this Lease (other than the indemnifications set forth in Paragraph 12 concerning environmental matters), but such coverage or the amount thereof shall in no way limit such indemnifications. The policy evidencing such insurance shall name as additional insureds Landlord and all Participants of which Tenant has been notified (including Landlord's Parent and the Participants). Tenant shall maintain with respect to each policy or agreement evidencing such commercial general liability insurance such endorsements as may be reasonably required by Landlord and shall at all times deliver and maintain with Landlord written confirmation (in form satisfactory to Landlord) with respect to such insurance from the applicable insurer or its authorized agent, which confirmation must provide that insurance coverage will not be canceled or reduced without at least ten (10) days notice to Landlord. Not less than five (5) days prior to the expiration date of each policy of insurance required of Tenant pursuant to this subparagraph, Tenant shall deliver to Landlord a certificate evidencing a paid renewal policy or policies. (aa) Permitted Encumbrances. Except to the extent expressly required of Landlord by subparagraph 10.(b), Tenant shall comply with and will cause to be performed all of the covenants, agreements and obligations imposed upon the owner of the Leased Property in the Permitted Encumbrances in accordance with their respective terms and provisions. Tenant shall not, without the prior written consent of Landlord, modify or permit any modification of any Permitted Encumbrance in any manner that could impose significant monetary obligations upon Landlord or any subsequent owner of the Leased Property, could significantly and adversely affect the value of the Leased Property, could impose any lien to secure payment or performance obligations against any part of the Leased Property or would otherwise be material and adverse to Landlord. (ab) Environmental. (i) Environmental Covenants. Tenant covenants: a) not to cause or permit the Leased Property to be in violation of, or do anything or permit anything to be done which will subject the Leased Property to any remedial obligations under, any Environmental Laws, including without limitation CERCLA and RCRA, assuming disclosure to the applicable governmental authorities of all relevant facts, conditions and circumstances pertaining to the Leased Property; b) not to conduct or authorize others to conduct Hazardous Substance Activities on the Leased Property, except Permitted Hazardous Substance Use; c) to the extent required by Environmental Laws, to remove Hazardous Substances from the Leased Property (or if removal is prohibited by law, to take whatever action is required by law) promptly upon discovery; and d) not to discharge or authorize the discharge of anything (including Permitted Hazardous Substances) from the Leased Property into groundwater or surface water that would require any permit under applicable Environmental Laws, other than storm water runoff. If Tenant's failure to cure any breach of the covenants listed above in this subparagraph (i) continues beyond the Environmental Cure Period (as defined below), Landlord may, in addition to any other remedies available to it, after notifying Tenant of the remediation efforts Landlord believes are needed, cause the Leased Property to be freed from all Hazardous Substances (or if removal is prohibited by law, to take whatever action is required by law), and the cost of the removal shall be a demand obligation owing by Tenant to Landlord. Further, subject to the provisions of subparagraph 12.(c) below, Tenant agrees to indemnify Landlord against all Losses incurred by or asserted or proven against Landlord in connection therewith. As used in this subparagraph, "Environmental Cure Period" means the period ending on the earlier of: (1) one hundred and eighty days (180) after Tenant is notified of the breach which must be cured within such period, or such longer period as is reasonably required for any cure that Tenant pursues with diligence pursuant to and in accordance with an Approved Plan (as defined below), (2) the date any writ or order is issued for the levy or sale of any property owned by Landlord (including the Leased Property) or any criminal action is instituted against Landlord or any of its directors, officers or employees because of the breach which must be cured within such period, (3) the end of the Term. As used in this subparagraph, an "Approved Plan" means a plan of remediation of a violation of Environmental Laws for which Tenant has obtained, within one hundred and eighty days (180) after Tenant is notified of the applicable breach of the covenants listed above in this subparagraph (i), the written approval of the governmental authority with primary jurisdiction over the violation and with respect to which no other governmental authority asserting jurisdiction has claimed such plan is inadequate. (ii) Environmental Inspections and Reviews. Landlord reserves the right to retain an independent professional consultant to review any report prepared by Tenant or to conduct Landlord's own investigation to confirm whether Hazardous Substances Activities or the discharge of anything into groundwater or surface water has occurred in violation of the preceding subparagraph (i), but Landlord's right to reimbursement for the fees of such consultant shall be limited to the following circumstances: (1) an Event of Default shall have occurred; (2) Landlord shall have retained the consultant to establish the condition of the Leased Property just prior to any conveyance thereof pursuant to the Purchase Agreement or just prior to the expiration of this Lease; (3) Landlord shall have retained the consultant to satisfy any regulatory requirements applicable to Landlord or its Affiliates; or (4) Landlord shall have retained the consultant because Landlord has been notified of a violation of Environmental Laws concerning the Leased Property or Landlord otherwise reasonably believes that Tenant has not complied with the preceding subparagraph (i). Tenant grants to Landlord and to Landlord's agents, employees, consultants and contractors the right during reasonable business hours and after reasonable notice to enter upon the Leased Property to inspect the Leased Property and to perform such tests as are reasonably necessary or appropriate to conduct a review or investigation of Hazardous Substances on, or any discharge into groundwater or surface water from, the Leased Property. Tenant shall promptly reimburse Landlord for the cost of any such inspections and tests, but only when the inspections and tests are (1) ordered by Landlord after an Event of Default; (2) ordered by Landlord to establish the condition of the Leased Property just prior to any conveyance thereof pursuant to the Purchase Agreement or just prior to the expiration of this Lease; (3) ordered by Landlord to satisfy any regulatory requirements applicable to Landlord or its Affiliates; or (4) ordered because Landlord has been notified of a violation of Environmental Laws concerning the Leased Property or Landlord otherwise reasonably believes that Tenant has not complied with the preceding subparagraph (i). (iii) Notice of Environmental Problems. Tenant shall immediately advise Landlord of (i) any discovery of any event or circumstance which would render any of the representations contained in subparagraph 9.(e) inaccurate in any material respect if made at the time of such discovery, (ii) any remedial action taken by Tenant in response to any (A) discovery of any Hazardous Substances other than Permitted Hazardous Substances on, under or about the Leased Property or (B) any claim for damages resulting from Hazardous Substance Activities, (iii) Tenant's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Leased Property which could cause the Leased Property or any part thereof to be subject to any ownership, occupancy, transferability or use restrictions under Environmental Laws, or (iv) any investigation or inquiry affecting the Leased Property by any governmental authority in connection with any Environmental Laws. In such event, Tenant shall deliver to Landlord within thirty (30) days after Landlord's request, a preliminary written environmental plan setting forth a general description of the action that Tenant proposes to take with respect thereto, if any, to bring the Leased Property into compliance with Environmental Laws or to correct any breach by Tenant of the covenants listed above in subparagraph (i), including, without limitation, any proposed corrective work, the estimated cost and time of completion, the name of the contractor and a copy of the construction contract, if any, and such additional data, instruments, documents, agreements or other materials or information as Landlord may reasonably request. (ac) Affirmative Financial Covenants. (i) Quick Ratio. Tenant shall maintain a ratio of (A) Quick Assets of Tenant and its Subsidiaries (determined on a consolidated basis) to (B) the sum of Current Liabilities of Tenant and its Subsidiaries (determined on a consolidated basis), of not less than 1.00 to 1.00. As used in this subparagraph 9.(ac), "Quick Assets" means the sum (without duplication of any item) of the Collateral held and pledged under the Pledge Agreement, plus unencumbered cash, plus unencumbered short term cash investments, plus other unencumbered marketable securities which are classified as short term investments according to GAAP, plus the fair market value of unencumbered Long-Term Investments, plus unencumbered current net accounts receivable. For purposes of determining Quick Assets, assets will be deemed to be "unencumbered" if they are actually unencumbered or if they are encumbered only by Liens, from which, at the time of the applicable determination of Quick Assets, Tenant is entitled to a release of such assets upon no more than ninety days' notice, without any payment (other than the payment of ministerial fees and costs), without subjecting other assets to any Lien and without otherwise satisfying any condition that is beyond Tenant's control. As used herein "Long-Term Investments" means those investments described below (to the extent that they are not classified as short term investments in accordance with GAAP), provided that such investments shall have maturities of not longer than two years, and shall be rated not less than A- by Standard & Poor's Corporation or less than A by Moody's Investors Service, Inc.: (1) Securities issued or fully guaranteed or fully insured by the United States government or any agency thereof and backed by the full faith and credit of the United States; (2) Certificates of deposit, time deposits, eurodollar time deposits, repurchase agreements, or banker's acceptances that are issued by either one of the 50 largest (in assets) banks in the United States or by one of the 100 largest (in assets) banks in the world; and (3) Notes and municipal bonds. As used in this subparagraph 9.(ac), "Current Liabilities" means, with respect to any Person, all liabilities of such Person treated as current liabilities in accordance with GAAP, including without limitation (a) all obligations payable on demand or within one year after the date in which the determination is made and (b) installment and sinking fund payments required to be made within one year after the date on which determination is made, but excluding all such liabilities or obligations which are renewable or extendable at the option of such Person to a date more than one year from the date of determination. (ii) Maximum Senior Debt to Capitalization. Throughout the Term Tenant shall maintain a ratio of Senior Debt to Capitalization of not more than 0.35 to 1.00. As used in this subparagraph 9.(ac): "Senior Debt" means the outstanding Debt of Tenant and its Subsidiaries (determined on a consolidated basis), minus the aggregate principal amount of the Subordinated Debt. "Capitalization" means the sum of the Debt of Tenant and its Subsidiaries (determined on a consolidated basis), including the aggregate principal amount of the Subordinated Debt, plus Consolidated Tangible Net Worth of Tenant and its Subsidiaries (determined on a consolidated basis). "Subordinated Debt" means the following unsecured Debt of Tenant: (i) unsecured Debt in respect of the $110,000,000 aggregate principal amount at maturity of 10 1/14% Convertible Subordinated Notes due 2001 issued pursuant to the Indenture (in this definition called the "Existing Subordinated Notes") but only so long as such unsecured Debt remains expressly and unconditionally subordinated to the payment and performance obligations of Tenant in transactions of the type and structure contemplated by this Lease and the Purchase Agreement; (ii) other unsecured Debt of Tenant which is expressly and unconditionally subordinated to the obligations of Tenant under this Lease and the Purchase Agreement on the same terms as the Existing Subordinated Notes or on other terms approved by the Majority, as defined in the Participation Agreement (such approval not to be unreasonably withheld), which together with the Existing Subordinated Notes, does not exceed at any time an aggregate amount equal to fifteen percent (15%) of Tenant's Consolidated Tangible Net Worth at such time; and (iii) other unsecured Debt of Tenant in an amount approved in writing by the Majority and which is expressly and unconditionally subordinated to the obligations of Tenant under this Lease and the Purchase Agreement on terms approved in writing by the Majority, in each case in its sole discretion. "Consolidated Tangible Net Worth" means, at any date of determination thereof, the excess determined in accordance with GAAP of consolidated total assets on such date over consolidated total liabilities on such date; provided, however, that Intangible Assets on such date shall be excluded from any determination of consolidated total assets on such date. "Intangible Assets" means, as of the date of any determination thereof, the total amount of all assets of Tenant and its consolidated Subsidiaries that are properly classified as "intangible assets" in accordance with GAAP and, in any event, shall include, without limitation, goodwill, patents, trade names, trademarks, copyrights, franchises, experimental expense, organization expense, unamortized debt discount and expense, and deferred charges other than prepaid insurance and prepaid taxes and current deferred taxes which are classified on the balance sheet of Tenant and its consolidated Subsidiaries as a current asset in accordance with GAAP and in which classification Tenant's independent public accountants concur. "Indenture" means the Indenture dated as of November 1, 1994 by and between Tenant and the First National Bank of Boston, as trustee. (iii) Minimum Tangible Net Worth. Tenant shall not permit its Consolidated Tangible Net Worth, on a consolidated basis, at the end of any fiscal quarter to be less than the sum of: (A) eighty percent (80%) of Consolidated Tangible Net Worth of Tenant as of May 31, 1997 (restated to give effect to Tenant's subsequent merger with U.S. Robotics, such that "Consolidated Tangible Net Worth" as used in this clause (A) reflects not only Tenant's May 31, 1997 Consolidated Tangible Net Worth as reported prior to the merger, but also the March 30, 1997 Consolidated Tangible Net Worth of U.S. Robotics reported prior to the merger); plus (B) fifty percent (50%) of Tenant's net income (but without deducting any net losses for any period) earned in each fiscal quarter, starting with the quarter ended August 31, 1997, and ending with the quarter which, at such time, is the most recently ended fiscal quarter; less (C) the amount of write-offs resulting from acquisitions after May 31, 1997, such amount not to exceed an aggregate, cumulative amount of $550,000,000. (iv) Fixed Charge Ratio. Throughout the Term Tenant shall maintain as of the last day of each fiscal quarter of Tenant a ratio of (A) Adjusted EBIT of Tenant and its Subsidiaries (determined on a consolidated basis) for the twelve (12) month period ending on such date, to (B) Fixed Charges of Tenant and its Subsidiaries (determined on a consolidated basis) for the twelve (12) month period ending on such date, of not less than 2.00 to 1.00. As used in this clause (iv), "Adjusted EBIT" means, for any accounting period, net income (or net loss), plus the amounts (if any) which, in the determination of net income (or net loss) for such period, have been deducted for (a) gross interest expense, (b) income tax expense (c) rent expense under leases of property (excluding rent expense payable under any "Minor Lease", which shall mean a lease under which rent is less than $1,000,000 per annum), (d) depreciation, and (e) non- recurring charges taken in connection with acquisitions, in each case determined in accordance with GAAP. As used in this clause (iv), "Fixed Charges" means, for any accounting period, the sum of (a) gross interest expense, plus (b) amortization of principal or debt discount in respect of all Debt during such period, plus (c) rent payable under all leases of property during such period (excluding rent payable under any Minor Lease), plus (d) taxes payable during such period. EX-10 7 (ad) Negative Covenants. Without the prior written consent of Landlord in each case, neither Tenant nor any of its Subsidiaries shall: (i) Liens. Create, incur, assume or suffer to exist any Lien, upon or with respect to any of its properties, now owned or hereafter acquired; provided, however, that the following shall be permitted except to the extent that they would encumber any interest in the Leased Property in violation of other provisions of this Lease or would encumber Collateral covered by the Pledge Agreement: a) Liens for taxes or assessments or other government charges or levies if not yet due and payable or if they are being contested in good faith by appropriate proceedings and for which appropriate reserves are maintained; b) Liens that secure obligations incurred in the ordinary course of business, that are not past due for more than thirty (30) days (or that are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established) and that: (1) are imposed by law, such as mechanic's, materialmen's, landlord's, warehousemen's and carrier's Liens, and other similar Liens; or (2) encumber only equipment or other tangible personal property and any proceeds thereof (including Liens created by equipment leases) and are imposed to secure the payment of the purchase price or other direct costs of acquiring the equipment or other tangible personal property they encumber; c) Liens under workmen's compensation, unemployment insurance, social security or similar legislation (other than ERISA); d) Liens, deposits or pledges to secure the performance of bids, tenders, contracts (other than contracts for the payment of money), leases, public or statutory obligations, surety, stay, appeal, indemnity, performance or other similar bonds, or other similar obligations arising in the ordinary course of business; e) judgment and other similar Liens arising in connection with court proceedings; provided that the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings; f) easements, rights-of-way, restrictions and other similar encumbrances which, in the aggregate, do not materially interfere with the occupation, use and enjoyment by Tenant or any such Subsidiary of the property or assets encumbered thereby in the normal course of its business or materially impair the value of the property subject thereto; g) Liens securing obligations of such a Subsidiary to Tenant or to another such Subsidiary; h) Liens incurred after the date of this Lease given to secure the payment of the purchase price or other direct costs incurred in connection with the acquisition, construction, improvement or rehabilitation of assets, including Liens existing on such assets at the time of acquisition thereof or at the time of acquisition by Tenant or a Subsidiary of any business entity (including a Subsidiary) then owning such assets, whether or not such existing Liens were given to secure the payment of the purchase price of the assets to which they attach, provided that (i) except in the case of Liens existing on assets at the time of acquisition of a Subsidiary then owning such assets, the Lien shall be created within six (6) months of the later of the acquisition of, or the completion of the construction or improvement in respect of, such assets and shall attach solely to such assets, and (ii) except in the case of Liens existing on assets at the time of acquisition of a Subsidiary then owning such assets, at the time such Liens are imposed, the aggregate amount remaining unpaid on all Debt secured by Liens on such assets whether or not assumed by Tenant or a Subsidiary shall not exceed an amount equal to seventy-five percent (75%) of the lesser of the total purchase price or fair market value, at the time such Debt is incurred, of such assets; i) existing mortgages and deeds of trust as of the date of this Lease; j) Liens created by any real property lease (including this Lease), or related documents (including the Purchase Agreement and other separate purchase agreements), that require Tenant or its Subsidiaries to purchase or cause another to purchase any interest in the property covered thereby and thus guarantee a minimum residual value of the property to the landlord; provided, that the value of all such leases (including this Lease) shall not exceed an aggregate, cumulative amount of $700,000,000 (for purposes of this Section (ad)(i), the "value" of a lease means the amount, determined as of the date the lease became effective, equal to the greater of (1) the present value of rentals and other minimum lease payments required in connection with such lease [calculated in accordance with FASB Statement 13 and other GAAP relevant to the determination of the whether such lease must be accounted for as capital leases, and calculated under the assumption that any allowance for construction to be provided by the landlord will be fully funded] or (2) the fair value of the property covered thereby); k) Liens imposed to secure Debt incurred to finance the acquisition of property which has been leased or sold by Tenant or one of its Subsidiaries to another Person (other than Tenant or a Subsidiary of Tenant) pursuant to a lease or sales agreement providing for payments sufficient to pay such Debt in full, provided such Debt is not a general obligation of Tenant or its Subsidiaries, but rather is payable only from the rentals or other sums payable under the lease or sales agreement or from the property sold or leased thereunder; l) Liens not otherwise permitted by this subparagraph 9.(ad)(i) (and not encumbering the Leased Property or any Collateral) which secure the payment of Debt, provided that (i) at no time does the sum of the aggregate amount of all outstanding Debt secured by such Liens exceed $50,000,000, and (i) such Liens do not constitute Liens against Tenant's interest in any material Subsidiary or blanket Liens against all or substantially all of the inventory, receivables, general intangibles or equipment of Tenant or of any material Subsidiary of Tenant (for purposes of this clause, a "material Subsidiary" means any subsidiary whose assets represent a substantial part of the total assets of Tenant and its Subsidiaries, determined on a consolidated basis in accordance with GAAP); and m) Liens incurred in connection with any renewals, extensions or refundings of any Debt secured by Liens described in the other clauses of this subparagraph 9.(ad)(i), provided that there is no increase in the aggregate principal amount of Debt secured thereby from that which was outstanding as of the date of such renewal, extension or refunding and no additional property is encumbered. (ii) Transactions with Affiliates. Enter into any transactions that individually or in the aggregate are material to Tenant (including, without limitation, the purchase, sale or exchange of property or the rendering of any service) with any Affiliates, except upon fair and reasonable terms no less favorable to Tenant than would be obtained in a comparable arm's length transaction with a Person not an Affiliate. (iii) Mergers; Sales of Assets. a) Except to the extent permitted by the last sentence of this subparagraph 9.(ad), liquidate or dissolve, or merge, consolidate with or into, or convey, transfer, lease, or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired), to any Person, or enter into any joint venture, partnership or other combination which involves the investment, sale, lease, loan, or other disposition of the business or all of the assets of Tenant and its Subsidiaries or so much thereof as, in the reasonable opinion of Landlord, constitutes a substantial portion of such business or assets. b) Except to the extent permitted by the last sentence of this subparagraph 9.(ad), acquire the assets or business of any Person, other than in the ordinary course of Tenant's business as presently conducted. (iv) Sale of Receivables. Sell for less than the full face value of, or otherwise sell for consideration other than cash, any of its notes or accounts receivable. However, this subparagraph (iv) shall not prohibit: a) a sale of receivables for cash at a discount which is less than fifteen percent (15%) of the face value of all receivables then outstanding on the books of Tenant and its consolidated Subsidiaries, if such sale and all other discounted sales of receivables permitted by this clause a) during the same fiscal year of Tenant do not affect more than fifteen percent (15%) of the individual accounts (excluding intercompany accounts) comprising the receivables of Tenant and its Subsidiaries; b) any license or sale of products or services in the ordinary course of business where payment for such transactions is made by credit card, provided that the fees and discounts incurred by the Tenant or the Subsidiary in connection therewith shall not exceed the normal and customary fees and discounts incurred for general credit card transactions through major credit card issuers; or c) the delivery and endorsement to banks in the ordinary course of business by Tenant or any of its Subsidiaries of promissory notes received in payment of trade receivables, where delivery and endorsement are made prior to the date of maturity of such promissory notes, and the retention by such banks of normal and customary fees and discounts therefor, provided such practice is usual and customary in the country where such activity occurs. (v) Change of Business. Permit any significant change in the nature of the business of Tenant and its Subsidiaries, taken as whole, from that presently conducted. Notwithstanding any contrary provisions of subparagraph 9.(ad)(iii), Tenant may engage in any of the following transactions, provided that immediately prior to and immediately after giving effect thereto, no Default or Event of Default exists or would exist: (i) merge with another entity if Tenant is the corporation surviving the merger; (ii) enter into joint ventures; (iii) acquire the assets or business of another Person; or (iv) liquidate or dissolve Subsidiaries to the extent that such liquidations and dissolutions would not, in the aggregate, result in a material adverse effect on the properties, assets, operations or businesses of Tenant and its Subsidiaries, taken as a whole. (ae) ERISA. (i) Each Plan is in compliance in all material respects with, and has been administered in all material respects in compliance with, the applicable provisions of ERISA, the Code and any other applicable Federal or state law, and as of the date hereof no event or condition is occurring or exists which would require a notice from Tenant under clause 9.(ae)(ii). (ii) Tenant shall provide a notice to Landlord as soon as possible after, and in any event within ten (10) days after Tenant becomes aware that, any of the following has occurred, with respect to which the potential aggregate liability to Tenant relating thereto is $2,000,000 or more, and such notice shall include a statement signed by a senior financial officer of Tenant setting forth details of the following and the response, if any, which Tenant or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to Pension Benefit Guaranty Corporation by Tenant or an ERISA Affiliate with respect to any of the following or the events or conditions leading up it): (A) the assertion, to secure any Unfunded Benefit Liabilities, of any Lien against the assets of Tenant, against the assets of any Plan of Tenant or any ERISA Affiliate of Tenant or against any interest of Landlord or Tenant in the Leased Property or the Collateral covered by the Pledge Agreement, or (B) the taking of any action by the Pension Benefit Guaranty Corporation or any other governmental authority action against Tenant to terminate any Plan of Tenant or any ERISA Affiliate of Tenant or to cause the appointment of a trustee or receiver to administer any such Plan. 10. Representations, Warranties and Covenants of Landlord. Landlord represents, warrants and covenants as follows: (a) Title Claims By, Through or Under Landlord. Except by a Permitted Transfer, Landlord shall not assign, transfer, mortgage, pledge, encumber or hypothecate this Lease or any interest of Landlord in and to the Leased Property during the Term without the prior written consent of Tenant. Landlord further agrees that if any encumbrance or title defect affecting the Leased Property is lawfully claimed through or under Landlord, including any judgment lien lawfully filed against Landlord, Landlord will at its own cost and expense remove any such encumbrance and cure any such defect; provided, however, Landlord shall not be responsible for (i) any Permitted Encumbrances (regardless of whether claimed through or under Landlord) or any other encumbrances not lawfully claimed through or under Landlord, (ii) any encumbrances or title defects claimed by, through or under Tenant, an Approved Participant, or any other Participant (other than Landlord's Parent) which Tenant shall have approved, or (iii) any encumbrance or title defect arising because of Landlord's compliance with subparagraph 10.(b) or any request made by Tenant. (b) Actions Required of the Title Holder. So long as no Event of Default shall have occurred and be continuing, Landlord shall take any and all action required of Landlord by the Permitted Encumbrances or otherwise required of Landlord by Applicable Laws or reasonably requested by Tenant (including granting any utility easements required in connection with construction of Improvements); provided that (i) actions Tenant may require of Landlord under this subparagraph shall be limited to actions that can only be taken by Landlord as the owner of the Leased Property, as opposed to any action that can be taken by Tenant or any third party (and the payment of any monetary obligation shall not be an action required of Landlord under this subparagraph unless Landlord shall first have received funds from Tenant, in excess of any other amounts due from Tenant hereunder, sufficient to pay such monetary obligations), (ii) Tenant requests the action to be taken by Landlord (which request must be specific and in writing, if required by Landlord at the time the request is made) and (iii) the action to be taken will not constitute a violation of any Applicable Laws or compromise or constitute a waiver of Landlord's rights hereunder or under the Purchase Documents, or Environmental Indemnity or otherwise be reasonably objectionable to Landlord. Any Losses incurred by Landlord because of any action taken pursuant to this subparagraph shall be covered by the indemnification set forth in subparagraph 9.(y). Further, for purposes of such indemnification, any action taken by Landlord will be deemed to have been made at the request of Tenant if made pursuant to any request of Tenant's counsel or of any officer of Tenant (or with their knowledge, and without their objection) in connection with the closing under the Existing Contract or the execution, administration or enforcement of any Construction Document. (c) No Default or Violation. The execution, delivery and performance of this Lease do not contravene, result in a breach of or constitute a default under any material contract or agreement to which Landlord is a party or by which Landlord is bound and do not, to the knowledge of Landlord, violate or contravene any law, order, decree, rule or regulation to which Landlord is subject. (d) No Suits. To Landlord's knowledge there are no judicial or administrative actions, suits or proceedings involving the validity, enforceability or priority of this Lease, and to Landlord's knowledge no such suits or proceedings are threatened. (e) Organization. Landlord is duly incorporated and legally existing under the laws of Delaware and is or, if necessary, will become duly qualified to do business in the States of California and Massachusetts. Landlord has or will obtain, at Tenant's expense pursuant to the other provisions of this Lease, all requisite power and all material governmental certificates of authority, licenses, permits, qualifications and other documentation necessary to own and lease the Leased Property and to perform its obligations under this Lease. (f) Enforceability. The execution, delivery and performance of this Lease and the Purchase Documents by Landlord are duly authorized, are not in contravention of or conflict with any term or provision of Landlord's articles of incorporation or bylaws and do not, to Landlord's knowledge, require the consent or approval of any governmental body or other regulatory authority that has not heretofore been obtained or conflict with any Applicable Laws. This Lease and the Purchase Documents are valid, binding and legally enforceable obligations of Landlord except as such enforcement is affected by bankruptcy, insolvency and similar laws affecting the rights of creditors, generally, and equitable principles of general application; provided, Landlord makes no representation or warranty that conditions imposed by any state or local Applicable Laws to the purchase, ownership, lease or operation of the Leased Property have been satisfied. (g) Existence. Landlord will continuously maintain its existence and, after qualifying to do business in the States of California and Massachusetts if Landlord has not already done so, Landlord will continuously maintain its right to do business in those states to the extent necessary for the performance of Landlord's obligations hereunder. (h) Not a Foreign Person. Landlord is not a "foreign person" within the meaning of the Sections 1445 and 7701 of the Code (i.e., Landlord is not a non-resident alien, foreign corporation, foreign partnership, foreign trust or foreign estate as those terms are defined in the Code and regulations promulgated thereunder). 11. Assignment and Subletting. (a) Consent Required. During the term of this Lease, without the prior written consent of Landlord first had and received, Tenant shall not assign, transfer, mortgage, pledge or hypothecate this Lease or any interest of Tenant hereunder and shall not sublet all or any part of the Leased Property, by operation of law or otherwise; provided, that, so long as no Event of Default has occurred and is continuing, Tenant shall be entitled without the consent of Landlord to sublet all or any portion of the space in any then completed Improvements if: (i) any sublease by Tenant is made expressly subject and subordinate to the terms hereof; (ii) no sublease has a term longer than the remainder of the then effective term of this Lease; (iii) the use permitted by such sublease is expressly limited to general office use or other uses approved in advance by Landlord as uses that will not present extraordinary risks of uninsured environmental or other liability; and (iv) no more than forty-five percent (45%) of the total space of completed Improvements shall be subleased without Landlord's prior consent to any Person that is neither (A) an Affiliate of Tenant nor (B) the operator of a business in the subleased space that is related to the operation of Tenant's own business (such as another venturer in a joint venture with Tenant). (b) Standard for Landlord's Consent to Assignments and Certain Other Matters. Consents and approvals of Landlord which are required by this Paragraph 11 will not be unreasonably withheld, but Tenant acknowledges that Landlord's withholding of such consent or approval shall be reasonable if Landlord determines in good faith that (1) giving the approval may increase Landlord's risk of liability for any existing or future environmental problem, (2) giving the approval is likely to substantially increase Landlord's administrative burden of complying with or monitoring Tenant's compliance with the requirements of this Lease, or (3) any transaction for which Tenant has requested the consent or approval would negate Tenant's representations in this Lease regarding ERISA or cause this Lease or the other documents referenced herein to constitute a violation of any provision of ERISA. (c) Consent Not a Waiver. No consent by Landlord to a sale, assignment, transfer, mortgage, pledge or hypothecation of this Lease or Tenant's interest hereunder, and no assignment or subletting of the Leased Property or any part thereof in accordance with this Lease or otherwise with Landlord's consent, shall release Tenant from liability hereunder; and any such consent shall apply only to the specific transaction thereby authorized and shall not relieve Tenant from any requirement of obtaining the prior written consent of Landlord to any further sale, assignment, transfer, mortgage, pledge or hypothecation of this Lease or any interest of Tenant hereunder. (d) Landlord's Assignment. Landlord shall have the right to transfer, assign and convey, in whole or in part, the Leased Property and any and all of its rights under this Lease by any conveyance that constitutes a Permitted Transfer. (However, any Permitted Transfer shall be subject to all of the provisions of each and every agreement concerning the Leased Property then existing between Landlord and Tenant, including without limitation this Lease and the Purchase Agreement.) If Landlord sells or otherwise transfers the Leased Property and assigns its rights under this Lease and the Purchase Documents pursuant to a Permitted Transfer, then to the extent Landlord's successor in interest confirms its liability for the obligations imposed upon Landlord by this Lease and the Purchase Documents on and subject to the express terms and conditions set out herein and therein, the original Landlord shall thereby be released from any obligations thereafter arising under this Lease and the Purchase Documents, and Tenant will look solely to each successor in interest of Landlord for performance of such obligations. However, notwithstanding anything to the contrary herein contained, if withholding taxes are imposed on the rents and other amounts payable to Landlord hereunder because of Landlord's assignment of this Lease to any citizen of, or any corporation or other entity formed under the laws of, a country other than the United States, Tenant shall not be required to compensate such assignee for the withholding tax. Further, during the Term and so long as no Event of Default has occurred and is continuing, Landlord shall not decrease the aggregate of its and Landlord's Parent's Percentages under and as defined in the Participation Agreement below the minimum percentage require by paragraph 14.2 of the Participation Agreement. 12. Environmental Indemnification. (a) Indemnity. Tenant hereby agrees to assume liability for and to pay, indemnify, defend, and hold harmless each and every Indemnified Party from and against any and all Environmental Losses, subject only to the provisions of subparagraph 12.(c) below. (b) Assumption of Defense. (i) If an Indemnified Party notifies Tenant of any claim, demand, action, administrative or legal proceeding, investigation or allegation as to which the indemnity provided for in this Paragraph 12 applies, Tenant shall assume on behalf of the Indemnified Party and conduct with due diligence and in good faith the investigation and defense thereof and the response thereto with counsel selected by Tenant but reasonably satisfactory to the Indemnified Party; provided, that the Indemnified Party shall have the right to be represented by advisory counsel of its own selection and at its own expense; and provided further, that if any such claim, demand, action, proceeding, investigation or allegation involves both Tenant and the Indemnified Party and the Indemnified Party shall have been advised in writing by counsel that there may be legal defenses available to it which are inconsistent with those available to Tenant, then the Indemnified Party shall have the right to select separate counsel to participate in the investigation and defense of and response to such claim, demand, action, proceeding, investigation or allegation on its own behalf, and Tenant shall pay or reimburse the Indemnified Party for all Attorney's Fees incurred by the Indemnified Party because of the selection of such separate counsel. (ii) If any claim, demand, action, proceeding, investigation or allegation arises as to which the indemnity provided for in this Paragraph 12 applies, and Tenant fails to assume promptly (and in any event within fifteen (15) days after being notified of the claim, demand, action, proceeding, investigation or allegation) the defense of the Indemnified Party, then the Indemnified Party may contest (or settle, with the prior written consent of Tenant, which consent will not be unreasonably withheld) the claim, demand, action, proceeding, investigation or allegation at Tenant's expense using counsel selected by the Indemnified Party; provided, that if any such failure by Tenant continues for thirty (30) days or more after Tenant is notified thereof, no such contest need be made by the Indemnified Party and settlement or full payment of any claim may be made by the Indemnified Party without Tenant's consent and without releasing Tenant from any obligations to the Indemnified Party under this Paragraph 12 so long as, in the written opinion of reputable counsel to the Indemnified Party, the settlement or payment in full is clearly advisable. (c) Notice of Environmental Losses. If an Indemnified Party receives a written notice of Environmental Losses that such Indemnified Party believes are covered by this Paragraph 12, then such Indemnified Party will be expected to promptly furnish a copy of such notice to Tenant. The failure to so provide a copy of the notice to Tenant shall not excuse Tenant from its obligations under this Paragraph 12; provided, that if Tenant is unaware of the matters described in the notice and such failure renders unavailable defenses that Tenant might otherwise assert, or precludes actions that Tenant might otherwise take, to minimize its obligations hereunder, then Tenant shall be excused from its obligation to indemnify such Indemnified Party (and any Affiliate of such Indemnified Party) against Environmental Losses, if any, which would not have been incurred but for such failure. For example, if Landlord fails to provide Tenant with a copy of a notice of an obligation covered by the indemnity set out in subparagraph 12.(a) and Tenant is not otherwise already aware of such obligation, and if as a result of such failure Landlord becomes liable for penalties and interest covered by the indemnity in excess of the penalties and interest that would have accrued if Tenant had been promptly provided with a copy of the notice, then Tenant will be excused from any obligation to Landlord (or any Affiliate of Landlord) to pay the excess. (d) Rights Cumulative. The rights of each Indemnified Party under this Paragraph 12 shall be in addition to any other rights and remedies of such Indemnified Party against Tenant under the other provisions of this Lease or under any other document or instrument now or hereafter executed by Tenant, or at law or in equity (including, without limitation, any right of reimbursement or contribution pursuant to CERCLA). (e) Survival of the Indemnity. Tenant's obligations under this Paragraph 12 shall survive the termination or expiration of this Lease. All obligations of Tenant under this Paragraph 12 shall be payable upon demand, and any amount due upon demand to any Indemnified Party by Tenant which is not paid shall bear interest from the date of such demand at a floating interest rate equal to the Default Rate, but in no event in excess of the maximum rate permitted by law. 13. Landlord's Right of Access. (a) Landlord and Landlord's representatives may enter the Leased Property, after five (5) Business Days advance written notice to Tenant (except in the event of an emergency, when no advance notice will be required), for the purpose of making inspections or performing any work Landlord is authorized to undertake by the next subparagraph. So long as Tenant remains in possession of the Leased Property, Landlord or Landlord's representative will, before making any such inspection or performing any such work on the Leased Property, if then requested to do so by Tenant to maintain Tenant's security: (i) sign in at Tenant's security or information desk if Tenant has such a desk on the premises, (ii) wear a visitor's badge or other reasonable identification provided by Tenant when Landlord or Landlord's representative first arrives at the Leased Property, (iii) permit an employee of Tenant to observe such inspection or work, and (iv) comply with other similar reasonable nondiscriminatory security requirements of Tenant that do not, individually or in the aggregate, interfere with or delay inspections or work of Landlord authorized by this Lease. (b) If Tenant fails to perform any act or to take any action which hereunder Tenant is required to perform or take, or to pay any money which hereunder Tenant is required to pay, and if such failure or action constitutes an Event of Default or renders Landlord or any director, officer, employee or Affiliate of Landlord at risk of criminal prosecution or renders Landlord's interest in the Leased Property or any part thereof at risk of forfeiture by forced sale or otherwise, then in addition to any other remedies specified herein or otherwise available, Landlord may, in Tenant's name or in Landlord's own name, perform or cause to be performed such act or take such action or pay such money. Any expenses so incurred by Landlord, and any money so paid by Landlord, shall be a demand obligation owing by Tenant to Landlord. Further, Landlord, upon making such payment, shall be subrogated to all of the rights of the person, corporation or body politic receiving such payment. But nothing herein shall imply any duty upon the part of Landlord to do any work which under any provision of this Lease Tenant may be required to perform, and the performance thereof by Landlord shall not constitute a waiver of Tenant's default. Landlord may during the progress of any such work permitted by Landlord hereunder on or in the Leased Property keep and store upon the Leased Property all necessary materials, tools, and equipment. Landlord shall not in any event be liable for inconvenience, annoyance, disturbance, loss of business, or other damage to Tenant or the subtenants of Tenant by reason of making such repairs or the performance of any such work on or in the Leased Property, or on account of bringing materials, supplies and equipment into or through the Leased Property during the course of such work (except for liability in connection with death or injury or damage to the property of third parties caused by the Active Negligence, gross negligence or wilful misconduct of Landlord or its officers, employees, or agents in connection therewith), and the obligations of Tenant under this Lease shall not thereby be affected in any manner. 14. Events of Default. (a) Definition of Event of Default. Each of the following events shall be deemed to be an "Event of Default" by Tenant under this Lease: (i) Tenant shall fail to pay when due any installment of Rent due hereunder and such failure shall continue for three (3) Business Days after Tenant is notified thereof. (ii) Tenant shall fail to cause any representation or warranty of Tenant contained herein that is false or misleading in any material respect when made to be made true and not misleading (other than as described in the other clauses of this subparagraph 14.(a)), or Tenant shall fail to comply with any term, provision or covenant of this Lease (other than as described in the other clauses of this subparagraph 14.(a)), and in either case shall not cure such failure prior to the earlier of (A) thirty (30) days after written notice thereof is sent to Tenant or (B) the date any writ or order is issued for the levy or sale of any property owned by Landlord (including the Leased Property) or any criminal action is instituted against Landlord or any of its directors, officers or employees because of such failure; provided, however, that so long as no such writ or order is issued and no such criminal action is instituted, if such failure is susceptible of cure but cannot with reasonable diligence be cured within such thirty day period, and if Tenant shall promptly have commenced to cure the same and shall thereafter prosecute the curing thereof with reasonable diligence, the period within which such failure may be cured shall be extended for such further period (not to exceed an additional sixty (60) days) as shall be necessary for the curing thereof with reasonable diligence. (iii) Tenant shall fail to comply with any term, provision or condition of the Purchase Documents and, if any Purchase Document expressly provides a time within which Tenant may cure such failure, Tenant shall not cure the failure within such time. (iv) Tenant shall abandon the Leased Property. (v) Tenant shall fail to make any payment or payments of principal, premium or interest, on any Debt of Tenant described in the next sentence when due (taking into consideration the time Tenant may have to cure such failure, if any, under the documents governing such Debt). As used in this clause 14.(a)(v), "Debt" shall mean only a Debt of Tenant now existing or arising in the future, (A) payable to Landlord or any Participant or any Affiliate of Landlord or any Participant, the outstanding balance of which has become due by reason of acceleration or maturity, or (B) payable to any Person, with respect to which $20,000,000 or more is actually due and payable because of acceleration or otherwise. (vi) Tenant or any of its Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against Tenant or any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of thirty (30) consecutive days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or Tenant or any of its Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this clause (vi). (vii) Any order, judgment or decree is entered in any proceedings against Tenant or any Subsidiary decreeing the dissolution of Tenant or such Subsidiary and such order, judgment or decree remains unstayed and in effect for more than sixty (60) days. (viii) Any order, judgment or decree is entered in any proceedings against Tenant or any Subsidiary decreeing a split-up of Tenant or such Subsidiary which requires the divestiture of assets representing a substantial part, or the divestiture of the stock of a Subsidiary whose assets represent a substantial part, of the consolidated assets of Tenant and its Subsidiaries (determined in accordance with GAAP) or which requires the divestiture of assets, or stock of a Subsidiary, which shall have contributed a substantial part of the consolidated net income of Tenant and its Subsidiaries (determined in accordance with GAAP) for any of the three fiscal years then most recently ended, and such order, judgment or decree remains unstayed and in effect for more than sixty (60) days. (ix) One or more non-interlocutory judgments, non- interlocutory orders, decrees, or arbitration awards is entered against Tenant or any of its Subsidiaries involving in the aggregate a liability (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage) as to any single or related series of transactions, incidents, or conditions, of $20,000,000 or more, and the same shall remain unvacated and unstayed pending appeal for a period of ten days after the entry thereof; (x) Any ERISA Termination Event that Landlord determines might constitute grounds for the termination of any Plan or for the appointment by the appropriate United States district court of a trustee to administer any Plan shall have occurred and be continuing thirty (30) days after written notice to such effect shall have been given to Tenant by Landlord, or any Plan shall be terminated, or a trustee shall be appointed by an appropriate United States district court to administer any Plan, or the Pension Benefit Guaranty Corporation shall institute proceedings to terminate any Plan or to appoint a trustee to administer any Plan. (xi) A Change of Control Event not approved in advance by Landlord shall occur. (xii) The subordination provisions of the Indenture (as defined in subparagraph 9.(ac)(ii) of this Lease) or any other agreement or instrument governing the Subordinated Debt (as defined in subparagraph 9.(ac)(ii) of this Lease) shall be for any reason revoked or invalidated, or otherwise cease to be in full force and effect; or the Tenant or any of its Subsidiaries shall contest in any manner the validity or enforceability of such subordination provisions or shall deny that it has any further liability or obligation thereunder; or the obligations of Tenant hereunder or under the Purchase Documents shall be for any reason subordinated to such Subordinated Debt or shall not have the priority over such Subordinated Debt as contemplated by this Lease or by the Indenture or by such subordination provisions. Notwithstanding the foregoing, any Default that could become an Event of Default under clause 14.(a)(ii) may be cured within the earlier of the periods described in clauses (A) and (B) thereof by Tenant's delivery to Landlord of a written notice irrevocably exercising Tenant's option under the Purchase Agreement to purchase Landlord's interest in the Leased Property and designating as the Designated Sale Date the next following date which is an Advance Date or Base Rent Date and which is at least ten (10) days after the date of such notice; provided, however, Tenant must, as a condition to the effectiveness of its cure, on the date so designated as the Designated Sale Date tender to Landlord the full purchase price required by the Purchase Agreement and all Rent and all other amounts then due or accrued and unpaid hereunder (including reimbursement for any costs incurred by Landlord in connection with the applicable Default hereunder, regardless of whether Landlord shall have been reimbursed for such costs in whole or in part by any Participants) and Tenant must also furnish written confirmation that all indemnities set forth herein (including specifically, but without limitation, the general indemnity set forth in subparagraph 9.(y) and the environmental indemnity set forth in Paragraph 12 shall survive the payment of such amounts by Tenant to Landlord and the conveyance of Landlord's interest in the Leased Property to Tenant. (b) Remedies. Upon the occurrence of an Event of Default which is not cured within any applicable period expressly permitted by subparagraph 14.(a), at Landlord's option and without limiting Landlord in the exercise of any other right or remedy Landlord may have on account of such default, and without any further demand or notice except as expressly described in this subparagraph 14.(b): (i) By notice to Tenant, Landlord may terminate Tenant's right to possession of the Leased Property. A notice given in connection with unlawful detainer proceedings specifying a time within which to cure a default shall terminate Tenant's right to possession if Tenant fails to cure the default within the time specified in the notice. (ii) Upon termination of Tenant's right to possession and without further demand or notice, Landlord may re-enter the Leased Property and take possession of all improvements, additions, alterations, equipment and fixtures thereon and remove any persons in possession thereof. Any property in the Leased Property may be removed and stored in a warehouse or elsewhere at the expense and risk of and for the account of Tenant. (iii) Upon termination of Tenant's right to possession, this Lease shall terminate and Landlord may recover from Tenant: a) The worth at the time of award of the unpaid Rent which had been earned at the time of termination; b) The worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; c) The worth at the time of award of the amount by which the unpaid Rent for the balance of the scheduled Term after the time of award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; and d) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform Tenant's obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including, but not limited to, the costs and expenses (including Attorneys' Fees, advertising costs and brokers' commissions) of recovering possession of the Leased Property, removing persons or property therefrom, placing the Leased Property in good order, condition, and repair, preparing and altering the Leased Property for reletting, all other costs and expenses of reletting, and any loss incurred by Landlord as a result of Tenant's failure to perform Tenant's obligations under the Purchase Agreement. The "worth at the time of award" of the amounts referred to in subparagraph 14.(b)(iii)a) and subparagraph 14.(b)(iii)b) shall be computed by allowing interest at ten percent (10%) per annum or such other rate as may be the maximum interest rate then permitted to be charged under Massachusetts law at the time of computation. The "worth at the time of award" of the amount referred to in subparagraph 14.(b)(iii)c) shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). e) Such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable Massachusetts law. (iv) Even if Tenant breaches this Lease and abandons the Leased Property, this Lease shall continue in effect for so long as Landlord does not terminate Tenant's right to possession, and Landlord may enforce all of Landlord's rights and remedies under this Lease, including the right to recover the Rent as it becomes due under this Lease. Tenant's right to possession shall not be deemed to have been terminated by Landlord except pursuant to subparagraph 14.(b)(i) hereof. The following shall not constitute a termination of Tenant's right to possession: a) Acts of maintenance or preservation or efforts to relet the Leased Property; b) The appointment of a receiver upon the initiative of Landlord to protect Landlord's interest under this Lease; or c) Reasonable withholding of consent to an assignment or subletting, or terminating a subletting or assignment by Tenant. (v) No re-entry or reletting of the Leased Property or any filing or service of an unlawful detainer action or similar action will be construed as an election by Landlord to terminate or accept a forfeiture of this Lease or to accept a surrender of the Leased Property after an Event of Default by Tenant, unless a written notice of such intention is given by Landlord to Tenant; but notwithstanding any such action without such notice, Landlord may at any time thereafter elect to terminate this Lease by notifying Tenant. (c) Enforceability. This Paragraph shall be enforceable to the maximum extent not prohibited by Applicable Law, and the unenforceability of any provision in this Paragraph shall not render any other provision unenforceable. (d) Remedies Cumulative. No right or remedy herein conferred upon or reserved to Landlord is intended to be exclusive of any other right or remedy, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing under Applicable Law or in equity. In addition to other remedies provided in this Lease, Landlord shall be entitled, to the extent permitted by Applicable Law, to injunctive relief in case of the violation, or attempted or threatened violation, of any of the covenants, agreements, conditions or provisions of this Lease to be performed by Tenant, or to a decree compelling performance of any of the other covenants, agreements, conditions or provisions of this Lease to be performed by Tenant, or to any other remedy allowed to Landlord under Applicable Law or in equity. Nothing contained in this Lease shall limit or prejudice the right of Landlord to prove for and obtain in proceedings for bankruptcy or insolvency of Tenant by reason of the termination of this Lease, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, the damages are to be proved, whether or not the amount be greater, equal to, or less than the amount of the loss or damages referred to above. Without limiting the generality of the foregoing, nothing contained herein shall modify, limit or impair any of the rights and remedies of Landlord under the Purchase Documents or the Environmental Indemnity. (e) Waiver by Tenant. To the extent permitted by law, Tenant hereby waives and surrenders for itself and all claiming by, through and under it, including creditors of all kinds, (i) any right and privilege which it or any of them may have under any present or future constitution, statute or rule of law to have a continuance of this Lease for the term hereby demised after termination of Tenant's right of occupancy by order or judgment of any court or by any legal process or writ, or under the terms of this Lease, or after the termination of this Lease as herein provided, and (ii) the benefits of any present or future constitution, or statute or rule of law which exempts property from liability for debt or for distress for rent, and (iii) the provisions of law relating to notice and/or delay in levy of execution in case of eviction of a lessee for nonpayment of rent. (f) No Implied Waiver. The failure of Landlord to insist at any time upon the strict performance of any covenant or agreement or to exercise any option, right, power or remedy contained in this Lease shall not be construed as a waiver or a relinquishment thereof for the future. The waiver of or redress for any violation by Tenant of any term, covenant, agreement or condition contained in this Lease shall not prevent a similar subsequent act from constituting a violation. Any express waiver shall affect only the term or condition specified in such waiver and only for the time and in the manner specifically stated therein. A receipt by Landlord of any Base Rent or other payment hereunder with knowledge of the breach of any covenant or agreement contained in this Lease shall not be deemed a waiver of such breach, and no waiver by Landlord of any provision of this Lease shall be deemed to have been made unless expressed in writing and signed by Landlord. 15. Default by Landlord. If Landlord should default in the performance of any of its obligations under this Lease, Landlord shall have the time reasonably required, but in no event less than thirty (30) days, to cure such default after receipt of written notice from Tenant specifying such default and specifying what action Tenant believes is necessary to cure the default. If Tenant prevails in any litigation brought against Landlord because of Landlord's failure to cure a default within the time required by the preceding sentence, then Tenant shall be entitled to an award against Landlord for the damages proximately caused to Tenant by such default. 16. Quiet Enjoyment. Provided no Event of Default has occurred and is continuing, Landlord shall not during the Term disturb Tenant's peaceable and quiet enjoyment of the Leased Property; however, such enjoyment shall be subject to the terms, provisions, covenants, agreements and conditions of this Lease and the Permitted Encumbrances and any other claims or encumbrances not lawfully made through or under Landlord, to which this Lease is subject and subordinate as hereinabove set forth. Any breach by Landlord of the foregoing covenant of quiet enjoyment shall, subject to the other provisions of this Lease, render Landlord liable to Tenant for any monetary damages proximately caused thereby, but as more specifically provided in Paragraph 5 above, no such breach shall entitle Tenant to terminate this Lease or excuse Tenant from its obligation to pay Base Rent and other amounts hereunder. 17. Surrender Upon Termination. Unless Tenant or an Applicable Purchaser purchases Landlord's entire interest in the Leased Property pursuant to the terms of the Purchase Agreement, Tenant shall, upon the termination of Tenant's right to occupancy, surrender to Landlord the Leased Property, including any buildings, alterations, improvements, replacements or additions constructed by Tenant, with all fixtures and furnishings included in the Leased Property, but not including movable furniture and movable personal property not covered by this Lease, free of all Hazardous Substances (including Permitted Hazardous Substances) and tenancies and, to the extent required by Landlord, with all Improvements in the same condition as of the date hereof, excepting only (i) ordinary wear and tear (provided that the Leased Property shall have been maintained as required by the other provisions hereof) and (ii) alterations and additions which are expressly permitted by the terms of this Lease and which have been completed by Tenant in a good and workmanlike manner in accordance with all Applicable Laws. Any movable furniture or movable personal property belonging to Tenant or any party claiming under Tenant, if not removed at the time of such termination and if Landlord shall so elect, shall be deemed abandoned and become the property of Landlord without any payment or offset therefor. If Landlord shall not so elect, Landlord may remove such property from the Leased Property and store it at Tenant's risk and expense. Tenant shall bear the expense of repairing any damage to the Leased Property caused by such removal by Landlord or Tenant. 18. Holding Over by Tenant. Should Tenant not purchase Landlord's right, title and interest in the Leased Property as provided in the Purchase Agreement, but nonetheless continue to hold the Leased Property after the termination of this Lease without Landlord's written consent, whether such termination occurs by lapse of time or otherwise, such holding over shall constitute and be construed as a tenancy from day to day only, at a daily Base Rent equal to: (i) the unpaid Purchase Price on the day in question, times (ii) the Holdover Rate (as defined below) for such day, divided by (iii) 360; subject, however, to all of the terms, provisions, covenants and agreements on the part of Tenant hereunder. No payments of money by Tenant to Landlord after the termination of this Lease shall reinstate, continue or extend the Term of this Lease and no extension of this Lease after the termination thereof shall be valid unless and until the same shall be reduced to writing and signed by both Landlord and Tenant; provided, however, following any breach by Landlord of its obligations to tender a deed and other documents on the Designated Sale Date as provided in the Purchase Agreement, Tenant may at its option continue its possession and use of the Leased Property pursuant to this Lease, as if the Term had been extended, for a period not to exceed 180 days after the Designated Sale Date or such longer time as may be proscribed by Applicable Law. As used herein, the "Holdover Rate" means: (1) for any day prior to the date on which Landlord tenders a deed and other documents as required by the Purchase Agreement (or is excused from its obligation to tender by Tenant's breach or anticipatory repudiation of the Purchase Agreement), a rate equal to the Fed Funds Rate on that day plus one hundred basis points; (2) for any day on which or within ninety days after Landlord tenders a deed and other documents as required by the Purchase Agreement (or is excused from its obligation to tender by Tenant's breach or anticipatory repudiation of the Purchase Agreement), the per annum Prime Rate in effect for such day; and (3) for any day after the ninety days described in the preceding clause, a rate which is three percent (3%) above the per annum Prime Rate. 19. Miscellaneous. (a) Notices. Each provision of this Lease, or of any Applicable Laws with reference to the sending, mailing or delivery of any notice or with reference to the making of any payment by Tenant to Landlord, shall be deemed to be complied with when and if the following steps are taken: (i) All Rent required to be paid by Tenant to Landlord hereunder shall be paid to Landlord in immediately available funds by wire transfer to: Federal Reserve Bank of San Francisco Account: Banque Nationale de Paris ABA #: 121027234 Reference: 3COM - Marlborough Site or at such other place and in such other manner as Landlord may designate in a notice to Tenant (provided Landlord will not unreasonably designate a method of payment other than wire transfer). Time is of the essence as to all payments and other obligations of Tenant under this Lease. (ii) All Construction Advances required to be paid to Tenant by Landlord hereunder shall be paid to Tenant in immediately available funds by wire transfer to: Account Name: 3Com Corporation Account Number: ___________________ ABA #: 121000358 Reference: Construction Advance/3COM - Marlborough Site or at such other place and in such other manner as Tenant may designate in a notice to Landlord (provided Tenant will not unreasonably designate a method of payment other than wire transfer). Time is of the essence as to the payment of all Construction Advances required of Landlord under this Lease. (iii) All notices, demands and other communications to be made hereunder to the parties hereto shall be in writing (at the addresses set forth below, or in the case of communications to Participants, at the addresses for notice established by the Participation Agreement) and shall be given by any of the following means: (A) personal service, with proof of delivery or attempted delivery retained; (B) electronic communication, whether by telex, telegram or telecopying (if confirmed in writing sent by United States first class mail, return receipt requested); or (C) registered or certified first class mail, return receipt requested. Such addresses may be changed by notice to the other parties given in the same manner as provided above. Any notice or other communication sent pursuant to clause (A) or (C) hereof shall be deemed received (whether or not actually received) upon first attempted delivery at the proper notice address on any Business Day between 9:00 A.M. and 5:00 P.M., and any notice or other communication sent pursuant to clause (B) hereof shall be deemed received upon dispatch by electronic means. Address of Landlord: BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd Cox Telecopy: (214) 969-0060 With a copy to: Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Jennifer Cho or Will La Herran Telecopy: (415) 296-8954 And with a copy to: Clint Shouse Thompson & Knight, P.C. 1700 Pacific Avenue Suite 3300 Dallas, Texas 75201 Telecopy: (214) 969-1550 Address of Tenant: 3Com Corporation 5400 Bayfront Plaza Santa Clara, California 95052 Attn: Legal Dept. MS - 1308 Telecopy: (408) 764-6434 With copies to: 3Com Corporation 5400 Bayfront Plaza Santa Clara, California 95052 Attn: Real Estate Dept. MS - 1220 Telecopy: (408) 764-5718; and 3Com Corporation 5400 Bayfront Plaza Santa Clara, California 95052 Attn: Treasury Dept. MS - 1307 Telecopy: (408) 764-8403; and Gray Cary Ware & Freidenrich 400 Hamilton Avenue Palo Alto, California 94301 Attn: Jonathan E. Rattner, Esq. Telecopy: (415) 328-3029 (b) Severability. If any term or provision of this Lease or the application thereof shall to any extent be held by a court of competent jurisdiction to be invalid and unenforceable, the remainder of this Lease, or the application of such term or provision other than to the extent to which it is invalid or unenforceable, shall not be affected thereby. (c) No Merger. There shall be no merger of this Lease or of the leasehold estate hereby created with the fee estate in the Leased Property or any part thereof by reason of the fact that the same person may acquire or hold, directly or indirectly, this Lease or the leasehold estate hereby created or any interest in this Lease or in such leasehold estate as well as the fee estate in the Leased Property or any interest in such fee estate, unless all Persons with an interest in the Leased Property that would be adversely affected by any such merger specifically agree in writing that such a merger shall occur. (d) NO IMPLIED REPRESENTATIONS BY LANDLORD. LANDLORD AND LANDLORD'S AGENTS HAVE MADE NO REPRESENTATIONS OR PROMISES WITH RESPECT TO THE LEASED PROPERTY EXCEPT AS EXPRESSLY SET FORTH HEREIN, AND NO RIGHTS, EASEMENTS OR LICENSES ARE ACQUIRED BY TENANT BY IMPLICATION OR OTHERWISE EXCEPT AS EXPRESSLY SET FORTH IN THE PROVISIONS OF THIS LEASE, AND THE PURCHASE DOCUMENTS. (e) Entire Agreement. This Lease and the instruments referred to herein supersede any prior negotiations and agreements between the parties concerning the Leased Property and no amendment or modification of this Lease shall be binding or valid unless expressed in a writing executed by both parties hereto. (f) Binding Effect. All of the covenants, agreements, terms and conditions to be observed and performed by the parties hereto shall be applicable to and binding upon their respective successors and, to the extent assignment is permitted hereunder, their respective assigns. (g) Time is of the Essence. Time is of the essence as to all obligations of Tenant and all notices required of Tenant under this Lease, but this paragraph shall not limit Tenant's opportunity to prevent an Event of Default by curing any breach within the cure period (if any) applicable under subparagraph 14.(a). (h) Termination of Prior Rights. Without limiting the rights and obligations of Tenant under this Lease, Tenant acknowledges that any and all rights or interest of Tenant in and to the Land, the improvements to the Land and to any other property included in the Leased Property (except under this Lease and the Purchase Agreement) are hereby superseded. Tenant quitclaims unto Landlord any rights or interests Tenant has in or to the Land, the improvements to the Land and to any other property included in the Leased Property other than the rights and interests created by this Lease and the Purchase Agreement. (i) Governing Law. This Lease shall be governed by and construed in accordance with the laws of the State of Massachusetts. (j) Waiver of a Jury Trial. LANDLORD AND TENANT EACH HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS LEASE OR ANY OTHER DOCUMENT OR DEALINGS BETWEEN THEM RELATING TO THIS LEASE OR THE LEASED PROPERTY. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including, without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Tenant and Landlord each acknowledge that this waiver is a material inducement to enter into a business relationship, that each has already relied on the waiver in entering into this Lease and the other documents referred to herein, and that each will continue to rely on the waiver in their related future dealings. Tenant and Landlord each further warrants and represents that it has reviewed this waiver with its legal counsel, and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LEASE OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS LEASE OR THE LEASED PROPERTY. In the event of litigation, this Lease may be filed as a written consent to a trial by the court. (k) Not a Partnership, Etc. NOTHING IN THIS LEASE IS INTENDED TO BE OR TO CREATE ANY PARTNERSHIP, JOINT VENTURE, OR OTHER JOINT ENTERPRISE BETWEEN LANDLORD AND TENANT. NEITHER THE EXECUTION OF THIS LEASE NOR THE ADMINISTRATION OF THIS LEASE OR OTHER DOCUMENTS REFERENCED HEREIN BY LANDLORD, NOR ANY OTHER RIGHT, DUTY OR OBLIGATION OF LANDLORD UNDER OR PURSUANT TO THIS LEASE OR SUCH DOCUMENTS IS INTENDED TO BE OR TO CREATE ANY FIDUCIARY OBLIGATIONS OF LANDLORD TO TENANT. (l) Tax Reporting. Landlord and Tenant shall report this Lease and the Purchase Agreement for federal income tax purposes as a conditional sale unless prohibited from doing so by the Internal Revenue Service. Similarly, Tenant shall report all interest earned on Escrowed Proceeds or the Collateral as Tenant's income for federal and state income tax purposes. If the Internal Revenue Service shall challenge Landlord's characterization of this Lease and the Purchase Agreement as a conditional sale for federal income tax reporting purposes, Landlord shall notify Tenant in writing of such challenge and consider in good faith any reasonable suggestions by Tenant about an appropriate response. In any event, Tenant shall indemnify and hold harmless Landlord from and against all liabilities, costs, additional taxes and other expenses that may arise or become due because of such challenge or because of any resulting recharacterization required by the Internal Revenue Service, including any additional taxes that may become due upon any sale under the Purchase Agreement to the extent (if any) that such additional taxes are not offset by tax savings resulting from additional depreciation deductions or other tax benefits to Landlord of the recharacterization. [Remainder of page intentionally left blank.] IN WITNESS WHEREOF, this Lease is hereby executed in multiple originals as of July 29, 1997. "Landlord" BNP LEASING CORPORATION, a Delaware corporation By: /s/ Lloyd G. Cox ---------------------------- Lloyd G. Cox, Vice President [Continuation of signature pages to Lease Agreement dated to be effective July 29, 1997] "Tenant" 3COM CORPORATION, a Delaware corporation By: /s/ Mark D. Michael ---------------------------------- SVP, General Counsel and Secretary Exhibit A Legal Description The land with the buildings thereon situated on Forest Street in Marlborough, Middlesex County, Massachusetts and being shown as Lots 1 and 2 on a plan of land entitled "Plan of Land in Marlborough, Mass." drawn by Guerriere & Halnon, Inc. Engineering and Land Surveying, owned by Metropolitan Life Insurance Company, Sale 200 feet to an inch, dated August 17, 1989 and recorded in Middlesex County Registry of Deeds in Book 25878, Page 342, to which plan reference is made for a more particular description of Lots 1 and 2. Exhibit B Permitted Encumbrances 1. Easement to New England Power Engineering & Service Corporation dated February 17, 1931 and recorded in Book 5544, Page 152. 2. Easement to New England Power Engineering & Service Corporation dated February 17, 1931 and recorded in Book 5546, Page 341. 3. Easement to Worcester County Electric Company dated May 27, 1959 and recorded in Book 9395, Page 43. 4. Order of Taking by the City of Marlborough for laying out of Forest Street dated December 9, 1968 and recorded in Book 11624, Page 1; as affected by Order for the Relocation of Forest Street by the County Commissioners for the County of Middlesex dated March 24, 1961 and recorded in Book 9789, Page 242. 5. Matters as shown or disclosed on a plan entitled, "Title Insurance Plan of Land in Marlborough, Mass." Prepared for: 3COM Corporation Scale: 1" = 100' Date: November 8, 1996 Prepared by: Guerriere & Halnon, Inc. Engineering & Land Surveying 333 West Street Milford, Massachusetts as follows: a) encroachment of stone wall; b) encroachment of fence; c) encroachment of guard rail; and d) encroachment of utility poles. 6. Order of Conditions by the Marlborough Conservation Commission, DEP File No. 212-408 dated April 19, 1990 and recorded in Book 20539, Page 467. 7. Order of Conditions by the Marlborough Conservation Commission, DEP File No. 212-408 dated November 29, 1989 and recorded in Book 20539, Page 515, as affected by Amendment dated April 19, 1990 and recorded in Book 20598, Page 521. 8. PROPERTY TAXES, including any assessments collected with taxes, for the fiscal year 1997, a lien not yet due or payable. Exhibit C PERMITTED HAZARDOUS SUBSTANCES (NOT a Comprehensive List) It is anticipated that the following Hazardous Substances, and others necessary for the use, occupancy, and operation of the Leased Property in accordance with the terms and conditions of this Lease, will be used by Tenant at the Leased Property: Description C.A.S.# Solder bars (lead) 7439-92-1 Solder paste Lead 7439-91-1 Tin 7440-31-5 Solder paste remover Sodium hydroxide 1310-73-2 Isopropyl alcohol Isopropanol 67-63-0 S32-10M Isopropanol 67-63-0 Methanol 67-56-1 Exhibit D RESOLUTION OF DISPUTED INSURANCE CLAIMS If Landlord and Tenant cannot agree upon the amount for which any insurance claim against an insurer should be settled after damage to the Leased Property by fire or other casualty, and so long as neither Tenant nor Landlord is authorized to determine such amount without the consent of the other pursuant to subparagraph 9.(r), then either party may require that the amount be determined as follows: (i) Landlord and Tenant shall each appoint an experienced architect who is familiar with construction costs for comparable properties in the vicinity of the Leased Property. Each party will make the appointment no later than 10 days after receipt of notice from the other party that the dispute resolution process described in this Exhibit has been invoked. The agreement of the two architects as to the appropriate amount of the insurance settlement will be binding upon Landlord and Tenant. If the two architects cannot agree upon the settlement amount within 30 days following their appointment, they shall within another 10 days agree upon a third architect. Immediately thereafter, each of the first two architects will submit his best estimate of the appropriate settlement amount (together with a written report supporting such estimate) to the third architect and the third architect will choose between the two estimates. The estimate chosen by the third architect as the closest to the amount needed to repair and restore the Leased Property will be binding upon Landlord and Tenant as the amount for which the applicable insurance claim should be settled. (However, no such estimate and nothing contained in this Exhibit will limit Tenant's liability under other provisions of this Lease for the repair and restoration of the Leased Property.) Notification in writing of the estimate chosen by the third architect shall be made to Landlord and Tenant within 15 days following the selection of the third architect. (ii) If architects must be selected under the procedure set out above and either Tenant or Landlord fails to appoint an architect or fails to notify the other party of such appointment within 10 days after receipt of notice that the prescribed time for appointing the architects has passed, then the other party's architect will determine the appropriate settlement amount. All architects selected for the dispute resolution process set out in this Exhibit will be disinterested, reputable, qualified architects with at least 15 years experience designing and overseeing the construction of properties comparable to the Leased Property. (iii) If a third architect must be chosen under the procedure set out above, he will be chosen on the basis of objectivity and competence, not on the basis of his relationship with the other architects or the parties to this Lease, and the first two architects will be so advised. Although the first two architects will be instructed to attempt in good faith to agree upon the third architect, if for any reason they cannot agree within the prescribed time, either Landlord or Tenant may require the first two architects to immediately submit its top choice for the third architect to the then highest ranking officer of the San Francisco Bar Association who will agree to help and who has no attorney/client or other significant relationship to either Landlord or Tenant. Such officer will have complete discretion to select the most objective and competent third architect from between the choice of each of the first two architects, and will do so within 20 days after such choices are submitted to him. (iv) Either Landlord or Tenant may notify the architect selected by the other party to demand the submission of an estimate of the appropriate settlement amount or a choice of a third architect as required under the procedure described above; and if the submission of such an estimate or choice is required but the other party's architect fails to comply with the demand within 5 days after receipt of such notice, then the settlement amount or choice of the third architect, as the case may be, selected by the other architect (i.e., the notifying party's architect) will be binding upon Landlord and Tenant. (v) For the purposes of this Exhibit, "appropriate settlement amount" and words of like effect means the amount required to restore the Leased Property, less any insurance deductible that clearly applies under the policy of insurance which provides the coverage to be settled; and all architects and other persons involved in the determination of the settlement amount will be so advised. Exhibit E FINANCIAL COVENANT COMPLIANCE CERTIFICATE BNP Leasing Corporation c/o Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Jennifer Cho or Will La Herran Re: 3Com Lease Agreement (Marlborough Site) Gentlemen: I, the undersigned, the [chief financial officer, controller, treasurer or the assistant treasurer] of 3Com Corporation, do hereby certify, represent and warrant that: 1. This Certificate is furnished pursuant to subparagraph 9.(w)(iii) of that certain Lease Agreement dated as of July 29, 1997 (the "Lease Agreement," the terms defined therein being used herein as therein defined) between 3Com Corporation (the "Tenant"), and you. 2. Annex 1 attached hereto sets forth financial data and computations evidencing the Tenant's compliance with certain covenants of the Lease Agreement, all of which data and computations are complete, true and correct. 3. To the knowledge of Tenant no Default or Event of Default under the Lease Agreement has occurred and is continuing. 4. The representations of Tenant set forth in the Lease Agreement are true and correct in all material respects as of the date hereof as though made on and as of the date hereof. Executed this _____ day of ______________, ____. 3Com Corporation Name:_________________________ Title:________________________ [cc all Participants] Annex 1 To Compliance Certificate For the _________________ Ended ________________, ____ I. PARAGRAPH 9.(ac)(i): Quick Ratio A. Unencumbered Cash and Cash Equivalents and other "Quick Assets" as defined in Paragraph 9.(ac)(i) of the Lease: $_____________ B. "Current Liabilities" as defined in Paragraph 9.(ac)(i) of the Lease: $_____________ C. Ratio of A to B: _____ to 1.00 F. Minimum ratio computed as provided in Paragraph 9.(ac)(i) of the Lease: 1.00 to 1.00 II. PARAGRAPH 9.(ac)(ii): Maximum Senior Debt to Capitalization A. Total "Debt" as defined in Paragraph 1.(ad) of Tenant and its consolidated Subsidiaries: $_____________ B. "Subordinated Debt" as defined in Paragraph 9.(ac)(ii) of the Lease $_____________ C. "Senior Debt" as defined in Paragraph 9.(ac)(ii) of the Lease (A - B): $_____________ D. Consolidated Tangible Net Worth (from calculation below): $_____________ E. Capitalization as defined in Paragraph 9.(ac)(ii) of the Lease (A + D): $_____________ F. Ratio of B to E: _____ to 1.00 D. Maximum ratio: 0.35 to 1.00 III. PARAGRAPH 9.(ac)(iii): Minimum Tangible Net Worth A. Reported stockholders equity: $_____________ B. "Intangible Assets" as defined in Paragraph 9.(ac)(iii) of the Lease: $_____________ D. Consolidated Tangible Net Worth (A - B): $_____________ E. Minimum computed as provided in Paragraph 9.(ac)(iii) of the Lease: $_____________ IV. PARAGRAPH 9.(ac)(iv): Fixed Charge Ratio A. "Adjusted EBIT" as defined in Paragraph 9.(ac)(iv) of the Lease: $_____________ B. "Fixed Charges" as defined in Paragraph 9.(ac)(iv) of the Lease: $_____________ C. Ratio of A to B: _____ to 1.00 D. Minimum ratio: 2.00 to 1.00 Exhibit F CERTIFICATE OF TENANT'S CALCULATION OF THE SPREAD BNP Leasing Corporation c/o Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Jennifer Cho or Will La Herran Re: 3Com Lease Agreement (Marlborough Site) Gentlemen: I, the undersigned, the [chief financial officer, controller, treasurer or the assistant treasurer] of 3Com Corporation, do hereby certify, represent and warrant that: 1. This Certificate is furnished pursuant to subparagraph 9.(w)(iv) of that certain Lease Agreement dated as of July 29, 1997 (the "Lease Agreement," the terms defined therein being used herein as therein defined) between 3Com Corporation, and you. 2. Annex 1 attached hereto sets forth financial data and computations evidencing the Tenant's computation of the Spread, all of which data and computations are complete, true and correct. Executed this _____ day of ______________, ____. 3Com Corporation Name:_________________________ Title:________________________ [cc all Participants] Annex 1 To Certificate of Tenant's Calculation of the Spread As of the ________________, ____ I. S&P'S RATING OF TENANT'S SENIOR UNSECURED DEBT: _____________ II. MOODY'S RATING OF TENANT'S SENIOR UNSECURED DEBT: _____________ III. CALCULATION OF TENANT'S DEBT TO CAPITAL RATIO: _____________ A. Funded "Senior Debt" as defined in Paragraph 9.(ac)(ii) of the Lease: $_____________ B. Other outstanding Debt as defined in Paragraph 1.(ad) of the Lease: $_____________ C. Outstanding "Subordinated Debt" as defined in Paragraph 9.(ac)(ii) of the Lease: $_____________ D. Debt for purposes of this ratio (A + B - C): $_____________ E. Reported stockholders equity: $_____________ F. "Intangible Assets" as defined in Paragraph 9.(ac)(iii) of the Lease: $_____________ G. Consolidated Tangible Net Worth (E - F): $_____________ H. Capital for purposes of this test (A + B + G): $_____________ I. D divided by H: _____________ III. SPREAD AS DEFINED IN PARAGRAPH 1.(cm) OF THE LEASE:_____________ Exhibit G LIST OF ENVIRONMENTAL REPORTS As used in this Lease, "Environmental Report" means, collectively, the following reports provided to Landlord by 3COM or acquired by Landlord from its own consultants: Letter dated October 31, 1996, from Vanesse Hangen Brustlin, Inc., to the Executive Office of Environmental Affairs, regarding Metropolitan Corporate Center/Forest Street Parcels - EOEA # 7515, Marlborough, Massachusetts, Notice of Project Change Exhibit H DESCRIPTION OF RENDERINGS OF THE DESIGNATED IMPROVEMENTS Designated Improvements to the Leased Property will consist of the following improvements: [to be added] For a better description of the Designated Improvements, reference is made to [BY PAGE SUBSTITUTION, THIS REFERENCE WILL BE COMPLETED TO REFER TO THE ARCHITECT'S REPORT CONTAINING RENDERINGS AND A CONCEPTUAL PROJECT DESCRIPTION AS DISCUSSED BY BNPLC'S COUNSEL AND 3COM'S COUNSEL WHEN THE REPORT IS RECEIVED BY BNPLC'S COUNSEL.] If requested by Landlord from time to time, Tenant will provide current renderings and conceptual plans and specifications for any Designated Improvements then contemplated or under construction. Exhibit I Estoppel From Contractors _________, 199__ BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd Cox Re: Assignment of Construction Contract Ladies and Gentlemen: The undersigned hereby confirms, warrants and represents to BNP Leasing Corporation, a Delaware corporation ("BNP"), and covenants with BNP as follows: 1. The undersigned has entered into that certain [Construction Contract] (the "Construction Contract") by and between the undersigned and 3Com Corporation ("Tenant") dated ____________________, 199___ for the construction of the multiuse complex to be constructed on the campus leased by Tenant (the "Improvements") located on the land described in Exhibit A attached hereto and made a part hereof for all purposes (the "Land" and, together with the Improvements and any other improvements now on or constructed in the future on the Land, being herein collectively referred to as the "Project"). 2. The undersigned has been advised that BNP owns the Land. 3. The undersigned has also received a copy of the Lease Agreement dated as of July 29, 1997 (the "Lease"), pursuant to which BNP is leasing the Project to Tenant, and BNP has agreed, subject to the terms and conditions of the Lease, to provide a construction allowance for Tenant's construction of the Improvements. The Lease also requires Tenant to fulfill all obligations of the ["Owner"] under the Construction Contract and related documents and to indemnify BNP against any liability arising thereunder, all as more particularly provided in the Lease, reference to which is hereby made for all purposes. 4. A complete and correct copy of the Construction Contract is attached to this letter. The Construction Contract is in full force and effect and has not been modified or amended. 5. The undersigned has not sent to Tenant or received from Tenant any notice of default or any other notice for the purpose of terminating the Construction Contract, nor is there any existing circumstance or event which, but for the elapse of time or otherwise, would constitute a default by the undersigned or the ["Owner"] under the Construction Contract. The undersigned acknowledges and agrees that: a) BNP shall not be held liable for, and the undersigned shall not assert, any claims, demands or liabilities against BNP or, except for any statutory lien rights, against the Project arising under or in any way relating to the Construction Contract; provided, this paragraph will not prohibit the undersigned from asserting any claims or making demands under the Construction Contract if BNP elects in writing, pursuant to Paragraph b) below, to assume the Construction Contract in the event Tenant's right to possession of the Land is terminated, in which event BNP shall be liable thereunder for (but only for) any acts or omissions on the part of BNP occurring after the date on which BNP notifies the undersigned of BNP's election to assume the Construction Contract. b) Upon any termination of Tenant's right to possession of the Project under the Lease, including but not limited to any eviction of Tenant resulting from an Event of Default (as defined in the Lease), BNP may, by notice to the undersigned and without the necessity of the execution of any other document, assume Tenant's rights and obligations under the Construction Contract, cure any defaults by Tenant thereunder and enforce the Construction Contract and all rights of the ["Owner"] thereunder. Within ten (10) days of receiving notice from BNP that Tenant's right to possession has been terminated, the undersigned shall send to BNP a written estoppel letter stating: (i) that the undersigned has not performed any act or executed any other instrument which invalidates or modifies the Construction Contract in whole or in part (or, if so, the nature of such modification); (ii) that the Construction Contract is valid and subsisting and in full force and effect; (iii) that there are no defaults or events of default then existing under the Construction Contract and no event has occurred which with the passage of time or the giving of notice, or both, would constitute such a default or event of default (or, if there is a default, the nature of such default in detail); (iv) that the construction contemplated by the Construction Contract is proceeding in a satisfactory manner in all material respects (or if not, a detailed description of all significant problems with the progress of construction); (v) a reasonably detailed report of the then critical dates projected by the undersigned for work and deliveries required to complete the construction project; (vi) the total amount paid for construction through the date of the letter; (vii) the estimated total cost of completing such construction as of the date of the letter, together with a current draw schedule; and (viii) any other information BNP may request to allow it to decide whether to assume the Construction Contract. BNP shall have thirty (30) days from receipt of such written certificate containing all such requested information to decide whether to assume the Construction Contract. If BNP fails to assume the Construction Contract within such time, the undersigned agrees that BNP shall not be liable for (and the undersigned shall not assert or bring any action against BNP or, except for any statutory lien rights not waived, against the Land or improvements thereon for) any damages or other amounts resulting from the breach or termination of the Construction Contract or under any other theory of liability of any kind or nature, but rather the undersigned shall look solely to Tenant and any statutory lien rights not waived for the recovery of any such damages or other amounts. c) If BNP notifies the undersigned that BNP shall not assume the Construction Contract pursuant to the preceding paragraph following the termination of Tenant's right to possession of the Project under the Lease, the undersigned shall immediately discontinue the work under the Construction Contract and remove its personnel from the Project, and BNP shall be entitled to take exclusive possession of the Project and all or any part of the equipment and materials delivered or en route to the Project. The undersigned shall also, upon request by BNP, deliver and assign to BNP all plans and specifications and other contract documents previously delivered to the undersigned (except that the undersigned may keep an original set of the Construction Contract and other contract documents executed by Tenant), all other material relating to the work which belongs to BNP or Tenant, and all papers and documents relating to governmental permits, orders placed, bills and invoices, lien releases and financial management under the Construction Contract. Notwithstanding the undersigned's receipt of any notice from BNP that BNP declines to assume the Construction Contract, the undersigned shall for a period not to exceed fifteen (15) days after receipt of such notice take such steps, at BNP's expense, as are reasonably necessary to preserve and protect work completed and in progress and to protect materials, equipment and supplies at the site or in transit. d) No action taken by BNP or the undersigned with respect to the Construction Contract shall prejudice any other rights or remedies of BNP or the undersigned provided by law, by the Lease, by the Construction Contract or otherwise against Tenant. e) The undersigned agrees promptly to notify BNP of any material default or claimed material default by Tenant under the Construction Contract, describing with particularity the default and the action the undersigned believes is necessary to cure the same. The undersigned will send any such notice to BNP prominently marked "URGENT - NOTICE OF TENANT'S DEFAULT UNDER CONSTRUCTION AGREEMENT WITH 3COM CORPORATION - MARLBOROUGH, MASSACHUSETTS" at the address specified for notice below (or at such other addresses as BNP shall designate in notice sent to the undersigned), by certified or registered mail, return receipt requested. Following receipt of such notice, the undersigned will permit BNP or its designee to cure any such default within the time period reasonably required for such cure, but in no event less than thirty (30) days. If it is necessary or helpful to take possession of all or any portion of the Project to cure a default by Tenant under the Construction Contract, the time permitted by the undersigned for cure by BNP will include the time necessary to terminate Tenant's right to possession of the Project and evict Tenant, provided that BNP commences the steps required to exercise such right within sixty (60) days after it is entitled to do so under the terms of the Lease and applicable law. If the undersigned incurs additional costs due to the extension of the aforementioned cure period, the undersigned shall be entitled to an equitable adjustment to the price of the Construction Contract for such additional costs. f) Any notice or communication required or permitted hereunder shall be given in writing, sent by (a) personal delivery or (b) expedited delivery service with proof of delivery or (c) United States mail, postage prepaid, registered or certified mail or (d) telegram, telex or telecopy, addressed as follows: To the undersigned: _____________________________ ______________________________ ______________________________ To BNP: BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 g) The undersigned acknowledges that it has all requisite authority to execute this letter. The undersigned further acknowledges that BNP has requested this letter, and is relying on the truth and accuracy of the representations made herein, in connection with BNP's decision to advance funds for construction under the Lease with Tenant. Very truly yours, _____________________________ By:__________________________ Name:_____________________ Title:____________________ Tenant joins in the execution of this letter solely for the purpose of evidencing its consent hereto, including its consent to the provisions that would allow, but not require, BNP to assume the Construction Contract in the event Tenant is evicted from the Project. 3Com Corporation By:__________________________ Name:_____________________ Title:____________________ Exhibit J Estoppel From Architects/Engineers _________, 199__ BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd Cox Re: Assignment of Construction Contract Ladies and Gentlemen: The undersigned hereby confirms, warrants and represents to BNP Leasing Corporation, a Delaware corporation ("BNP"), and covenants with BNP as follows: 1. The undersigned has entered into that certain [Architect's/Engineer's Agreement] (the "Agreement") by and between the undersigned and 3Com Corporation ("Tenant") dated ____________________, 199___ for the [design] of the multiuse complex to be constructed on the Santa Clara campus leased by Tenant (the "Improvements") located on the land described in Exhibit A attached hereto and made a part hereof for all purposes (the "Land" and, together with the Improvements and any other improvements now on or constructed in the future on the Land, being herein collectively referred to as the "Project"). 2. The undersigned has been advised that BNP owns the Land. 3. The undersigned has also received a copy of the Lease Agreement dated as of July 29, 1997 (the "Lease"), pursuant to which BNP is leasing the Project to Tenant, and BNP has agreed, subject to the terms and conditions of the Lease, to provide a construction allowance for Tenant's construction of the Improvements. The Lease also requires Tenant to fulfill all obligations of the ["Owner"] under the Agreement and related documents and to indemnify BNP against any liability arising thereunder, all as more particularly provided in the Lease, reference to which is hereby made for all purposes. 4. A complete and correct copy of the Agreement is attached to this letter. The Agreement is in full force and effect and has not been modified or amended. 5. The undersigned has not sent to Tenant or received from Tenant any notice of default or any other notice for the purpose of terminating the Agreement, nor is there any existing circumstance or event which, HEADER FOLLOWS THIS COMMENT BOX -- MOVE TO FIT PAGE NUMBERINGbut for the elapse of time or otherwise, would constitute a default by the undersigned or the ["Owner"] under the Agreement. The undersigned acknowledges and agrees that: a) BNP shall not be held liable for, and the undersigned shall not assert, any claims, demands or liabilities against BNP or, except for any statutory lien rights, against the Project arising under or in any way relating to the Agreement; provided, this paragraph will not prohibit the undersigned from asserting any claims or making demands under the Agreement if BNP elects in writing, pursuant to Paragraph b) below, to assume the Agreement in the event Tenant's right to possession of the Land is terminated, in which event BNP shall be liable thereunder for (but only for) any acts or omissions on the part of BNP occurring after the date on which BNP notifies the undersigned of BNP's election to assume the Agreement. b) Upon any termination of Tenant's right to possession of the Project under the Lease, including but not limited to any eviction of Tenant resulting from an Event of Default (as defined in the Lease), BNP may, by notice to the undersigned and without the necessity of the execution of any other document, assume Tenant's rights and obligations under the Agreement, cure any defaults by Tenant thereunder and enforce the Agreement and all rights of the ["Owner"] thereunder. Within ten (10) days of receiving notice from BNP that Tenant's right to possession has been terminated, the undersigned shall send to BNP a written estoppel letter stating: (i) that the undersigned has not performed any act or executed any other instrument which invalidates or modifies the Agreement in whole or in part (or, if so, the nature of such modification); (ii) that the Agreement is valid and subsisting and in full force and effect; (iii) that there are no defaults or events of default then existing under the Agreement and no event has occurred which with the passage of time or the giving of notice, or both, would constitute such a default or event of default (or, if there is a default, the nature of such default in detail); (iv) that the construction contemplated by the Agreement is proceeding in a satisfactory manner in all material respects (or if not, a detailed description of all significant problems with the progress of construction); (v) a reasonably detailed report of the then critical dates projected by the undersigned for work and deliveries required to complete the Project; (vi) the total amount paid for construction through the date of the letter; (vii) the estimated total cost of completing such construction as of the date of the letter, together with a current draw schedule; and (viii) any other information BNP may request to allow it to decide whether to assume the Agreement. BNP shall have thirty (30) days from receipt of such written certificate containing all such requested information to decide whether to assume the Agreement. If BNP fails to assume the Agreement within such time, the undersigned agrees that BNP shall not be liable for (and the undersigned shall not assert or bring any action against BNP or, except for any statutory lien rights not waived, against the Land or improvements thereon for) any damages or other amounts resulting from the breach or termination of the Agreement or under any other theory of liability of any kind or nature, but rather the undersigned shall look solely to Tenant and any statutory lien rights not waived for the recovery of any such damages or other amounts. c) If BNP notifies the undersigned that BNP shall not assume the Agreement pursuant to the preceding paragraph following the termination of Tenant's right to possession of the Project under the Lease, the undersigned shall immediately discontinue the work under the Agreement and remove its personnel from the Project, and BNP shall be entitled to take exclusive possession of the Project and all or any part of the equipment and materials delivered or en route to the Project. The undersigned shall also, upon request by BNP, deliver and assign to BNP all plans and specifications and other contract documents previously delivered to the undersigned (except that the undersigned may keep an original set of the Agreement and other contract documents executed by Tenant), all other material relating to the work which belongs to BNP or Tenant, and all papers and documents relating to governmental permits, orders placed, bills and invoices, lien releases and financial management under the Agreement. Notwithstanding the undersigned's receipt of any notice from BNP that BNP declines to assume the Agreement, the undersigned shall for a period not to exceed fifteen (15) days after receipt of such notice take such steps, at BNP's expense, as are reasonably necessary to preserve and protect work completed and in progress and to protect materials, equipment and supplies at the site or in transit. d) No action taken by BNP or the undersigned with respect to the Agreement shall prejudice any other rights or remedies of BNP or the undersigned provided by law, by the Lease, by the Agreement or otherwise against Tenant. e) The undersigned agrees promptly to notify BNP of any material default or claimed material default by Tenant under the Agreement, describing with particularity the default and the action the undersigned believes is necessary to cure the same. The undersigned will send any such notice to BNP prominently marked "URGENT - NOTICE OF TENANT'S DEFAULT UNDER AGREEMENT WITH 3COM CORPORATION - MARLBOROUGH, MASSACHUSETTS" at the address specified for notice below (or at such other addresses as BNP shall designate in notice sent to the undersigned), by certified or registered mail, return receipt requested. Following receipt of such notice, the undersigned will permit BNP or its designee to cure any such default within the time period reasonably required for such cure, but in no event less than thirty (30) days. If it is necessary or helpful to take possession of all or any portion of the Project to cure a default by Tenant under the Agreement, the time permitted by the undersigned for cure by BNP will include the time necessary to terminate Tenant's right to possession of the Project and evict Tenant, provided that BNP commences the steps required to exercise such right within sixty (60) days after it is entitled to do so under the terms of the Lease and applicable law. f) Any notice or communication required or permitted hereunder shall be given in writing, sent by (a) personal delivery or (b) expedited delivery service with proof of delivery or (c) United States mail, postage prepaid, registered or certified mail or (d) telegram, telex or telecopy, addressed as follows: To the undersigned: _________________________ _________________________ _________________________ To BNP: BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 g) The undersigned acknowledges that it has all requisite authority to execute this letter. The undersigned further acknowledges that BNP has requested this letter, and is relying on the truth and accuracy of the representations made herein, in connection with BNP's decision to advance funds for construction under the Lease with Tenant. Very truly yours, _____________________________ By:__________________________ Name:_____________________ Title:____________________ Tenant joins in the execution of this letter solely for the purpose of evidencing its consent hereto, including its consent to the provisions that would allow, but not require, BNP to assume the Agreement in the event Tenant is evicted from the Project. 3Com Corporation By:_________________________ Name:____________________ Title:___________________ Exhibit K Draw Request Forms ________, 199__ BNP Leasing Corporation c/o Banque Nationale de Paris 180 Montgomery Street San Francisco, California 94104 Attention: Ms. Jennifer Cho Re: Construction Advance Request No. __________ by 3Com Corporation Ladies and Gentlemen: Reference is made to the Lease Agreement between BNP Leasing Corporation (herein "Landlord") and 3Com Corporation (herein "Tenant") dated as of July 29, 1997 (herein "the Lease"). Capitalized terms defined in the Lease and used but not defined in this letter are intended to have the meanings assigned to them in the Lease. Tenant hereby makes request for a Construction Advance in the amount of $________________ (herein the "Current Advance"). Included herewith are: 1. An Application and Certificate for Payment based on AIA Form G702 (herein the "Contractor's Application") from Tenant's general contractor, attached to which is a schedule of values listing all subcontractors, suppliers and other parties to whom the general contractor has or will make payments from the draw requested in the Contractor's Application. The Contractor's Application evidences an obligation incurred by (and previously paid by) Tenant for construction of Improvements and for which Tenant is entitled to reimbursement from the Current Advance. 2. A list of any costs paid by Tenant, other than to the general contractor, for which Tenant is entitled to reimbursement from the proceeds of the Current Advance (herein the "Other Costs List"). 3. Invoices and requests for payments from the subcontractors and others entitled to payment from the general contractor for construction and related work covered by the Contractor's Application; excluding, however, invoices or requests from some or all subcontractors and others that, according to the Contractor's Application, are to be paid less than $300,000 from the draw requested in Contractor's Application. Such invoices and requests for payments are consistent with the detail shown in the schedule of values attached to the Contractor's Application. 4. Invoices or other evidence of the costs (if any) included in the Other Costs List. 5. A list of any "checks on hold" (i.e., payments withheld from subcontractors or suppliers by Tenant's general contractor because of some defect or deficiency in the payee's request for payment or in the work or materials provided by the payee) in excess of $50,000. 6. An up-to-date list of the names and addresses of any subcontractors that have actually filed a claim of lien against the Leased Property, together with, to the extent not already provided with a prior request for a Construction Advance, a copy of the claim of lien filed. 7. A certification of an officer of Tenant as required by Paragraph 6.(c)(viii) of the Lease. We hereby confirm that Landlord will not be responsible for the application of any funds advanced to Tenant or to any other party at our request. Sincerely, 3Com Corporation By:_________________________ Name:____________________ Title:___________________ cc: BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd Cox Clint Shouse Thompson & Knight, a Professional Corporation 3300 First City Center 1700 Pacific Avenue Dallas, Texas 75201 Construction Advance Certificate Pursuant to Paragraph 6.(c)(viii) of the Lease dated as of July 29, 1997 (the "Lease") between 3Com Corporation ("Tenant") and BNP Leasing Corporation ("Landlord"), Tenant does hereby represent, warrant and certify to Landlord in connection with Tenant's request for Construction Advance No. __________ that: a) no Event of Default has occurred and is continuing, b) the representations and warranties of Tenant contained in the Lease are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof, subject only to the following exceptions: [LIST EXCEPTIONS HERE, OR IF THERE ARE NO EXCEPTIONS, INSERT "NONE"] c) Construction of the Designated Improvements has commenced and is progressing without any significant continuing interruption in a good and workmanlike manner and substantially in accordance with the requirements of the Lease and all Applicable Laws and Tenant has corrected or is diligently pursuing the correction of any significant defect in such construction, d) all costs and expenses for which Tenant is requesting reimbursement by the Construction Advance referenced above constitute actual costs and expenses incurred by Tenant for the Designated Improvements or for property taxes or assessments assessed against and paid with respect to the Leased Property, and e) Potential Lien Claimants have been paid all sums for which prior Construction Advances have been advanced, and the advance being requested will not result in an excess of $3,000,000 or more of (1) the total cost of work with respect to which Potential Lien Claimants could have asserted a lien against the Leased Property and for which Construction Advances have been advanced by Landlord, over (2) the cost of such work for which Tenant has provided to Landlord unconditional statutory lien releases from all Potential Lien Claimants. Capitalized terms used herein which are defined in the Lease but not in this Certificate shall have the meanings assigned to them in the Lease. In witness whereof, this Certificate is executed by an officer of 3Com Corporation as of ______________, 19___. 3Com Corporation By:_________________________ Name:____________________ Title:___________________ List of Liens For Which a Claim of Lien Has Actually Been Filed (Construction Advance Request No. ________) Liens for which a claim of lien has actually been filed are as follows: 1. 2. 3. Other Costs List (Construction Advance Request No. ________) Costs paid - other than to Tenant's general contractor - by Tenant and for which Tenant is entitled to reimbursement from the Current Advance being requested are as follows: 1. 2. 3. Exhibit L Notice to Accelerate the Carrying Costs Accrual Termination Date BNP Leasing Corporation c/o Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Jennifer Cho or Will La Herran Re: Lease Agreement/3COM (Marlborough Site) Gentlemen: This notice is furnished pursuant to subparagraph 1.(p) of that certain Lease Agreement dated as of July 29, 1997 (the "Lease Agreement," the terms defined therein being used herein as therein defined) between 3Com Corporation and you. I, the undersigned, the [chief financial officer, controller, treasurer or the assistant treasurer] of 3Com Corporation, do hereby notify you that 3COM Corporation irrevocably elects to accelerate the Carrying Costs Accrual Termination Date and thereby accelerate the commencement of Base Rent accruals and the termination of accruals of Carrying Costs. Because of this notice, the Carrying Costs Accrual Termination Date will occur on the next following Advance Date that is at least ten (10) days after the date you receive this notice. Executed this _____ day of ______________, ____. 3Com Corporation Name:_________________________ Title:________________________ [cc all Participants] Exhibit M Notice of LIBOR Period Election BNP Leasing Corporation c/o Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Jennifer Cho or Will La Herran Re: Lease Agreement dated as of July 29, 1997, between 3COM Corporation, as tenant, and BNP Leasing Corporation, as landlord Gentlemen: Capitalized terms used in this letter are intended to have the meanings assigned to them in the Lease referenced above. This letter constitutes notice to you that the LIBOR Period Election under the Lease shall be: ________________ month(s), beginning with the first Base Rent Period that commences on or after: ______________, ____. NOTE: YOU SHALL BE ENTITLED TO DISREGARD THIS NOTICE IF THE NUMBER OF MONTHS SPECIFIED ABOVE IS NOT A PERMITTED NUMBER UNDER THE DEFINITION OF "LIBOR PERIOD ELECTION" IN THE LIST OF DEFINED TERMS ATTACHED TO THE LEASE, OR IF THE DATE SPECIFIED ABOVE CONCERNING THE COMMENCEMENT OF THE LIBOR PERIOD ELECTION IS LESS THAN TEN BUSINESS DAYS AFTER YOUR RECEIPT OF THIS NOTICE. HOWEVER, WE ASK THAT YOU NOTIFY US IMMEDIATELY IF FOR ANY REASON YOU BELIEVE THIS NOTICE IS DEFECTIVE. Executed this _____ day of ______________, 19___. 3COM CORPORATION Name:_________________________ Title:________________________ [cc all Participants] Schedule 1 LIST OF APPROVED PARTICIPANTS "Approved Participants" as used in this Lease will include the existing Participants, Banque Nationale de Paris and ABN Amro Bank N.V., and the following prospective participants, to the extent that any one or more of the following may at the request of Landlord become parties to the Participation Agreement and the Pledge Agreement by executing supplements to those agreements as therein provided: Credit Suisse First Boston Industrial Bank of Japan, Limited Mellon Bank, N.A. Societe Generale The Toronto-Dominion Bank The Bank of Nova Scotia Union Bank of California EX-10 8 EXHIBIT 10.20 The transactions contemplated in this Purchase Agreement have been made possible by the following banks, acting in the capacities indicated: Banque Nationale de Paris, ABN Amro Bank N.V., as Administrative/Documentation as Syndication Agent and Agent and Arranger Co-Arranger $86,000,000 PURCHASE AGREEMENT BETWEEN BNP LEASING CORPORATION, AS SELLER AND 3COM CORPORATION, AS PURCHASER EFFECTIVE AS OF JULY 29, 1997 (Marlborough Site) This Purchase Agreement amends, restates and replaces the Purchase Agreement between the Seller and Purchaser dated January 21, 1997, covering the Land (as described in Exhibit A attached hereto). PURCHASE AGREEMENT This PURCHASE AGREEMENT (this "Agreement") is made as of July 29, 1997, by 3COM CORPORATION, a Delaware corporation ("3COM") and BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"). R E C I T A L S --------------- A. BNPLC acquired the land described in Exhibit A attached hereto and the improvements and fixtures located thereon, if any, and has leased the same to 3COM pursuant to that certain Lease Agreement (as from time to time supplemented, amended or restated, the "Original Lease") between 3COM Corporation, a California corporation, the predecessor in interest to 3Com, and BNPLC dated as January 21, 1997. B. By a Lease Agreement dated of even date herewith (as from time to time supplemented, amended or restated, the "Lease"), BNPLC and 3Com have amended, restated and replaced the Original Lease. (The land described in Exhibit A and any and all other real or personal property from time to time covered by the Lease and included within the "Leased Property" as defined therein are hereinafter collectively referred to as the "Property".) C. BNPLC is also concurrently herewith receiving a separate environmental indemnity from 3COM pursuant to an Environmental Indemnity Agreement (as from time to time supplemented, amended or restated, the "Environmental Indemnity") between 3COM and BNPLC dated as of the date hereof. D. 3COM has requested an option to purchase the Property, which BNPLC is willing to provide on and subject to the terms and conditions set out herein. NOW, THEREFORE, in consideration of the above recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Definitions. As used herein, the terms "3COM", "BNPLC", "Original Lease", "Lease", "Leased Property", "Property", and "Environmental Indemnity" shall have the meanings indicated above; terms with initial capitals defined in the Lease and used but not defined herein shall have the meanings assigned to them in the Lease; and the terms listed immediately below shall have the following meanings: "Applicable Purchaser" means any third party designated by 3COM to purchase the interest of BNPLC in the Property as provided in Paragraph 2(a)(ii) below. "Deposit Taker" shall have the meaning assigned to it in the Pledge Agreement. "Deposit Taker Losses" shall have the meaning assigned to it in the Pledge Agreement. "Designated Sale Date" means the earlier of: (1) the effective date of any termination of the Lease by 3COM pursuant to Paragraph 2 thereof; (2) any date designated by BNPLC in a written notice given by BNPLC to 3COM when an Event of Default by 3COM is continuing, provided the notice of the date so designated is given by BNPLC at least thirty (30) days before the date so designated; or (3) the first Business Day in August, 2002. "Direct Payments to Participants" means the amounts paid or required to be paid directly to Participants on the Designated Sale Date as provided in Section 6.2 of the Pledge Agreement at the direction of and for 3COM by the collateral agent appointed pursuant to the Pledge Agreement from all or any part of the Collateral described therein. "Fair Market Value" means the fair market value of the Property on or about the Designated Sale Date (calculated under the assumptions, whether or not then accurate, that 3COM has maintained the Property in compliance with all Applicable Laws [including Environmental Laws]; that 3COM has completed the construction of any Improvements which was commenced prior to the Designated Sale Date; that all such Improvements are self-sufficient in the sense that any easements or offsite facilities needed for their use will be available at no additional cost to the owner of the Improvements; that 3COM has repaired and restored the Property after any damage following fire or other casualty; that 3COM has restored the remainder of the Property after any partial taking by eminent domain; that 3COM has completed any contests of and paid any taxes due [other than Excluded Taxes] or other amounts secured by or allegedly secured by a lien against the Property other than Prohibited Encumbrances; that no conditions or circumstances on or about the Property [such as the presence of an endangered species] is discovered that will impede the use or any development of the Property permitted by the Lease; that any use or development of the Property as permitted by the Lease will not be hindered or delayed because of the limited availability of utilities or water; that without undue cost or delay any purchaser paying fair market value for the Property can obtain any necessary permits or licenses needed to use the Property for the purposes permitted by the Lease; and that 3COM has cured any title defects affecting the Property other than Prohibited Encumbrances, all in accordance with the standards and requirements of the Lease as though the Lease were continuing in force) as determined by an independent MAI appraiser selected by BNPLC, which appraiser must have five (5) years or more experience appraising similar properties in Massachusetts. "Qualified Deposit Taker" means one of the fifty largest (measured by total assets) U.S. banks, or one of the one hundred largest (measured by total assets) banks in the world, with debt ratings of at least (i) A- (in the case of long term debt) and A-1 (in the case of short term debt) or the equivalent thereof by Standard and Poor's Corporation, and (ii) A (in the case of long term debt) and P-1 (in the case of short term debt) or the equivalent thereof by Moody's Investor Service, Inc. The parties believe it improbable that the ratings systems used by Standard and Poor's Corporation and by Moody's Investor Service, Inc. will be discontinued or changed, but if such ratings systems are discontinued or changed, 3COM shall be entitled to select and use a comparable ratings systems as a substitute for the S&P Rating or the Moody Rating, as the case may be, for purposes of determining the status of any bank as a Qualified Deposit Taker. "Purchase Price" means an amount equal to Stipulated Loss Value outstanding on the Designated Sale Date, plus all costs and expenses (including appraisal costs, withholding taxes (if any) and reasonable Attorneys' Fees, as defined in the Lease) incurred in connection with any sale of the Property by BNPLC hereunder or in connection with collecting sales proceeds due hereunder, less the aggregate amounts (if any) of Direct Payments to Participants and Deposit Taker Losses. "Prohibited Encumbrance" means any lien or other title defect encumbering the Property that is claimed by BNPLC itself or lawfully claimed by a third party through or under BNPLC, including any judgment lien lawfully filed against BNPLC and including any tax lien assessed because of BNPLC's failure to pay Excluded Taxes, but excluding the Lease and any lien or other title defect that (i) is a Permitted Encumbrance (as defined in the Lease), regardless of whether claimed by, through or under BNPLC, (ii) is claimed by, through or under 3COM or any of the Participants approved by 3COM (other than Landlord's Parent), or (iii) exists because of any breach by 3COM of the Lease, because of anything done or not done by BNPLC in an effort to satisfy subparagraph 9(b) of the Lease, or because of anything done or not done by BNPLC at the request of 3COM. "Remarketing Notice" shall have the meaning assigned to it in Paragraph 2(b)(1) below. "Required Documents" means the quitclaim deed and other documents that BNPLC must tender pursuant to Paragraph 3 below. "Shortage Amount" means any amount payable to BNPLC by 3COM, rather than by the Applicable Purchaser, pursuant to clause 2(a)(ii) below. 2. 3COM's Options and Obligations on the Designated Sale Date. (a) Choices. On the Designated Sale Date 3COM shall have the right and the obligation to either: (i) purchase BNPLC's interest in the Property and in Escrowed Proceeds, if any, for a net cash price equal to the Purchase Price; or (ii) cause the Applicable Purchaser to purchase BNPLC's interest in the Property and in Escrowed Proceeds, if any, for a net cash price not less than the lesser of (a) the Fair Market Value of the Property, (b) fifteen percent (15%) of Stipulated Loss Value outstanding immediately prior to the purchase or (c) the Purchase Price. If, however, the Fair Market Value is less than fifteen percent (15%) of Stipulated Loss Value and less than the Purchase Price, BNPLC may elect to keep the Property and any Escrowed Proceeds rather than sell to the Applicable Purchaser, in which case 3COM shall pay BNPLC an amount equal to (A) eighty-five percent (85%) of Stipulated Loss Value, less (B) the sum of (x) any Escrowed Proceeds then held and to be retained by BNPLC, (y) any Direct Payments to Participants and (z) any Deposit Taker Losses. Unless BNPLC elects to keep the Property pursuant to the preceding sentence, 3COM must make a supplemental payment to BNPLC on the Designated Sale Date equal to the excess (if any) of the Purchase Price over the net cash price actually paid to BNPLC on the Designated Sale Date by the Applicable Purchaser for BNPLC's interest in the Property and in Escrowed Proceeds, if any. However, provided no Event of Default has occurred and is continuing under the Lease, and provided further that neither 3COM nor any Applicable Purchaser has failed to pay any amount required to be paid by this Agreement on the date such amount first became due, any supplemental payment required by the preceding sentence shall not exceed (1) eighty-five percent (85%) of Stipulated Loss Value on the Designated Sale Date, less (2) any Direct Payments to Participants and any Deposit Taker Losses. Any supplemental payment payable to BNPLC by 3COM, rather than by the Applicable Purchaser, pursuant to this clause (ii) is hereinafter referred to as the "Shortage Amount." If the net cash price actually paid by the Applicable Purchaser to BNPLC exceeds the Purchase Price and all other sums that are then due from 3COM to BNPLC, 3COM shall be entitled to such excess. If any amount payable to BNPLC pursuant to this subparagraph 2(a) is not actually paid to BNPLC on the Designated Sale Date, 3COM shall pay interest on the past due amount computed at the Default Rate from the Designated Sale Date. However, 3Com shall be entitled to a reduction of the interest required by the preceding sentence equal to the Base Rent, if any, paid by 3Com as provided in Paragraph 17 of the Lease for any holdover period after the Designated Sale Date. (b) Election by 3COM. 3COM shall have the right to elect whether it will satisfy the obligations set out in clause (i) or (ii) of the preceding Paragraph 2(a); provided, however, that the following conditions are satisfied: (1) To give BNPLC the opportunity to have the Fair Market Value determined by an appraiser as provided in the definition of Fair Market Value above before the Designated Sale Date, 3COM must, unless 3COM concedes that Fair Market Value will not be less than fifteen percent (15%) of Stipulated Loss Value on the Designated Sale Date, provide BNPLC with a Remarketing Notice. "Remarketing Notice" means a notice given by 3COM to BNPLC (and to each of the Participants) no earlier than one hundred eighty (180) days before the Designated Sale Date and no later than ninety (90) days before the Designated Sale Date, specifying that 3COM does not concede that the Fair Market Value is equal to or greater than fifteen percent (15%) of the Stipulated Loss Value. A Remarketing Notice will be required only if 3COM does not concede that Fair Market Value will equal or exceed fifteen percent (15%) of Stipulated Loss Value on the Designated Sale Date. But if for any reason (including but not limited to any acceleration of the Designated Sale Date pursuant to clause (2) of the definition of Designated Sale Date above) 3COM fails to provide a Remarketing Notice within the time periods specified in the definition of Remarketing Notice above, Fair Market Value shall, for purposes of this Agreement, be deemed to be no less than fifteen percent (15%) of Stipulated Loss Value on the Designated Sale Date. (2) To give BNPLC the opportunity to prepare the Required Documents before the Designated Sale Date, 3COM must, if it is to elect to satisfy the obligations set forth in clause (ii) of Paragraph 2(a), irrevocably specify an Applicable Purchaser in notice to BNPLC given at least seven (7) days prior to the Designated Sale Date. If for any reason 3COM fails to so specify an Applicable Purchaser, 3COM shall be deemed to have irrevocably elected to satisfy the obligations set forth in clause (i) of Paragraph 2(a). (c) Termination of 3COM's Option To Purchase. Without limiting BNPLC's right to require 3COM to satisfy the obligations imposed by Paragraph 2(a), 3COM shall have no further option hereunder to purchase the Property if either: (1) 3COM shall have elected to satisfy its obligations under clause (ii) of Paragraph 2(a) on a Designated Sale Date and BNPLC shall have elected to keep the Property on such Designated Sale Date in accordance with clause (ii) of Paragraph 2(a); or (2) 3COM shall have failed on a Designated Sale Date to make or cause to be made all payments to BNPLC required by this Agreement or by the Lease and such failure shall have continued beyond the thirty (30) day period for tender specified in the next sentence. If BNPLC does not receive all payments due under the Lease and all payments required hereunder on a Designated Sale Date, 3COM may nonetheless tender to BNPLC the full Purchase Price and all amounts then due under the Lease, together with interest on the total Purchase Price computed at the Default Rate from the Designated Sale Date to the date of tender, and if presented with such a tender within thirty (30) days after the applicable Designated Sale Date, BNPLC must accept it and promptly thereafter deliver any Escrowed Proceeds and a deed and all other Required Documents listed in Paragraph 3. (d) Payment to BNPLC. All amounts payable under the preceding Paragraphs 2(a) or 2(c) by 3COM and, if applicable, by the Applicable Purchaser must be paid directly to BNPLC, and no payment to any other party shall be effective for the purposes of this Agreement. In addition to the payments required under Paragraph 2(a) hereunder, on the Designated Sale Date 3COM must pay all amounts then due to BNPLC under the Lease. BNPLC will remit any excess amounts due 3COM pursuant to the last sentence of clause (ii) of Paragraph 2(a) promptly after BNPLC's receipt of the same and in no event later than thirty (30) days thereafter. (e) Effect of Options on Subsequent Title Encumbrances. It is the intent of BNPLC and 3COM that any conveyance of the Property to 3COM or any Applicable Purchaser pursuant to this Agreement shall cut off and terminate any interest in the Property claimed by, through or under BNPLC, including the Participants (but not any unsatisfied obligations to BNPLC under the Lease, the Environmental Indemnity or this Agreement), including but not limited to any Prohibited Encumbrances and any leasehold or other interests conveyed by BNPLC in the ordinary course of BNPLC's business. Anyone accepting or taking any interest in the Property by or through BNPLC after the date of this Agreement shall acquire such interest subject to the rights and options granted 3COM hereby. Further, 3COM and any Applicable Purchaser shall be entitled to pay any payment required by this Agreement for the purchase of the Property directly to BNPLC notwithstanding any prior conveyance or assignment by BNPLC, voluntary or otherwise, of any right or interest in this Agreement or the Property, and neither 3COM nor any Applicable Purchaser shall be responsible for the proper distribution or application of any such payments by BNPLC. 3. Terms of Conveyance Upon Purchase. Immediately after receipt of all payments to BNPLC required pursuant to the preceding Paragraph 2, BNPLC must, unless it is to keep the Property as permitted by Paragraph 2(a)(ii), deliver all Escrowed Proceeds, if any, and convey all of its right, title and interest in the Property by quitclaim deed to 3COM or the Applicable Purchaser, as the case may be, subject only to the Permitted Encumbrances (as defined in the Lease) and any other encumbrances that do not constitute Prohibited Encumbrances. However, such conveyance shall not include the right to receive any payment under the Lease then due BNPLC or that may become due thereafter because of any expense or liability incurred by BNPLC resulting in whole or in part from events or circumstances occurring before such conveyance. All costs of such purchase and conveyance of every kind whatsoever, both foreseen and unforeseen, shall be the responsibility of the purchaser, and the form of quitclaim deed used to accomplish such conveyance shall be substantially in the form attached as Exhibit B. With such quitclaim deed, BNPLC shall also tender to 3COM or the Applicable Purchaser, as the case may be, the following, each fully executed and, where appropriate, acknowledged on BNPLC's behalf by an officer of BNPLC: (1) a Bill of Sale and Assignment of Contract Rights and Intangible Assets in the form attached as Exhibit D, (2) an Acknowledgment of Disclaimer of Representations and Warranties, in the form attached as Exhibit E, which 3COM or the Applicable Purchaser must execute and return to BNPLC, (3) a Secretary's Certificate in the form attached as Exhibit G, (4) a letter to the title insurance company insuring title to the Property in the form attached as Exhibit H, and (5) a certificate concerning tax withholding in the form attached as Exhibit I. 4. Survival of 3COM's Obligations. (a) Status of this Agreement. Except as expressly provided in the last sentence of this subparagraph and elsewhere herein, this Agreement shall not terminate, nor shall 3COM have any right to terminate this Agreement, nor shall 3COM be entitled to any reduction of the Purchase Price hereunder, nor shall the obligations of 3COM to BNPLC under Paragraph 2 be affected by reason of (i) any damage to or the destruction of all or any part of the Property from whatever cause, (ii) the taking of or damage to the Property or any portion thereof under the power of eminent domain or otherwise for any reason, (iii) the prohibition, limitation or restriction of 3COM's use of all or any portion of the Property or any interference with such use by governmental action or otherwise, (iv) any eviction of 3COM or any party claiming under 3COM by paramount title or otherwise, (v) 3COM's prior acquisition or ownership of any interest in the Property, (vi) any default on the part of BNPLC under this Agreement, the Lease or any other agreement to which BNPLC is a party, or (vii) any other cause, whether similar or dissimilar to the foregoing, any existing or future law to the contrary notwithstanding. It is the intention of the parties hereto that the obligations of 3COM hereunder (including 3COM's obligation to make payments under - and, if applicable, to cause the Applicable Purchaser to make payments under - Paragraph 2) shall be separate and independent of the covenants and agreements of BNPLC. Accordingly, the Purchase Price and the Shortage Amount, as the case may be under Paragraph 2, shall continue to be payable in all events, and the obligations of 3COM hereunder shall continue unaffected by any breach of this Agreement by BNPLC. However, nothing in this subparagraph, nor the performance without objection by 3COM of its obligations hereunder, shall be construed as a waiver by 3COM of any right 3COM may have at law or in equity, following any failure by BNPLC to tender a quitclaim deed and the other Required Documents as required by Paragraph 3 upon the tender by 3COM and/or the Applicable Purchaser of the payments required by Paragraph 2 and of the other documents to be executed in favor of BNPLC at the closing of the sale hereunder, to (i) recover monetary damages proximately caused by such failure of BNPLC if BNPLC does not cure the failure within thirty (30) days after 3COM demands a cure by written notice to BNPLC, or (ii) a decree compelling performance of BNPLC's obligation to so tender a quitclaim deed and the Required Documents. (b) Remedies Under the Lease and the Environmental Indemnity. No repossession of or re-entering upon the Property or exercise of any other remedies available under the Lease or the Environmental Indemnity shall relieve 3COM of its liabilities and obligations hereunder, all of which shall survive the exercise of remedies under the Lease and Environmental Indemnity. 3COM acknowledges that the consideration for this Agreement is separate and independent of the consideration for the Lease and the Environmental Indemnity, and 3COM's obligations hereunder shall not be affected or impaired by any event or circumstance that would excuse 3COM from performance of its obligations under the Lease or the Environmental Indemnity. 5. Remedies Cumulative. No right or remedy herein conferred upon or reserved to BNPLC is intended to be exclusive of any other right or remedy BNPLC has with respect to the Property, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity or by statute. In addition to other remedies available under this Agreement, either party shall be entitled, to the extent permitted by applicable law, to a decree compelling performance of any of the other party's agreements hereunder. 6. No Implied Waiver. The failure of either party to this Agreement to insist at any time upon the strict performance of any covenant or agreement of the other party or to exercise any remedy contained in this Agreement shall not be construed as a waiver or a relinquishment thereof for the future. The waiver by either party of or redress for any violation of any term, covenant, agreement or condition contained in this Agreement shall not prevent a subsequent act, which would have originally constituted a violation, from having all the force and effect of an original violation. No express waiver by either party shall affect any condition other than the one specified in such waiver and that one only for the time and in the manner specifically stated. A receipt by BNPLC of any payment hereunder with knowledge of the breach of this Agreement shall not be deemed a waiver of such breach, and no waiver by either party of any provision of this Agreement shall be deemed to have been made unless expressed in writing and signed by the waiving party. 7. Attorneys' Fees and Legal Expenses. If either party commences any legal action or other proceeding to enforce any of the terms of this Agreement or the documents and agreements referred to herein, or because of any breach by the other party or dispute hereunder or thereunder, the successful or prevailing party, shall be entitled to recover from the nonprevailing party all Attorneys' Fees incurred in connection therewith, whether or not such controversy, claim or dispute is prosecuted to a final judgment. Any such Attorneys' Fees incurred by either party in enforcing a judgment in its favor under this Agreement shall be recoverable separately from such judgment, and the obligation for such Attorneys' Fees is intended to be severable from other provisions of this Agreement and not to be merged into any such judgment. 8. Estoppel Certificate. 3COM and BNPLC will each, upon not less than twenty (20) days' prior written request by the other, execute, acknowledge and deliver to the requesting party a written statement certifying that this Agreement is unmodified and in full effect (or, if there have been modifications, that this Agreement is in full effect as modified, and setting forth such modification) and either stating that no default exists hereunder or specifying each such default of which the signer may have knowledge. Any such statement may be relied upon by any Participant or prospective purchaser or assignee of BNPLC with respect to the Property. Neither 3COM nor BNPLC shall be required to provide such a certificate more frequently than once in any six month period; provided, however, that if either party determines that there is a significant business reason for requiring a current certificate, including, without limitation, the need to provide such a certificate to a prospective purchaser or assignee, the other shall provide a certificate upon request whether or not it had provided a certificate within the prior six month period. 9. Notices. Each provision of this Agreement referring to the sending, mailing or delivery of any notice or referring to the making of any payment to BNPLC, shall be deemed to be complied with when and if the following steps are taken: (a) All payments required to be made by 3COM or the Applicable Purchaser to BNPLC hereunder shall be paid to BNPLC in immediately available funds by wire transfer to: Federal Reserve Bank of San Francisco Account: Banque Nationale de Paris ABA #: 121027234 Reference: 3COM (Marlborough Site) or at such other place and in such other manner as BNPLC may designate in a notice to 3COM (provided BNPLC will not unreasonably designate a method of payment other than wire transfer). Time is of the essence as to all payments to BNPLC under this Agreement. Any payments required to be made by BNPLC to 3COM pursuant to the last sentence of clause (ii) of Paragraph 2(a) shall be paid to 3COM in immediately available funds at the address of 3COM set forth below or as 3COM may otherwise direct by written notice sent in accordance herewith. (b) All notices, demands and other communications to be made hereunder to the parties hereto shall be in writing (at the addresses set forth below) and shall be given by any of the following means: (A) personal service, with proof of delivery or attempted delivery retained; (B) electronic communication, whether by telex, telegram or telecopying (if confirmed in writing sent by United States first class mail, return receipt requested); or (C) registered or certified first class mail, return receipt requested. Such addresses may be changed by notice to the other parties given in the same manner as provided above. Any notice or other communication sent pursuant to clause (A) or (C) hereof shall be deemed received (whether or not actually received) upon first attempted delivery at the proper notice address on any Business Day between 9:00 A.M. and 5:00 P.M., and any notice or other communication sent pursuant to clause (B) hereof shall be deemed received upon dispatch by electronic means. Address of BNPLC: BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd Cox Telecopy: (214) 969-0060 With a copy to: Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention:Jennifer Cho or William J. La Herran Telecopy: (415) 296-8954 And with a copy to: Clint Shouse Thompson & Knight, P.C. 1700 Pacific Avenue Suite 3300 Dallas, Texas 75201 Telecopy: (214) 969-1550 Address of 3COM: 3Com Corporation 5400 Bayfront Plaza Santa Clara, California 95052 Attn: Legal Dept. Mail Stop 1308 Telecopy: (408) 764-6434 With copies to: 3Com Corporation 5400 Bayfront Plaza Santa Clara, California 95052 Attn: Real Estate Dept. Mail Stop 1220 Telecopy: (408) 764-5718; and 3Com Corporation 5400 Bayfront Plaza Santa Clara, California 95052 Attn: Treasury Dept. Mail Stop 1307 Telecopy: (408) 764-8403; and Gray Cary Ware & Freidenrich 400 Hamilton Avenue Palo Alto, California 94301 Attn: Jonathan E. Rattner, Esq. Telecopy: (415) 328-3029 10. Severability. Each and every covenant and agreement of 3COM contained in this Agreement is, and shall be construed to be, a separate and independent covenant and agreement. If any term or provision of this Agreement or the application thereof to any person or circumstances shall to any extent be invalid and unenforceable, the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby. Further, the obligations of 3COM hereunder, to the maximum extent possible, shall be deemed to be separate, independent and in addition to, not in lieu of, the obligations of 3COM under the Lease. In the event of any inconsistency between the terms of this Agreement and the terms and provisions of the Lease, the terms and provisions of this Agreement shall control. 11. Entire Agreement. This Agreement and the documents and agreements referred to herein set forth the entire agreement between the parties concerning the subject matter hereof and no amendment or modification of this Agreement shall be binding or valid unless expressed in a writing executed by both parties hereto. 12. Paragraph Headings. The paragraph headings contained in this Agreement are for convenience only and shall in no way enlarge or limit the scope or meaning of the various and several paragraphs hereof. 13. Gender and Number. Within this Agreement, words of any gender shall be held and construed to include any other gender and words in the singular number shall be held and construed to include the plural, unless the context otherwise requires. 14. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE UNDER AND SHALL BE GOVERNED BY THE LAWS OF THE STATE OF MASSACHUSETTS. 15. Successors and Assigns. The terms, provisions, covenants and conditions hereof shall be binding upon 3COM and BNPLC and their respective permitted successors and assigns and shall inure to the benefit of 3COM and BNPLC and all permitted transferees, mortgagees, successors and assignees of 3COM and BNPLC with respect to the Property; provided, that the rights of BNPLC hereunder shall not pass to 3COM or any Applicable Purchaser or any subsequent owner claiming through them. Prior to the Designated Sale Date BNPLC may transfer, assign and convey, in whole or in part, the Property and any and all of its rights under this Agreement (subject to the terms of this Agreement) by any conveyance that constitutes a Permitted Transfer, but not otherwise. If BNPLC sells or otherwise transfers the Property and assigns its rights under this Agreement and the Lease pursuant to a Permitted Transfer, then to the extent BNPLC's successor in interest confirms its liability for the obligations imposed upon BNPLC by this Agreement and the Lease on and subject to the express terms set out herein and therein, BNPLC shall thereby be released from any further obligations thereafter arising under this Agreement and the Lease, and 3COM will look solely to each successor in interest of BNPLC for performance of such obligations. 16. WAIVER OF JURY TRIAL. BNPLC AND 3COM EACH HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THE LEASE, THIS AGREEMENT OR ANY OTHER DOCUMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION AND THE RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. 3COM and BNPLC each acknowledge that this waiver is a material inducement to enter into a business relationship, that each has already relied on the waiver in entering into this Agreement and the other documents referred to herein, and that each will continue to rely on the waiver in their related future dealings. 3COM and BNPLC each further warrant and represent that it has reviewed this waiver with its legal counsel, and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LEASE, THIS AGREEMENT OR THE ENVIRONMENTAL INDEMNITY. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. 17. Security for 3COM's Obligations. 3COM's obligations under this Agreement are secured by the Pledge Agreement, reference to which is hereby made for a description of the Collateral covered thereby and the rights and remedies provided to BNPLC thereby. Although the collateral agent appointed for BNPLC as provided in the Pledge Agreement shall be entitled to hold all Collateral as security for the full and faithful performance by 3COM of 3COM's covenants and obligations under this Agreement, the Collateral shall not be considered an advance payment of the Purchase Price or any Shortage Amount or a measure of BNPLC's damages should 3COM breach this Agreement. If 3COM does breach this Agreement and fails to cure the same within any time specified herein for the cure, BNPLC may, from time to time, without prejudice to any other remedy and without notice to 3COM, require the collateral agent to immediately apply the proceeds of any disposition of the Collateral (and any cash included in the Collateral) to amounts then due hereunder from 3COM. If BNPLC assigns its interest in the Property before the Designated Sale Date, BNPLC may also assign BNPLC's interest in the Collateral to the assignee. 18. Replacement of Participants Proposed by 3COM. So long as no Event of Default has occurred and is continuing, BNPLC shall not unreasonably withhold its approval for a substitution under the Participation Agreement of a new Participant proposed by 3COM for any Participant, the Deposit Taker for whom has ceased to be a Qualified Deposit Taker; provided, however, that (A) the proposed substitution can be accomplished without a release or breach by BNPLC of its rights and obligations under the Participation Agreement or the "Underlying Documents" described therein (including this Purchase Agreement); (B) the new Participant will agree (by executing Supplements to the Participation Agreement and Pledge Agreement as therein contemplated and by other agreements as may be reasonably required by BNPLC and 3COM) to become a party to the Participation Agreement and to the Pledge Agreement, to designate a Qualified Deposit Taker as the Deposit Taker for it under the Pledge Agreement and to accept a Percentage under the Participation Agreement equal to the Percentage of the Participant to be replaced; (C) the new Participant (or 3COM) will provide the funds required to pay the termination fee by Section 6.4 of the Participation Agreement to accomplish the substitution; (D) 3COM (or the new Participant) agrees in writing to indemnify and defend BNPLC for any and all Losses incurred by BNPLC in connection with or because of the substitution, including the cost of preparing supplements to the Participation Agreement and the Pledge Agreement and including any cost of defending and paying any claim asserted by the Participant to be replaced because of the substitution (but not including any liability of BNPLC to such Participant for damages caused by BNPLC's bad faith or gross negligence in the performance of BNPLC's obligations under the Participation Agreement prior to the substitution); and (E) the new Participant shall be a reputable financial institution having a net worth of no less than seven and one half percent (7.5%) of total assets and total assets of no less than $10,000,000,000.00 (all according to then recent audited financial statements). BNPLC shall attempt in good faith to assist (and cause its Affiliate, Banque Nationale de Paris, to attempt in good faith to assist) 3COM in identifying a new Participant that 3COM may propose to substitute for an existing Participant pursuant to this Paragraph, as 3COM may reasonably request from time to time. However, in no event shall BNPLC itself, or any of its Affiliates, be required to take the Percentage of any Participant to be replaced. 19. Security for BNPLC's Obligations. To secure 3COM's right to recover any damages caused by a breach of Paragraph 3 by BNPLC, including any such breach caused by a rejection or termination of this Agreement in any bankruptcy or insolvency proceeding instituted by or against BNPLC, as debtor, BNPLC does hereby grant to 3COM a lien and security interest against all rights, title and interests of BNPLC from time to time in and to the Property. 3COM may enforce such lien and security interest judicially after any such breach by BNPLC, but not otherwise. Contemporaneously with the execution of this Agreement, 3COM and BNPLC will execute a memorandum of this Agreement which is in recordable form and which specifically references the lien granted in this Paragraph, and 3COM shall be entitled to record such memorandum at any time prior to the Designated Sale Date. 20. Not a Partnership, Etc. NOTHING IN THIS PURCHASE AGREEMENT IS INTENDED TO BE OR TO CREATE ANY PARTNERSHIP, JOINT VENTURE, OR OTHER JOINT ENTERPRISE BETWEEN BNPLC AND 3COM. NEITHER THE EXECUTION OF THIS PURCHASE AGREEMENT NOR THE ADMINISTRATION OF THIS PURCHASE AGREEMENT OR OTHER DOCUMENTS REFERENCED HEREIN BY BNPLC, NOR ANY OTHER RIGHT, DUTY OR OBLIGATION OF BNPLC UNDER OR PURSUANT TO THIS PURCHASE AGREEMENT OR SUCH DOCUMENTS IS INTENDED TO BE OR TO CREATE ANY FIDUCIARY OBLIGATIONS OF BNPLC TO 3COM. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties have executed this Purchase Agreement as of July 29, 1997. "BNPLC" BNP LEASING CORPORATION, a Delaware corporation By: /s/ Lloyd G. Cox ---------------------------- Lloyd G. Cox, Vice President [Continuation of signature pages to Purchase Agreement dated to be effective July 29, 1997] "3COM" 3COM CORPORATION, a Delaware corporation By: /s/ Mark D. Michael Name:Mark D. Michael Title:SVP, Gen Counsel & Secretary Exhibit A Legal Description The land with the buildings thereon situated on Forest Street in Marlborough, Middlesex County, Massachusetts and being shown as Lots 1 and 2 on a plan of land entitled "Plan of Land in Marlborough, Mass." drawn by Guerriere & Halnon, Inc. Engineering and Land Surveying, owned by Metropolitan Life Insurance Company, Sale 200 feet to an inch, dated August 17, 1989 and recorded in Middlesex County Registry of Deeds in Book 25878, Page 342, to which plan reference is made for a more particular description of Lots 1 and 2. Exhibit B QUITCLAIM DEED THE STATE OF MASSACHUSETTS ) ) KNOW ALL MEN BY THESE PRESENTS THAT: COUNTY OF ______________ ) BNP LEASING CORPORATION, a Delaware corporation ("Grantor"), for and in consideration of the sum of [INSERT AMOUNT] paid to Grantor by [3COM OR THE APPLICABLE PURCHASER, AS THE CASE MAY BE] ("Grantee"), the receipt and sufficiency of which are hereby acknowledged, does hereby GRANT, SELL, CONVEY, ASSIGN and DELIVER to Grantee, with quitclaim covenants, the real property described in Exhibit A attached hereto and made a part hereof (the "Property"), together with any buildings and other improvements situated thereon, any fixtures and other property affixed thereto and all right, title, and interest of Grantor in and to adjacent streets, alleys, and rights-of-way; provided, however, this conveyance is made by Grantor and accepted by Grantee subject to the following, as well as the Permitted Encumbrances described on Annex B (collectively, the "Permitted Encumbrances"): 1. Real Estate Taxes not yet due and payable; 2. General or Special Assessments due and payable after the date hereof; and 3. Encroachments, variations in area or in measurements, boundary line disputes, roadways and other matters not of record which would be disclosed by a survey and inspection of the property conveyed hereby. IN WITNESS WHEREOF, this Deed is executed by Grantor on this ________ day of __________, 199__. BNP LEASING CORPORATION a Delaware corporation By:______________________________ Its:_____________________________ THE STATE OF ) ) COUNTY OF ) In witness whereof, the said BNP Leasing Corporation, a Delaware corporation, has caused its corporate seal to be hereto affixed and these presents to be signed, acknowledged, and delivered in its name and behalf by ______________________, its ___________________ hereto duly authorized this ___ day of ____________, 199__. Signed and sealed in the presence of __________________________________ __________________________________ __________________________________ __________________________________ The Commonwealth of Massachusetts ss. 19__ Then personally appeared the above named ________________ and acknowledged the foregoing instrument to be the free act and deed of the ____________________ before me. Notary Public My commission expires__________________. Annex A LEGAL DESCRIPTION The land with the buildings thereon situated on Forest Street in Marlborough, Middlesex County, Massachusetts and being shown as Lots 1 and 2 on a plan of land entitled "Plan of Land in Marlborough, Mass." drawn by Guerriere & Halnon, Inc. Engineering and Land Surveying, owned by Metropolitan Life Insurance Company, Sale 200 feet to an inch, dated August 17, 1989 and recorded in Middlesex County Registry of Deeds in Book 25878, Page 342, to which plan reference is made for a more particular description of Lots 1 and 2. Annex B Permitted Encumbrances [NOTE: TO THE EXTENT THAT SPECIFIC ENCUMBRANCES (OTHER THAN "PROHIBITED LIENS") ARE IDENTIFIED IN ADDITION TO THOSE DESCRIBED BELOW, SUCH ADDITIONAL ENCUMBRANCES WILL BE ADDED TO THE LIST BELOW AND THIS "NOTE" WILL BE DELETED BEFORE THIS DEED IS ACTUALLY EXECUTED AND DELIVERED BY BNPLC. SUCH ADDITIONAL ENCUMBRANCES WOULD INCLUDE ANY NEW ENCUMBRANCES APPROVED BY BNPLC AS "PERMITTED ENCUMBRANCES" FROM TIME TO TIME BECAUSE OF 3COM'S REQUEST FOR BNPLC'S CONSENT OR APPROVAL TO AN ADJUSTMENT AS PROVIDED IN THE LEASE.] This conveyance is subject to any encumbrances that do not constitute "Prohibited Encumbrances" (as defined in the Purchase Agreement pursuant to which this Deed is being delivered), including county and city taxes for the Fiscal Year 1997, a lien not yet due or payable, and including the following matters to the extent the same are still valid and in force: 1. Easement to New England Power Engineering & Service Corporation dated February 17, 1931 and recorded in Book 5544, Page 152. 2. Easement to New England Power Engineering & Service Corporation dated February 17, 1931 and recorded in Book 5546, Page 341. 3. Easement to Worcester County Electric Company dated May 27, 1959 and recorded in Book 9395, Page 43. 4. Order of Taking by the City of Marlborough for laying out of Forest Street dated December 9, 1968 and recorded in Book 11624, Page 1; as affected by Order for the Relocation of Forest Street by the County Commissioners for the County of Middlesex dated March 24, 1961 and recorded in Book 9789, Page 242. 5. Matters as shown or disclosed on a plan entitled, "Title Insurance Plan of Land in Marlborough, Mass." Prepared for: 3COM Corporation Scale: 1" = 100' Date: November 8, 1996 Prepared by: Guerriere & Halnon, Inc. Engineering & Land Surveying 333 West Street Milford, Massachusetts as follows: a. encroachment of stone wall; b. encroachment of fence; c. encroachment of guard rail; and d. encroachment of utility poles. 6. Order of Conditions by the Marlborough Conservation Commission, DEP File No. 212-408 dated April 19, 1990 and recorded in Book 20539, Page 467. 7. Order of Conditions by the Marlborough Conservation Commission, DEP File No. 212-408 dated November 29, 1989 and recorded in Book 20539, Page 515, as affected by Amendment dated April 19, 1990 and recorded in Book 20598, Page 521. EXHIBIT C [Intentionally deleted.] Exhibit D BILL OF SALE, ASSIGNMENT OF CONTRACT RIGHTS AND INTANGIBLE ASSETS Reference is made to that certain Sale Agreement dated December 13, 1996 (the "Agreement") between 3Com Corporation, a California Corporation, the predecessor in interest to 3Com Corporation, a Delaware corporation, and Metropolitan Life Insurance Company, a New York corporation ("Seller"), pursuant to which 3Com Corporation named BNP LEASING CORPORATION ("Assignor") as its designee and Seller conveyed to Assignor the real property described in Annex A attached hereto (the "Property"). Assignor hereby sells, transfers and assigns unto [3COM OR THE APPLICABLE PURCHASER, AS THE CASE MAY BE], a _____________ ("Assignee"), all of Assignor's right, title and interest in and to the following property, if any, to the extent such property is assignable: (a) any warranties, guaranties, indemnities and claims Assignor may have under the Agreement or under any document delivered by Seller thereunder to the extent related to the Property; (b) all licenses, permits or similar consents (excluding any prepaid utility reservations) from third parties to the extent related to the Property; (c) any pending or future award made because of any condemnation affecting the Property or because of any conveyance to be made in lieu thereof, and any unpaid award for damage to the Property and any unpaid proceeds of insurance or claim or cause of action for damage, loss or injury to the Property; (d) any goods, equipment, furnishings, furniture, chattels and personal property of whatever nature that are located on or about the Property; and (e) any general intangibles, permits, licenses, franchises, certificates, and other rights and privileges owned by Assignor and used solely in connection with, or relating solely to, the Property, including any such rights and privileges conveyed to Assignor pursuant to the Agreement; but excluding any rights or privileges of Assignor under (i) the Environmental Indemnity, as defined in that certain Purchase Agreement between Assignor and 3Com Corporation dated as of July 29, 2997 (the "Purchase Agreement") (pursuant to which this document is being delivered), (ii) the Lease, as defined in the Purchase Agreement, to the extent rights under the Lease relate to the period ending on the date hereof, whether such rights are presently known or unknown, including rights of the Assignor to be indemnified against claims of third parties as provided in the Lease which may not presently be known, and including rights to recover any accrued unpaid rent under the Lease which may be outstanding as of the date hereof, (iii) agreements between Assignor and Participants, as defined in the Lease, or any modification or extension thereof, and (iv) any other instrument being delivered to Assignor contemporaneously herewith pursuant to the Purchase Agreement. Assignor does for itself and its heirs, executors and administrators, covenant and agree to warrant and defend the title to the property assigned herein against the just and lawful claims and demands of any person claiming under or through Assignor, but not otherwise; excluding, however, any claim or demand arising by, through or under [3COM]. Assignee hereby assumes and agrees to keep, perform and fulfill Assignor's obligations, if any, relating to any permits or contracts, under which Assignor has rights being assigned herein. Executed: ____________________, _____. ASSIGNOR: BNP LEASING CORPORATION a Delaware corporation By:______________________________ Its:_____________________________ ASSIGNEE: [3COM, OR THE APPLICABLE PURCHASER], a _________ corporation By:______________________________ Its:_____________________________ Annex A Legal Description The land with the buildings thereon situated on Forest Street in Marlborough, Middlesex County, Massachusetts and being shown as Lots 1 and 2 on a plan of land entitled "Plan of Land in Marlborough, Mass." drawn by Guerriere & Halnon, Inc. Engineering and Land Surveying, owned by Metropolitan Life Insurance Company, Sale 200 feet to an inch, dated August 17, 1989 and recorded in Middlesex County Registry of Deeds in Book 25878, Page 342, to which plan reference is made for a more particular description of Lots 1 and 2. Exhibit E Acknowledgment of Disclaimer of Representations and Warranties THIS ACKNOWLEDGMENT OF DISCLAIMER OF REPRESENTATIONS AND WARRANTIES (this "Certificate") is made as of ___________________, ____, by [3COM or the Applicable Purchaser, as the case may be], a ___________________ ("Grantee"). Contemporaneously with the execution of this Certificate, BNP Leasing Corporation, a Delaware corporation ("BNPLC"), is executing and delivering to Grantee (1) a Corporation Grant Deed and (2) a Bill of Sale, Assignment of Contract Rights and Intangible Assets (the foregoing documents and any other documents to be executed in connection therewith are herein called the "Conveyancing Documents" and any of the properties, rights or other matters assigned, transferred or conveyed pursuant thereto are herein collectively called the "Subject Property"). Notwithstanding any provision contained in the Conveyancing Documents to the contrary, Grantee acknowledges that BNPLC makes no representations or warranties of any nature or kind, whether statutory, express or implied, with respect to environmental matters or the physical condition of the Subject Property, and Grantee, by acceptance of the Conveyancing Documents, accepts the Subject Property "AS IS," "WHERE IS," "WITH ALL FAULTS" and without any such representation or warranty by Grantor as to environmental matters, the physical condition of the Subject Property, compliance with subdivision or platting requirements or construction of any improvements. Without limiting the generality of the foregoing, Grantee hereby further acknowledges and agrees that warranties of merchantability and fitness for a particular purpose are excluded from the transaction contemplated by the Conveyancing Documents, as are any warranties arising from a course of dealing or usage of trade. Grantee hereby assumes all risk and liability (and agrees that BNPLC shall not be liable for any special, direct, indirect, consequential, or other damages resulting or arising from or relating to the ownership, use, condition, location, maintenance, repair, or operation of the Subject Property, except for damages proximately caused by (and attributed by any applicable principles of comparative fault to) the wilful misconduct, Active Negligence or gross negligence of BNPLC, its agents or employees. As used in the preceding sentence, "Active Negligence" of a party means, and is limited to, the negligent conduct of activities actually on or about the Property by that party in a manner that proximately causes actual bodily injury or property damage to be incurred. "Active negligence" shall not include (1) any negligent failure of BNPLC to act when the duty to act would not have been imposed but for BNPLC's status as owner of the Subject Property or as a party to the transactions pursuant to which BNPLC is delivering this instrument (the "Applicable Transactions"), (2) any negligent failure of any other party to act when the duty to act would not have been imposed but for such party's contractual or other relationship to BNPLC or participation or facilitation in any manner, directly or indirectly, of the Applicable Transactions, or (3) the exercise in a lawful manner by BNPLC (or any party lawfully claiming through or under BNPLC) of any remedy provided in connection with the Applicable Transactions. The provisions of this Certificate shall be binding on Grantee, its successors and assigns and any other party claiming through Grantee. Grantee hereby acknowledges that BNPLC is entitled to rely and is relying on this Certificate. EXECUTED as of ________________, ____. _________________________________ By:______________________________ Name:_________________________ Title:________________________ Exhibit F [Intentionally deleted.] Exhibit G SECRETARY'S CERTIFICATE The undersigned, ____________________ Secretary of BNP Leasing Corporation, a Delaware corporation (the "Corporation"), hereby certifies as follows: 1. That he is the duly, elected, qualified and acting Secretary [or Assistant Secretary] of the Corporation and has custody of the corporate records, minutes and corporate seal. 2. That the following named persons have been properly designated, elected and assigned to the office in the Corporation as indicated below; that such persons hold such office at this time and that the specimen signature appearing beside the name of such officer is his or her true and correct signature. [The following blanks must be completed with the names and signatures of the officers who will be signing the deed and other Required Documents on behalf of the Corporation.] Name Title Signature ____________________ ____________________ ____________________ ____________________ ____________________ ____________________ 3. That the resolutions attached hereto and made a part hereof were duly adopted by the Board of Directors of the Corporation in accordance with the Corporation's Articles of Incorporation and Bylaws. Such resolutions have not been amended, modified or rescinded and remain in full force and effect. IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal of the Corporation on this ____, day of ________________, ____. ______________________________ [signature] CORPORATE RESOLUTIONS OF BNP LEASING CORPORATION WHEREAS, pursuant to that certain Purchase Agreement (herein called the "Purchase Agreement") dated as of July 29, 1997, by and between BNP Leasing Corporation (the "Corporation") and [3COM OR THE APPLICABLE PURCHASER AS THE CASE MAY BE] ("Purchaser"), the Corporation agreed to sell and Purchaser agreed to purchase or cause the Applicable Purchaser (as defined in the Purchase Agreement) to purchase the Corporation's interest in the property (the "Property") located in Middlesex County, Massachusetts, more particularly described therein. NOW THEREFORE, BE IT RESOLVED, that the Board of Directors of the Corporation, in its best business judgment, deems it in the best interest of the Corporation and its shareholders that the Corporation convey the Property to Purchaser or the Applicable Purchaser pursuant to and in accordance with the terms of the Purchase Agreement. RESOLVED FURTHER, that the proper officers of the Corporation, and each of them, are hereby authorized and directed in the name and on behalf of the Corporation to cause the Corporation to fulfill its obligations under the Purchase Agreement. RESOLVED FURTHER, that the proper officers of the Corporation, and each of them, are hereby authorized and directed to take or cause to be taken any and all actions and to prepare or cause to be prepared and to execute and deliver any and all deeds and other documents, instruments and agreements that shall be necessary, advisable or appropriate, in such officer's sole and absolute discretion, to carry out the intent and to accomplish the purposes of the foregoing resolutions. Exhibit H BNP LEASING CORPORATION 717 N. HARWOOD SUITE 2630 DALLAS, TEXAS 75201 ____________________ , ____ [Title Insurance Company] _________________ _________________ _________________ Re: Recording of Grant Deed to [3COM or the Applicable Purchaser] ("Purchaser") Ladies and Gentlemen: BNP Leasing Corporation has executed and delivered to Purchaser a Grant Deed in the form attached to this letter. You are hereby authorized and directed to record the Grant Deed at the request of Purchaser. Sincerely, Exhibit I FIRPTA STATEMENT Section 1445 of the Internal Revenue Code of 1986, as amended, provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person. To inform [3COM or the Applicable Purchaser] (the "Transferee") that withholding of tax is not required upon the disposition of a real property interest by transferor, BNP Leasing Corporation (the "Seller"), the undersigned hereby certifies the following on behalf of the Seller: 1. The Seller is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations); 2. The United States employer identification number for the Seller is _____________________; 3. The office address of the Seller is ______________ __________________________________________. The Seller understands that this certification may be disclosed to the Internal Revenue Service by the Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both. The Seller understands that the Transferee is relying on this affidavit in determining whether withholding is required upon said transfer. The Seller hereby agrees to indemnify and hold the Transferee harmless from and against any and all obligations, liabilities, claims, losses, actions, causes of action, demands, rights, damages, costs, and expenses (including but not limited to court costs and attorneys' fees) incurred by the Transferee as a result of any false misleading statement contained herein. Under penalties of perjury I declare that I have examined this certification and to the best of my knowledge and belief it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of the Seller. Dated: ___________, ____. By:______________________________ Name:_________________________ Title:________________________ EX-10 9 EXHIBIT 10.21 The transactions contemplated in this Lease Agreement have been made possible by the following banks, acting in the capacities indicated: Banque Nationale de Paris, ABN Amro Bank N.V., as Administrative/Documentation as Syndication Agent and Agent and Arranger Co-Arranger $95,000,000 LEASE AGREEMENT BETWEEN BNP LEASING CORPORATION, AS LANDLORD AND 3COM CORPORATION, AS TENANT EFFECTIVE AS OF AUGUST 11, 1997 (Rolling Meadows Site) TABLE OF CONTENTS 1. 1. Definitions (a) Active Negligence (b) Additional Rent (c) Administrative Fee (d) Advance Date (e) Affiliate (f) Applicable Laws (g) Applicable Purchaser (h) Approved Participants (i) As-built Appraisal (j) Attorneys' Fees (k) Base Rent (l) Base Rent Date (m) Breakage Costs (n) Business Day (o) Capital Adequacy Charges (p) Carrying Costs (q) Carrying Costs Accrual Termination Date (r) Cash Collateral (s) Certificate of Deposit Collateral Percentage (t) Closing Costs (u) Change of Control Event (v) Code (w) Collateral (x) Commitment Fee (y) Completion Deadline (z) Completion Notice (aa) Construction Advances (ab) Construction Allowance (ac) Construction Documents (ac) Construction Periods (ad) Custodial Agreement (ae) Debt (af) Default (ag) Default Rate (ah) Defaulting Participant (ai) Designated Improvements (aj) Designated Sale Date (ak) Effective Rate (al) Environmental Indemnity (am) Environmental Laws (an) Environmental Losses (ao) Environmental Report (ap) ERISA (aq) ERISA Affiliate (ar) ERISA Termination Event (as) Escrowed Proceeds (at) Eurocurrency Liabilities (au) Eurodollar Rate Reserve Percentage (av) Event of Default (aw) Excluded Taxes (ax) Fair Market Value (ay) Fed Funds Rate (az) Funding Advances (ba) GAAP (bb) Hazardous Substance (bc) Hazardous Substance Activity (bd) Impositions (be) Improvements (bf) Indemnified Party (bg) Initial Investment (bh) Landlord's Parent (bi) Last Advance Date (bj) LIBOR (bk) LIBOR Period Election (bl) Lien (bm) Losses (bn) Maximum Construction Allowance (bo) Notice of Last Advance (bp) Ordinary Negligence (bq) Outstanding Construction Allowance (br) Participant (bs) Participation Agreement (bt) Period (bu) Permitted Encumbrances (bv) Permitted Hazardous Substance Use (bw) Permitted Hazardous Substances (bx) Permitted Transfer (by) Person (bz) Plan (ca) Pledge Agreement (cb) Prime Rate (cc) Purchase Agreement (cd) Purchase Documents (ce) Purchase Price (cf) Qualified Payments (cg) Qualifying Security Interest (ch) Remaining Proceeds (ci) Rent (cj) Responsible Financial Officer (ck) Scope Change (cl) Securities Collateral (cm) Securities Collateral Percentage (cn) Spread (co) Stipulated Loss Value (cp) Subsidiary (cq) Tenant's Knowledge (cr) Term (cs) Unfunded Benefit Liabilities (ct) Upfront Fee (cu) Voluntary Minimum Pledge Commitment (cv) Other Terms and References 2. 2. Term 3. 3. Rental (a) Base Rent (b) Upfront Fee (c) Commitment Fees (d) Administrative Agency Fees (e) Additional Rent (f) Interest and Order of Application (g) Net Lease (h) No Demand or Setoff (i) Overdrawn Allowance 4. 4. Insurance and Condemnation Proceeds 5. 5. No Lease Termination (a) Status of Lease (b) Waiver By Tenant 6. 6. Construction Allowance (a) Advances; Outstanding Construction Allowance (b) Designated Improvements (i) Responsibility for Construction. (ii) Approval of Descriptions and Renderings of the Designated Improvements. (iii) Scope Changes Subsequent to Initial Approval. (iv) Value Added. (v) Estoppel Letters Required. (vi) Advances Not a Waiver. (c) Conditions to Construction Advances (i) Prior Notice (ii) Amount of the Advances (iii) Insurance a) Title Insurance b) Builder's Risk Insurance (iv) Progress of Construction (v) Evidence of Costs to be Reimbursed (vi) No Event of Default or Change of Control Event (vii) No Sale of Landlord's Interest (viii) Certificate of No Default (ix) Payments by Approved Participants (x) Approval of Designated Improvements and As-built Appraisal (d) Completion Notice 7. 7. Purchase Documents and Environmental Indemnity 8. 8. Use and Condition of Leased Property (a) Use (b) Condition (c) Consideration of and Scope of Waiver 9. 9. Other Representations, Warranties and Covenants of Tenant (a) Financial Matters (b) Existing Contract (c) No Default or Violation (d) Compliance with Covenants and Laws (e) Environmental Representations (f) No Suits (g) Condition of Property (h) Organization (i) Enforceability (j) Not a Foreign Person (k) Omissions (l) Existence (m) Tenant Taxes (n) Operation of Property (o) Debts for Construction (p) Impositions (q) Repair, Maintenance, Alterations and Additions (r) Insurance and Casualty (s) Condemnation (t) Protection and Defense of Title (u) No Liens on the Leased Property (v) Books and Records (w) Financial Statements; Required Notices; Certificates as to Default (x) Further Assurances (y) Fees and Expenses; General Indemnification; Increased Costs; and Capital Adequacy Charges (z) Liability Insurance (aa) Permitted Encumbrances (ab) Environmental (ac) Affirmative Financial Covenants (ad) Negative Covenants (i) Liens (ii) Transactions with Affiliates (iii) Mergers; Sales of Assets (v) Change of Business (ae) ERISA 10. 10. Representations, Warranties and Covenants of Landlord (a) Title Claims By, Through or Under Landlord (b) Actions Required of the Title Holder (c) No Default or Violation (d) No Suits (e) Organization (f) Enforceability (g) Existence (h) Not a Foreign Person 11. 11. Assignment and Subletting (a) Consent Required (b) Standard for Landlord's Consent to Assignments and Certain Other Matters (c) Consent Not a Waiver (d) Landlord's Assignment 12. 12. Environmental Indemnification (a) Indemnity (b) Assumption of Defense (c) Notice of Environmental Losses (d) Rights Cumulative (e) Survival of the Indemnity 13. 13. Landlord's Right of Access 14. 14. Events of Default (a) Definition of Event of Default (b) Remedies (c) Enforceability (d) Remedies Cumulative (e) Waiver by Tenant (f) No Implied Waiver 15. 15. Default by Landlord 16. 16. Quiet Enjoyment 17. 17. Surrender Upon Termination 18. 18. Holding Over by Tenant 19. 19. Miscellaneous (a) Notices (b) Severability (c) No Merger (d) NO IMPLIED REPRESENTATIONS BY LANDLORD (e) Entire Agreement (f) Binding Effect (g) Time is of the Essence (h) Termination of Prior Rigts (i) Governing Law (j) Waiver of a Jury Trial (k) Not a Partnership, Etc (l) Tax Reporting Exhibits and Schedules Exhibit A Legal Description Exhibit B Encumbrance List Exhibit C Permitted Hazardous Substances Exhibit D Resolution of Disputed Insurance Claims Exhibit E Covenant Compliance Certificate Exhibit F Certificate Setting Forth the Calculation of the Spread Exhibit G List of Environmental Reports Exhibit H Contractor's Estoppel Letter Exhibit I Architect's Estoppel Letter Exhibit J Draw Request Forms Exhibit K Notice to Accelerate the Carrying Costs Accrual Termination Date Exhibit L Notice of Libor Period Election Schedule 1 List of Approved Participants LEASE AGREEMENT This LEASE AGREEMENT (hereinafter called this "Lease"), made to be effective as of August 11, 1997 (all references herein to the "date hereof" or words of like effect shall mean such effective date), by and between BNP LEASING CORPORATION, a Delaware corporation (hereinafter called "Landlord"), and 3COM CORPORATION, a Delaware corporation (hereinafter called "Tenant"); W I T N E S E T H T H A T: WHEREAS, pursuant to an Agreement for Purchase and Sale of Real Estate dated June 20, 1997 and with an "effective date" of June 24, 1997 (as amended, hereinafter called the "Existing Contract") between Tenant and 3800 Golf Company, L.L.C. (hereinafter called "Seller"), concerning the land described in Exhibit A attached hereto (hereinafter called the "Land") and the improvements on such Land, if any, Landlord (as the assignee of Tenant thereunder) is acquiring the Land and improvements (if any) from Seller contemporaneously with the execution of this Lease; WHEREAS, In anticipation of Landlord's acquisition of the Land and the improvements on the Land, Landlord and Tenant have reached agreement as to the terms and conditions upon which Landlord will lease the same to Tenant, and by this Lease Landlord and Tenant desire to evidence such agreement. NOW, THEREFORE, in consideration of the rent to be paid and the covenants and agreements to be performed by Tenant, as hereinafter set forth, Landlord does hereby LEASE, DEMISE and LET unto Tenant for the term hereinafter set forth the Land, together with: (i) Landlord's interest in any and all buildings and improvements now existing or hereafter erected on the Land, including, but not limited to, the fixtures, attachments, appliances, equipment, machinery and other articles attached to such buildings and improvements (hereinafter called the "Improvements"); (ii) all easements and rights-of-way now owned or hereafter acquired by Landlord for use in connection with the Land or Improvements or as a means of access thereto; (iii) all right, title and interest of Landlord, now owned or hereafter acquired, in and to (A) any land lying within the right-of-way of any street, open or proposed, adjoining the Land, (B) any and all sidewalks and alleys adjacent to the Land and (C) any strips and gores between the Land and abutting land (except strips and gores, if any, between the Land and abutting land owned by Landlord, with respect to which this Lease shall cover only the portion thereof to the center line between the Land and the abutting land owned by Landlord). The Land and all of the property described in items (i) through (iii) above are hereinafter referred to collectively as the "Real Property". In addition to conveying the leasehold in the Real Property as described above, Landlord hereby grants and assigns to Tenant for the term of this Lease the right to use and enjoy (and, to the extent the following consist of contract rights, to enforce) any assignable interests or rights in, to or under the following that have been transferred to Landlord by Seller under the Existing Contract: (a) any goods, equipment, furnishings, furniture, chattels and personal property of whatever nature that are located on the Real Property and all renewals or replacements of or substitutions for any of the foregoing; and (b) any general intangibles, permits, licenses, franchises, certificates, and other rights and privileges. All of the property, rights and privileges described above in this paragraph are hereinafter collectively called the "Personal Property". The Real Property and the Personal Property are hereinafter sometimes collectively called the "Leased Property." Provided, however, the leasehold estate conveyed hereby and Tenant's rights hereunder are expressly made subject and subordinate to the Permitted Encumbrances (as hereinafter defined) and to any other claims or encumbrances not asserted by Landlord itself or by third parties lawfully claiming through or under Landlord. The Leased Property is leased by Landlord to Tenant and is accepted and is to be used and possessed by Tenant upon and subject to the following terms, provisions, covenants, agreements and conditions: 1. Definitions. As used herein, the terms "Lease," "Landlord," "Tenant," "Existing Contract," "Seller," "Land," "Improvements," "Real Property," "Personal Property" and "Leased Property" shall have the meanings indicated above and the terms listed immediately below shall have the following meanings: (a) Active Negligence. "Active Negligence" of an Indemnified Party means, and is limited to, the negligent conduct of activities on the Leased Property by the Indemnified Party in a manner that proximately causes actual bodily injury or property damage to occur. "Active Negligence" shall not include (1) any negligent failure of Landlord to act when the duty to act would not have been imposed but for Landlord's status as owner of the Leased Property or as a party to the transactions described in this Lease, (2) any negligent failure of any other Indemnified Party to act when the duty to act would not have been imposed but for such party's contractual or other relationship to Landlord or participation or facilitation in any manner, directly or indirectly, of the transactions described in this Lease, or (3) the exercise in a lawful manner by Landlord (or any party lawfully claiming through or under Landlord) of any remedy provided herein or in the Purchase Documents. (b) Additional Rent. "Additional Rent" shall have the meaning assigned to it in subparagraph 3.(e) below. (c) Administrative Fee. "Administrative Fee" shall have the meaning assigned to it in subparagraph 3.(d) below. (d) Advance Date. "Advance Date" means, regardless of whether any Construction Advance shall actually be made thereon, the first Business Day of every calendar month, beginning with September 2, 1997 and continuing regularly thereafter to and including the Carrying Costs Accrual Termination Date; provided, that if the Carrying Costs Accrual Termination Date occurs before the Last Advance Date (as defined below), then after the Carrying Costs Accrual Termination Date each Base Rent Date upon which commences a new Base Rent Period (and only such Base Rent Dates) through and including the Last Advance Date shall also constitute an "Advance Date" hereunder. In any event, no Advance Date shall occur after the Last Advance Date. (e) Affiliate. "Affiliate" of any Person means any other Person controlling, controlled by or under common control with such Person. For purposes of this definition, the term "control" when used with respect to any Person means the power to direct the management of policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. (f) Applicable Laws. "Applicable Laws" shall have the meaning assigned to it in subparagraph 9.(d) below. (g) Applicable Purchaser. "Applicable Purchaser" means any third party designated by Tenant to purchase the Landlord's interest in the Leased Property and in any Escrowed Proceeds as provided in the Purchase Agreement. (h) Approved Participants. "Approved Participants" means (1) the existing Participants and prospective participants listed on Schedule 1 attached hereto; and (2) any other party which Tenant shall have approved as a Participant, which approval shall not be unreasonably withheld for any party that Landlord proposes as a new Participant to replace, in whole or in part, an Approved Participant under the Participation Agreement and the Pledge Agreement; provided, the party proposed by Landlord as a new Participant is a commercial bank operating in the United States of America having capital and surplus in excess of $500,000,000 or an Affiliate of such a bank; and, provided further, the replacement will not reduce the aggregate Percentages of Landlord and Landlord's Parent under and as defined in the Participation Agreement below the minimum percentage specified in paragraph 14.2 of the Participation Agreement. (i) As-built Appraisal. "As-built Appraisal" means an appraisal of the Leased Property, prepared by an independent appraiser reasonably satisfactory to Landlord, in form and scope reasonably satisfactory to Landlord, reflecting assumptions that the Designated Improvements have been completed in accordance with descriptions and renderings approved by Landlord as provided in subparagraph 6.(b)(ii) and that the Designated Improvements are vacant and ready for use and occupancy, and in any event satisfying the regulatory requirements for such appraisals issued under 12 U.S.C. 93a and title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), 12 U.S.C. 3331 et. seq. (j) Attorneys' Fees. "Attorneys' Fees" means the reasonable fees and expenses of counsel to the parties incurring the same, which may include fairly allocated costs of in-house counsel, printing, photostating, duplicating and other expenses, air freight charges, and fees billed for law clerks, paralegals, librarians and others not admitted to the bar but performing services under the supervision of an attorney. Such terms shall also include, without limitation, all such fees and expenses incurred with respect to appeals, arbitrations and bankruptcy proceedings, and whether or not any manner or proceeding is brought with respect to the matter for which such fees and expenses were incurred. (k) Base Rent. "Base Rent" means the rent payable by Tenant pursuant to subparagraph 3.(a) below. (l) Base Rent Date. "Base Rent Date" means a date upon which Base Rent must be paid under the Lease, all of which dates shall be the first Business Day of a calendar month. The first Base Rent Date shall be determined as follows: a) If a LIBOR Period Election of one month is in effect on the Carrying Costs Accrual Termination Date, then the first Business Day of the first calendar month following the Carrying Costs Accrual Termination Date shall be the first Base Rent Date. b) If a LIBOR Period Election of two months is in effect on the Carrying Costs Accrual Termination Date, then the first Business Day of the second calendar month following the Carrying Costs Accrual Termination Date shall be the first Base Rent Date. c) If the LIBOR Period Election in effect on the Carrying Costs Accrual Termination Date is three months or six months, then the first Business Day of the third calendar month following the Carrying Costs Accrual Termination Date shall be the first Base Rent Date. Each successive Base Rent Date after the first Base Rent Date shall be the first Business Day of the first, second or third calendar month following the calendar month which includes the preceding Base Rent Date, determined as follows: (1) If a LIBOR Period Election of one month is in effect on a Base Rent Date, then the first Business Day of the first calendar month following such Base Rent Date shall be the next following Base Rent Date. (2) If a LIBOR Period Election of two months is in effect on a Base Rent Date, then the first Business Day of the second calendar month following such Base Rent Date shall be the next following Base Rent Date. (3) If a LIBOR Period Election of three months or six months is in effect on a Base Rent Date, then the first Business Day of the third calendar month following such Base Rent Date shall be the next following Base Rent Date. Thus, for example, if the Carrying Costs Accrual Termination Date falls on the first Business Day of June, 1999 and a LIBOR Period Election of six months commences on the Carrying Costs Accrual Termination Date, then the first Base Rent Date shall be the first Business Day of September, 1999, and the second Base Rent Date shall be the first Business Day of December, 1999. "Base Rent Period" means a period for which Base Rent must be paid under the Lease, each of which periods shall correspond to the LIBOR Period Election for such period. The first Base Rent Period shall begin on and include the Carrying Costs Accrual Termination Date, and each successive Base Rent Period shall begin on and include the Base Rent Date upon which the preceding Base Rent Period ends. Each Base Rent Period, including the first Base Rent Period, shall end on but not include the first or second Base Rent Date after the Base Rent Date upon which such period began, determined as follows: (1) If the LIBOR Period Election for a Base Rent Period is one month, two months or three months, then such Base Rent Period shall end on the first Base Rent Date after the Base Rent Date upon which such period began. (2) If the LIBOR Period Election for a Base Rent Period is six months, then such Base Rent Period shall end on the second Base Rent Date after the Base Rent Date upon which such period began. The determination of Base Rent Periods can be illustrated by two examples: 1) If Tenant makes a LIBOR Period Election of three months for a hypothetical Base Rent Period beginning on the first Business Day in January, 2000, then such Base Rent Period will end on but not include the first Base Rent Date after it begins; that is, such Base Rent Period will end on the first Business Day in April, 2000, the third calendar month after January, 2000. 2) If, however, Tenant makes a LIBOR Period Election of six months for the hypothetical Base Rent Period beginning the first Business Day in January, 2000, then such Base Rent Period will end on but not include the second Base Rent Date after it begins; that is, the first Business Day in July, 2000. (m) Breakage Costs. "Breakage Costs" means any and all costs, losses or expenses incurred or sustained by Landlord's Parent or any other Participant, for which Landlord's Parent or the other Participant shall expect reimbursement from Landlord, because of the resulting liquidation or redeployment of deposits or other funds used to make Funding Advances upon any termination of this Lease by Tenant pursuant to Paragraph 2 or any sale of the Leased Property pursuant to the Purchase Agreement, if such termination or sale is effective as of any day other than a Base Rent Date. Breakage Costs will include losses attributable to any decline in LIBOR as of the effective date of termination or sale as compared to LIBOR used to determine the Effective Rate then in effect. (However, if Landlord's Parent or another Participant actually receives a profit upon the liquidation or redeployment of deposits or other funds used to make Funding Advances, because of any increase in LIBOR, then such profit will be offset against costs or expenses that would otherwise be charged as Breakage Costs for the account of Landlord's Parent or the applicable Participant under this Lease.) Each determination by Landlord's Parent of Breakage Costs shall, in the absence of clear and demonstrable error, be conclusive and binding upon Landlord and Tenant. (n) Business Day. "Business Day" means any day that is (1) not a Saturday, Sunday or day on which commercial banks are generally closed or required to be closed in New York City, New York or San Francisco, California, and (2) a day on which dealings in deposits of dollars are transacted in the London interbank market; provided that if such dealings are suspended indefinitely for any reason, "Business Day" shall mean any day described in clause (1). (o) Capital Adequacy Charges. "Capital Adequacy Charges" means any additional amounts Landlord's Parent or any other Participant requires Landlord to pay as compensation for an increase in required capital as provided in subparagraph 9.(y)(iv). (p) Carrying Costs. "Carrying Costs" means the charges added to and made a part of the Outstanding Construction Allowance from time to time on and before the Carrying Costs Accrual Termination Date pursuant to and as more particularly described in subparagraph 6.(a)(ii) below. (q) Carrying Costs Accrual Termination Date. "Carrying Costs Accrual Termination Date" means the earlier of (1) the Last Advance Date or (2) the first Advance Date that occurs at least ten (10) days after Landlord has received a notice from Tenant, in the form of Exhibit K attached hereto, stating that Tenant irrevocably elects to accelerate the Carrying Costs Accrual Termination Date and thereby accelerate the commencement of Base Rent accruals and the termination of accruals of Carrying Costs. It is understood that Tenant may, but shall not be required, to give such a notice at any time. (r) Cash Collateral. "Cash Collateral" shall have the meaning assigned to it in the Pledge Agreement. (s) Certificate of Deposit Collateral Percentage. "Certificate of Deposit Collateral Percentage" for each Period means the Certificate of Deposit Collateral Percentage for such Period (as defined in and determined in accordance with the Pledge Agreement); provided, however, for purposes of this Lease, the Certificate of Deposit Collateral Percentage for any Period shall not exceed a fraction, the numerator of which fraction shall equal the Value (as defined in and determined in accordance with the Pledge Agreement) of all Cash Collateral that is, on the first day of such Period, held by the Deposit Takers under (and as defined in) the Pledge Agreement, subject to a Qualifying Security Interest and free from claims or security interests held or asserted by any third party, and the denominator of which fraction shall equal the Stipulated Loss Value on the first day of such Period (computed after the addition of any Construction Advance made on such first day, after the addition of all Carrying Costs for prior Construction Periods, and after the subtraction of any Qualified Payments applied on such first day). (t) Closing Costs. "Closing Costs" means an amount requested by Tenant advanced by or on behalf of Landlord on the effective date of this Lease to pay on behalf of Tenant (i) the Upfront Fee, and (ii) expenses incurred in connection with the preparation and negotiation of this Lease, the Purchase Documents, the Environmental Indemnity, the Participation Agreement and related documents. To the extent that Landlord does not itself apply funds advanced as provided in this definition, the remainder thereof will be advanced to Tenant, with the expectation that Tenant shall use any such amount advanced for one or more of the following purposes: (1) the payment of the Upfront Fee and expenses incurred in connection with the preparation and negotiation of this Lease, the Purchase Documents, the Environmental Indemnity, the Participation Agreement and related documents; (2) the payment or reimbursement of other expenses incurred by Tenant in connection with any improvements Tenant may elect to make to the Leased Property in accordance with the requirements and limitations imposed by this Lease, including the planning, design, engineering and permitting of thereof; (3) the maintenance of the Leased Property; or (4) the payment of Rents next due. The advance described in this definition shall constitute part of the Initial Investment, and the amount thereof may be confirmed by Landlord and Tenant in a separate closing certificate. (u) Change of Control Event. "Change of Control Event" means the occurrence of any merger or consolidation or sale of assets involving Tenant that is prohibited by subparagraph 9.(ad)(iii). (v) Code. "Code" means the Internal Revenue Code of 1986, as amended from time to time. (w) Collateral. "Collateral" shall have the meaning assigned to it in the Pledge Agreement. (x) Commitment Fee. "Commitment Fee" shall have the meaning assigned to it in subparagraph 3.(c) below. (y) Completion Deadline. "Completion Deadline" means the first Business Day in August, 1999. (z) Completion Notice. "Completion Notice" shall have the meaning assigned to it in subparagraph 6.(d) below. (aa) Construction Advances. "Construction Advances" means actual advances of funds made by or on behalf of Landlord pursuant to Paragraph 6.(a)(i) below for costs incurred to construct the Designated Improvements or for property taxes and assessments assessed against the Leased Property paid prior to the Last Advance Date. (ab) Construction Allowance. "Construction Allowance" means the allowance, consisting of all Construction Advances and Carrying Costs, which is to be provided by Landlord for the construction of the Designated Improvements as more particularly described in Paragraph 6 below. (ac) Construction Documents. "Construction Documents" means all construction contracts, architectural contracts, engineering contracts, drawings, plans, specifications, change orders, budgets, surveys, soils reports, environmental impact studies and other documents executed by or prepared for Tenant with respect to the construction of the Designated Improvements. (ac) Construction Periods. The first "Construction Period" shall be the period beginning on and including the effective date hereof and ending on but not including the first Advance Date. Each successive "Construction Period" after the first Construction Period shall be a period of approximately one (1) month (except Construction Periods, if any, commencing on or after the Carrying Costs Accrual Termination Date, which shall be coterminous with Base Rent Periods) and shall begin on and include the day on which the preceding Construction Period ends and shall end on but not include the next following Advance Date. The last "Construction Period" shall end on but not include the Last Advance Date. (ad) Custodial Agreement. "Custodial Agreement" means the Custodial Agreement dated as of the date hereof between Banque Nationale de Paris, New York Branch, and Tenant pursuant to which such bank will hold securities pledged by Tenant as collateral for Tenant's obligations under the Purchase Agreement, as such Custodial Agreement may be extended, supplemented, amended, restated or otherwise modified from time to time. (ae) Debt. "Debt" of any Person means (i) indebtedness of such Person for borrowed money, (ii) obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) obligations of such Person to pay the deferred purchase price of property or services, (iv) obligations of such Person as lessee under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases, (v) obligations of such Person, contingent or otherwise, under any lease of real property or related documents (including a separate purchase agreement) which provide that such Person must purchase or cause another to purchase any interest in the leased property and thereby guarantee a minimum residual value of the leased property to the lessor; (vi) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (v) above, (vii) liabilities of another Person secured by a Lien on, or payable out of the proceeds of production from, property of such Person even though such obligation shall not be assumed by such Person (but in the case of such liabilities not assumed by such Person, the liabilities shall constitute Debt of such Person only to the extent of the value of such Person's property encumbered by the Lien securing such liabilities) and (viii) Unfunded Benefit Liabilities. (af) Default. "Default" means any event which, with the passage of time or the giving of notice or both, would (if not cured within any applicable cure period) constitute an Event of Default. (ag) Default Rate. "Default Rate" means a floating per annum rate equal to three percent (3%) above the Prime Rate. However, in no event will the Default Rate exceed the maximum interest rate permitted by law. (ah) Defaulting Participant. "Defaulting Participant" means any Approved Participant that shall have breached the Participation Agreement by failing to provide a Funding Advance to Landlord for (or equal to) such Participant's percentage of any Construction Advance requested by Tenant. (For purposes of this Lease a "Participant's percentage" shall mean the percentage that, under the Participation Agreement, is to be multiplied against Construction Advances to compute the amount the Participant must advance to Landlord for (or equal to) a percentage of Construction Advances requested hereunder.) (ai) Designated Improvements. "Designated Improvements" shall mean the improvements on the Land and any furnishings for such improvements which are to be constructed and installed by Tenant using the Construction Allowance as described in Paragraph 6 below. (aj) Designated Sale Date. "Designated Sale Date" shall have the meaning assigned to it in the Purchase Agreement. (ak) Effective Rate. "Effective Rate" means, for each Period, the per annum rate determined by dividing (A) LIBOR for such Period, by (B) 100% minus the Eurodollar Rate Reserve Percentage for such Period; provided, however, for the short first Construction Period ending on September 2, 1997, the Effective Rate will equal the per annum rate (which may be confirmed by a separate document executed by BNPLC and 3COM contemporaneously with this Lease) equal to the higher of rates set by each Participant as its "cost of funds" for such period. If LIBOR or the Eurodollar Rate Reserve Percentage changes from Period to Period, then the Effective Rate shall be automatically increased or decreased, as the case may be, as of the date of the change from Period to Period. If for any reason Landlord's Parent determines that it is impossible or unreasonably difficult to determine the Effective Rate with respect to a given Period in accordance with the preceding sentences, then the "Effective Rate" for that Period shall equal any published index or per annum interest rate determined reasonably and in good faith by Landlord's Parent to be a comparable rate at the beginning of the first day of that period. A comparable interest rate might be, for example, the then existing yield on short term United States Treasury obligations (as compiled by and published in the then most recently published United States Federal Reserve Statistical Release H.15(519) or its successor publication), plus or minus a fixed adjustment based on Landlord's Parent's comparison of past eurodollar market rates to past yields on such Treasury obligations. Any determination by Landlord's Parent of the Effective Rate hereunder shall, in the absence of clear and demonstrable error, be conclusive and binding. (al) Environmental Indemnity. "Environmental Indemnity" means the separate Environmental Indemnity Agreement dated as of the date hereof executed by Tenant in favor of Landlord covering the Land and certain other property described therein, as such agreement may be extended, supplemented, amended, restated or otherwise modified from time to time. (am) Environmental Laws. "Environmental Laws" means any and all existing and future Applicable Laws pertaining to safety, health or the environment, or to Hazardous Substances or Hazardous Substance Activities, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 (as amended, hereinafter called "CERCLA"), and the Resource Conservation and Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal Act Amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984 (as amended, hereinafter called "RCRA"). (an) Environmental Losses. "Environmental Losses" means Losses suffered or incurred by any Indemnified Party, directly or indirectly, relating to or arising out of, based on or as a result of: (i) any Hazardous Substance Activity; (ii) any violation of Environmental Laws relating to the Leased Property or to the ownership, use, occupancy or operation thereof; (iii) any investigation, inquiry, order, hearing, action, or other proceeding by or before any governmental or quasi-governmental agency or authority in connection with any Hazardous Substance Activity; or (iv) any claim, demand, cause of action or investigation, or any action or other proceeding, whether meritorious or not, brought or asserted against any Indemnified Party which directly or indirectly relates to, arises from, is based on, or results from any of the matters described in clauses (i), (ii), or (iii) of this subparagraph 1.(an), or any allegation of any such matters. ENVIRONMENTAL LOSSES INCURRED BY OR ASSERTED AGAINST A PARTICULAR INDEMNIFIED PARTY SHALL INCLUDE LOSSES RELATING TO OR ARISING OUT OF OR AS A RESULT OF ANY MATTERS LISTED IN THE PRECEDING SENTENCE EVEN WHEN SUCH MATTERS ARE CAUSED BY THE ORDINARY NEGLIGENCE (AS DEFINED BELOW) OF THAT PARTICULAR OR ANY OTHER INDEMNIFIED PARTY. However, Losses incurred by or asserted against a particular Indemnified Party and proximately caused by (and attributed by any applicable principles of comparative fault to) the wilful misconduct, Active Negligence or gross negligence of any Indemnified Party will not constitute Environmental Losses of such Indemnified Party for purposes of this Lease. (ao) Environmental Report. "Environmental Report" means, collectively, the reports listed on Exhibit G attached hereto. (ap) ERISA. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, together with all rules and regulations promulgated with respect thereto. (aq) ERISA Affiliate. "ERISA Affiliate" means any Person who for purposes of Title IV of ERISA is a member of Tenant's controlled group, or under common control with Tenant, within the meaning of Section 414 of the Code, and the regulations promulgated and rulings issued thereunder. (ar) ERISA Termination Event. "ERISA Termination Event" means (i) the occurrence with respect to any Plan of a) a reportable event described in Sections 4043(b)(5) or (6) of ERISA or b) any other reportable event described in Section 4043(b) of ERISA other than a reportable event not subject to the provision for 30-day notice to the Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation under Section 4043(a) of ERISA, or (ii) the withdrawal of Tenant or any Affiliate of Tenant from a Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or (iii) the filing of a notice of intent to terminate any Plan or the treatment of any Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate any Plan by the Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or (v) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. (as) Escrowed Proceeds. "Escrowed Proceeds" shall mean any proceeds that are received by Landlord from time to time during the Term (and any interest earned thereon), which Landlord is holding for the purposes specified in the next sentence, from any party (1) under any casualty insurance policy as a result of damage to the Leased Property, (2) as compensation for any restriction placed upon the use or development of the Leased Property or for the condemnation of the Leased Property or any portion thereof, (3) because of any judgment, decree or award for injury or damage to the Leased Property or (4) under any title insurance policy or otherwise as a result of any title defect or claimed title defect with respect to the Leased Property; provided, however, in determining "Escrowed Proceeds" there shall be deducted all expenses and costs of every type, kind and nature (including Attorneys' Fees) incurred by Landlord to collect such proceeds; and provided, further, "Escrowed Proceeds" shall not include any payment to Landlord by a Participant or an Affiliate of Landlord that is made to compensate Landlord for the Participant's or Affiliate's share of any Losses Landlord may incur as a result of any of the events described in the preceding clauses (1) through (4). "Escrowed Proceeds" shall include only such proceeds as are held by Landlord (A) pursuant to Paragraph 4 for the payment to Tenant for the restoration or repair of the Leased Property or (B) for application (generally, on the next following Advance Date or Base Rent Date which is at least three (3) Business Days following Landlord's receipt of such proceeds) as a Qualified Payment or as reimbursement of costs incurred in connection with a Qualified Payment. "Escrowed Proceeds" shall not include any proceeds that have been applied as a Qualified Payment or to pay any costs incurred in connection with a Qualified Payment. Until Escrowed Proceeds are paid to Tenant pursuant to Paragraph 4 below or applied as a Qualified Payment or as reimbursement for costs incurred in connection with a Qualified Payment, Landlord shall keep the same deposited in an interest bearing account, and all interest earned on such account shall be added to and made a part of Escrowed Proceeds. (at) Eurocurrency Liabilities. "Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. (au) Eurodollar Rate Reserve Percentage. "Eurodollar Rate Reserve Percentage" means, for purposes of determining the Effective Rate for any Period, the reserve percentage applicable two Business Days before the first day of such period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with deposits exceeding One Billion Dollars with respect to liabilities or deposits consisting of or including Eurocurrency Liabilities (or with respect to any other category or liabilities by reference to which LIBOR is determined) having a term comparable to such period. (av) Event of Default. "Event of Default" shall have the meaning assigned to it in subparagraph 14.(a) below. (aw) Excluded Taxes. "Excluded Taxes" shall mean (1) all federal, state and local income taxes upon the Base Rent, the Upfront Fee, the Commitment Fee, Administrative Fees and any interest paid to Landlord pursuant to subparagraph 3.(f), (2) any taxes imposed by any governmental authority outside the United States, and (3) any transfer or change of ownership taxes assessed because of Landlord's transfer or conveyance to any third party of any rights or interest in this Lease, the Purchase Documents, or the Leased Property, but excluding any such taxes assessed because of any Permitted Transfer. (ax) Fair Market Value. "Fair Market Value" shall have the meaning assigned to it in the Purchase Agreement. (ay) Fed Funds Rate. "Fed Funds Rate" means, for any period, a fluctuating interest rate (expressed as a per annum rate and rounded upwards, if necessary, to the next 1/16 of 1%) equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rates are not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Landlord's Parent from three Federal funds brokers of recognized standing selected by Landlord's Parent. All determinations of the Fed Funds Rate by Landlord's Parent shall, in the absence of clear and demonstrable error, be binding and conclusive upon Landlord and Tenant. (az) Funding Advances. "Funding Advances" means (1) advances (equal in the aggregate to the Initial Investment) made on or prior to the date hereof by Landlord's Parent and other Participants to or on behalf of Landlord to permit Landlord to acquire or maintain its investment in the Leased Property and to allow Landlord to provide the advance described in the definition of Closing Costs in subparagraph 1.(t), (2) future advances (which, together with the Funding Advances described in the preceding clauses (1), are expected to total $95,000,000) made by Landlord's Parent or any Participant to or on behalf of Landlord to allow Landlord to provide Construction Advances hereunder and to cover Carrying Costs, and (3) future advances made by Landlord's Parent or any Participant to or on behalf of Landlord in replacement of or renewal and extension of other Funding Advances. For example, if after the date hereof a new Participant advances funds on behalf of Landlord to Landlord's Parent or another then existing Participant in repayment of all or part of Funding Advances previously made by Landlord's Parent or the other Participant, such advance of funds by the new Participant shall constitute a Funding Advance hereunder, and the prior Funding Advances so repaid to Landlord's Parent or the other Participant shall thereupon cease to constitute Funding Advances for purposes of this Lease. (ba) GAAP. "GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time, applied on a basis consistent with those used in the preparation of the financial statements referred to in subparagraph 9.(w) (except for changes concurred in by Tenant's independent public accountants). (bb) Hazardous Substance. "Hazardous Substance" means (i) any chemical, compound, material, mixture or substance that is now or hereafter defined or listed in, regulated under, or otherwise classified pursuant to, any Environmental Laws as a "hazardous substance," "hazardous material," "hazardous waste," "extremely hazardous waste," "infectious waste," "toxic substance," "toxic pollutant," or any other formulation intended to define, list or classify substances by reason of deleterious properties, including, without limitation, ignitability, corrosiveness, reactivity, carcinogenicity, toxicity or reproductive toxicity; (ii) petroleum, any fraction of petroleum, natural gas, natural gas liquids, liquified natural gas, synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas), and ash produced by a resource recovery facility utilizing a municipal solid waste stream, and drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (iii) asbestos and any asbestos containing material; and (iv) any other material that, because of its quantity, concentration or physical or chemical characteristics, poses a significant present or potential hazard to human health or safety or to the environment if released into the workplace or the environment. (bc) Hazardous Substance Activity. "Hazardous Substance Activity" means any actual, proposed or threatened use, storage, holding, existence, location, release (including, without limitation, any spilling, leaking, leaching, pumping, pouring, emitting, emptying, dumping, disposing into the environment, and the continuing migration into or through soil, surface water, groundwater or any body of water), discharge, deposit, placement, generation, processing, construction, treatment, abatement, removal, disposal, disposition, handling or transportation of any Hazardous Substance from, under, in, into or on the Leased Property, including, without limitation, the movement or migration of any Hazardous Substance from surrounding property, surface water, groundwater or any body of water under, in, into or onto the Leased Property and any residual Hazardous Substance contamination in, on or under the Leased Property. (bd) Impositions. "Impositions" shall have the meaning assigned to it in subparagraph 9.(p) below. (be) Improvements. "Improvements," as defined in the recitals at the beginning of this Lease, shall include not only existing improvements to the Land as of the date hereof, if any, but also any new improvements or changes to existing improvements made by Tenant. Accordingly, any and all new improvements made to the Leased Property by Tenant using the Construction Allowance as contemplated in this Lease shall constitute Improvements as that term is used herein. (bf) Indemnified Party. "Indemnified Party" means each of (1) Landlord and any of Landlord's successors and assigns as to all or any portion of the Leased Property or any interest therein (but excluding Tenant or any Applicable Purchaser under the Purchase Agreement or any Person that claims its interest in the Leased Property through or under Tenant or through or under an assignment from Landlord that does not constitute a Permitted Transfer), (2) the Participants, and (3) any Affiliate, officer, agent, director, employee or servant of any of the parties described in clause (1) or (2) preceding. (bg) Initial Investment. "Initial Investment" means $37,500,000, being equal to the purchase price and other costs paid by Landlord to acquire the Leased Property at the closing under the Existing Contract, plus the advance described in the definition of Closing Costs in subparagraph 1.(t) above. (bh) Landlord's Parent. "Landlord's Parent" means Landlord's Affiliate, Banque Nationale de Paris, a bank organized and existing under the laws of France, together with any Affiliates of such bank that directly or indirectly provided or hereafter during the Term provide or maintain any Funding Advances, and any successors of such bank and such Affiliates. (bi) Last Advance Date. "Last Advance Date" means the earlier of (1) the Completion Deadline (or - if the Completion Deadline is not an Advance Date, which could occur if Tenant exercises its rights hereunder to accelerate the Carrying Costs Accrual Termination Date and to thereafter designate a LIBOR Period Election of more than one month - then the latest Advance Date prior to the Completion Deadline), (2) the first Advance Date that occurs at least ten (10) days after Landlord has received a Completion Notice or a Notice of Last Advance, or (3) the Designated Sale Date. (bj) LIBOR. "LIBOR" means, for purposes of determining the Effective Rate for each Period, the rate determined by Landlord's Parent to be the average rate of interest per annum (rounded upwards, if necessary, to the next 1/16 of 1%) of the rates at which deposits of dollars are offered or available to Landlord's Parent in the London interbank market at approximately 11:00 a.m. (London time) on the second Business Day preceding the first day of such period. Landlord shall instruct Landlord's Parent to consider deposits, for purposes of making the determination described in the preceding sentence, that are offered: (i) for delivery on the first day of such Period, (ii) in an amount equal or comparable to the total (projected on the applicable date of determination by Landlord's Parent) Stipulated Loss Value on the first day of such Period, and (iii) for a period of time equal or comparable to the appropriate Period. If Landlord's Parent so chooses, it may determine LIBOR for any period by reference to the rate reported by the British Banker's Association on Page 3750 of the Telerate Service at approximately 11:00 a.m. (London time) on the second Business Day preceding the first day of such period; provided, however, Tenant may notify Landlord that Tenant objects to any future determination of LIBOR in the manner provided by this sentence, in which case any determination of LIBOR required more than three Business Days after Landlord's receipt of such notice shall be made as if this sentence had been struck from this Lease. If for any reason Landlord's Parent determines that it is impossible or unreasonably difficult to determine LIBOR with respect to a given Period in accordance with the preceding sentences, or if Landlord's Parent shall determine that it is unlawful (or any central bank or governmental authority shall assert that it is unlawful) for Landlord, Landlord's Parent or any other Participant to provide or maintain any Funding Advances hereunder during any Period for which Base Rent is computed by reference to LIBOR, then "LIBOR" for that Period shall equal the rate which is fifty basis points (50/100 of 1%) above the Fed Funds Rate for that period. All determinations of LIBOR by Landlord's Parent shall, in the absence of clear and demonstrable error, be binding and conclusive upon Landlord and Tenant. (bk) LIBOR Period Election. "LIBOR Period Election" for any Base Rent Period means a period of one month, two months, three months or six months as designated by Tenant at least ten Business Days prior to the commencement of such Base Rent Period by a notice given to Landlord in the form of Exhibit L attached to this Lease. (For purposes of this Lease a LIBOR Period Election for any Base Rent Period shall also be considered the LIBOR Period Election in effect on (1) the date [whether the Carrying Costs Accrual Termination Date or a Base Rent Date] upon which such Base Rent Period begins and (2) subsequent Base Rent Dates, if any, which occur before the date upon which such Base Rent Period ends.) Any LIBOR Period Election shall remain in effect not only for the entire first Base Rent Period for which it is designated or becomes effective, but also for subsequent Base Rent Periods until a new designation by Tenant becomes effective in accordance with the provisions set forth in this definition. Notwithstanding the foregoing, however: (1) any LIBOR Period Election that would cause a Base Rent Period to extend beyond the end of the scheduled Term will be shortened as necessary to cause such Base Rent Period to end when the scheduled Term ends; (2) changes in the LIBOR Period Election shall become effective only upon the commencement of a new Base Rent Period; (3) until such time as Tenant designates another LIBOR Period Election consistent with the foregoing requirements, Tenant will be considered to have designated a LIBOR Period Election of one month; and (4) if an Event of Default shall have occurred and be continuing on the third Business Day preceding the commencement of any Base Rent Period, the LIBOR Period Election for such Base Rent Period shall be one month. (bl) Lien. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any agreement to sell receivables with recourse, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction). Customary bankers' rights of set-off arising by operation of law or by contract (however styled, if the contract grants rights no greater than those arising by operation of law) in connection with working capital facilities, lines of credit, term loans and letter of credit facilities and other contractual arrangements entered into with banks in the ordinary course of business are not "Liens" for the purposes of this Lease. (bm) Losses. "Losses" means any and all losses, liabilities, damages (whether actual, consequential, punitive or otherwise denominated), demands, claims, actions, judgments, causes of action, assessments, fines, penalties, costs, and out-of-pocket expenses (including, without limitation, Attorneys' Fees and the fees of outside accountants and environmental consultants), of any and every kind or character, foreseeable and unforeseeable, liquidated and contingent, proximate and remote, known and unknown. (bn) Maximum Construction Allowance. "Maximum Construction Allowance" means $95,000,000, minus the Initial Investment. (bo) Notice of Last Advance. "Notice of Last Advance" means any notice given by Tenant to Landlord stating that Tenant irrevocably elects not to request or accept any further Construction Advances which Tenant might be entitled to but for such election. It is understood that Tenant may, but shall not be required, to give a Notice of Last Advance in order to accelerate the Last Advance Date and to thereby accelerate the date upon which Commitment Fees shall cease to accrue. (bp) Ordinary Negligence. "Ordinary Negligence" of an Indemnified Party means any negligent acts or omissions of such party that does not for any reason constitute Active Negligence as defined in this Lease. (bq) Outstanding Construction Allowance. "Outstanding Construction Allowance" means at any time the amount equal to (1) the total Construction Advances made by Landlord, PLUS (2) all Carrying Costs added to the Outstanding Construction Allowance under subparagraph 6.(a)(ii) on or prior to the date in question, LESS (3) the amount (if any) of Qualified Payments paid to Landlord and applied to the Outstanding Construction Allowance on or prior to such date, and LESS (4) any payments previously made by Tenant to Landlord pursuant to subparagraph 3.(i). (br) Participant. "Participant" means any Person, including Landlord's Parent, that agrees with Landlord or another Participant to participate in all or some of the risks and rewards to Landlord of this Lease and the Purchase Documents. As of the effective date hereof, the only Participants are those which have executed the Participation Agreement, but such Participants and Landlord may agree to share in risks and rewards of this Lease and the Purchase Documents with other Participants in the future. However, no Person other than Landlord's Parent and the Approved Participants shall qualify as a Participant for purposes of this Lease, the Purchase Documents or any other agreement to which Tenant is a party unless, with Tenant's prior written approval or when an Event of Default had occurred and was continuing, such Person became a party to the Pledge Agreement and to the Participation Agreement by executing supplements to those agreements as contemplated therein. (bs) Participation Agreement. "Participation Agreement" means the Participation Agreement dated the date hereof among Landlord, Landlord's Parent, and the Participants named therein, pursuant to which Landlord's Parent and such Participants have agreed to participate in certain risks and rewards to Landlord of this Lease and the Purchase Agreement, as such Participation Agreement may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. (bt) Period. "Period" means a Construction Period or a Base Rent Period, as the context requires. (bu) Permitted Encumbrances. "Permitted Encumbrances" means (i) the encumbrances and other matters affecting the Leased Property that are set forth in Exhibit B attached hereto and made a part hereof, and (ii) any provisions of the Existing Contract or any other agreement described therein that survived closing thereunder (but not any deed of trust, mortgage or other agreement given to secure the repayment of borrowed funds), and (iii) any easement agreement or other document affecting title to the Leased Property executed by Landlord at the request of or with the consent of Tenant. (bv) Permitted Hazardous Substance Use. "Permitted Hazardous Substance Use" means the use, storage and offsite disposal of Permitted Hazardous Substances in strict accordance with applicable Environmental Laws and with due care given the nature of the Hazardous Substances involved; provided, the scope and nature of such use, storage and disposal shall not include the use of underground storage tanks for any purpose other than the storage of water for fire control, nor shall such scope and nature: (1) exceed that reasonably required for the construction of Improvements permitted by this Lease and for the operation of the Leased Property for the purposes expressly permitted under subparagraph 8.(a); or (2) include any disposal, discharge or other release of Hazardous Substances from operations on the Leased Property in any manner that might allow such substances to reach surface water or groundwater, except (i) through a lawful and properly authorized discharge (A) to a publicly owned treatment works or (B) with rainwater or storm water runoff in accordance with Applicable Laws and any permits obtained by Tenant that govern such runoff; or (ii) any such disposal, discharge or other release of Hazardous Substances for which no permits are required and which are not otherwise regulated under applicable Environmental Laws. Further, notwithstanding anything to the contrary herein contained, Permitted Hazardous Substance Use shall not include any use of the Leased Property as a treatment, storage or disposal facility (as defined by federal Environmental Laws) for Hazardous Substances, including but not limited to a landfill, incinerator or other waste disposal facility. (bw) Permitted Hazardous Substances. "Permitted Hazardous Substances" means Hazardous Substances used and reasonably required for Tenant's operation of the Leased Property for the purposes expressly permitted by subparagraph 8.(a) in strict compliance with all Environmental Laws and with due care given the nature of the Hazardous Substances involved. Without limiting the generality of the foregoing, Permitted Hazardous Substances shall include, without limitation, usual and customary office and janitorial products, and the materials listed on Exhibit C attached hereto. (bx) Permitted Transfer. "Permitted Transfer" means any one or more of the following: (1) the creation or conveyance of rights and interests under the Participation Agreement in favor of Landlord's Parent or Participants; (2) subject to the last sentence of subparagraph 11.(d), any assignment or conveyance by Landlord of any lien or security interest against the Leased Property (in contrast to a conveyance of Landlord's fee estate in the Leased Property) or of any interest in Rent, payments required by the Purchase Agreement or payments to be generated from the Leased Property after the Term, to any present or future Participant or to any Affiliate of Landlord; (3) any agreement to exercise or refrain from exercising rights or remedies hereunder or under the Purchase Documents or the Environmental Indemnity made by Landlord with any present or future Participant or Affiliate of Landlord; (4) any assignment or conveyance by Landlord requested by Tenant or required by any Permitted Encumbrance, by the Purchase Agreement or by Applicable Laws; (5) any assignment or conveyance by Landlord when an Event of Default shall have occurred and be continuing; or (6) any assignment or conveyance by Landlord after the Designated Sale Date. (by) Person. "Person" means an individual, a corporation, a partnership, an unincorporated organization, an association, a joint stock company, a joint venture, a trust, an estate, a government or agency or political subdivision thereof or other entity, whether acting in an individual, fiduciary or other capacity. (bz) Plan. "Plan" means at any time an employee pension benefit plan which is covered under Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (i) maintained by Tenant or any Subsidiary for employees of Tenant or any Subsidiary or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which Tenant or any Subsidiary is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions. (ca) Pledge Agreement. "Pledge Agreement" means the Pledge Agreement dated as of the date hereof between Landlord and Tenant, pursuant to which Tenant may pledge certificates of deposit and/or securities as security for Tenant's obligations under the Purchase Agreement (and for the corresponding obligations of Landlord to the Participants under the Participation Agreement), as such Pledge Agreement may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. (cb) Prime Rate. "Prime Rate" means the prime interest rate or equivalent charged by Landlord's Parent in the United States as announced or published by Landlord's Parent from time to time, which need not be the lowest interest rate charged by Landlord's Parent. If for any reason Landlord's Parent does not announce or publish a prime rate or equivalent, the prime rate or equivalent announced or published by ABN AMRO Bank N.V. or Credit Commercial de France as selected by Landlord shall be used as the Prime Rate. The prime rate or equivalent announced or published by such bank need not be the lowest rate charged by it. The Prime Rate may change from time to time after the date hereof without notice to Tenant as of the effective time of each change in rates described in this definition. (cc) Purchase Agreement. "Purchase Agreement" means the Purchase Agreement dated as of the date hereof between Landlord and Tenant pursuant to which Tenant has agreed to purchase or to arrange for the purchase by a third party of the Leased Property, as such Purchase Agreement may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. (cd) Purchase Documents. "Purchase Documents" means collectively the Purchase Agreement, the Pledge Agreement, and the Custodial Agreement. (ce) Purchase Price. "Purchase Price" shall have the meaning assigned to it in the Purchase Agreement. (cf) Qualified Payments. "Qualified Payments" means all payments received by Landlord from time to time during the Term from any party (1) under any casualty insurance policy as a result of damage to the Leased Property, (2) as compensation for any restriction placed upon the use or development of the Leased Property or for the condemnation of the Leased Property or any portion thereof, (3) because of any judgment, decree or award for injury or damage to the Leased Property or (4) under any title insurance policy or otherwise as a result of any title defect or claimed title defect with respect to the Leased Property; provided, however, that (x) in determining Qualified Payments, there shall be deducted all expenses and costs of every kind, type and nature (including taxes and Attorneys' Fees) incurred by Landlord with respect to the collection of such payments, (y) Qualified Payments shall not include any payment to Landlord by a Participant or an Affiliate of Landlord that is made to compensate Landlord for the Participant's or Affiliate's share of any Losses Landlord may incur as a result of any of the events described in the preceding clauses (1) through (4) and (z) Qualified Payments shall not include any payments received by Landlord that Landlord has paid to Tenant for the restoration or repair of the Leased Property or that Landlord is holding as Escrowed Proceeds. For purposes of computing the total Qualified Payments (and other amounts dependent upon Qualified Payments, such as Stipulated Loss Value and the Outstanding Construction Allowance) paid to or received by Landlord as of any date, payments described in the preceding clauses (1) through (4) will be considered as Escrowed Proceeds, not Qualified Payments, until they are actually applied as Qualified Payments by Landlord, which Landlord will do upon the first Advance Date or Base Rent Date which is at least three (3) Business Days after Landlord's receipt of the same unless postponement of such application is required by other provisions of this Lease or consented to by Tenant in writing. Thus, for example, condemnation proceeds actually received by Landlord in the middle of a Base Rent Period will not be considered as having been received by Landlord for purposes of computing the total Qualified Payments unless and until actually applied by Landlord as a Qualified Payment on a subsequent Base Rent Date in accordance with Paragraph 4 below. (Landlord shall have no obligation to readvance any portion of the Outstanding Construction Allowance reduced by Qualified Payments.) (cg) Qualifying Security Interest. "Qualifying Security Interest" means a first priority perfected security interest under the Pledge Agreement which is sufficient, for purposes of the laws and regulations which govern minimum amounts of capital that Landlord and Participants or their affiliates must maintain, to permit them to assign a risk weighting of no more than twenty percent to a portion of their collective investment in the Leased Property equal to the Value (as defined in and determined in accordance with the Pledge Agreement) of the Collateral encumbered by such an interest. (ch) Remaining Proceeds. "Remaining Proceeds" shall have the meaning assigned to it in subparagraph 4.(a)(ii). (ci) Rent. "Rent" means the Base Rent and all Additional Rent. (cj) Responsible Financial Officer. "Responsible Financial Officer" means the chief financial officer, the controller, the treasurer or the assistant treasurer of Tenant. (ck) Scope Change. A "Scope Change" means a material addition to, deletion from or other modification to the quality, function or capacity of the Designated Improvements as delineated in descriptions and renderings approved by Landlord as provided in subparagraph 6.(b)(ii) or in any subsequent plans and specifications therefor approved by Landlord, but shall not include refinement, correction and detailing by Tenant or Tenant's architects or contractors from time to time. As used in this definition, a "material" change shall mean any change that (a) is reasonably likely to substantially reduce the fair market value of the Leased Property (after completion of the Designated Improvements), or (b) will change the general character of the Designated Improvements from that described and shown in the descriptions and renderings approved by Landlord pursuant to subparagraph 6.(b)(ii). (cl) Securities Collateral. "Securities Collateral" shall have the meaning assigned to it in the Pledge Agreement. (cm) Securities Collateral Percentage. "Securities Collateral Percentage" for each Period means the Securities Collateral Percentage for such Period (as defined in and determined in accordance with the Pledge Agreement); provided, however, for purposes of this Lease, the Securities Collateral Percentage: (i) for any Period ending on or prior to the Last Advance Date shall be zero; and (ii) for any Period ending after the Last Advance Date shall not exceed the lesser of (A) one minus the Certificate of Deposit Collateral Percentage for such Period, or (B) a fraction, the numerator of which fraction shall equal the Value (as defined below) of all Securities Collateral that is, on the first day of such Period, held by the Custodian under the Custodial Agreement, subject to a Qualifying Security Interest and free from claims or security interests held or asserted by any third party, and the denominator of which fraction shall equal the Stipulated Loss Value on the first day of such Period (computed after the subtraction of any Qualified Payments applied on such first day). "Value" means, for purposes of determining the Securities Collateral Percentage under this definition for each Period, the Value (as defined in and determined in accordance with the Pledge Agreement) on the Valuation Date (as defined in the Custodial Agreement) upon which such Period commences or, if such Period does not commence upon a Valuation Date, on the most recent Valuation Date prior to the commencement of such Period. (cn) Spread. The "Spread" on any date will depend upon a computation involving (a) the rating by Standard and Poor's Corporation (the "S&P Rating") or the rating by Moody's Investor Service, Inc. (the "Moody's Ratings"), whichever rating is higher, of Tenant's senior, unsecured debt on that date (whether such ratings are express or published, implied ratings), and (b) the Debt to Capital Ratio (as defined below) on that date, such computation to be as follows: (i) If (1) there is no S&P Rating for the senior, unsecured debt of Tenant (express or published, implied) or the S&P Rating is below BBB-, AND (2) there is no Moody's Rating for senior, unsecured debt of Tenant (express or published, implied) or the Moody's Rating is below Baa3, AND (3) the Debt to Capital Ratio is greater than 0.30, then the Spread will be sixty basis points (.600%). (ii) If (1) the S&P Rating is BBB-, OR (2) the Moody's Rating is Baa3, OR (3) the Debt to Capital Ratio is equal to or less than 0.30 and more than 0.15, and if Tenant does not qualify for a lower Spread pursuant to clause (iii), (iv) or (v) below, then the Spread will be forty- five basis points (.450%). (iii) If (1) the S&P Rating is BBB, OR (2) the Moody's Rating is Baa2, OR (3) the Debt to Capital Ratio is equal to or less than 0.15, and if Tenant does not qualify for a lower Spread pursuant to clause (iv) or (v) below, then the Spread will be thirty-seven and one-half basis points (.375%). (iv) If (1) the S&P Rating is BBB+, OR (2) the Moody's Rating is Baa1, and if Tenant does not qualify for a lower Spread pursuant to clause (v) below, then the Spread will be thirty basis points (.300%). (v) If (1) the S&P Rating is above BBB+, OR (2) the Moody's Rating is above Baa1, then the Spread will be twenty-seven and one-half basis points (.275%). For purposes of calculating the Spread, "Debt to Capital Ratio" means the quotient determined by dividing (A) funded Senior Debt (as defined in subparagraph 9.(ac)(ii)), by (B) the total Capitalization (as defined in subparagraph 9.(ac)(ii)), including Subordinated Debt (as defined in subparagraph 9.(ac)(ii)). The parties believe it improbable that the ratings systems used by Standard and Poor's Corporation and by Moody's Investor Service, Inc. will be discontinued or changed, but if such ratings systems are discontinued or changed, Landlord shall be entitled to select and use a comparable ratings systems as a substitute for the S&P Rating or the Moody Rating, as the case may be, for purposes of determining the Spread. All determinations of the Spread by Landlord shall, in the absence of clear and demonstrable error, be binding and conclusive for purposes of this Lease. Further Landlord may, but shall not be required, to rely on the determination of the Spread set forth in any certificate delivered by Tenant pursuant to subparagraph 9.(w)(iv) below, and no reduction in the Spread will be effective because of an improvement in the S&P Rating, the Moody's Rating or the Debt to Capital Ratio before Tenant has notified Landlord thereof by delivery of such a certificate. (co) Stipulated Loss Value. "Stipulated Loss Value" means at any time the amount equal to (1) the Initial Investment PLUS (2) the Outstanding Construction Allowance at such time, LESS (3) the aggregate amount (if any) of Qualified Payments paid to Landlord in excess of any Qualified Payments deducted in the computation of such Outstanding Construction Allowance. Under no circumstances will any payment of Base Rent, the Upfront Fee, Commitment Fees or Administrative Fees reduce Stipulated Loss Value. (cp) Subsidiary. "Subsidiary" means any corporation of which Tenant and/or its other Subsidiaries own, directly or indirectly, such number of outstanding shares as have more than 50% of the ordinary voting power for the election of directors. (cq) Tenant's Knowledge. "Tenant's knowledge," "to the knowledge of Tenant" and words of like effect means the actual knowledge (with due investigation) of any of the following employees of Tenant: Alan Groves, Vice President and Corporate Controller; Christopher B. Paisley, Chief Financial Officer; Abe Darwish, Vice President of Worldwide Real Estate and Site Services; and Paul Murray, Director of Worldwide Safety and Environmental Health. However, to the extent Tenant's knowledge after the date hereof may become relevant hereunder or under any certificate or other notice provided by Tenant to Landlord in connection with this Lease, "Tenant's knowledge" and words of like effect shall include the then actual knowledge of other employees of Tenant (if any) that have assumed responsibilities of the current employees listed in the preceding sentence or that have replaced such current employees. But none of the employees of Tenant whose knowledge is now or may hereafter be relevant shall be personally liable for the representations of Tenant made herein. (cr) Term. "Term" shall have the meaning assigned to it in Paragraph 2 below. (cs) Unfunded Benefit Liabilities. "Unfunded Benefit Liabilities" means, with respect to any Plan, the amount (if any) by which the present value of all benefit liabilities (within the meaning of Section 4001(a)(16) of ERISA) under the Plan exceeds the fair market value of all Plan assets allocable to such benefit liabilities, as determined on the most recent valuation date of the Plan and in accordance with the provisions of ERISA for calculating the potential liability of Tenant or any ERISA Affiliate of Tenant under Title IV of ERISA. (ct) Upfront Fee. "Upfront Fee" shall have the meaning assigned to it in subparagraph 3.(b). (cu) Voluntary Minimum Pledge Commitment. "Voluntary Minimum Pledge Commitment" means an agreement in form and substance reasonably satisfactory to Landlord and the other parties to the Pledge Agreement which Tenant may elect to execute in connection with a casualty, condemnation or sale in lieu of condemnation affecting the Leased Property and which modifies the Pledge Agreement by establishing a Minimum Collateral Percentage (as defined therein) sufficient to require Tenant to maintain Collateral under the Pledge Agreement with a value of no less than the insurance, condemnation or sale proceeds paid or to be paid because of the casualty, condemnation or sale in lieu of condemnation until Tenant has completed any related repairs or restoration required by this Lease. (cv) Other Terms and References. Words of any gender used in this Lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural and vice versa, unless the context otherwise requires. References herein to Paragraphs, subparagraphs or other subdivisions shall refer to the corresponding Paragraphs, subparagraphs or subdivisions of this Lease, unless specific reference is made to another document or instrument. References herein to any Schedule or Exhibit shall refer to the corresponding Schedule or Exhibit attached hereto, which shall be made a part hereof by such reference. All capitalized terms used in this Lease which refer to other documents shall be deemed to refer to such other documents as they may be renewed, extended, supplemented, amended or otherwise modified from time to time, provided such documents are not renewed, extended or modified in breach of any provision contained herein or therein or, in the case of any other document to which Landlord is a party or of which Landlord is an intended beneficiary, without the consent of Landlord. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. The words "this Lease", "herein", "hereof", "hereby", "hereunder" and words of similar import refer to this Lease as a whole and not to any particular subdivision unless expressly so limited. The phrases "this Paragraph" and "this subparagraph" and similar phrases refer only to the Paragraphs or subparagraphs hereof in which the phrase occurs. Unless required by the context in which it is used, the word "or" is not exclusive. Other capitalized terms are defined in the provisions that follow. 2. Term. The term of this Lease (herein called the "Term") shall commence on and include the effective date hereof, and end at 8:00 A.M. on the first Business Day of September, 2002, unless extended or sooner terminated as herein provided. Notwithstanding any other provision of this Lease which may expressly restrict the early termination hereof, and provided that Tenant is still in possession of the Leased Property and has not breached its obligation to make or have made any payment required by Paragraph 2 of the Purchase Agreement on any prior Designated Sale Date, Tenant may notify Landlord of Tenant's election to terminate this Lease before the first Business Day of September, 2002, by giving Landlord an irrevocable notice of such election and of the effective date of the termination, which notice must be given (if at all) at least sixty (60) days prior to the effective date of the termination. If Tenant elects to so terminate this Lease, then on the date on which this Lease is to be terminated, not only must Tenant pay all unpaid Rent, Tenant must also pay any Breakage Costs resulting from the termination and must satisfy its obligations under the Purchase Agreement. The payment of any unpaid Rent and Breakage Costs and the satisfaction of Tenant's obligations under the Purchase Agreement shall be conditions precedent to the effectiveness of any early termination of this Lease by Tenant. The Term may be extended at the option of Tenant for two successive periods of five (5) years each; provided, however, that prior to any such extension the following conditions must have been satisfied: (A) at least one hundred eighty (180) days prior to the commencement of any such extension, Landlord and Tenant must have agreed in writing upon, and received the written consent and approval of Landlord's Parent and all other Participants to (1) a corresponding extension of the date specified in clause (iii) of the definition of Designated Sale Date in the Purchase Agreement, and (2) an adjustment to the Rent that Tenant will be required to pay for the extension, it being expected that the Rent for the extension may be different than the Rent required for the original Term, and it being understood that the Rent for any extension must in all events be satisfactory to both Landlord and Tenant, each in its sole and absolute discretion; (B) there must be no Event of Default continuing hereunder at the time of Tenant's exercise of its option to extend; and (C) immediately prior to any such extension, this Lease must remain in effect. With respect to the condition that Landlord and Tenant must have agreed upon the Rent required for any extension of the Term, neither Tenant nor Landlord is willing to submit itself to a risk of liability or loss of rights hereunder for being judged unreasonable. Accordingly, both Tenant and Landlord hereby disclaim any obligation express or implied to be reasonable in negotiating the Rent for any such extension. Subject to the changes to the Rent payable during any extension of the Term as provided in this Paragraph, if Tenant exercises its option to extend the Term as provided in this Paragraph, this Lease shall continue in full force and effect, and the leasehold estate hereby granted to Tenant shall continue without interruption and without any loss of priority over other interests in or claims against the Leased Property that may be created or arise after the date hereof and before the extension. 3. Rental. (a) Base Rent. Tenant shall pay Landlord rent (herein called "Base Rent") in arrears, in currency that at the time of payment is legal tender for public and private debts in the United States of America, in installments on each Base Rent Date through the end of the Term. Each payment of Base Rent must be received by Landlord no later than 12:00 noon (San Francisco time) on the date it becomes due; if received after 12:00 noon it will be considered for purposes of this Lease as received on the next following Business Day. Each installment of Base Rent shall represent rent allocable to the Base Rent Period (or portion thereof) ending on the date on which the installment is due. Landlord shall notify Tenant in writing of the Base Rent due for each Base Rent Period at least fifteen (15) days prior to the Base Rent Date on which such period ends. Any failure by Landlord to so notify Tenant shall not constitute a waiver of Landlord's right to payment, but absent such notice Tenant shall not be in default for any underpayment resulting therefrom if Tenant, in good faith, reasonably estimates the payment required, makes a timely payment of the amount so estimated and corrects any underpayment within three (3) Business Days after being notified by Landlord of the underpayment. For all Base Rent Periods subject to a LIBOR Period Election of one month, two months or three months, Base Rent shall be due in one installment on the Base Rent Date upon which the Base Rent Period ends. For Base Rent Periods subject to a LIBOR Period Election of six months, Base Rent shall be payable in two installments, with the first installment becoming due on the Base Rent Date that occurs on the first Business Day of the third calendar month following the commencement of such Base Rent Period, and with the second installment becoming due on the Base Rent Date upon which the Base Rent Period ends. Notwithstanding the foregoing, if Tenant or any Applicable Purchaser purchases Landlord's interest in the Property pursuant to the Purchase Agreement, any accrued unpaid Base Rent and all outstanding Additional Rent shall be due on the date of purchase in addition to the purchase price and other sums due Landlord under the Purchase Agreement. The Base Rent for each Base Rent Period shall equal the sum of: (1) (A) Stipulated Loss Value on the first day of such Base Rent Period, times (B) one minus the sum of the Certificate of Deposit Collateral Percentage for such Base Rent Period and the Securities Collateral Percentage for such Base Rent Period, times (C) the sum of (i) the Effective Rate for such Base Rent Period and (ii) the Spread calculated on the tenth (10th) Business Day prior to the day upon which such Base Rent Period commences, times (D) the number of days in such Base Rent Period, divided by (E) three hundred sixty (360); PLUS (2) (A) Stipulated Loss Value on the first day of such Base Rent Period, times (B) the Certificate of Deposit Collateral Percentage for such Base Rent Period, times (C) twenty-two and one-half basis points (22.5/100 of 1%), times (D) the number of days in such Base Rent Period, divided by (E) three hundred sixty (360); PLUS (3) (A) Stipulated Loss Value on the first day of such Base Rent Period, times (B) the Securities Collateral Percentage for such Base Rent Period, times (C) the sum of (i) the Effective Rate for such Base Rent Period and (ii) twenty-two and one-half basis points (22.5/100 of 1%), times (D) the number of days in such Base Rent Period, divided by (E) three hundred sixty (360). To ease the administrative burden of this Lease and the Pledge Agreement, clause (2) in the formula above for calculating Base Rent reflects a reduction in the Base Rent equal to the interest that would accrue on any Cash Collateral required by the Pledge Agreement from time to time if the Accounts (as defined in the Pledge Agreement) bore interest at the Effective Rate. Landlord has agreed to such reduction in the Base Rent to provide Tenant with the economic equivalent of interest on such Cash Collateral, and in return Tenant has agreed to the provisions of the Pledge Agreement that excuse the actual payment of interest on the Accounts. By incorporating such reduction of Base Rent into the formula above, and by providing for noninterest bearing Accounts in the Pledge Agreement, the parties will avoid an unnecessary and cumbersome periodic exchange of equal payments. It is not, however, the intent of Landlord or Tenant to understate Base Rent or interest for financial reporting purposes. Accordingly, for purposes of determining Tenant's compliance with the affirmative financial covenants set forth in subparagraph 9.(ac), and for purposes of any financial reports that this Lease requires of Tenant from time to time, Tenant may report Base Rent as if there had been no such reduction and as if the Cash Collateral from time to time required by the Pledge Agreement had been maintained in Accounts bearing interest at the Effective Rate. Assume, only for the purpose of illustration of the calculation of Base Rent: that after the Carrying Costs Accrual Termination Date, a hypothetical Base Rent Period contains exactly ninety (90) days; that, after taking into account all Qualified Payments, the Stipulated Loss Value on the first day of such Base Rent Period is $50,000,000; that the Certificate of Deposit Collateral Percentage for such Base Rent Period is twenty percent (20%); that the Securities Collateral Percentage for such Base Rent Period is thirty percent (30%); that the Effective Rate for the applicable Base Rent Period is 5.5%; and that the Spread for the applicable Base Rent Period is 0.5%. Under such assumptions, the Base Rent for the hypothetical Base Rent Period will equal: $50,000,000 x 50% x (5.5% + 0.5%) x 90/360, or $375,000, PLUS $50,000,000 x 20% x .225% x 90/360, or $5,625, PLUS $50,000,000 x 30% x (5.5% + .225%) x 90/360, or $214,687.5, = $595,312.5 (b) Upfront Fee. Upon execution and delivery of this Lease by Landlord, Tenant shall pay Landlord an upfront fee (the "Upfront Fee") as provided in the letter dated July 10, 1997 from Landlord to Tenant, which Tenant executed and returned to Landlord to indicate (among other things) Tenant's willingness to proceed with negotiations for this Lease (the "Nonbinding Term Sheet"). (Tenant shall, however, be entitled to an appropriate credit against the Upfront Fee for the deposit already paid by Tenant as provided in the Nonbinding Term Sheet.) The Upfront Fee shall represent Additional Rent for the first Base Rent Period. (c) Commitment Fees. For each Construction Period, Tenant shall pay Landlord a fee (herein called a "Commitment Fee") equal to (1) twelve and one-half basis points (12.5/100 of 1%), times (2) the difference at the end of the first day of such Construction Period between (A) the Maximum Construction Allowance and (B) the sum (computed without deduction for any Qualified Payments) of all Construction Advances made by or on behalf of Landlord under this Lease and all Carrying Costs that have been added to and made a part of the Outstanding Construction Allowance, times (3) the number of days in such Construction Period, divided by (4) three hundred sixty (360). Tenant shall pay Commitment Fees in arrears on the first Business Day of February, May, August and November of each calendar year, beginning with the first Business Day in November, 1997 and continuing regularly thereafter to and including the first of such Business Days to fall on or after the Last Advance Date; provided that if any of such dates does not fall on a Business Day, the payment of Commitment Fees otherwise then due shall become due on the next following Business Day; and provided, further, if any Commitment Fees shall have accrued and remain unpaid on the Designated Sale Date, such accrued unpaid Commitment Fees shall be due on the Designated Sale Date. (d) Administrative Agency Fees. Upon execution and delivery of this Lease by Landlord, and again on each anniversary of the date hereof, Tenant shall pay to Landlord an administrative agency fee (an "Administrative Fee") in the amount equal to one third of the total per annum administrative agency fees specified in the Nonbinding Term Sheet. Each Administrative Fee shall represent Additional Rent for the Construction Period or Base Rent Period during which it is paid. (e) Additional Rent. All amounts which Tenant is required to pay to or on behalf of Landlord pursuant to this Lease, together with every charge, premium, interest and cost set forth herein which may be added for nonpayment or late payment thereof, shall constitute rent (all such amounts, other than Base Rent, are herein called "Additional Rent"). (f) Interest and Order of Application. All Rent shall bear interest, if not paid when first due, at the Default Rate in effect from time to time from the date due until paid; provided, that nothing herein contained will be construed as permitting the charging or collection of interest at a rate exceeding the maximum rate permitted under Applicable Laws. Landlord shall be entitled to apply any amounts paid by or on behalf of Tenant hereunder against any Rent then past due in the order the same became due or in such other order as Landlord may elect. (g) Net Lease. It is the intention of Landlord and Tenant that the Base Rent and all other payments herein specified shall be absolutely net to Landlord. Tenant shall pay all costs, expenses and obligations of every kind relating to the Leased Property or this Lease which may arise or become due, including, without limitation: (i) Impositions, including any taxes payable by virtue of Landlord's receipt of amounts paid to or on behalf of Landlord in accordance with this subparagraph 3.(g), but not including any Excluded Taxes; (ii) any Capital Adequacy Charges; (iii) any amount for which Landlord is or becomes liable with respect to the Permitted Encumbrances; and (iv) any costs incurred by Landlord (including Attorneys' Fees) because of Landlord's acquisition or ownership of the Leased Property or because of this Lease or the transactions contemplated herein. (h) No Demand or Setoff. The Base Rent and all Additional Rent shall be paid without notice or demand and without abatement, counterclaim, deduction, setoff or defense, except as expressly provided herein. (i) Overdrawn Allowance. On any Advance Date on which (1) the Outstanding Construction Allowance (including any Carrying Costs added thereto on such Advance Date), plus any Qualified Payments that have been applied to reduce the Outstanding Construction Allowance on or prior to such Advance Date, exceed (2) the Maximum Construction Allowance, Tenant shall pay to Landlord the amount of such excess. Each payment required by this subparagraph must be received by Landlord no later than 12:00 noon (San Francisco time) on the Advance Date it becomes due; if received after 12:00 noon it will be considered for purposes of this Lease as received on the next following Business Day. Landlord shall notify Tenant in writing of any payment due pursuant to this subparagraph at least fifteen (15) days prior to the Advance Date upon which it becomes due. Any failure by Landlord to so notify Tenant shall not constitute a waiver of Landlord's right to payment, but absent such notice Tenant shall not be in default for any underpayment resulting therefrom if Tenant, in good faith, reasonably estimates the payment required, makes a timely payment of the amount so estimated and corrects any underpayment within three (3) Business Days after being notified by Landlord of the underpayment. Nothing in this subparagraph shall be construed to require Landlord to make Construction Advances which could result in payments required by this subparagraph. 4. Insurance and Condemnation Proceeds. (a) Subject to Landlord's rights under this Paragraph 4, and so long as no Event of Default shall have occurred and be continuing, Tenant shall be entitled to use all casualty insurance and condemnation proceeds payable with respect to the Leased Property during the Term for the restoration and repair of the Leased Property or any remaining portion thereof. Except as provided in the last sentence of subparagraph 9.(r) and the last sentence of subparagraph 9.(s), all insurance and condemnation proceeds received with respect to the Leased Property (including proceeds payable under any insurance policy covering the Leased Property which is maintained by Tenant) shall be paid to Landlord and applied as follows: (i) First, such proceeds shall be used to reimburse Landlord for any costs and expenses, including Attorneys' Fees, incurred in connection with the collection of such proceeds. (ii) Second, the remainder of such proceeds (the "Remaining Proceeds"), shall be held by Landlord as Escrowed Proceeds and applied to reimburse Tenant for the actual cost of the repair, restoration or replacement of the Leased Property. However, any Remaining Proceeds not needed for such purpose shall be applied by Landlord as Qualified Payments after Tenant notifies Landlord that they are not needed for repairs, restoration or replacement. Notwithstanding the foregoing, if an Event of Default shall have occurred and be continuing, then Landlord shall be entitled to receive and collect insurance or condemnation proceeds payable with respect to the Leased Property, and either, at the discretion of Landlord, (A) hold such proceeds as Escrowed Proceeds until paid to Tenant as reimbursement for the actual and reasonable cost of repairing, restoring or replacing the Leased Property when Tenant has completed such repair, restoration or replacement, or (B) apply such proceeds (net of the deductions described in clause (i) above) as Qualified Payments. (b) Any Remaining Proceeds held by Landlord as Escrowed Proceeds shall be deposited by Landlord in an interest bearing account as provided in the definition of Escrowed Proceeds and shall be paid to Tenant upon completion of the applicable repair, restoration or replacement and upon compliance by Tenant with such terms, conditions and requirements as may be reasonably imposed by Landlord, but in no event shall Landlord be required to pay any Escrowed Proceeds to Tenant in excess of the actual cost to Tenant of the applicable repair, restoration or replacement, it being understood that Landlord may retain any such excess as a Qualified Payment. In any event, Tenant will not be entitled to any abatement or reduction of the Base Rent or any other amount due hereunder except to the extent that such excess Remaining Proceeds result in Qualified Payments which reduce Stipulated Loss Value (and thus payments computed on the basis of Stipulated Loss Value) as provided in the definitions set out above. Further, notwithstanding the inadequacy of the Remaining Proceeds held by Landlord as Escrowed Proceeds, if any, or anything herein to the contrary, Tenant must, after any taking of less than all or substantially all of the Leased Property by condemnation and after any damage to the Leased Property by fire or other casualty, restore or improve the Leased Property or the remainder thereof to a value no less than Stipulated Loss Value (computed after the application of any Remaining Proceeds as a Qualified Payment) and to a safe and sightly condition. Any taking of so much of the Leased Property as, in Landlord's reasonable judgment, makes it impracticable to restore or improve the remainder thereof as required by the preceding sentence shall be considered a taking of substantially all the Leased Property for purposes of this Paragraph 4. (c) In the event of any taking of all or substantially all of the Leased Property, Landlord shall be entitled to apply all Remaining Proceeds as a Qualified Payment, notwithstanding the foregoing. In addition, if Stipulated Loss Value immediately prior to any taking of all or substantially all of the Leased Property by condemnation exceeds the sum of the Remaining Proceeds resulting from such condemnation, then Landlord shall be entitled to recover the excess from Tenant upon demand as an additional Qualified Payment, whereupon this Lease shall terminate. (d) Nothing herein contained shall be construed to prevent Tenant from obtaining and applying as it deems appropriate any separate award from any condemning authority or from any insurer for a taking of or damage to Tenant's personal property not included in the Leased Property or for moving expenses or business interruption, provided, such award is not combined with and does not reduce the award for any taking of the Leased Property, including Tenant's interest therein. Further, notwithstanding anything to the contrary herein contained, if Remaining Proceeds held by Landlord during the term of this Lease shall exceed Stipulated Loss Value and any Rent payable by Tenant, then Tenant may get the excess by terminating this Lease in accordance with Paragraph 2 and purchasing such excess (which will then be held by Landlord as Escrowed Proceeds), together with any remaining interest of Landlord in the Leased Property, pursuant to the Purchase Agreement. (e) Landlord and Tenant each waive any right of recovery against the other, and the other's agents, officers or employees, for any damage to the Leased Property or to the personal property situated from time to time in or on the Leased Property resulting from fire or other casualty covered by a valid and collectible insurance policy; provided, however, that the waiver set forth in this subparagraph 4.(e) shall be effective insofar, but only insofar, as compensation for such damage or loss is actually recovered by the waiving party (net of costs of collection) under the policy notwithstanding the waivers set out in this paragraph. Tenant shall cause the insurance policies required of Tenant by this Lease to be properly endorsed, if necessary, to prevent any loss of coverage because of the waivers set forth in this paragraph. If such endorsements are not available, the waivers set forth in this paragraph shall be ineffective to the extent that such waivers would cause required insurance with respect to the Leased Property to be impaired. 5. No Lease Termination. (a) Status of Lease. Except as expressly provided herein, this Lease shall not terminate, nor shall Tenant have any right to terminate this Lease, nor shall Tenant be entitled to any abatement of the Rent, nor shall the obligations of Tenant under this Lease be excused, for any reason whatsoever, including without limitation any of the following: (i) any damage to or the destruction of all or any part of the Leased Property from whatever cause, (ii) the taking of the Leased Property or any portion thereof by eminent domain or otherwise for any reason, (iii) the prohibition, limitation or restriction of Tenant's use of all or any portion of the Leased Property or any interference with such use by governmental action or otherwise, (iv) any eviction of Tenant or of anyone claiming through or under Tenant by paramount title or otherwise (provided, if Tenant is wrongfully evicted by Landlord or by any third party lawfully claiming through or under Landlord, other than Tenant or a third party claiming through or under Tenant, then Tenant will have the remedies described in Paragraph 15 below), (v) any default on the part of Landlord under this Lease or under any other agreement to which Landlord and Tenant are parties, (vi) the inadequacy in any way whatsoever of the design or construction of any improvements included in the Leased Property, it being understood that Landlord has not made and will not make any representation express or implied as to the adequacy thereof, or (vii) any other cause whether similar or dissimilar to the foregoing, any existing or future law to the contrary notwithstanding. It is the intention of the parties hereto that the obligations of Tenant hereunder shall be separate and independent of the covenants and agreements of Landlord, that the Base Rent and all other sums payable by Tenant hereunder shall continue to be payable in all events and that the obligations of Tenant hereunder shall continue unaffected, unless the requirement to pay or perform the same shall have been terminated or limited pursuant to an express provision of this Lease. However, nothing in this Paragraph shall be construed as a waiver by Tenant of any right Tenant may have at law or in equity to (i) recover monetary damages for any default under this Lease by Landlord that Landlord fails to cure within the period provided in Paragraph 15, (ii) injunctive relief in case of the violation, or attempted or threatened violation, by Landlord of any of the express covenants, agreements, conditions or provisions of this Lease, or (iii) a decree compelling performance of any of the express covenants, agreements, conditions or provisions of this Lease. (b) Waiver By Tenant. Without limiting the foregoing, Tenant waives to the extent permitted by Applicable Laws, except as otherwise expressly provided herein, all rights to which Tenant may now or hereafter be entitled by law (including any such rights arising because of any implied "warranty of suitability" or other warranty under Applicable Laws) (i) to quit, terminate or surrender this Lease or the Leased Property or any part thereof or (ii) to any abatement, suspension, deferment or reduction of the Base Rent or any other sums payable under this Lease. 6. Construction Allowance. (a) Advances; Outstanding Construction Allowance. (i) Subject to the conditions set forth below, Landlord shall make advances (herein called "Construction Advances") on Advance Dates from time to time as requested by Tenant to reimburse Tenant for the actual cost of making the Designated Improvements to the Leased Property and for any property taxes or assessments payable prior to the Last Advance Date with respect to the Leased Property. In no event will Construction Advances which may be required of Landlord, when added to Carrying Costs accrued or projected by Landlord to accrue prior to the Carrying Costs Accrual Termination Date as described below, exceed the Maximum Construction Allowance. Notwithstanding the foregoing, if for any reason Stipulated Loss Value (and thus the Outstanding Construction Allowance included as a component thereof) must be determined under this Lease as of any date between Advance Dates, the Outstanding Construction Allowance determined on such date shall equal the Outstanding Construction Allowance on the immediately preceding Advance Date computed in accordance with the preceding sentence, plus Carrying Costs accruing on and after such preceding Advance Date to but not including the date in question. (ii) Charges (herein collectively called "Carrying Costs") shall accrue as described below for each Construction Period ending on or prior to the Carrying Costs Accrual Termination Date, and will be added to (and thereafter be included in) the Outstanding Construction Allowance on the last day of such Construction Period (i.e., generally on the Advance Date upon which such Construction Period ends). (iii) For each Construction Period prior to or ending on the Carrying Costs Accrual Termination Date, Carrying Costs shall equal: (1)(A) Stipulated Loss Value as of the first day of such Construction Period, times (B) one minus the Certificate of Deposit Collateral Percentage in effect during such Construction Period, times (C) the sum of (i) the Effective Rate in effect during such Construction Period and (ii) the Spread calculated on the tenth (10th) Business Day prior to the day upon which such Construction Period commences, times (D) the number of days in such Construction Period, divided by (E) three hundred sixty (360); PLUS (2)(A) Stipulated Loss Value as of the first day of such Construction Period, times (B) the Certificate of Deposit Collateral Percentage in effect during such Construction Period, times (C) twenty-two and one-half basis points (22.5/100 of 1%), times (D) the number of days in such Construction Period, divided by (E) three hundred sixty (360). (iv) To ease the administrative burden of this Lease and the Pledge Agreement, clause (2)(A) in the formula set forth in the preceding clause 6.(a)(iii) for calculating Carrying Costs reflects a reduction in the Carrying Costs equal to the interest that would accrue on any Cash Collateral required by the Pledge Agreement from time to time if the Accounts (as defined in the Pledge Agreement) bore interest at the Effective Rate. Landlord has agreed to such reduction in the Carrying Costs to provide Tenant with the economic equivalent of interest on such Cash Collateral, and in return Tenant has agreed to the provisions of the Pledge Agreement that excuse the actual payment of interest on the Accounts. By incorporating such reduction of Carrying Costs into the formula above, and by providing for noninterest bearing Accounts in the Pledge Agreement, the parties will avoid an unnecessary and cumbersome periodic exchange of equal payments. It is not, however, the intent of Landlord or Tenant to understate Carrying Costs or interest for financial reporting purposes. Accordingly, for purposes of determining Tenant's compliance with the affirmative financial covenants set forth in subparagraph 9.(ac), and for purposes of any financial reports that this Lease requires of Tenant from time to time, Tenant may report its financial statements as if there had been no such reduction and as if the Cash Collateral from time to time required by the Pledge Agreement had been maintained in Accounts bearing interest at the Effective Rate. (b) Designated Improvements. (i) Responsibility for Construction. Tenant shall construct all Designated Improvements in a good and workmanlike manner, in accordance with (1) the descriptions and renderings approved by Landlord as described in subparagraph 6.(b)(ii) below, (2) any Construction Documents for which Tenant has requested and obtained the written approval of Landlord or which Landlord has executed at the request of Tenant pursuant to Paragraph 10.(b) (though this clause (2) shall not be construed to require Tenant to get such approval or execution of Construction Documents by Landlord), (3) Applicable Laws, and (4) the other provisions of this Lease. Further, except for building foundations, driveways, parking lots, sidewalks and other improvements which would not suffer damage by being submerged under flood waters, all Designated Improvements shall be constructed by Tenant above the elevation that the U.S. Army Corp of Engineers or any other governmental authority estimates as the highest elevation that 100 year flood waters could be expected to reach. Tenant shall have sole responsibility for contracting for and administering the construction of Designated Improvements, it being understood that Landlord's obligation with respect to the Designated Improvements shall be limited to the making of advances under and subject to the conditions set forth in this Paragraph 6. No contractor or other third party shall be entitled to enforce Landlord's obligations to make advances as a third party beneficiary. Notwithstanding delays beyond Tenant's control, and even if the Construction Allowance is not sufficient to pay for completion of Designated Improvements, Tenant warrants that it shall cause all Designated Improvements with respect to which it receives any Construction Advances to be completed on or prior to the Completion Deadline. (ii) Approval of Descriptions and Renderings of the Designated Improvements. No later than six months after the date of this Lease, Tenant shall submit to Landlord and obtain Landlord's approval of descriptions and renderings of the Designated Improvements. Such descriptions and renderings must be in form and substance reasonably satisfactory to Landlord, and in any event they must be in form and substance sufficient in Landlord's reasonable judgment to permit Landlord to obtain an As-built Appraisal that will allow Landlord to evaluate whether Tenant has satisfied the condition to advances set forth in subparagraph 6.(c)(x). In this regard, Tenant acknowledges that its conceptual plans for the Designated Improvements have yet to be finalized, leaving Tenant unable as of the date of this Lease to provide Landlord with a description of the Designated Improvements needed for an As-built Appraisal. Accordingly, Landlord does not as of the date of this Lease have an As-built Appraisal meeting Landlord's regulatory and internal underwriting requirements for the provision of the full Construction Allowance. Tenant covenants, however, to complete such conceptual plans, to obtain Landlord's approval of descriptions and renderings consistent therewith as required to satisfy the condition to advances set forth in subparagraph 6.(c)(x), and to thereafter construct the Designated Improvements in a manner consistent with the requirements of this Lease, all prior to any Designated Sale Date on which neither Tenant nor any Applicable Purchaser purchases the Leased Property pursuant to the Purchase Agreement for a price to Landlord (when taken together with any additional payments made by Tenant pursuant to Paragraph 2(a)(ii) of the Purchase Agreement, in the case of a purchase by an Applicable Purchaser) of not less than the Purchase Price. (iii) Scope Changes Subsequent to Initial Approval. Before making any Scope Change to the Designated Improvements contemplated in descriptions and renderings approved by Landlord as provided in subparagraph 6.(b)(ii), Tenant shall provide to Landlord a reasonably detailed written description of the Scope Change and a revised construction budget, all of which must be approved in writing by Landlord (or by any construction representative appointed by Landlord from time to time) before the Scope Change is implemented. (iv) Value Added. The Designated Improvements, upon completion and taken as a whole, must enhance the value of the Leased Property such that the market value of the Leased Property shall be no less than fifty percent (50%) of Stipulated Loss Value when the Designated Improvements are complete; however: (1) this subparagraph 6.(b)(iv) will not preclude Tenant from obtaining Construction Advances for soft costs (such as architectural fees, consultant fees, Attorneys' Fees, design costs, and permitting), demolition costs, environmental remediation costs or other costs that do not, individually, add value to the Leased Property but that are incurred in connection with construction which will in the aggregate satisfy this subparagraph 6.(b)(iv); (2) to address any concerns Landlord may express about Tenant's ability to satisfy this subparagraph 6.(b)(iv), Tenant shall have the option to (A) provide a notice to Landlord that unequivocally stipulates a maximum amount of Construction Advances that Landlord will be required to make for the Designated Improvements, in which case Landlord shall not be required to make Construction Advances in excess of the amount so stipulated, and/or (B) establish by an As-built Appraisal that the value of the Leased Property will be no less than fifty percent (50%) of Stipulated Loss Value upon completion of the Designated Improvements and after Landlord has provided the maximum Construction Advances that may be required of it hereunder. (v) Estoppel Letters Required. If requested by Landlord prior to the substantial completion of the Designated Improvements, Tenant shall cause the contractor under each significant general construction contract for the Designated Improvements to execute and deliver to Landlord an estoppel letter in the form of Exhibit H attached hereto. Similarly, if requested by Landlord prior to the substantial completion of the Designated Improvements, Tenant shall also cause the architect and engineer under any material architectural or engineering contract for the Designated Improvements to execute and deliver to Landlord an estoppel letter in the form of Exhibit I attached hereto; provided, that no such estoppel letter shall be required from any architect or engineer who has assigned his plans and specifications for the Designated Improvements to Tenant without restricting Tenant's right to further assign or allow other to use the same. Tenant hereby grants to Landlord (and Landlord's successors and assigns through any Permitted Transfer) a license to copy and use any such plans and specifications as Landlord shall deem appropriate. (vi) Advances Not a Waiver. No funding of Construction Advances and no failure of Landlord to object to Designated Improvements proposed or constructed by Tenant shall constitute a waiver by Landlord of the requirements contained in this subparagraph 6.(b). (c) Conditions to Construction Advances. Landlord's obligation to make Construction Advances from time to time under this Paragraph 6 shall be subject to the following terms and conditions, all of which are intended for the sole benefit of Landlord: (i) Prior Notice. Tenant must make a request in substantially the form attached to this Lease as Exhibit J for any Construction Advance at least ten (10) Business Days prior to the Advance Date upon which the advance is to be paid. Landlord shall consider in good faith any changes to the Construction Advance request forms attached hereto that Tenant may reasonably request, provided the requested changes do not impair Landlord's rights or create or increase any liability Landlord may have in connection with the Designated Improvements. (ii) Amount of the Advances. No Construction Advance shall exceed the lesser of: a) the Maximum Construction Allowance, less the sum of (1) all prior Construction Advances and all Carrying Costs accruing through the date of such advance, and (2) the Carrying Costs then projected by Landlord to be added to the Construction Allowance on and after the date of the advance; or b) (1) the actual costs and expenses previously incurred and paid by Tenant for the Designated Improvements, including "soft costs," and for property taxes or assessments assessed against the Leased Property after the date hereof and prior to the Last Advance Date, less (2) the sum of all previous Construction Advances made under this Paragraph 6 to Tenant as reimbursement for such costs and expenses. Further, no Construction Advance shall be required that would cause the cost of completing all Designated Improvements then contemplated as estimated by Landlord to exceed the difference computed by subtracting (1) the Carrying Costs then projected by Landlord to be added to the Outstanding Construction Allowance, from (2) the Construction Allowance remaining to be advanced. Tenant shall not request any Construction Advance (other than the final Construction Advance) for an amount less than $500,000. (iii) Insurance. Tenant shall have obtained and provided certificates (or, in the case of clause a) below, title policies or binders) reasonably satisfactory to Landlord evidencing insurance covering the Leased Property as follows (in addition to the liability insurance required under subparagraph 9.(z) below): a) Title Insurance. An owner's title insurance policy (or binder committing the applicable title insurer to issue an owner's title insurance policy, without the payment of further premiums) in an amount, form and substance and written by one or more title insurance companies reasonably satisfactory to Landlord and insuring Landlord's ownership of fee title to the Leased Property, including any new Improvements constructed by Tenant, in the amount no less than Stipulated Loss Value; and b) Builder's Risk Insurance. Builder's risk and such other hazard insurance as Landlord may reasonably require against all risks of physical loss (including collapse and transit coverage, but not including earthquake or flood coverage) with deductibles not to exceed $1,000,000 (or such other amount as Landlord and Tenant may agree upon in writing from time to time), such insurance to be in amounts sufficient to cover the total value of any Improvements under construction and to be maintained in full force and effect at all times until completion of the Designated Improvements. (iv) Progress of Construction. Construction of the Designated Improvements shall be progressing in a good and workmanlike manner and in accordance with the requirements of this Lease without any continuing significant interruption, other than interruptions beyond the reasonable control of Tenant that are not likely to cause the cost of such construction (and Carrying Costs and construction period and property taxes and assessments) to exceed the Maximum Construction Allowance. Also, Tenant shall have corrected or caused the correction promptly of any significant defect in such construction. (v) Evidence of Costs to be Reimbursed. To the extent contemplated by the Construction Advance request forms attached as Exhibit J and described in subparagraph 6.(c)(i), or otherwise required by Landlord at the time a Construction Advance is to be made, Tenant shall have submitted invoices, requests for payment from contractors, certifications from Tenant's architect or construction manager, lien releases and other evidence satisfactory to Landlord that (A) all costs for which Tenant requests reimbursement constitute actual costs incurred by Tenant for the construction of the Designated Improvements or constitute property taxes or assessments assessed against the Leased Property and paid by Tenant prior to the Last Advance Date with respect to the Leased Property and (B) general contractors and all parties that have the right to assert a mechanic's or materialman's lien against the Leased Property for labor performed in connection with the Leased Property or materials delivered to the Leased Property (collectively, "Potential Lien Claimants") have been paid all sums for which prior Construction Advances have been advanced under this Lease. Without limiting the foregoing, Landlord may decline to advance any amount that would result in an excess of $5,000,000 or more of (1) the total cost of work with respect to which Potential Lien Claimants could have asserted a lien against the Leased Property and for which Construction Advances have been advanced by Landlord, over (2) the cost of such work for which Tenant has provided to Landlord unconditional statutory lien releases from all Potential Lien Claimants in form and substance reasonably satisfactory to Landlord. (vi) No Event of Default or Change of Control Event. No Event of Default shall have occurred and be continuing under this Lease and no Change of Control Event shall have occurred. (vii) No Sale of Landlord's Interest. No sale of Landlord's interest in the Leased Property shall have occurred pursuant to the Purchase Agreement. (viii) Certificate of No Default. Landlord shall have received, together with the notice requesting the Construction Advance described in clause (i) above, a current certificate of a Responsible Financial Officer of Tenant in the form attached as Exhibit E. (ix) Payments by Approved Participants. None of the Approved Participants (other than Landlord's Parent) shall have failed to advance to Landlord their respective percentage shares of the Construction Advance being requested as required by Section 3.2 of the Participation Agreement. However, any such failure shall excuse Landlord's obligation to provide the Construction Advance requested only to the extent of the funds that the applicable Defaulting Participant or Participants should have advanced (but did not advance) to Landlord. Moreover, in the event of any such failure: a) Landlord will, to the extent possible, postpone reductions of Construction Advances because of the failure by any one or more Defaulting Participants to make required advances under Section 3.2 of the Participation Agreement by adjusting (and readjusting from time to time, as required) the funding "Percentages" of other Participants, and by requesting the other Participants to make advances to Landlord on the basis of such adjusted Percentages, in each case as provided in Section 4 of the Participation Agreement; however, so long as a Defaulting Participant's failure to make required advances continues, no Construction Advance shall be required that would cause the Outstanding Construction Allowance (plus Carrying Costs to accrue thereafter as projected by Landlord) to exceed (a) the Maximum Construction Allowance available under this Lease, less (b) all amounts that should have been, but have not been, advanced by a Defaulting Participant as required by Section 3.2 of the Participation Agreement. b) Tenant may exercise its rights under Section 3.1.3 of the Pledge Agreement to require Landlord to attempt in good faith, on and subject to the terms and conditions set forth in that Section, to assist Tenant in identifying one or more new Participants to replace the Defaulting Participants. (x) Approval of Designated Improvements and As-built Appraisal. Landlord shall have received and approved descriptions and renderings of the Designated Improvements as provided in subparagraph 6.(b)(ii), and based upon such descriptions and renderings Landlord shall have received an As-built Appraisal indicating that the Designated Improvements will add sufficient value to the Leased Property to satisfy the requirements of subparagraph 6.(b)(iv) above. (d) Completion Notice. Tenant shall provide a notice to Landlord (the "Completion Notice") promptly after construction of the Designated Improvements is substantially complete and more than fifty percent (50%) of the Designated Improvements are being occupied by Tenant or any subtenant permitted by Paragraph 11.(a). 7. Purchase Documents and Environmental Indemnity. Tenant acknowledges and agrees that nothing contained in this Lease shall limit, modify or otherwise affect any of Tenant's obligations under the Purchase Documents or Environmental Indemnity, which obligations are intended to be separate, independent and in addition to, and not in lieu of, the obligations established by this Lease. In the event of any inconsistency between the terms and provisions of the Purchase Documents or Environmental Indemnity and the terms and provisions of this Lease, the terms and provisions of the Purchase Documents or Environmental Indemnity (as the case may be) shall control. 8. Use and Condition of Leased Property. (a) Use. Subject to the Permitted Encumbrances and the terms hereof, Tenant may use and occupy the Leased Property so long as no Event of Default occurs hereunder, but only for the following purposes and other lawful purposes (including parking) incidental thereto: (i) research and development of computer-related and other electronic products; and (ii) administrative and office space; and (iii) distribution and warehouse storage of computer-related and other electronic products; and (iv) assembly of computer-related and other electronic products using components manufactured elsewhere, and light manufacturing of computer-related and other electronic products, but not including the manufacture of computer chips on-site; and (v) cafeteria, library, fitness center and other support function uses that Tenant may provide to its employees. Although the term "electronic products" in this subparagraph may include products designed to detect, monitor, neutralize, handle or process Hazardous Substances, the use of the Leased Property by Tenant shall not include bringing Hazardous Substances onto the Leased Property for the purpose of researching, testing or demonstrating any such products. (b) Condition. Tenant accepts the Leased Property (and will accept the same upon any purchase of the Landlord's interest therein) in its present state, AS IS, and without any representation or warranty, express or implied, as to the condition of such property or as to the use which may be made thereof. Tenant also accepts the Leased Property without any representation or warranty, express or implied, by Landlord regarding the title thereto or the rights of any parties in possession of any part thereof, except as set forth in subparagraph 10.(a). Landlord shall not be responsible for any latent or other defect or change of condition in the Land, Improvements, fixtures and personal property forming a part of the Leased Property, and the Rent hereunder shall in no case be withheld or diminished because of any latent or other defect in such property, any change in the condition thereof or the existence with respect thereto of any violations of Applicable Laws. Nor shall Landlord be required to furnish to Tenant any facilities or service of any kind, such as, but not limited to, water, steam, heat, gas, hot water, electricity, light or power. (c) Consideration of and Scope of Waiver. The provisions of subparagraph 8.(b) above have been negotiated by the Landlord and Tenant after due consideration for the Rent payable hereunder and are intended to be a complete exclusion and negation of any representations or warranties of the Landlord, express or implied, with respect to the Leased Property that may arise pursuant to any law now or hereafter in effect, or otherwise. However, such exclusion of representations and warranties by Landlord is not intended to impair any representations or warranties made by other parties, including Seller, the benefit of which is to pass to Tenant during the Term because of the definition of Personal Property and Leased Property above. 9. Other Representations, Warranties and Covenants of Tenant. Tenant represents, warrants and covenants as follows: (a) Financial Matters. Tenant is solvent and has no outstanding liens, suits, garnishments or court actions which could render Tenant insolvent. There has not been filed by or, to Tenant's knowledge, against Tenant a petition in bankruptcy or a petition or answer seeking an assignment for the benefit of creditors, the appointment of a receiver, trustee, custodian or liquidator with respect to Tenant or any significant portion of Tenant's property, reorganization, arrangement, rearrangement, composition, extension, liquidation or dissolution or similar relief under the federal Bankruptcy Code or any state law. The financial statements and all financial data heretofore delivered to Landlord relating to Tenant have been prepared in accordance with GAAP in all material respects. No material adverse change has occurred in the financial position of Tenant as reflected in Tenant's financial statements covering the fiscal period ended May 31, 1997. (b) Existing Contract. Except to the extent required of Landlord under subparagraph 10.(b), Tenant shall satisfy all surviving obligations of Tenant under the Existing Contract and under other agreements described therein. Tenant agrees to indemnify, defend and hold Landlord harmless from and against any and all Losses imposed on or asserted against or incurred by Landlord at any time and from time to time by reason of, in connection with or arising out of any obligations imposed by the Existing Contract or the other agreements described therein. THE INDEMNITY SET OUT IN THIS SUBPARAGRAPH SHALL APPLY EVEN IF THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE ORDINARY NEGLIGENCE (AS DEFINED ABOVE) OF LANDLORD; provided, such indemnity shall not apply to Losses proximately caused by (and attributed by any applicable principles of comparative fault to) the Active Negligence, gross negligence or willful misconduct of Landlord. Because Tenant hereby assumes and agrees to satisfy all surviving obligations of Tenant under the Existing Contract and the other agreements described therein, no failure by Landlord to take any action required by the Existing Contract or such other agreements (save and except any actions required of Landlord under subparagraph 10.(b)) shall, for the purposes of this indemnity, be deemed to be caused by the Active Negligence, gross negligence or willful misconduct of Landlord. The foregoing indemnity is in addition to the other indemnities set out herein and shall not terminate upon the closing of any sale of Landlord's interest in the Leased Property pursuant to the provisions of the Purchase Agreement or the termination of this Lease. (c) No Default or Violation. The execution, delivery and performance by Tenant of this Lease, the Purchase Documents and the Environmental Indemnity do not and will not constitute a breach or default under any other material agreement or contract to which Tenant is a party or by which Tenant is bound or which affects the Leased Property or Tenant's use, occupancy or operation of the Leased Property or any part thereof and do not, to the knowledge of Tenant, violate or contravene any law, order, decree, rule or regulation to which Tenant is subject, and such execution, delivery and performance by Tenant will not result in the creation or imposition of (or the obligation to create or impose) any lien, charge or encumbrance on, or security interest in, Tenant's property pursuant to the provisions of any of the foregoing. (d) Compliance with Covenants and Laws. The intended use of the Leased Property by Tenant complies, or will comply after Tenant obtains readily available permits, in all material respects with all applicable restrictive covenants, zoning ordinances and building codes, flood disaster laws, applicable health, safety and environmental laws and regulations, the Americans with Disabilities Act and other laws pertaining to disabled persons, and all other applicable laws, statutes, ordinances, rules, permits, regulations, orders, determinations and court decisions (all of the foregoing are herein sometimes collectively called "Applicable Laws"). Tenant has obtained or will promptly obtain all utility, building, health and operating permits as may be required for Tenant's use of the Leased Property by any governmental authority or municipality having jurisdiction over the Leased Property. (e) Environmental Representations. To Tenant's knowledge and except as otherwise disclosed in the Environmental Report, as of the date hereof: (i) no Hazardous Substances Activity has occurred prior to the date of this Lease; (iii) neither Tenant nor any prior owner or operator of the Leased Property or any surrounding property has reported or been required to report any release of any Hazardous Substances on or from the Leased Property or the surrounding property pursuant to any Environmental Law; (iv) neither Tenant nor any prior owner or operator of the Leased Property or any surrounding property has received any warning, citation, notice of violation or other communication regarding a suspected or known release or discharge of Hazardous Substances on or from the Leased Property or regarding a suspected or known violation of Environmental Laws concerning the Leased Property from any federal, state or local agency; and (v) none of the following are located on the Leased Property: asbestos; urea formaldehyde foam insulation; transformers or other equipment which contain dielectric fluid containing levels of polychlorinated biphenyls in excess of fifty (50) parts per million; any other Hazardous Substances other than Permitted Hazardous Substances; or any underground storage tank or tanks. Further, Tenant represents that to its knowledge the Environmental Report is not misleading or inaccurate in any material respect. (f) No Suits. There are no judicial or administrative actions, suits, proceedings or investigations pending or, to Tenant's knowledge, threatened that will affect Tenant's intended use of the Leased Property or the validity, enforceability or priority of this Lease, or Tenant's use, occupancy and operation of the Leased Property or any part thereof, and Tenant is not in default with respect to any order, writ, injunction, decree or demand of any court or other governmental or regulatory authority that could materially and adversely affect the business or assets of Tenant and its Subsidiaries taken as a whole or Tenant's use, occupancy or operation of the Leased Property. No condemnation or other like proceedings are pending or, to Tenant's knowledge, threatened against the Leased Property. (g) Condition of Property. The Land as described in Exhibit A is shown on the plat included as part of the A.L.T.A. Survey prepared by J. Coline Toline R.P.S. of SDI Consultants Ltd., dated 7/7/97, which was delivered to Landlord at the request of Tenant. All material improvements on the Land as of the date hereof are as shown on that survey, and except as shown on that survey there are no easements or encroachments visible or apparent from an inspection of the Real Property. Adequate provision has been made (or can be made at a cost that is reasonable in connection with development of the Land) for the Leased Property to be served by electric, gas, storm and sanitary sewers, sanitary water supply, telephone and other utilities required for the use thereof. All streets, alleys and easements necessary to serve the Leased Property have been completed and are serviceable (or can be completed at a cost that is reasonable in connection with development of the Land). The Leased Property shall be in a condition satisfactory for its use and occupancy upon completion of the Designated Improvements. Tenant is not aware of any latent or patent material defects or deficiencies in the Real Property that, either individually or in the aggregate, could materially and adversely affect Tenant's use or occupancy or could reasonably be anticipated to endanger life or limb. (h) Organization. Tenant is duly incorporated and legally existing under the laws of the State of Delaware. Tenant has all requisite power and has procured or will procure on a timely basis all governmental certificates of authority, licenses, permits, qualifications and other documentation required to lease and operate the Leased Property. Tenant has the corporate power and adequate authority, rights and franchises to own Tenant's property and to carry on Tenant's business as now conducted and is (or has properly applied with all appropriate authorities to become) duly qualified and in good standing in each state in which the character of Tenant's business makes such qualification necessary (including, without limitation, the States of California and Illinois) or, if it is not so qualified in a state other than California and Illinois, such failure does not have a material adverse effect on the properties, assets, operations or businesses of Tenant and its Subsidiaries, taken as a whole. (i) Enforceability. The execution, delivery and performance of this Lease, the Purchase Documents, and the Environmental Indemnity are duly authorized and do not require the consent or approval of any governmental body or other regulatory authority that has not heretofore been obtained and are not in contravention of or conflict with any Applicable Laws or any term or provision of Tenant's articles of incorporation or bylaws. This Lease, the Purchase Documents, and the Environmental Indemnity are valid, binding and legally enforceable obligations of Tenant in accordance with their terms, except as such enforcement is affected by bankruptcy, insolvency and similar laws affecting the rights of creditors, generally, and equitable principles of general application. (j) Not a Foreign Person. Tenant is not a "foreign person" within the meaning Sections 1445 and 7701 of the Code (i.e., Tenant is not a non-resident alien, foreign corporation, foreign partnership, foreign trust or foreign estate as those terms are defined in the Code and regulations promulgated thereunder). (k) Omissions. To Tenant's knowledge, none of Tenant's representations or warranties contained in this Lease or any document, certificate or written statement furnished to Landlord by or on behalf of Tenant contains any untrue statement of a material fact or omits a material fact necessary in order to make the statements contained herein or therein (when taken in their entireties) not misleading. (l) Existence. Tenant shall continuously maintain its corporate existence, and Tenant shall continuously maintain its qualification to do business in the States of California and Illinois. (m) Tenant Taxes. Tenant shall comply with all applicable tax laws and pay before the same become delinquent all taxes imposed upon it or upon its property where the failure to so comply or so pay would have a material adverse effect on the financial condition or operations of Tenant; except that Tenant may in good faith by appropriate proceedings contest the validity, applicability or amount of any such taxes and pending such contest Tenant shall not be deemed in default under this subparagraph if (1) Tenant diligently prosecutes such contest to completion in an appropriate manner, and (2) Tenant promptly causes to be paid any tax adjudged by a court of competent jurisdiction to be due, with all costs, penalties, and interest thereon, promptly after such judgment becomes final; provided, however, in any event such contest shall be concluded and the tax, penalties, interest and costs shall be paid prior to the date any writ or order is issued under which any of Tenant's property that is material to the business of Tenant and its Subsidiaries taken as a whole may be seized or sold because of the nonpayment thereof. (n) Operation of Property. Tenant shall operate the Leased Property in a good and workmanlike manner and in compliance with all Applicable Laws and will pay all fees or charges of any kind in connection therewith. Tenant shall not use or occupy, or allow the use or occupancy of, the Leased Property in any manner which violates any Applicable Law or which constitutes a public or private nuisance or which makes void, voidable or cancelable any insurance then in force with respect thereto. To the extent that any of the following would, individually or in the aggregate, materially and adversely affect the value of the Leased Property or Tenant's use, occupancy or operations on the Leased Property, Tenant shall not: (i) initiate or permit any zoning reclassification of the Leased Property; (ii) seek any variance under existing zoning ordinances applicable to the Leased Property; (iii) use or permit the use of the Leased Property in a manner that would result in such use becoming a nonconforming use under applicable zoning ordinances or similar laws, rules or regulations; (iv) execute or file any subdivision plat affecting the Leased Property; or (v) consent to the annexation of the Leased Property to any municipality. If a change in the zoning or other Applicable Laws affecting the permitted use or development of the Leased Property shall occur that Landlord determines will materially reduce the then-current market value of the Leased Property, and if after such reduction the Stipulated Loss Value shall substantially exceed the then- current market value of the Leased Property in the reasonable judgment of Landlord, then Tenant shall pay Landlord an amount equal to such excess for application as a Qualified Payment. Tenant shall make any payment required by the preceding sentence within one hundred eighty (180) days after it is requested by Landlord, and in any event shall make any such payment before the end of the Term. Tenant shall not impose any restrictive covenants or encumbrances upon the Leased Property without the prior written consent of the Landlord; provided, that such consent shall not be unreasonably withheld for any encumbrance or restriction that is made expressly subject to this Lease, as modified from time to time, and subordinate to Landlord's interest in the Leased Property by an agreement in form satisfactory to Landlord. Tenant shall not cause or permit any drilling or exploration for, or extraction, removal or production of, minerals from the surface or subsurface of the Leased Property. Tenant shall not do any act whereby the market value of the Leased Property may be materially lessened. Tenant shall allow Landlord or its authorized representative to enter the Leased Property at any reasonable time to inspect the Leased Property and, after reasonable notice, to inspect Tenant's books and records pertaining thereto, and Tenant shall assist Landlord or Landlord's representative in whatever way reasonably necessary to make such inspections. If Tenant receives a written notice or claim from any federal, state or other governmental entity that the Leased Property is not in compliance in any material respect with any Applicable Law, or that any action may be taken against the owner of the Leased Property because the Leased Property does not comply with Applicable Law, Tenant shall promptly furnish a copy of such notice or claim to Landlord. Notwithstanding the foregoing, Tenant may in good faith, by appropriate proceedings, contest the validity and applicability of any Applicable Law with respect to the Leased Property, and pending such contest Tenant shall not be deemed in default hereunder because of a violation of such Applicable Law, if Tenant diligently prosecutes such contest to completion in a manner reasonably satisfactory to Landlord, and if Tenant promptly causes the Leased Property to comply with any such Applicable Law upon a final determination by a court of competent jurisdiction that the same is valid and applicable to the Leased Property; provided, that in any event such contest shall be concluded and the violation of such Applicable Law must be corrected and any claims asserted against Landlord or the Leased Property because of such violation must be paid by Tenant, all prior to the date that (i) any criminal charges may be brought against Landlord or any of its directors, officers or employees because of such violation or (ii) any action may be taken by any governmental authority against Landlord or any property owned by Landlord (including the Leased Property) because of such violation. (o) Debts for Construction. Tenant shall cause all debts and liabilities incurred in the construction, maintenance, operation and development of the Leased Property, including without limitation all debts and liabilities for labor, material and equipment and all debts and charges for utilities servicing the Leased Property, to be promptly paid. Notwithstanding the foregoing, Tenant may in good faith by appropriate proceedings contest the validity, applicability or amount of any asserted mechanic's or materialmen's lien and pending such contest Tenant shall not be deemed in default under this subparagraph (or subparagraphs 9.(t) or 9.(u)) because of the contested lien if (1) within sixty (60) days after being asked to do so by Landlord, Tenant bonds over to Landlord's satisfaction any contested liens alleged to secure an amount in excess of $3,000,000 (individually or in the aggregate), (2) Tenant diligently prosecutes such contest to completion in a manner reasonably satisfactory to Landlord, and (3) Tenant promptly causes to be paid any amount adjudged by a court of competent jurisdiction to be due, with all costs and interest thereon, promptly after such judgment becomes final; provided, however, that in any event each such contest shall be concluded and the lien, interest and costs shall be paid prior to the date (i) any criminal action may be instituted against Landlord or its directors, officers or employees because of the nonpayment thereof or (ii) any writ or order is issued under which any property owned by Landlord (including the Leased Property) may be seized or sold or any other action may be taken against Landlord or any property owned by Landlord because of the nonpayment thereof. (p) Impositions. Tenant shall reimburse Landlord for (or, if requested by Landlord, will pay or cause to be paid prior to delinquency) all sales, excise, ad valorem, gross receipts, business, transfer, stamp, occupancy, rental and other taxes, levies, fees, charges, surcharges, assessments or penalties which arise out of or are attributable to this Lease or which are imposed upon Landlord or the Leased Property because of the ownership, leasing, occupancy, sale or operation of the Leased Property, or any part thereof, or relating to or required to be paid by the terms of any of the Permitted Encumbrances (collectively, herein called the "Impositions"), excluding only Excluded Taxes. If Landlord requires Tenant to pay any Impositions directly to the applicable taxing authority or other party entitled to collect the same, Tenant shall furnish Landlord with receipts showing payment of such Impositions and other amounts prior to delinquency; except that Tenant may in good faith by appropriate proceedings contest the validity, applicability or amount of any asserted Imposition, and pending such contest Tenant shall not be deemed in default of this subparagraph (or subparagraphs 9.(t) or 9.(u)) because of the contested Imposition if (1) within sixty (60) days after being asked to do so by Landlord, Tenant bonds over to the satisfaction of Landlord any lien asserted against the Leased Property and alleged to secure an amount in excess of $1,000,000 because of the contested Imposition, (2) Tenant diligently prosecutes such contest to completion in a manner reasonably satisfactory to Landlord, and (3) Tenant promptly causes to be paid any amount adjudged by a court of competent jurisdiction to be due, with all costs, penalties and interest thereon, promptly after such judgment becomes final; provided, however, that in any event each such contest shall be concluded and the Impositions, penalties, interest and costs shall be paid prior to the date (i) any criminal action may be instituted against Landlord or its directors, officers or employees because of the nonpayment thereof or (ii) any writ or order is issued under which any property owned by Landlord (including the Leased Property) may be seized or sold or any other action may be taken against Landlord or any property owned by Landlord because of the nonpayment thereof. (q) Repair, Maintenance, Alterations and Additions. Tenant shall keep the Leased Property in good order, repair, operating condition and appearance (ordinary wear and tear excepted), causing all necessary repairs, renewals, replacements, additions and improvements to be promptly made, and will not allow any of the Leased Property to be materially misused, abused or wasted or to deteriorate. Tenant shall promptly replace any worn-out fixtures included within the Leased Property with fixtures comparable to the replaced fixtures when new and repair any damage caused by the removal of such fixtures. Further, Tenant shall not, without the prior written consent of Landlord, (i) remove from the Leased Property any fixtures of significant value, except such as are replaced by Tenant by articles of equal value, free and clear of any Lien (and for purposes of this clause "significant value" will mean any fixture that has a value of more than $500,000 or that, when considered together with all other fixtures removed and not replaced by Tenant by articles of equal suitability and value, has an aggregate value of $1,000,000 or more) or (ii) make any alteration to any Improvements which significantly reduce the fair market value or change the general character of the Leased Property, taken as a whole, or which impair in any significant manner the useful life or utility of the Improvements, taken as whole. Upon request of Landlord made at any time when an Event of Default shall have occurred and be continuing, Tenant shall deliver to Landlord an inventory describing and showing the make, model, serial number and location of all fixtures and personalty, if any, included in the Leased Property with a certification by Tenant that such inventory is a true and complete schedule of all such fixtures and personalty and that all items specified in the inventory are covered hereby free and clear of any Lien other than the Permitted Encumbrances described in Exhibit B. (r) Insurance and Casualty. Throughout the Term, Tenant will keep all Improvements (including all alterations, additions and changes made to the Improvements) which are located within the Leased Property insured under an all-risk property insurance policy (excluding from coverage damage by flood or earthquake, but not excluding other perils normally included within the definitions of extended coverage, vandalism and malicious mischief) in the amount of one hundred percent (100%) of the replacement value with endorsements for contingent liability from operation of building laws, increased cost of construction and demolition costs which may be necessary to comply with building laws. Tenant will be responsible for determining the amount of property insurance to be maintained, but such coverage will be on an agreed value basis to eliminate the effects of coinsurance. Such insurance shall be issued by an insurance company or companies rated by the A.M. Best Company of Oldwick, New Jersey as having a policyholder's rating of A or better and a reported financial information rating of X or better. Any deductible applicable to such insurance shall not exceed $1,000,000 (or such other amount as Landlord and Tenant may agree upon in writing from time to time). Such insurance shall cover not only the value of Tenant's interest in the Improvements, but also the interest of Landlord, and such insurance shall include provisions that Landlord must be notified at least ten (10) days prior to any cancellation or reduction of insurance coverage. With this Lease Tenant shall deliver to Landlord a certificate from the applicable insurer or its authorized agent evidencing the insurance required by this subparagraph and any additional insurance which shall be taken out upon any part of the Leased Property. Thereafter, Tenant shall deliver to Landlord certificates from the applicable insurer or its authorized agent of renewals or replacements of all such policies of insurance at least five (5) days before any such insurance shall expire. Tenant further agrees that all such policies shall provide that proceeds thereunder will be payable to Landlord as Landlord's interest may appear. If Tenant fails to obtain any insurance required by this Lease or to provide confirmation of any such insurance as required by this Lease, Landlord shall be entitled (but not required) to obtain the insurance that Tenant has failed to obtain or for which Tenant has not provided the required confirmation and, without limiting Landlord's other remedies under the circumstances, Landlord may require Tenant to reimburse Landlord for the cost of such insurance and to pay interest thereon computed at the Default Rate from the date such cost was paid by Landlord until the date of reimbursement by Tenant. In the event any of the Leased Property is destroyed or damaged by fire, explosion, windstorm, hail or by any other casualty against which insurance shall have been required hereunder, (i) Landlord may, but shall not be obligated to, make proof of loss if not made promptly by Tenant, (ii) each insurance company concerned is hereby authorized and directed to make payment for such loss directly to Landlord for application as required by Paragraph 4, and (iii) Landlord's consent must be obtained for any settlement, adjustment or compromise of any claims for loss, damage or destruction under any policy or policies of insurance (provided, that if any such claim is for less than $2,000,000 and no Event of Default shall have occurred and be continuing, Tenant alone shall have the right to settle, adjust or compromise the claim as Tenant deems appropriate; and, provided further, that any disagreement between Landlord and Tenant about the amount for which any such claim should be settled shall, at the request of either party, be resolved as provided in Exhibit D, unless an Event of Default shall have occurred and be continuing, in which case Landlord alone shall have the right to settle, adjust or compromise the claim as Landlord deems appropriate). If any casualty shall result in damage to or loss or destruction of the Leased Property in excess of $3,000,000, Tenant shall give immediate notice thereof to Landlord and Paragraph 4 shall apply. Notwithstanding the foregoing provisions of this subparagraph 9.(r), following any fire or other casualty involving the Leased Property, if insurance proceeds totaling not more than $2,000,000 are to be recovered as a result thereof, or if in connection therewith Tenant shall have executed a Voluntary Minimum Pledge Commitment and delivered any additional Collateral required to satisfy such Voluntary Minimum Pledge Commitment, Tenant shall be entitled to receive directly and hold such insurance proceeds, so long as no Event of Default shall have occurred and be continuing and so long as Tenant applies such proceeds towards the restoration, replacement and repair of the Leased Property as required by subparagraph 4.(b). (s) Condemnation. Immediately upon obtaining knowledge of the institution of any proceedings for the condemnation of the Leased Property or any portion thereof, or any other similar governmental or quasi-governmental proceedings arising out of injury or damage to the Leased Property or any portion thereof, Tenant shall notify Landlord of the pendency of such proceedings. Tenant shall, at its expense, diligently prosecute any such proceedings and shall consult with Landlord, its attorneys and experts and cooperate with them as reasonably requested in the carrying on or defense of any such proceedings. All proceeds of condemnation awards or proceeds of sale in lieu of condemnation with respect to the Leased Property and all judgments, decrees and awards for injury or damage to the Leased Property shall be paid to Landlord and applied as provided in Paragraph 4 above. Landlord is hereby authorized, in the name of Tenant, to execute and deliver valid acquittances for, and to appeal from, any such judgment, decree or award concerning condemnation of any of the Leased Property. Landlord shall not be, in any event or circumstances, liable or responsible for failure to collect, or to exercise diligence in the collection of, any such proceeds, judgments, decrees or awards. Notwithstanding the foregoing provisions of this subparagraph 9.(s), following any condemnation or sale in lieu of condemnation involving the Leased Property, if condemnation or sale proceeds totaling not more than $2,000,000 are to be recovered as a result thereof, or if in connection therewith Tenant shall have executed a Voluntary Minimum Pledge Commitment and delivered any additional Collateral required to satisfy such Voluntary Minimum Pledge Commitment, Tenant shall be entitled to receive directly and hold such condemnation or sale proceeds, so long as no Event of Default shall have occurred and be continuing and so long as Tenant applies such proceeds towards the restoration, replacement and repair of the remainder of the Leased Property as required by subparagraph 4.(b). (t) Protection and Defense of Title. If any encumbrance or title defect whatsoever affecting Landlord's fee interest in the Leased Property is claimed or discovered (excluding Permitted Encumbrances, this Lease and any other encumbrance which is claimed by Landlord or lawfully claimed through or under Landlord and which is not claimed by, through or under Tenant) or if any legal proceedings are instituted with respect to title to the Leased Property, Tenant shall give prompt written notice thereof to Landlord and at Tenant's own cost and expense will promptly cause the removal of any such encumbrance and cure any such defect and will take all necessary and proper steps for the defense of any such legal proceedings, including but not limited to the employment of counsel, the prosecution or defense of litigation and the release or discharge of all adverse claims. If Tenant fails to promptly remove any such encumbrance or title defect (other than a Lien Tenant is contesting as expressly permitted by and in accordance with subparagraph 9.(o) or subparagraph 9.(p)), Landlord (whether or not named as a party to legal proceedings with respect thereto) shall be entitled to take such additional steps as in its judgment may be necessary or proper to remove such encumbrance or cure such defect or for the defense of any such attack or legal proceedings or the protection of Landlord's fee interest in the Leased Property, including but not limited to the employment of counsel, the prosecution or defense of litigation, the compromise or discharge of any adverse claims made with respect to the Leased Property, the removal of prior liens or security interests, and all expenses (including Attorneys' Fees) so incurred of every kind and character shall be a demand obligation owing by Tenant. For purposes of this subparagraph 9.(t), Tenant shall be deemed to be acting promptly to remove any encumbrance or to cure any title defect, other than a Lien which Tenant has itself granted or authorized, so long as Tenant (or a title insurance company obligated to do so) is in good faith by appropriate proceedings contesting the validity and applicability of the encumbrance or defect, and pending such contest Tenant shall not be deemed in default under this subparagraph because of the encumbrance or defect; provided, with respect to a contest of any encumbrance or title defect which is the subject of subparagraphs 9.(o) or 9.(p), Tenant (or the applicable title insurance company) must satisfy the conditions and requirements for a permitted contest set forth in those subparagraphs, and with respect to a contest of any other encumbrance or title defect, Tenant (or the applicable title insurance company) must: (1) diligently prosecute the contest to completion in a manner reasonably satisfactory to Landlord; (2) immediately remove the encumbrance or cure the defect, as and to the extent reasonably required to preserve Landlord's indefeasible fee estate in the Leased Property and to prevent any significant adverse impact the encumbrance or defect may have on the value of the Leased Property, upon a final determination by a court of competent jurisdiction that the encumbrance or defect is valid and applicable to the Leased Property; and (3) in any event conclude the contest and remove the encumbrance or cure the defect and pay any claims asserted against Landlord or the Leased Property because of such encumbrance or defect, all prior to (i) any Designated Sale Date on which neither Tenant nor any Applicable Purchaser purchases the Leased Property pursuant to the Purchase Agreement for a price to Landlord (when taken together with any additional payments made by Tenant pursuant to Paragraph 2(a)(ii) of the Purchase Agreement, in the case of a purchase by an Applicable Purchaser) of not less than the Purchase Price, (ii) the date any criminal charges may be brought against Landlord or any of its directors, officers or employees because of such encumbrance or defect or (iii) the date any action may be taken against Landlord or any property owned by Landlord (including the Leased Property) by any governmental authority or any other Person who has or claims rights superior to Landlord because of the encumbrance or defect. (u) No Liens on the Leased Property. Tenant shall not, without the prior written consent of Landlord, create, place or permit to be created or placed, or through any act or failure to act, acquiesce in the placing of, or allow to remain, any Lien (except Permitted Encumbrances, the lien for property taxes or assessments assessed against the Leased Property which are not delinquent and any Lien Tenant is contesting as expressly permitted by and in accordance with subparagraph 9.(o) or subparagraph 9.(p)), against or covering the Leased Property or any part thereof (other than any Lien which is lawfully claimed through or under Landlord and which is not claimed by, through or under Tenant) regardless of whether the same are expressly or otherwise subordinate to this Lease or Landlord's interest in the Leased Property, and should any prohibited Lien exist or become attached hereafter in any manner to any part of the Leased Property without the prior written consent of Landlord, Tenant shall cause the same to be promptly discharged and released to the satisfaction of Landlord. (v) Books and Records. Tenant shall keep books and records that are accurate and complete in all material respects for the construction and maintenance of the Leased Property and will permit all such books and records (including without limitation all contracts, statements, invoices, bills and claims for labor, materials and services supplied for the construction and operation of any Improvements) to be inspected and copied by Landlord and its duly accredited representatives at all times during reasonable business hours; provided that so long as Tenant remains in possession of the Leased Property, Landlord or Landlord's representative will, before making any such inspection or copying any such documents, if then requested to do so by Tenant to maintain Tenant's security: (i) sign in at Tenant's security or information desk if Tenant has such a desk on the premises, (ii) wear a visitor's badge or other reasonable identification provided by Tenant when Landlord or Landlord's representative first arrives at the Leased Property, (iii) permit an employee of Tenant to observe such inspection or work, and (iv) comply with other similar reasonable nondiscriminatory security requirements of Tenant that do not, individually or in the aggregate, interfere with or delay inspections or copying by Landlord authorized by this subparagraph.. This subparagraph shall not be construed as requiring Tenant to regularly maintain separate books and records relating exclusively to the Leased Property; provided, however, that if requested by Landlord at any time when an Event of Default shall have occurred and be continuing, Tenant shall construct or abstract from its regularly maintained books and records information required by this subparagraph relating to the Leased Property. (w) Financial Statements; Required Notices; Certificates as to Default. Tenant shall deliver to Landlord and to each Participant of which Tenant has been notified: (i) as soon as available and in any event within one hundred twenty (120) days after the end of each fiscal year of Tenant, a consolidated balance sheet of Tenant and its consolidated Subsidiaries as of the end of such fiscal year and a consolidated income statement and statement of cash flows of Tenant and its consolidated Subsidiaries for such fiscal year, all in reasonable detail and all prepared in accordance with GAAP and accompanied by a report and opinion of accountants of national standing selected by Tenant, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any qualifications or exceptions as to the scope of the audit nor to any qualification or exception which Landlord determines, in Landlord's reasonable discretion, is unacceptable; provided that notwithstanding the foregoing, for so long as Tenant is a company subject to the periodic reporting requirements of Section 12 of the Securities Exchange Act of 1934, as amended, Tenant shall be deemed to have satisfied its obligations under this clause (i) so long as Tenant delivers to Landlord the same annual report and report and opinion of accountants that Tenant delivers to its shareholders; (ii) as soon as available and in any event within sixty (60) days after the end of each of the first three quarters of each fiscal year of Tenant, the consolidated balance sheet of Tenant and its consolidated Subsidiaries as of the end of such quarter and the consolidated income statement and the consolidated statement of cash flows of Tenant and its consolidated Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, all in reasonable detail and all prepared in accordance with GAAP and certified by a Responsible Financial Officer of Tenant (subject to year-end adjustments); provided that notwithstanding the foregoing, for so long as Tenant is a company subject to the periodic reporting requirements of Section 12 of the Securities Exchange Act of 1934, as amended, Tenant shall be deemed to have satisfied its obligations under this clause (ii) so long as Tenant delivers to Landlord the same quarterly reports, certified by a Responsible Financial Officer of Tenant (subject to year-end adjustments), that Tenant delivers to its shareholders; (iii) together with the financial statements furnished in accordance with subparagraph 9.(w)(ii) and 9.(w)(i), a certificate of a Responsible Financial Officer of Tenant in substantially the form attached hereto as Exhibit E: (i) certifying that to the knowledge of Tenant no Default or Event of Default under this Lease has occurred and is continuing or, if a Default or Event of Default has occurred and is continuing, a brief statement as to the nature thereof and the action which is proposed to be taken with respect thereto, (ii) certifying that the representations of Tenant set forth in Paragraph 9 of this Lease are true and correct in all material respects as of the date thereof as though made on and as of the date thereof or, if not then true and correct, a brief statement as to why such representations are no longer true and correct, and (iii) with computations demonstrating compliance with the financial covenants contained in subparagraph 9.(ac); (iv) promptly after any change in the rating of Tenant's senior, unsecured debt by Standard and Poor's Corporation or Moody's Investor Service, Inc. or in Tenant's Debt to Capital Ratio (as defined in subparagraph 1.(cn)), which will result in a change in the Spread (as defined in subparagraph 1.(cn)), a certificate of a Responsible Financial Officer of Tenant in substantially the form attached hereto as Exhibit F with computations evidencing Tenant's calculation of the Spread after giving effect to such changes; (v) promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports which Tenant sends to Tenant's stockholders, and copies of all regular, periodic and special reports, and all registration statements (other than registration statements on Form S-8 or any form substituted therefor) which Tenant files with the Securities and Exchange Commission or any governmental authority which may be substituted therefor, or with any national securities exchange; (vi) as soon as possible and in any event within five (5) Business Days after a Responsible Financial Officer of Tenant becomes aware of the occurrence of each Default or Event of Default with respect to the Affirmative Financial Covenants described in subparagraph 9.(ae) or the Negative Covenants described in subparagraph 9.(af), a statement of a Responsible Financial Officer of Tenant setting forth details of such Default or Event of Default and the action which Tenant has taken and proposes to take with respect thereto; (vii) upon request by Landlord, a statement in writing certifying that this Lease is unmodified and in full effect (or, if there have been modifications, that this Lease is in full effect as modified, and setting forth such modifications) and the dates to which the Base Rent has been paid and either stating that to the knowledge of Tenant no Default or Event of Default under this Lease has occurred and is continuing or, if a Default or Event of Default under this Lease has occurred and is continuing, a brief statement as to the nature thereof; it being intended that any such statement by Tenant may be relied upon by any prospective purchaser or mortgagee of the Leased Property and by any Participant; and (viii) such other information respecting the condition or operations, financial or otherwise, of Tenant, of any of its Subsidiaries or of the Leased Property as Landlord or any Participant through Landlord may from time to time reasonably request. Landlord is hereby authorized to deliver a copy of any information or certificate delivered to it pursuant to this subparagraph 9.(w) to any Participant and to any regulatory body having jurisdiction over Landlord that requires or requests it. (x) Further Assurances. Tenant shall, on request of Landlord, (i) promptly correct any defect, error or omission which may be discovered in the contents of this Lease or in any other instrument executed in connection herewith or in the execution or acknowledgment thereof; (ii) execute, acknowledge, deliver and record or file such further instruments and do such further acts as may be necessary, desirable or proper to carry out more effectively the purposes of this Lease and to subject to this Lease any property intended by the terms hereof to be covered hereby including specifically, but without limitation, any renewals, additions, substitutions, replacements or appurtenances to the Leased Property; (iii) execute, acknowledge, deliver, procure and record or file any document or instrument deemed advisable by Landlord to protect its rights in and to the Leased Property against the rights or interests of third persons; and (iv) provide such certificates, documents, reports, information, affidavits and other instruments and do such further acts as may be necessary, desirable or proper in the reasonable determination of Landlord to enable Landlord, Landlord's Parent and other Participants to comply with the requirements or requests of any agency or authority having jurisdiction over them. (y) Fees and Expenses; General Indemnification; Increased Costs; and Capital Adequacy Charges. (i) Except for any costs paid by Landlord with the proceeds of the advance described in subparagraph 1.(t) as part of the Closing Costs, Tenant shall pay (and shall indemnify and hold harmless Landlord, Landlord's Parent and any Person claiming through Landlord by reason of a Permitted Transfer from and against) all Losses incurred by Landlord or Landlord's Parent or any Person claiming through Landlord through a Permitted Transfer in connection with or because of (A) the ownership of any interest in or operation of the Leased Property, (B) the negotiation or administration of this Lease, the Purchase Documents, the Environmental Indemnity or the Participation Agreement, (C) the making of Funding Advances, including Attorneys' Fees or other costs incurred to evaluate lien releases and other information submitted by Tenant with requests for Construction Advances, (D) the construction of the Designated Improvements, whether such Losses are incurred at the time of execution of this Lease or at any time during the Term, or (E) Tenant's request for assistance in identifying any new Participant pursuant to Paragraph 18 of the Purchase Agreement, whether such Losses are incurred at the time of execution of this Lease or at any time during the Term. Costs and expenses included in such Losses may include, without limitation, all appraisal fees, filing and recording fees, inspection fees, survey fees, taxes (other than Excluded Taxes), brokerage fees and commissions, abstract fees, title policy fees, Uniform Commercial Code search fees, escrow fees, Attorneys' Fees and environmental consulting fees incurred by Landlord with respect to the Leased Property. If Landlord pays or reimburses Landlord's Parent for any such Losses, Tenant shall reimburse Landlord for the same notwithstanding that Landlord may have already received any payment from any other Participant on account of such Losses, it being understood that the other Participant may expect repayment from Landlord when Landlord does collect the required reimbursement from Tenant. (ii) Tenant shall also pay (and indemnify and hold harmless Landlord, Landlord's Parent and any Person claiming through Landlord by reason of a Permitted Transfer from and against) all Losses, including Attorneys' Fees, incurred or expended by Landlord or Landlord's Parent or any Person claiming through Landlord through a Permitted Transfer or in connection with (A) the breach by Tenant of any covenant of Tenant herein or in any other instrument executed in connection herewith or (B) Landlord's exercise in a lawful manner of any of Landlord's remedies hereunder or under Applicable Law or Landlord's protection of the Leased Property and Landlord's interest therein as permitted hereunder or under Applicable Law. (However, the indemnity in the preceding sentence shall not be construed to make Tenant liable to both Landlord and any Participant or other party claiming through Landlord for the same damages. For example, so long as Landlord remains entitled to recover any past due Base Rent from Tenant, no Participant shall be entitled to collect a percentage of the same Base Rent from Tenant.) Tenant shall further indemnify and hold harmless Landlord and all other Indemnified Parties against, and reimburse them for, all Losses which may be imposed upon, asserted against or incurred or paid by them by reason of, on account of or in connection with any bodily injury or death or damage to the property of third parties occurring in or upon or in the vicinity of the Leased Property through any cause whatsoever. THE FOREGOING INDEMNITY FOR INJURY, DEATH OR PROPERTY DAMAGE SHALL APPLY EVEN WHEN INJURY, DEATH OR PROPERTY DAMAGE IN, ON OR IN THE VICINITY OF THE LEASED PROPERTY RESULTS IN WHOLE OR IN PART FROM THE ORDINARY NEGLIGENCE (AS DEFINED ABOVE) OF AN INDEMNIFIED PARTY; provided, such indemnity shall not apply to Losses suffered by an Indemnified Party that were proximately caused by (and attributed by any applicable principles of comparative fault to) the Active Negligence, gross negligence or wilful misconduct of such Indemnified Party. (iii) If, after the date hereof, due to either (A) the introduction of or any change (other than any change by way of imposition or increase of reserve requirements included in the Eurodollar Rate Reserve Percentage) in or in the interpretation of any law or regulation or (B) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to Landlord's Parent or any other Participant of agreeing to make or making, funding or maintaining advances to Landlord in connection with the Leased Property, then Tenant shall from time to time, upon demand by Landlord pay to Landlord for the account of Landlord's Parent or such other Participant, as the case may be, additional amounts sufficient to compensate Landlord's Parent or the Participant for such increased cost. An increase in costs resulting from any imposition or increase of reserve requirements applicable to Collateral held from time to time by Landlord's Parent or other Participants pursuant to the Pledge Agreement would be an increase covered by the preceding sentence. A certificate as to the amount of any increased cost covered by this subparagraph, submitted to Landlord and Tenant by Landlord's Parent or the other Participant, shall be conclusive and binding for purposes of determining Tenant's obligations hereunder, absent clear and demonstrable error. (iv) Landlord's Parent or any other Participant may demand additional payments (herein called "Capital Adequacy Charges") if Landlord's Parent or the other Participant determines that any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects the amount of capital to be maintained by it and that the amount of such capital is increased by or based upon the existence of Funding Advances made or to be made to Landlord to permit Landlord to maintain Landlord's investment in the Leased Property or to make Construction Advances. To the extent that Landlord's Parent or the other Participant demands Capital Adequacy Charges as compensation for the additional capital requirements reasonably allocable to such advances, Tenant shall pay to Landlord for the account of Landlord's Parent or the other Participant, as the case may be, the amount so demanded. (v) Any amount to be paid to Landlord, Landlord's Parent or any other Indemnified Party under this subparagraph 9.(y) shall be a demand obligation owing by Tenant. Tenant's indemnities and obligations under this subparagraph 9.(y) shall survive the termination or expiration of this Lease with respect to any circumstance or event existing or occurring prior to such termination or expiration. (z) Liability Insurance. Tenant shall maintain one or more policies of commercial general liability insurance against claims for bodily injury or death and property damage occurring or resulting from any occurrence in or upon the Leased Property, in standard form and with an insurance company or companies rated by the A.M. Best Company of Oldwick, New Jersey as having a policyholder's rating of A or better and a reported financial information rating of X or better, such insurance to afford immediate protection, to the aggregate limit of not less than $10,000,000 combined single limit for bodily injury and property damage in respect of any one accident or occurrence, with not more than $1,000,000 (or such other amount as Landlord and Tenant may agree upon in writing from time to time) self-insured retention. Such commercial general liability insurance shall include blanket contractual liability coverage which insures contractual liability under the indemnifications set forth in this Lease (other than the indemnifications set forth in Paragraph 12 concerning environmental matters), but such coverage or the amount thereof shall in no way limit such indemnifications. The policy evidencing such insurance shall name as additional insureds Landlord and all Participants of which Tenant has been notified (including Landlord's Parent and the Participants). Tenant shall maintain with respect to each policy or agreement evidencing such commercial general liability insurance such endorsements as may be reasonably required by Landlord and shall at all times deliver and maintain with Landlord written confirmation (in form satisfactory to Landlord) with respect to such insurance from the applicable insurer or its authorized agent, which confirmation must provide that insurance coverage will not be canceled or reduced without at least ten (10) days notice to Landlord. Not less than five (5) days prior to the expiration date of each policy of insurance required of Tenant pursuant to this subparagraph, Tenant shall deliver to Landlord a certificate evidencing a paid renewal policy or policies. (aa) Permitted Encumbrances. Except to the extent expressly required of Landlord by subparagraph 10.(b), Tenant shall comply with and will cause to be performed all of the covenants, agreements and obligations imposed upon the owner of the Leased Property in the Permitted Encumbrances in accordance with their respective terms and provisions. Tenant shall not, without the prior written consent of Landlord, modify or permit any modification of any Permitted Encumbrance in any manner that could impose significant monetary obligations upon Landlord or any subsequent owner of the Leased Property, could significantly and adversely affect the value of the Leased Property, could impose any lien to secure payment or performance obligations against any part of the Leased Property or would otherwise be material and adverse to Landlord. (ab) Environmental. (i) Environmental Covenants. Tenant covenants: a) not to cause or permit the Leased Property to be in violation of, or do anything or permit anything to be done which will subject the Leased Property to any remedial obligations under, any Environmental Laws, including without limitation CERCLA and RCRA, assuming disclosure to the applicable governmental authorities of all relevant facts, conditions and circumstances pertaining to the Leased Property; b) not to conduct or authorize others to conduct Hazardous Substance Activities on the Leased Property, except Permitted Hazardous Substance Use; c) to the extent required by Environmental Laws, to remove Hazardous Substances from the Leased Property (or if removal is prohibited by law, to take whatever action is required by law) promptly upon discovery; and d) not to discharge or authorize the discharge of anything (including Permitted Hazardous Substances) from the Leased Property into groundwater or surface water that would require any permit under applicable Environmental Laws, other than storm water runoff. If Tenant's failure to cure any breach of the covenants listed above in this subparagraph (i) continues beyond the Environmental Cure Period (as defined below), Landlord may, in addition to any other remedies available to it, after notifying Tenant of the remediation efforts Landlord believes are needed, cause the Leased Property to be freed from all Hazardous Substances (or if removal is prohibited by law, to take whatever action is required by law), and the cost of the removal shall be a demand obligation owing by Tenant to Landlord. Further, subject to the provisions of subparagraph 12.(c) below, Tenant agrees to indemnify Landlord against all Losses incurred by or asserted or proven against Landlord in connection therewith. As used in this subparagraph, "Environmental Cure Period" means the period ending on the earlier of: (1) one hundred and eighty days (180) after Tenant is notified of the breach which must be cured within such period, or such longer period as is reasonably required for any cure that Tenant pursues with diligence pursuant to and in accordance with an Approved Plan (as defined below), (2) the date any writ or order is issued for the levy or sale of any property owned by Landlord (including the Leased Property) or any criminal action is instituted against Landlord or any of its directors, officers or employees because of the breach which must be cured within such period, (3) the end of the Term. As used in this subparagraph, an "Approved Plan" means a plan of remediation of a violation of Environmental Laws for which Tenant has obtained, within one hundred and eighty days (180) after Tenant is notified of the applicable breach of the covenants listed above in this subparagraph (i), the written approval of the governmental authority with primary jurisdiction over the violation and with respect to which no other governmental authority asserting jurisdiction has claimed such plan is inadequate. (ii) Environmental Inspections and Reviews. Landlord reserves the right to retain an independent professional consultant to review any report prepared by Tenant or to conduct Landlord's own investigation to confirm whether Hazardous Substances Activities or the discharge of anything into groundwater or surface water has occurred in violation of the preceding subparagraph (i), but Landlord's right to reimbursement for the fees of such consultant shall be limited to the following circumstances: (1) an Event of Default shall have occurred; (2) Landlord shall have retained the consultant to establish the condition of the Leased Property just prior to any conveyance thereof pursuant to the Purchase Agreement or just prior to the expiration of this Lease; (3) Landlord shall have retained the consultant to satisfy any regulatory requirements applicable to Landlord or its Affiliates; or (4) Landlord shall have retained the consultant because Landlord has been notified of a violation of Environmental Laws concerning the Leased Property or Landlord otherwise reasonably believes that Tenant has not complied with the preceding subparagraph (i). Tenant grants to Landlord and to Landlord's agents, employees, consultants and contractors the right during reasonable business hours and after reasonable notice to enter upon the Leased Property to inspect the Leased Property and to perform such tests as are reasonably necessary or appropriate to conduct a review or investigation of Hazardous Substances on, or any discharge into groundwater or surface water from, the Leased Property. Tenant shall promptly reimburse Landlord for the cost of any such inspections and tests, but only when the inspections and tests are (1) ordered by Landlord after an Event of Default; (2) ordered by Landlord to establish the condition of the Leased Property just prior to any conveyance thereof pursuant to the Purchase Agreement or just prior to the expiration of this Lease; (3) ordered by Landlord to satisfy any regulatory requirements applicable to Landlord or its Affiliates; or (4) ordered because Landlord has been notified of a violation of Environmental Laws concerning the Leased Property or Landlord otherwise reasonably believes that Tenant has not complied with the preceding subparagraph (i). (iii) Notice of Environmental Problems. Tenant shall immediately advise Landlord of (i) any discovery of any event or circumstance which would render any of the representations contained in subparagraph 9.(e) inaccurate in any material respect if made at the time of such discovery, (ii) any remedial action taken by Tenant in response to any (A) discovery of any Hazardous Substances other than Permitted Hazardous Substances on, under or about the Leased Property or (B) any claim for damages resulting from Hazardous Substance Activities, (iii) Tenant's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Leased Property which could cause the Leased Property or any part thereof to be subject to any ownership, occupancy, transferability or use restrictions under Environmental Laws, or (iv) any investigation or inquiry affecting the Leased Property by any governmental authority in connection with any Environmental Laws. In such event, Tenant shall deliver to Landlord within thirty (30) days after Landlord's request, a preliminary written environmental plan setting forth a general description of the action that Tenant proposes to take with respect thereto, if any, to bring the Leased Property into compliance with Environmental Laws or to correct any breach by Tenant of the covenants listed above in subparagraph (i), including, without limitation, any proposed corrective work, the estimated cost and time of completion, the name of the contractor and a copy of the construction contract, if any, and such additional data, instruments, documents, agreements or other materials or information as Landlord may reasonably request. (ac) Affirmative Financial Covenants. (i) Quick Ratio. Tenant shall maintain a ratio of (A) Quick Assets of Tenant and its Subsidiaries (determined on a consolidated basis) to (B) the sum of Current Liabilities of Tenant and its Subsidiaries (determined on a consolidated basis), of not less than 1.00 to 1.00. As used in this subparagraph 9.(ac), "Quick Assets" means the sum (without duplication of any item) of the Collateral held and pledged under the Pledge Agreement, plus unencumbered cash, plus unencumbered short term cash investments, plus other unencumbered marketable securities which are classified as short term investments according to GAAP, plus the fair market value of unencumbered Long-Term Investments, plus unencumbered current net accounts receivable. For purposes of determining Quick Assets, assets will be deemed to be "unencumbered" if they are actually unencumbered or if they are encumbered only by Liens, from which, at the time of the applicable determination of Quick Assets, Tenant is entitled to a release of such assets upon no more than ninety days' notice, without any payment (other than the payment of ministerial fees and costs), without subjecting other assets to any Lien and without otherwise satisfying any condition that is beyond Tenant's control. As used herein "Long-Term Investments" means those investments described below (to the extent that they are not classified as short term investments in accordance with GAAP), provided that such investments shall have maturities of not longer than two years, and shall be rated not less than A- by Standard & Poor's Corporation or less than A by Moody's Investors Service, Inc.: (1) Securities issued or fully guaranteed or fully insured by the United States government or any agency thereof and backed by the full faith and credit of the United States; (2) Certificates of deposit, time deposits, eurodollar time deposits, repurchase agreements, or banker's acceptances that are issued by either one of the 50 largest (in assets) banks in the United States or by one of the 100 largest (in assets) banks in the world; and (3) Notes and municipal bonds. As used in this subparagraph 9.(ac), "Current Liabilities" means, with respect to any Person, all liabilities of such Person treated as current liabilities in accordance with GAAP, including without limitation (a) all obligations payable on demand or within one year after the date in which the determination is made and (b) installment and sinking fund payments required to be made within one year after the date on which determination is made, but excluding all such liabilities or obligations which are renewable or extendable at the option of such Person to a date more than one year from the date of determination. (ii) Maximum Senior Debt to Capitalization. Throughout the Term Tenant shall maintain a ratio of Senior Debt to Capitalization of not more than 0.35 to 1.00. As used in this subparagraph 9.(ac): "Senior Debt" means the outstanding Debt of Tenant and its Subsidiaries (determined on a consolidated basis), minus the aggregate principal amount of the Subordinated Debt. "Capitalization" means the sum of the Debt of Tenant and its Subsidiaries (determined on a consolidated basis), including the aggregate principal amount of the Subordinated Debt, plus Consolidated Tangible Net Worth of Tenant and its Subsidiaries (determined on a consolidated basis). "Subordinated Debt" means the following unsecured Debt of Tenant: (i) unsecured Debt in respect of the $110,000,000 aggregate principal amount at maturity of 10 1/14% Convertible Subordinated Notes due 2001 issued pursuant to the Indenture (in this definition called the "Existing Subordinated Notes") but only so long as such unsecured Debt remains expressly and unconditionally subordinated to the payment and performance obligations of Tenant in transactions of the type and structure contemplated by this Lease and the Purchase Agreement; (ii) other unsecured Debt of Tenant which is expressly and unconditionally subordinated to the obligations of Tenant under this Lease and the Purchase Agreement on the same terms as the Existing Subordinated Notes or on other terms approved by the Majority, as defined in the Participation Agreement (such approval not to be unreasonably withheld), which together with the Existing Subordinated Notes, does not exceed at any time an aggregate amount equal to fifteen percent (15%) of Tenant's Consolidated Tangible Net Worth at such time; and (iii) other unsecured Debt of Tenant in an amount approved in writing by the Majority and which is expressly and unconditionally subordinated to the obligations of Tenant under this Lease and the Purchase Agreement on terms approved in writing by the Majority, in each case in its sole discretion. "Consolidated Tangible Net Worth" means, at any date of determination thereof, the excess determined in accordance with GAAP of consolidated total assets on such date over consolidated total liabilities on such date; provided, however, that Intangible Assets on such date shall be excluded from any determination of consolidated total assets on such date. "Intangible Assets" means, as of the date of any determination thereof, the total amount of all assets of Tenant and its consolidated Subsidiaries that are properly classified as "intangible assets" in accordance with GAAP and, in any event, shall include, without limitation, goodwill, patents, trade names, trademarks, copyrights, franchises, experimental expense, organization expense, unamortized debt discount and expense, and deferred charges other than prepaid insurance and prepaid taxes and current deferred taxes which are classified on the balance sheet of Tenant and its consolidated Subsidiaries as a current asset in accordance with GAAP and in which classification Tenant's independent public accountants concur. "Indenture" means the Indenture dated as of November 1, 1994 by and between Tenant and the First National Bank of Boston, as trustee. (iii) Minimum Tangible Net Worth. Tenant shall not permit its Consolidated Tangible Net Worth, on a consolidated basis, at the end of any fiscal quarter to be less than the sum of: (A) eighty percent (80%) of Consolidated Tangible Net Worth of Tenant as of May 31, 1997 (restated to give effect to Tenant's subsequent merger with U.S. Robotics, such that "Consolidated Tangible Net Worth" as used in this clause (A) reflects not only Tenant's May 31, 1997 Consolidated Tangible Net Worth as reported prior to the merger, but also the March 30, 1997 Consolidated Tangible Net Worth of U.S. Robotics reported prior to the merger); plus (B) fifty percent (50%) of Tenant's net income (but without deducting any net losses for any period) earned in each fiscal quarter, starting with the quarter ended August 31, 1997, and ending with the quarter which, at such time, is the most recently ended fiscal quarter; less (C) the amount of write-offs resulting from acquisitions after May 31, 1997, such amount not to exceed an aggregate, cumulative amount of $550,000,000. (iv) Fixed Charge Ratio. Throughout the Term Tenant shall maintain as of the last day of each fiscal quarter of Tenant a ratio of (A) Adjusted EBIT of Tenant and its Subsidiaries (determined on a consolidated basis) for the twelve (12) month period ending on such date, to (B) Fixed Charges of Tenant and its Subsidiaries (determined on a consolidated basis) for the twelve (12) month period ending on such date, of not less than 2.00 to 1.00. As used in this clause (iv), "Adjusted EBIT" means, for any accounting period, net income (or net loss), plus the amounts (if any) which, in the determination of net income (or net loss) for such period, have been deducted for (a) gross interest expense, (b) income tax expense (c) rent expense under leases of property (excluding rent expense payable under any "Minor Lease", which shall mean a lease under which rent is less than $1,000,000 per annum), (d) depreciation, and (e) non- recurring charges taken in connection with acquisitions, in each case determined in accordance with GAAP. As used in this clause (iv), "Fixed Charges" means, for any accounting period, the sum of (a) gross interest expense, plus (b) amortization of principal or debt discount in respect of all Debt during such period, plus (c) rent payable under all leases of property during such period (excluding rent payable under any Minor Lease), plus (d) taxes payable during such period. EX-10 10 (ad) Negative Covenants. Without the prior written consent of Landlord in each case, neither Tenant nor any of its Subsidiaries shall: (i) Liens. Create, incur, assume or suffer to exist any Lien, upon or with respect to any of its properties, now owned or hereafter acquired; provided, however, that the following shall be permitted except to the extent that they would encumber any interest in the Leased Property in violation of other provisions of this Lease or would encumber Collateral covered by the Pledge Agreement: a) Liens for taxes or assessments or other government charges or levies if not yet due and payable or if they are being contested in good faith by appropriate proceedings and for which appropriate reserves are maintained; b) Liens that secure obligations incurred in the ordinary course of business, that are not past due for more than thirty (30) days (or that are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established) and that: (1) are imposed by law, such as mechanic's, materialmen's, landlord's, warehousemen's and carrier's Liens, and other similar Liens; or (2) encumber only equipment or other tangible personal property and any proceeds thereof (including Liens created by equipment leases) and are imposed to secure the payment of the purchase price or other direct costs of acquiring the equipment or other tangible personal property they encumber; c) Liens under workmen's compensation, unemployment insurance, social security or similar legislation (other than ERISA); d) Liens, deposits or pledges to secure the performance of bids, tenders, contracts (other than contracts for the payment of money), leases, public or statutory obligations, surety, stay, appeal, indemnity, performance or other similar bonds, or other similar obligations arising in the ordinary course of business; e) judgment and other similar Liens arising in connection with court proceedings; provided that the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings; f) easements, rights-of-way, restrictions and other similar encumbrances which, in the aggregate, do not materially interfere with the occupation, use and enjoyment by Tenant or any such Subsidiary of the property or assets encumbered thereby in the normal course of its business or materially impair the value of the property subject thereto; g) Liens securing obligations of such a Subsidiary to Tenant or to another such Subsidiary; h) Liens incurred after the date of this Lease given to secure the payment of the purchase price or other direct costs incurred in connection with the acquisition, construction, improvement or rehabilitation of assets, including Liens existing on such assets at the time of acquisition thereof or at the time of acquisition by Tenant or a Subsidiary of any business entity (including a Subsidiary) then owning such assets, whether or not such existing Liens were given to secure the payment of the purchase price of the assets to which they attach, provided that (i) except in the case of Liens existing on assets at the time of acquisition of a Subsidiary then owning such assets, the Lien shall be created within six (6) months of the later of the acquisition of, or the completion of the construction or improvement in respect of, such assets and shall attach solely to such assets, and (ii) except in the case of Liens existing on assets at the time of acquisition of a Subsidiary then owning such assets, at the time such Liens are imposed, the aggregate amount remaining unpaid on all Debt secured by Liens on such assets whether or not assumed by Tenant or a Subsidiary shall not exceed an amount equal to seventy-five percent (75%) of the lesser of the total purchase price or fair market value, at the time such Debt is incurred, of such assets; i) existing mortgages and deeds of trust as of the date of this Lease; j) Liens created by any real property lease (including this Lease), or related documents (including the Purchase Agreement and other separate purchase agreements), that require Tenant or its Subsidiaries to purchase or cause another to purchase any interest in the property covered thereby and thus guarantee a minimum residual value of the property to the landlord; provided, that the value of all such leases (including this Lease) shall not exceed an aggregate, cumulative amount of $700,000,000 (for purposes of this Section (ad)(i), the "value" of a lease means the amount, determined as of the date the lease became effective, equal to the greater of (1) the present value of rentals and other minimum lease payments required in connection with such lease [calculated in accordance with FASB Statement 13 and other GAAP relevant to the determination of the whether such lease must be accounted for as capital leases, and calculated under the assumption that any allowance for construction to be provided by the landlord will be fully funded] or (2) the fair value of the property covered thereby); k) Liens imposed to secure Debt incurred to finance the acquisition of property which has been leased or sold by Tenant or one of its Subsidiaries to another Person (other than Tenant or a Subsidiary of Tenant) pursuant to a lease or sales agreement providing for payments sufficient to pay such Debt in full, provided such Debt is not a general obligation of Tenant or its Subsidiaries, but rather is payable only from the rentals or other sums payable under the lease or sales agreement or from the property sold or leased thereunder; l) Liens not otherwise permitted by this subparagraph 9.(ad)(i) (and not encumbering the Leased Property or any Collateral) which secure the payment of Debt, provided that (i) at no time does the sum of the aggregate amount of all outstanding Debt secured by such Liens exceed $50,000,000, and (i) such Liens do not constitute Liens against Tenant's interest in any material Subsidiary or blanket Liens against all or substantially all of the inventory, receivables, general intangibles or equipment of Tenant or of any material Subsidiary of Tenant (for purposes of this clause, a "material Subsidiary" means any subsidiary whose assets represent a substantial part of the total assets of Tenant and its Subsidiaries, determined on a consolidated basis in accordance with GAAP); and m) Liens incurred in connection with any renewals, extensions or refundings of any Debt secured by Liens described in the other clauses of this subparagraph 9.(ad)(i), provided that there is no increase in the aggregate principal amount of Debt secured thereby from that which was outstanding as of the date of such renewal, extension or refunding and no additional property is encumbered. (ii) Transactions with Affiliates. Enter into any transactions that individually or in the aggregate are material to Tenant (including, without limitation, the purchase, sale or exchange of property or the rendering of any service) with any Affiliates, except upon fair and reasonable terms no less favorable to Tenant than would be obtained in a comparable arm's length transaction with a Person not an Affiliate. (iii) Mergers; Sales of Assets. a) Except to the extent permitted by the last sentence of this subparagraph 9.(ad), liquidate or dissolve, or merge, consolidate with or into, or convey, transfer, lease, or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired), to any Person, or enter into any joint venture, partnership or other combination which involves the investment, sale, lease, loan, or other disposition of the business or all of the assets of Tenant and its Subsidiaries or so much thereof as, in the reasonable opinion of Landlord, constitutes a substantial portion of such business or assets. b) Except to the extent permitted by the last sentence of this subparagraph 9.(ad), acquire the assets or business of any Person, other than in the ordinary course of Tenant's business as presently conducted. (iv) Sale of Receivables. Sell for less than the full face value of, or otherwise sell for consideration other than cash, any of its notes or accounts receivable. However, this subparagraph (iv) shall not prohibit: a) a sale of receivables for cash at a discount which is less than fifteen percent (15%) of the face value of all receivables then outstanding on the books of Tenant and its consolidated Subsidiaries, if such sale and all other discounted sales of receivables permitted by this clause a) during the same fiscal year of Tenant do not affect more than fifteen percent (15%) of the individual accounts (excluding intercompany accounts) comprising the receivables of Tenant and its Subsidiaries; b) any license or sale of products or services in the ordinary course of business where payment for such transactions is made by credit card, provided that the fees and discounts incurred by the Tenant or the Subsidiary in connection therewith shall not exceed the normal and customary fees and discounts incurred for general credit card transactions through major credit card issuers; or c) the delivery and endorsement to banks in the ordinary course of business by Tenant or any of its Subsidiaries of promissory notes received in payment of trade receivables, where delivery and endorsement are made prior to the date of maturity of such promissory notes, and the retention by such banks of normal and customary fees and discounts therefor, provided such practice is usual and customary in the country where such activity occurs. (v) Change of Business. Permit any significant change in the nature of the business of Tenant and its Subsidiaries, taken as whole, from that presently conducted. Notwithstanding any contrary provisions of subparagraph 9.(ad)(iii), Tenant may engage in any of the following transactions, provided that immediately prior to and immediately after giving effect thereto, no Default or Event of Default exists or would exist: (i) merge with another entity if Tenant is the corporation surviving the merger; (ii) enter into joint ventures; (iii) acquire the assets or business of another Person; or (iv) liquidate or dissolve Subsidiaries to the extent that such liquidations and dissolutions would not, in the aggregate, result in a material adverse effect on the properties, assets, operations or businesses of Tenant and its Subsidiaries, taken as a whole. (ae) ERISA. (i) Each Plan is in compliance in all material respects with, and has been administered in all material respects in compliance with, the applicable provisions of ERISA, the Code and any other applicable Federal or state law, and as of the date hereof no event or condition is occurring or exists which would require a notice from Tenant under clause 9.(ae)(ii). (ii) Tenant shall provide a notice to Landlord as soon as possible after, and in any event within ten (10) days after Tenant becomes aware that, any of the following has occurred, with respect to which the potential aggregate liability to Tenant relating thereto is $2,000,000 or more, and such notice shall include a statement signed by a senior financial officer of Tenant setting forth details of the following and the response, if any, which Tenant or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to Pension Benefit Guaranty Corporation by Tenant or an ERISA Affiliate with respect to any of the following or the events or conditions leading up it): (A) the assertion, to secure any Unfunded Benefit Liabilities, of any Lien against the assets of Tenant, against the assets of any Plan of Tenant or any ERISA Affiliate of Tenant or against any interest of Landlord or Tenant in the Leased Property or the Collateral covered by the Pledge Agreement, or (B) the taking of any action by the Pension Benefit Guaranty Corporation or any other governmental authority action against Tenant to terminate any Plan of Tenant or any ERISA Affiliate of Tenant or to cause the appointment of a trustee or receiver to administer any such Plan. 10. Representations, Warranties and Covenants of Landlord. Landlord represents, warrants and covenants as follows: (a) Title Claims By, Through or Under Landlord. Except by a Permitted Transfer, Landlord shall not assign, transfer, mortgage, pledge, encumber or hypothecate this Lease or any interest of Landlord in and to the Leased Property during the Term without the prior written consent of Tenant. Landlord further agrees that if any encumbrance or title defect affecting the Leased Property is lawfully claimed through or under Landlord, including any judgment lien lawfully filed against Landlord, Landlord will at its own cost and expense remove any such encumbrance and cure any such defect; provided, however, Landlord shall not be responsible for (i) any Permitted Encumbrances (regardless of whether claimed through or under Landlord) or any other encumbrances not lawfully claimed through or under Landlord, (ii) any encumbrances or title defects claimed by, through or under Tenant, an Approved Participant, or any other Participant (other than Landlord's Parent) which Tenant shall have approved, or (iii) any encumbrance or title defect arising because of Landlord's compliance with subparagraph 10.(b) or any request made by Tenant. (b) Actions Required of the Title Holder. So long as no Event of Default shall have occurred and be continuing, Landlord shall take any and all action required of Landlord by the Permitted Encumbrances or otherwise required of Landlord by Applicable Laws or reasonably requested by Tenant (including granting any utility easements required in connection with construction of Improvements); provided that (i) actions Tenant may require of Landlord under this subparagraph shall be limited to actions that can only be taken by Landlord as the owner of the Leased Property, as opposed to any action that can be taken by Tenant or any third party (and the payment of any monetary obligation shall not be an action required of Landlord under this subparagraph unless Landlord shall first have received funds from Tenant, in excess of any other amounts due from Tenant hereunder, sufficient to pay such monetary obligations), (ii) Tenant requests the action to be taken by Landlord (which request must be specific and in writing, if required by Landlord at the time the request is made) and (iii) the action to be taken will not constitute a violation of any Applicable Laws or compromise or constitute a waiver of Landlord's rights hereunder or under the Purchase Documents, or Environmental Indemnity or otherwise be reasonably objectionable to Landlord. Any Losses incurred by Landlord because of any action taken pursuant to this subparagraph shall be covered by the indemnification set forth in subparagraph 9.(y). Further, for purposes of such indemnification, any action taken by Landlord will be deemed to have been made at the request of Tenant if made pursuant to any request of Tenant's counsel or of any officer of Tenant (or with their knowledge, and without their objection) in connection with the closing under the Existing Contract or the execution, administration or enforcement of any Construction Document. (c) No Default or Violation. The execution, delivery and performance of this Lease do not contravene, result in a breach of or constitute a default under any material contract or agreement to which Landlord is a party or by which Landlord is bound and do not, to the knowledge of Landlord, violate or contravene any law, order, decree, rule or regulation to which Landlord is subject. (d) No Suits. To Landlord's knowledge there are no judicial or administrative actions, suits or proceedings involving the validity, enforceability or priority of this Lease, and to Landlord's knowledge no such suits or proceedings are threatened. (e) Organization. Landlord is duly incorporated and legally existing under the laws of Delaware and is or, if necessary, will become duly qualified to do business in the States of California and Illinois. Landlord has or will obtain, at Tenant's expense pursuant to the other provisions of this Lease, all requisite power and all material governmental certificates of authority, licenses, permits, qualifications and other documentation necessary to own and lease the Leased Property and to perform its obligations under this Lease. (f) Enforceability. The execution, delivery and performance of this Lease and the Purchase Documents by Landlord are duly authorized, are not in contravention of or conflict with any term or provision of Landlord's articles of incorporation or bylaws and do not, to Landlord's knowledge, require the consent or approval of any governmental body or other regulatory authority that has not heretofore been obtained or conflict with any Applicable Laws. This Lease and the Purchase Documents are valid, binding and legally enforceable obligations of Landlord except as such enforcement is affected by bankruptcy, insolvency and similar laws affecting the rights of creditors, generally, and equitable principles of general application; provided, Landlord makes no representation or warranty that conditions imposed by any state or local Applicable Laws to the purchase, ownership, lease or operation of the Leased Property have been satisfied. (g) Existence. Landlord will continuously maintain its existence and, after qualifying to do business in the States of California and Illinois if Landlord has not already done so, Landlord will continuously maintain its right to do business in those states to the extent necessary for the performance of Landlord's obligations hereunder. (h) Not a Foreign Person. Landlord is not a "foreign person" within the meaning of the Sections 1445 and 7701 of the Code (i.e., Landlord is not a non-resident alien, foreign corporation, foreign partnership, foreign trust or foreign estate as those terms are defined in the Code and regulations promulgated thereunder). 11. Assignment and Subletting. (a) Consent Required. During the term of this Lease, without the prior written consent of Landlord first had and received, Tenant shall not assign, transfer, mortgage, pledge or hypothecate this Lease or any interest of Tenant hereunder and shall not sublet all or any part of the Leased Property, by operation of law or otherwise; provided, that, so long as no Event of Default has occurred and is continuing, Tenant shall be entitled without the consent of Landlord to sublet all or any portion of the space in any then completed Improvements if: (i) any sublease by Tenant is made expressly subject and subordinate to the terms hereof; (ii) no sublease has a term longer than the remainder of the then effective term of this Lease; (iii) the use permitted by such sublease is expressly limited to general office use or other uses approved in advance by Landlord as uses that will not present extraordinary risks of uninsured environmental or other liability; and (iv) no more than forty-five percent (45%) of the total space of completed Improvements shall be subleased without Landlord's prior consent to any Person that is neither (A) an Affiliate of Tenant nor (B) the operator of a business in the subleased space that is related to the operation of Tenant's own business (such as another venturer in a joint venture with Tenant). (b) Standard for Landlord's Consent to Assignments and Certain Other Matters. Consents and approvals of Landlord which are required by this Paragraph 11 will not be unreasonably withheld, but Tenant acknowledges that Landlord's withholding of such consent or approval shall be reasonable if Landlord determines in good faith that (1) giving the approval may increase Landlord's risk of liability for any existing or future environmental problem, (2) giving the approval is likely to substantially increase Landlord's administrative burden of complying with or monitoring Tenant's compliance with the requirements of this Lease, or (3) any transaction for which Tenant has requested the consent or approval would negate Tenant's representations in this Lease regarding ERISA or cause this Lease or the other documents referenced herein to constitute a violation of any provision of ERISA. (c) Consent Not a Waiver. No consent by Landlord to a sale, assignment, transfer, mortgage, pledge or hypothecation of this Lease or Tenant's interest hereunder, and no assignment or subletting of the Leased Property or any part thereof in accordance with this Lease or otherwise with Landlord's consent, shall release Tenant from liability hereunder; and any such consent shall apply only to the specific transaction thereby authorized and shall not relieve Tenant from any requirement of obtaining the prior written consent of Landlord to any further sale, assignment, transfer, mortgage, pledge or hypothecation of this Lease or any interest of Tenant hereunder. (d) Landlord's Assignment. Landlord shall have the right to transfer, assign and convey, in whole or in part, the Leased Property and any and all of its rights under this Lease by any conveyance that constitutes a Permitted Transfer. (However, any Permitted Transfer shall be subject to all of the provisions of each and every agreement concerning the Leased Property then existing between Landlord and Tenant, including without limitation this Lease and the Purchase Agreement.) If Landlord sells or otherwise transfers the Leased Property and assigns its rights under this Lease and the Purchase Documents pursuant to a Permitted Transfer, then to the extent Landlord's successor in interest confirms its liability for the obligations imposed upon Landlord by this Lease and the Purchase Documents on and subject to the express terms and conditions set out herein and therein, the original Landlord shall thereby be released from any obligations thereafter arising under this Lease and the Purchase Documents, and Tenant will look solely to each successor in interest of Landlord for performance of such obligations. However, notwithstanding anything to the contrary herein contained, if withholding taxes are imposed on the rents and other amounts payable to Landlord hereunder because of Landlord's assignment of this Lease to any citizen of, or any corporation or other entity formed under the laws of, a country other than the United States, Tenant shall not be required to compensate such assignee for the withholding tax. Further, during the Term and so long as no Event of Default has occurred and is continuing, Landlord shall not decrease the aggregate of its and Landlord's Parent's Percentages under and as defined in the Participation Agreement below the minimum percentage require by paragraph 14.2 of the Participation Agreement. 12. Environmental Indemnification. (a) Indemnity. Tenant hereby agrees to assume liability for and to pay, indemnify, defend, and hold harmless each and every Indemnified Party from and against any and all Environmental Losses, subject only to the provisions of subparagraph 12.(c) below. (b) Assumption of Defense. (i) If an Indemnified Party notifies Tenant of any claim, demand, action, administrative or legal proceeding, investigation or allegation as to which the indemnity provided for in this Paragraph 12 applies, Tenant shall assume on behalf of the Indemnified Party and conduct with due diligence and in good faith the investigation and defense thereof and the response thereto with counsel selected by Tenant but reasonably satisfactory to the Indemnified Party; provided, that the Indemnified Party shall have the right to be represented by advisory counsel of its own selection and at its own expense; and provided further, that if any such claim, demand, action, proceeding, investigation or allegation involves both Tenant and the Indemnified Party and the Indemnified Party shall have been advised in writing by counsel that there may be legal defenses available to it which are inconsistent with those available to Tenant, then the Indemnified Party shall have the right to select separate counsel to participate in the investigation and defense of and response to such claim, demand, action, proceeding, investigation or allegation on its own behalf, and Tenant shall pay or reimburse the Indemnified Party for all Attorney's Fees incurred by the Indemnified Party because of the selection of such separate counsel. (ii) If any claim, demand, action, proceeding, investigation or allegation arises as to which the indemnity provided for in this Paragraph 12 applies, and Tenant fails to assume promptly (and in any event within fifteen (15) days after being notified of the claim, demand, action, proceeding, investigation or allegation) the defense of the Indemnified Party, then the Indemnified Party may contest (or settle, with the prior written consent of Tenant, which consent will not be unreasonably withheld) the claim, demand, action, proceeding, investigation or allegation at Tenant's expense using counsel selected by the Indemnified Party; provided, that if any such failure by Tenant continues for thirty (30) days or more after Tenant is notified thereof, no such contest need be made by the Indemnified Party and settlement or full payment of any claim may be made by the Indemnified Party without Tenant's consent and without releasing Tenant from any obligations to the Indemnified Party under this Paragraph 12 so long as, in the written opinion of reputable counsel to the Indemnified Party, the settlement or payment in full is clearly advisable. (c) Notice of Environmental Losses. If an Indemnified Party receives a written notice of Environmental Losses that such Indemnified Party believes are covered by this Paragraph 12, then such Indemnified Party will be expected to promptly furnish a copy of such notice to Tenant. The failure to so provide a copy of the notice to Tenant shall not excuse Tenant from its obligations under this Paragraph 12; provided, that if Tenant is unaware of the matters described in the notice and such failure renders unavailable defenses that Tenant might otherwise assert, or precludes actions that Tenant might otherwise take, to minimize its obligations hereunder, then Tenant shall be excused from its obligation to indemnify such Indemnified Party (and any Affiliate of such Indemnified Party) against Environmental Losses, if any, which would not have been incurred but for such failure. For example, if Landlord fails to provide Tenant with a copy of a notice of an obligation covered by the indemnity set out in subparagraph 12.(a) and Tenant is not otherwise already aware of such obligation, and if as a result of such failure Landlord becomes liable for penalties and interest covered by the indemnity in excess of the penalties and interest that would have accrued if Tenant had been promptly provided with a copy of the notice, then Tenant will be excused from any obligation to Landlord (or any Affiliate of Landlord) to pay the excess. (d) Rights Cumulative. The rights of each Indemnified Party under this Paragraph 12 shall be in addition to any other rights and remedies of such Indemnified Party against Tenant under the other provisions of this Lease or under any other document or instrument now or hereafter executed by Tenant, or at law or in equity (including, without limitation, any right of reimbursement or contribution pursuant to CERCLA). (e) Survival of the Indemnity. Tenant's obligations under this Paragraph 12 shall survive the termination or expiration of this Lease. All obligations of Tenant under this Paragraph 12 shall be payable upon demand, and any amount due upon demand to any Indemnified Party by Tenant which is not paid shall bear interest from the date of such demand at a floating interest rate equal to the Default Rate, but in no event in excess of the maximum rate permitted by law. 13. Landlord's Right of Access. (a) Landlord and Landlord's representatives may enter the Leased Property, after five (5) Business Days advance written notice to Tenant (except in the event of an emergency, when no advance notice will be required), for the purpose of making inspections or performing any work Landlord is authorized to undertake by the next subparagraph. So long as Tenant remains in possession of the Leased Property, Landlord or Landlord's representative will, before making any such inspection or performing any such work on the Leased Property, if then requested to do so by Tenant to maintain Tenant's security: (i) sign in at Tenant's security or information desk if Tenant has such a desk on the premises, (ii) wear a visitor's badge or other reasonable identification provided by Tenant when Landlord or Landlord's representative first arrives at the Leased Property, (iii) permit an employee of Tenant to observe such inspection or work, and (iv) comply with other similar reasonable nondiscriminatory security requirements of Tenant that do not, individually or in the aggregate, interfere with or delay inspections or work of Landlord authorized by this Lease. (b) If Tenant fails to perform any act or to take any action which hereunder Tenant is required to perform or take, or to pay any money which hereunder Tenant is required to pay, and if such failure or action constitutes an Event of Default or renders Landlord or any director, officer, employee or Affiliate of Landlord at risk of criminal prosecution or renders Landlord's interest in the Leased Property or any part thereof at risk of forfeiture by forced sale or otherwise, then in addition to any other remedies specified herein or otherwise available, Landlord may, in Tenant's name or in Landlord's own name, perform or cause to be performed such act or take such action or pay such money. Any expenses so incurred by Landlord, and any money so paid by Landlord, shall be a demand obligation owing by Tenant to Landlord. Further, Landlord, upon making such payment, shall be subrogated to all of the rights of the person, corporation or body politic receiving such payment. But nothing herein shall imply any duty upon the part of Landlord to do any work which under any provision of this Lease Tenant may be required to perform, and the performance thereof by Landlord shall not constitute a waiver of Tenant's default. Landlord may during the progress of any such work permitted by Landlord hereunder on or in the Leased Property keep and store upon the Leased Property all necessary materials, tools, and equipment. Landlord shall not in any event be liable for inconvenience, annoyance, disturbance, loss of business, or other damage to Tenant or the subtenants of Tenant by reason of making such repairs or the performance of any such work on or in the Leased Property, or on account of bringing materials, supplies and equipment into or through the Leased Property during the course of such work (except for liability in connection with death or injury or damage to the property of third parties caused by the Active Negligence, gross negligence or wilful misconduct of Landlord or its officers, employees, or agents in connection therewith), and the obligations of Tenant under this Lease shall not thereby be affected in any manner. 14. Events of Default. (a) Definition of Event of Default. Each of the following events shall be deemed to be an "Event of Default" by Tenant under this Lease: (i) Tenant shall fail to pay when due any installment of Rent due hereunder and such failure shall continue for three (3) Business Days after Tenant is notified thereof. (ii) Tenant shall fail to cause any representation or warranty of Tenant contained herein that is false or misleading in any material respect when made to be made true and not misleading (other than as described in the other clauses of this subparagraph 14.(a)), or Tenant shall fail to comply with any term, provision or covenant of this Lease (other than as described in the other clauses of this subparagraph 14.(a)), and in either case shall not cure such failure prior to the earlier of (A) thirty (30) days after written notice thereof is sent to Tenant or (B) the date any writ or order is issued for the levy or sale of any property owned by Landlord (including the Leased Property) or any criminal action is instituted against Landlord or any of its directors, officers or employees because of such failure; provided, however, that so long as no such writ or order is issued and no such criminal action is instituted, if such failure is susceptible of cure but cannot with reasonable diligence be cured within such thirty day period, and if Tenant shall promptly have commenced to cure the same and shall thereafter prosecute the curing thereof with reasonable diligence, the period within which such failure may be cured shall be extended for such further period (not to exceed an additional sixty (60) days) as shall be necessary for the curing thereof with reasonable diligence. (iii) Tenant shall fail to comply with any term, provision or condition of the Purchase Documents and, if any Purchase Document expressly provides a time within which Tenant may cure such failure, Tenant shall not cure the failure within such time. (iv) Tenant shall abandon the Leased Property. (v) Tenant shall fail to make any payment or payments of principal, premium or interest, on any Debt of Tenant described in the next sentence when due (taking into consideration the time Tenant may have to cure such failure, if any, under the documents governing such Debt). As used in this clause 14.(a)(v), "Debt" shall mean only a Debt of Tenant now existing or arising in the future, (A) payable to Landlord or any Participant or any Affiliate of Landlord or any Participant, the outstanding balance of which has become due by reason of acceleration or maturity, or (B) payable to any Person, with respect to which $20,000,000 or more is actually due and payable because of acceleration or otherwise. (vi) Tenant or any of its Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against Tenant or any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of thirty (30) consecutive days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or Tenant or any of its Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this clause (vi). (vii) Any order, judgment or decree is entered in any proceedings against Tenant or any Subsidiary decreeing the dissolution of Tenant or such Subsidiary and such order, judgment or decree remains unstayed and in effect for more than sixty (60) days. (viii) Any order, judgment or decree is entered in any proceedings against Tenant or any Subsidiary decreeing a split-up of Tenant or such Subsidiary which requires the divestiture of assets representing a substantial part, or the divestiture of the stock of a Subsidiary whose assets represent a substantial part, of the consolidated assets of Tenant and its Subsidiaries (determined in accordance with GAAP) or which requires the divestiture of assets, or stock of a Subsidiary, which shall have contributed a substantial part of the consolidated net income of Tenant and its Subsidiaries (determined in accordance with GAAP) for any of the three fiscal years then most recently ended, and such order, judgment or decree remains unstayed and in effect for more than sixty (60) days. (ix) One or more non-interlocutory judgments, non- interlocutory orders, decrees, or arbitration awards is entered against Tenant or any of its Subsidiaries involving in the aggregate a liability (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage) as to any single or related series of transactions, incidents, or conditions, of $20,000,000 or more, and the same shall remain unvacated and unstayed pending appeal for a period of ten days after the entry thereof; (x) Any ERISA Termination Event that Landlord determines might constitute grounds for the termination of any Plan or for the appointment by the appropriate United States district court of a trustee to administer any Plan shall have occurred and be continuing thirty (30) days after written notice to such effect shall have been given to Tenant by Landlord, or any Plan shall be terminated, or a trustee shall be appointed by an appropriate United States district court to administer any Plan, or the Pension Benefit Guaranty Corporation shall institute proceedings to terminate any Plan or to appoint a trustee to administer any Plan. (xi) A Change of Control Event not approved in advance by Landlord shall occur. (xii) The subordination provisions of the Indenture (as defined in subparagraph 9.(ac)(ii) of this Lease) or any other agreement or instrument governing the Subordinated Debt (as defined in subparagraph 9.(ac)(ii) of this Lease) shall be for any reason revoked or invalidated, or otherwise cease to be in full force and effect; or the Tenant or any of its Subsidiaries shall contest in any manner the validity or enforceability of such subordination provisions or shall deny that it has any further liability or obligation thereunder; or the obligations of Tenant hereunder or under the Purchase Documents shall be for any reason subordinated to such Subordinated Debt or shall not have the priority over such Subordinated Debt as contemplated by this Lease or by the Indenture or by such subordination provisions. Notwithstanding the foregoing, any Default that could become an Event of Default under clause 14.(a)(ii) may be cured within the earlier of the periods described in clauses (A) and (B) thereof by Tenant's delivery to Landlord of a written notice irrevocably exercising Tenant's option under the Purchase Agreement to purchase Landlord's interest in the Leased Property and designating as the Designated Sale Date the next following date which is an Advance Date or Base Rent Date and which is at least ten (10) days after the date of such notice; provided, however, Tenant must, as a condition to the effectiveness of its cure, on the date so designated as the Designated Sale Date tender to Landlord the full purchase price required by the Purchase Agreement and all Rent and all other amounts then due or accrued and unpaid hereunder (including reimbursement for any costs incurred by Landlord in connection with the applicable Default hereunder, regardless of whether Landlord shall have been reimbursed for such costs in whole or in part by any Participants) and Tenant must also furnish written confirmation that all indemnities set forth herein (including specifically, but without limitation, the general indemnity set forth in subparagraph 9.(y) and the environmental indemnity set forth in Paragraph 12 shall survive the payment of such amounts by Tenant to Landlord and the conveyance of Landlord's interest in the Leased Property to Tenant. (b) Remedies. Upon the occurrence of an Event of Default which is not cured within any applicable period expressly permitted by subparagraph 14.(a), at Landlord's option and without limiting Landlord in the exercise of any other right or remedy Landlord may have on account of such default, and without any further demand or notice except as expressly described in this subparagraph 14.(b): (i) By notice to Tenant, Landlord may terminate Tenant's right to possession of the Leased Property. A notice given in connection with unlawful detainer proceedings specifying a time within which to cure a default shall terminate Tenant's right to possession if Tenant fails to cure the default within the time specified in the notice. (ii) Upon termination of Tenant's right to possession and without further demand or notice, Landlord may re-enter the Leased Property and take possession of all improvements, additions, alterations, equipment and fixtures thereon and remove any persons in possession thereof. Any property in the Leased Property may be removed and stored in a warehouse or elsewhere at the expense and risk of and for the account of Tenant. (iii) Upon termination of Tenant's right to possession, this Lease shall terminate and Landlord may recover from Tenant: a) The worth at the time of award of the unpaid Rent which had been earned at the time of termination; b) The worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; c) The worth at the time of award of the amount by which the unpaid Rent for the balance of the scheduled Term after the time of award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; and d) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform Tenant's obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including, but not limited to, the costs and expenses (including Attorneys' Fees, advertising costs and brokers' commissions) of recovering possession of the Leased Property, removing persons or property therefrom, placing the Leased Property in good order, condition, and repair, preparing and altering the Leased Property for reletting, all other costs and expenses of reletting, and any loss incurred by Landlord as a result of Tenant's failure to perform Tenant's obligations under the Purchase Agreement. The "worth at the time of award" of the amounts referred to in subparagraph 14.(b)(iii)a) and subparagraph 14.(b)(iii)b) shall be computed by allowing interest at ten percent (10%) per annum or such other rate as may be the maximum interest rate then permitted to be charged under Illinois law at the time of computation. The "worth at the time of award" of the amount referred to in subparagraph 14.(b)(iii)c) shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). e) Such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable Illinois law. (iv) Even if Tenant breaches this Lease and abandons the Leased Property, this Lease shall continue in effect for so long as Landlord does not terminate Tenant's right to possession, and Landlord may enforce all of Landlord's rights and remedies under this Lease, including the right to recover the Rent as it becomes due under this Lease. Tenant's right to possession shall not be deemed to have been terminated by Landlord except pursuant to subparagraph 14.(b)(i) hereof. The following shall not constitute a termination of Tenant's right to possession: a) Acts of maintenance or preservation or efforts to relet the Leased Property; b) The appointment of a receiver upon the initiative of Landlord to protect Landlord's interest under this Lease; or c) Reasonable withholding of consent to an assignment or subletting, or terminating a subletting or assignment by Tenant. (v) No re-entry or reletting of the Leased Property or any filing or service of an unlawful detainer action or similar action will be construed as an election by Landlord to terminate or accept a forfeiture of this Lease or to accept a surrender of the Leased Property after an Event of Default by Tenant, unless a written notice of such intention is given by Landlord to Tenant; but notwithstanding any such action without such notice, Landlord may at any time thereafter elect to terminate this Lease by notifying Tenant. (c) Enforceability. This Paragraph shall be enforceable to the maximum extent not prohibited by Applicable Law, and the unenforceability of any provision in this Paragraph shall not render any other provision unenforceable. (d) Remedies Cumulative. No right or remedy herein conferred upon or reserved to Landlord is intended to be exclusive of any other right or remedy, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing under Applicable Law or in equity. In addition to other remedies provided in this Lease, Landlord shall be entitled, to the extent permitted by Applicable Law, to injunctive relief in case of the violation, or attempted or threatened violation, of any of the covenants, agreements, conditions or provisions of this Lease to be performed by Tenant, or to a decree compelling performance of any of the other covenants, agreements, conditions or provisions of this Lease to be performed by Tenant, or to any other remedy allowed to Landlord under Applicable Law or in equity. Nothing contained in this Lease shall limit or prejudice the right of Landlord to prove for and obtain in proceedings for bankruptcy or insolvency of Tenant by reason of the termination of this Lease, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, the damages are to be proved, whether or not the amount be greater, equal to, or less than the amount of the loss or damages referred to above. Without limiting the generality of the foregoing, nothing contained herein shall modify, limit or impair any of the rights and remedies of Landlord under the Purchase Documents or the Environmental Indemnity. (e) Waiver by Tenant. To the extent permitted by law, Tenant hereby waives and surrenders for itself and all claiming by, through and under it, including creditors of all kinds, (i) any right and privilege which it or any of them may have under any present or future constitution, statute or rule of law to have a continuance of this Lease for the term hereby demised after termination of Tenant's right of occupancy by order or judgment of any court or by any legal process or writ, or under the terms of this Lease, or after the termination of this Lease as herein provided, and (ii) the benefits of any present or future constitution, or statute or rule of law which exempts property from liability for debt or for distress for rent, and (iii) the provisions of law relating to notice and/or delay in levy of execution in case of eviction of a lessee for nonpayment of rent. (f) No Implied Waiver. The failure of Landlord to insist at any time upon the strict performance of any covenant or agreement or to exercise any option, right, power or remedy contained in this Lease shall not be construed as a waiver or a relinquishment thereof for the future. The waiver of or redress for any violation by Tenant of any term, covenant, agreement or condition contained in this Lease shall not prevent a similar subsequent act from constituting a violation. Any express waiver shall affect only the term or condition specified in such waiver and only for the time and in the manner specifically stated therein. A receipt by Landlord of any Base Rent or other payment hereunder with knowledge of the breach of any covenant or agreement contained in this Lease shall not be deemed a waiver of such breach, and no waiver by Landlord of any provision of this Lease shall be deemed to have been made unless expressed in writing and signed by Landlord. 15. Default by Landlord. If Landlord should default in the performance of any of its obligations under this Lease, Landlord shall have the time reasonably required, but in no event less than thirty (30) days, to cure such default after receipt of written notice from Tenant specifying such default and specifying what action Tenant believes is necessary to cure the default. If Tenant prevails in any litigation brought against Landlord because of Landlord's failure to cure a default within the time required by the preceding sentence, then Tenant shall be entitled to an award against Landlord for the damages proximately caused to Tenant by such default. 16. Quiet Enjoyment. Provided no Event of Default has occurred and is continuing, Landlord shall not during the Term disturb Tenant's peaceable and quiet enjoyment of the Leased Property; however, such enjoyment shall be subject to the terms, provisions, covenants, agreements and conditions of this Lease and the Permitted Encumbrances and any other claims or encumbrances not lawfully made through or under Landlord, to which this Lease is subject and subordinate as hereinabove set forth. Any breach by Landlord of the foregoing covenant of quiet enjoyment shall, subject to the other provisions of this Lease, render Landlord liable to Tenant for any monetary damages proximately caused thereby, but as more specifically provided in Paragraph 5 above, no such breach shall entitle Tenant to terminate this Lease or excuse Tenant from its obligation to pay Base Rent and other amounts hereunder. 17. Surrender Upon Termination. Unless Tenant or an Applicable Purchaser purchases Landlord's entire interest in the Leased Property pursuant to the terms of the Purchase Agreement, Tenant shall, upon the termination of Tenant's right to occupancy, surrender to Landlord the Leased Property, including any buildings, alterations, improvements, replacements or additions constructed by Tenant, with all fixtures and furnishings included in the Leased Property, but not including movable furniture and movable personal property not covered by this Lease, free of all Hazardous Substances (including Permitted Hazardous Substances) and tenancies and, to the extent required by Landlord, with all Improvements in the same condition as of the date hereof, excepting only (i) ordinary wear and tear (provided that the Leased Property shall have been maintained as required by the other provisions hereof) and (ii) alterations and additions which are expressly permitted by the terms of this Lease and which have been completed by Tenant in a good and workmanlike manner in accordance with all Applicable Laws. Any movable furniture or movable personal property belonging to Tenant or any party claiming under Tenant, if not removed at the time of such termination and if Landlord shall so elect, shall be deemed abandoned and become the property of Landlord without any payment or offset therefor. If Landlord shall not so elect, Landlord may remove such property from the Leased Property and store it at Tenant's risk and expense. Tenant shall bear the expense of repairing any damage to the Leased Property caused by such removal by Landlord or Tenant. 18. Holding Over by Tenant. Should Tenant not purchase Landlord's right, title and interest in the Leased Property as provided in the Purchase Agreement, but nonetheless continue to hold the Leased Property after the termination of this Lease without Landlord's written consent, whether such termination occurs by lapse of time or otherwise, such holding over shall constitute and be construed as a tenancy from day to day only, at a daily Base Rent equal to: (i) the unpaid Purchase Price on the day in question, times (ii) the Holdover Rate (as defined below) for such day, divided by (iii) 360; subject, however, to all of the terms, provisions, covenants and agreements on the part of Tenant hereunder. No payments of money by Tenant to Landlord after the termination of this Lease shall reinstate, continue or extend the Term of this Lease and no extension of this Lease after the termination thereof shall be valid unless and until the same shall be reduced to writing and signed by both Landlord and Tenant; provided, however, following any breach by Landlord of its obligations to tender a deed and other documents on the Designated Sale Date as provided in the Purchase Agreement, Tenant may at its option continue its possession and use of the Leased Property pursuant to this Lease, as if the Term had been extended, for a period not to exceed 180 days after the Designated Sale Date or such longer time as may be proscribed by Applicable Law. As used herein, the "Holdover Rate" means: (1) for any day prior to the date on which Landlord tenders a deed and other documents as required by the Purchase Agreement (or is excused from its obligation to tender by Tenant's breach or anticipatory repudiation of the Purchase Agreement), a rate equal to the Fed Funds Rate on that day plus one hundred basis points; (2) for any day on which or within ninety days after Landlord tenders a deed and other documents as required by the Purchase Agreement (or is excused from its obligation to tender by Tenant's breach or anticipatory repudiation of the Purchase Agreement), the per annum Prime Rate in effect for such day; and (3) for any day after the ninety days described in the preceding clause, a rate which is three percent (3%) above the per annum Prime Rate. 19. Miscellaneous. (a) Notices. Each provision of this Lease, or of any Applicable Laws with reference to the sending, mailing or delivery of any notice or with reference to the making of any payment by Tenant to Landlord, shall be deemed to be complied with when and if the following steps are taken: (i) All Rent required to be paid by Tenant to Landlord hereunder shall be paid to Landlord in immediately available funds by wire transfer to: Federal Reserve Bank of San Francisco Account: Banque Nationale de Paris ABA #: 121027234 Reference: 3COM - Rolling Meadows Site or at such other place and in such other manner as Landlord may designate in a notice to Tenant (provided Landlord will not unreasonably designate a method of payment other than wire transfer). Time is of the essence as to all payments and other obligations of Tenant under this Lease. (ii) All Construction Advances required to be paid to Tenant by Landlord hereunder shall be paid to Tenant in immediately available funds by wire transfer to: Account Name: 3Com Corporation Account Number: 14848-01985 ABA #: 121000358 Reference: Construction Advance/3COM - Rolling Meadows Site or at such other place and in such other manner as Tenant may designate in a notice to Landlord (provided Tenant will not unreasonably designate a method of payment other than wire transfer). Time is of the essence as to the payment of all Construction Advances required of Landlord under this Lease. (iii) All notices, demands and other communications to be made hereunder to the parties hereto shall be in writing (at the addresses set forth below, or in the case of communications to Participants, at the addresses for notice established by the Participation Agreement) and shall be given by any of the following means: (A) personal service, with proof of delivery or attempted delivery retained; (B) electronic communication, whether by telex, telegram or telecopying (if confirmed in writing sent by United States first class mail, return receipt requested); or (C) registered or certified first class mail, return receipt requested. Such addresses may be changed by notice to the other parties given in the same manner as provided above. Any notice or other communication sent pursuant to clause (A) or (C) hereof shall be deemed received (whether or not actually received) upon first attempted delivery at the proper notice address on any Business Day between 9:00 A.M. and 5:00 P.M., and any notice or other communication sent pursuant to clause (B) hereof shall be deemed received upon dispatch by electronic means. Address of Landlord: BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd Cox Telecopy: (214) 969-0060 With a copy to: Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Jennifer Cho or Will La Herran Telecopy: (415) 296-8954 And with a copy to: Clint Shouse Thompson & Knight, P.C. 1700 Pacific Avenue Suite 3300 Dallas, Texas 75201 Telecopy: (214) 969-1550 Address of Tenant: 3Com Corporation 5400 Bayfront Plaza Santa Clara, California 95052 Attn: Legal Dept. MS - 1308 Telecopy: (408) 764-6434 With copies to: 3Com Corporation 5400 Bayfront Plaza Santa Clara, California 95052 Attn: Real Estate Dept. MS - 1220 Telecopy: (408) 764-5718; and 3Com Corporation 5400 Bayfront Plaza Santa Clara, California 95052 Attn: Treasury Dept. MS - 1307 Telecopy: (408) 764-8403; and Gray Cary Ware & Freidenrich 400 Hamilton Avenue Palo Alto, California 94301 Attn: Jonathan E. Rattner, Esq. Telecopy: (415) 328-3029 (b) Severability. If any term or provision of this Lease or the application thereof shall to any extent be held by a court of competent jurisdiction to be invalid and unenforceable, the remainder of this Lease, or the application of such term or provision other than to the extent to which it is invalid or unenforceable, shall not be affected thereby. (c) No Merger. There shall be no merger of this Lease or of the leasehold estate hereby created with the fee estate in the Leased Property or any part thereof by reason of the fact that the same person may acquire or hold, directly or indirectly, this Lease or the leasehold estate hereby created or any interest in this Lease or in such leasehold estate as well as the fee estate in the Leased Property or any interest in such fee estate, unless all Persons with an interest in the Leased Property that would be adversely affected by any such merger specifically agree in writing that such a merger shall occur. (d) NO IMPLIED REPRESENTATIONS BY LANDLORD. LANDLORD AND LANDLORD'S AGENTS HAVE MADE NO REPRESENTATIONS OR PROMISES WITH RESPECT TO THE LEASED PROPERTY EXCEPT AS EXPRESSLY SET FORTH HEREIN, AND NO RIGHTS, EASEMENTS OR LICENSES ARE ACQUIRED BY TENANT BY IMPLICATION OR OTHERWISE EXCEPT AS EXPRESSLY SET FORTH IN THE PROVISIONS OF THIS LEASE, AND THE PURCHASE DOCUMENTS. (e) Entire Agreement. This Lease and the instruments referred to herein supersede any prior negotiations and agreements between the parties concerning the Leased Property and no amendment or modification of this Lease shall be binding or valid unless expressed in a writing executed by both parties hereto. (f) Binding Effect. All of the covenants, agreements, terms and conditions to be observed and performed by the parties hereto shall be applicable to and binding upon their respective successors and, to the extent assignment is permitted hereunder, their respective assigns. (g) Time is of the Essence. Time is of the essence as to all obligations of Tenant and all notices required of Tenant under this Lease, but this paragraph shall not limit Tenant's opportunity to prevent an Event of Default by curing any breach within the cure period (if any) applicable under subparagraph 14.(a). (h) Termination of Prior Rights. Without limiting the rights and obligations of Tenant under this Lease, Tenant acknowledges that any and all rights or interest of Tenant in and to the Land, the improvements to the Land and to any other property included in the Leased Property (except under this Lease and the Purchase Agreement) are hereby superseded. Tenant quitclaims unto Landlord any rights or interests Tenant has in or to the Land, the improvements to the Land and to any other property included in the Leased Property other than the rights and interests created by this Lease and the Purchase Agreement. (i) Governing Law. This Lease shall be governed by and construed in accordance with the laws of the State of Illinois. (j) Waiver of a Jury Trial. LANDLORD AND TENANT EACH HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS LEASE OR ANY OTHER DOCUMENT OR DEALINGS BETWEEN THEM RELATING TO THIS LEASE OR THE LEASED PROPERTY. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including, without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Tenant and Landlord each acknowledge that this waiver is a material inducement to enter into a business relationship, that each has already relied on the waiver in entering into this Lease and the other documents referred to herein, and that each will continue to rely on the waiver in their related future dealings. Tenant and Landlord each further warrants and represents that it has reviewed this waiver with its legal counsel, and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LEASE OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS LEASE OR THE LEASED PROPERTY. In the event of litigation, this Lease may be filed as a written consent to a trial by the court. (k) Not a Partnership, Etc. NOTHING IN THIS LEASE IS INTENDED TO BE OR TO CREATE ANY PARTNERSHIP, JOINT VENTURE, OR OTHER JOINT ENTERPRISE BETWEEN LANDLORD AND TENANT. NEITHER THE EXECUTION OF THIS LEASE NOR THE ADMINISTRATION OF THIS LEASE OR OTHER DOCUMENTS REFERENCED HEREIN BY LANDLORD, NOR ANY OTHER RIGHT, DUTY OR OBLIGATION OF LANDLORD UNDER OR PURSUANT TO THIS LEASE OR SUCH DOCUMENTS IS INTENDED TO BE OR TO CREATE ANY FIDUCIARY OBLIGATIONS OF LANDLORD TO TENANT. (l) Tax Reporting. Landlord and Tenant shall report this Lease and the Purchase Agreement for federal income tax purposes as a conditional sale unless prohibited from doing so by the Internal Revenue Service. Similarly, Tenant shall report all interest earned on Escrowed Proceeds or the Collateral as Tenant's income for federal and state income tax purposes. If the Internal Revenue Service shall challenge Landlord's characterization of this Lease and the Purchase Agreement as a conditional sale for federal income tax reporting purposes, Landlord shall notify Tenant in writing of such challenge and consider in good faith any reasonable suggestions by Tenant about an appropriate response. In any event, Tenant shall indemnify and hold harmless Landlord from and against all liabilities, costs, additional taxes and other expenses that may arise or become due because of such challenge or because of any resulting recharacterization required by the Internal Revenue Service, including any additional taxes that may become due upon any sale under the Purchase Agreement to the extent (if any) that such additional taxes are not offset by tax savings resulting from additional depreciation deductions or other tax benefits to Landlord of the recharacterization. [Remainder of page intentionally left blank.] IN WITNESS WHEREOF, this Lease is hereby executed in multiple originals as of August 11, 1997. "Landlord" BNP LEASING CORPORATION, a Delaware corporation By: /s/ Lloyd G. Cox ---------------------------- Lloyd G. Cox, Vice President [Continuation of signature pages to Lease Agreement dated to be effective August 11, 1997] "Tenant" 3COM CORPORATION, a Delaware corporation By: /s/ Mark D. Michael ---------------------------- Mark D. Michael, SVP, General Counsel & Secretary Exhibit A Legal Description PARCEL 1: Lot 1 in 3800 Golf Road Subdivision of part of Fractional Section 7, Township 41 North, Range 11, East of the Third Principal Meridian, according to the plat recorded January 31, 1996 as Document No. 96080514, in Cook County, Illinois. PARCEL 2: Easement for the benefit of Parcel 1 aforesaid, to go upon Lot 2 in 3800 Golf Road Subdivision aforesaid, for the purpose of performing work of construction and maintenance of Berm if such work is not timely performed by the owner of said Lot 2, as granted in paragraph 9.4 of Article 9 of the Declaration and Grant of Easements, Covenants and Restrictions executed by AT&T Corp., a New York corporation, dated January 26, 1996 and recorded February 9, 1996 as Document No. 96110279, in Cook County, Illinois. Exhibit B Permitted Encumbrances 1. Declaration of Restrictions dated July 7, 1965 and recorded November 8, 1965 as Document No. 19654849 and amended by Document No. 22518743 made by Chicago Title and Trust Company, an Illinois corporation, as Trustee under Trust Agreement dated June 15, 1960 known as Trust No. 42370, American National Bank of Chicago, a National Banking Association, as Trustee under Trust Agreement dated December 17, 1958 and known as Trust No. 14073 and Western Electric Co., Inc., New York, relating to construction, materials, location, area, height and approval of plans of buildings to be erected on the land and other property; specific uses of the land; lot size, weed control, landscaping; signs and control of junk and debris. Note: the rights of Chicago Title and Trust Company as Trustee under Trust Agreement dated June 15, 1960 and known as Trust No. 42370 were assigned to Chemplex Company by Assignment and Notice dated March 7, 1969 and recorded April 30, 1969 as Document No. 20826795. Note: said instrument contains no provision for a forfeiture of or reversion of title in case of breach of condition. 2. The Land falls in Drainage District No. 1 of the Township of Elk Grove, Cook County, Illinois. 3. Covenants and conditions contained in the Deed dated March 4, 1970 and recorded July 16, 1971 as Document No. 21549676 from the Corporation of Illinois, for the use of the Department of Public Works and Buildings to Western Electric Company, Inc., a New York corporation, that the Land shall not be used as a junkyard of for advertising of any kind except "on premises signs" as defined in the Rules and Regulations for Outdoor Advertising on Interstate Highways promulgated by the Department of Public Works and Buildings, State of Illinois, revised January 3, 1966, as amended: and there is no access to, from or over the Land to and from the public highway lying adjoining to said Land and known as F.A.I. Route 90 previously declared a freeway nor will access be permitted in the future to, from or over the Land to and from said public highway, which instrument does not contain a reverter clause. (Affects that part of the Land lying westerly of a line 400 feet easterly of the center line of Rohlwing Road) 4. Grant from Western Electric Company, Inc., a New York corporation, to Northern Illinois Gas Company, an Illinois corporation, contained in the Easement Agreement dated July 25, 1972 and recorded August 4, 1972 as Document No. 22002493, of a nonexclusive perpetual right of ingress and egress to Northern's Dubuque right-of-way line together with the right to use as working space in connection with construction and maintenance of existing and future pipelines, now located or to be constructed on Northern's Dubuque right-of-way, in, under, over and across Western's parcel described as follows, as shown on Plat of Survey dated December 27, 1968 prepared by Albert C. Schmitt, Registered Land Surveyor, marked Exhibit A and attached thereto; and the covenants and conditions therein contained. (Affects that part of Section 7, Township 41 North, Range 11 East of the Third Principal Meridian, in Cook County, Illinois. Bounded and described as follows: commencing at the concrete right-of-way monument at the intersection of the north line of the south 1/2 of the south 1/2 of said Section 7, with the easterly line of the Illinois Toll Road; thence North 86 29' 43" East along said north line a distance of 326.18 feet to an iron stake for a point of beginning; thence North 62 21' 31" East along a straight line a distance of 424.07 feet to a point; thence South 32 29' 31" West along a straight line a distance of 214.33 feet to a point on said north line of the south 1/2 of the south 1/2 of Section 7; thence South 86 29' 43" West along said north line a distance of 261.02 feet to the point of beginning) (Affects Westerly part of the Land) 5. Terms, provisions, conditions and limitations of the Declaration of Grant of Easements, Covenants and Restrictions for ingress and egress and for public utilities and drainage, etc., recorded February 9, 1996 as Document No. 96110279. 6. Terms, provisions, conditions and limitations of the Declaration of Restrictive Covenant made by AT&T Technologies, Inc., recorded March 18, 1996 as Document No. 88113916. 7. 20 foot water pipeline easement as disclosed by Document No. 27362784 also as depicted on Plat of 3800 Golf Road Subdivision recorded January 31, 1996 as Document No. 96080514. 8. Terms, provisions, and conditions relating to the easement described as Parcel 2, contained in the instrument creating said easement. 9. Public utilities and drainage easement over the Easterly line of Lot 1 as shown on Plat of 3800 Golf Road Subdivision recorded January 31, 1996 as Document No. 96080514. 10. The Plat of Subdivision recorded January 31, 1996 as Document No. 96080514 includes a certification by the surveyor that the Land is located within a Special Flood Area as identified by the Federal Emergency Management Agency. Exhibit C PERMITTED HAZARDOUS SUBSTANCES (NOT a Comprehensive List) It is anticipated that the following Hazardous Substances, and others necessary for the use, occupancy, and operation of the Leased Property in accordance with the terms and conditions of this Lease, will be used by Tenant at the Leased Property: Description C.A.S.# Solder bars (lead) 7439-92-1 Solder paste Lead 7439-91-1 Tin 7440-31-5 Solder paste remover Sodium hydroxide 1310-73-2 Isopropyl alcohol Isopropanol 67-63-0 S32-10M Isopropanol 67-63-0 Methanol 67-56-1 Exhibit D RESOLUTION OF DISPUTED INSURANCE CLAIMS If Landlord and Tenant cannot agree upon the amount for which any insurance claim against an insurer should be settled after damage to the Leased Property by fire or other casualty, and so long as neither Tenant nor Landlord is authorized to determine such amount without the consent of the other pursuant to subparagraph 9.(r), then either party may require that the amount be determined as follows: 1. Landlord and Tenant shall each appoint an experienced architect who is familiar with construction costs for comparable properties in the vicinity of the Leased Property. Each party will make the appointment no later than 10 days after receipt of notice from the other party that the dispute resolution process described in this Exhibit has been invoked. The agreement of the two architects as to the appropriate amount of the insurance settlement will be binding upon Landlord and Tenant. If the two architects cannot agree upon the settlement amount within 30 days following their appointment, they shall within another 10 days agree upon a third architect. Immediately thereafter, each of the first two architects will submit his best estimate of the appropriate settlement amount (together with a written report supporting such estimate) to the third architect and the third architect will choose between the two estimates. The estimate chosen by the third architect as the closest to the amount needed to repair and restore the Leased Property will be binding upon Landlord and Tenant as the amount for which the applicable insurance claim should be settled. (However, no such estimate and nothing contained in this Exhibit will limit Tenant's liability under other provisions of this Lease for the repair and restoration of the Leased Property.) Notification in writing of the estimate chosen by the third architect shall be made to Landlord and Tenant within 15 days following the selection of the third architect. 2. If architects must be selected under the procedure set out above and either Tenant or Landlord fails to appoint an architect or fails to notify the other party of such appointment within 10 days after receipt of notice that the prescribed time for appointing the architects has passed, then the other party's architect will determine the appropriate settlement amount. All architects selected for the dispute resolution process set out in this Exhibit will be disinterested, reputable, qualified architects with at least 15 years experience designing and overseeing the construction of properties comparable to the Leased Property. 3. If a third architect must be chosen under the procedure set out above, he will be chosen on the basis of objectivity and competence, not on the basis of his relationship with the other architects or the parties to this Lease, and the first two architects will be so advised. Although the first two architects will be instructed to attempt in good faith to agree upon the third architect, if for any reason they cannot agree within the prescribed time, either Landlord or Tenant may require the first two architects to immediately submit its top choice for the third architect to the then highest ranking officer of the San Francisco Bar Association who will agree to help and who has no attorney/client or other significant relationship to either Landlord or Tenant. Such officer will have complete discretion to select the most objective and competent third architect from between the choice of each of the first two architects, and will do so within 20 days after such choices are submitted to him. 4. Either Landlord or Tenant may notify the architect selected by the other party to demand the submission of an estimate of the appropriate settlement amount or a choice of a third architect as required under the procedure described above; and if the submission of such an estimate or choice is required but the other party's architect fails to comply with the demand within 5 days after receipt of such notice, then the settlement amount or choice of the third architect, as the case may be, selected by the other architect (i.e., the notifying party's architect) will be binding upon Landlord and Tenant. 5. For the purposes of this Exhibit, "appropriate settlement amount" and words of like effect means the amount required to restore the Leased Property, less any insurance deductible that clearly applies under the policy of insurance which provides the coverage to be settled; and all architects and other persons involved in the determination of the settlement amount will be so advised. (vi) Exhibit E FINANCIAL COVENANT COMPLIANCE CERTIFICATE BNP Leasing Corporation c/o Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Jennifer Cho or Will La Herran Re: 3Com Lease Agreement (Rolling Meadows Site) Gentlemen: I, the undersigned, the [chief financial officer, controller, treasurer or the assistant treasurer] of 3Com Corporation, do hereby certify, represent and warrant that: 1. This Certificate is furnished pursuant to subparagraph 9.(w)(iii) of that certain Lease Agreement dated as of August 11, 1997 (the "Lease Agreement," the terms defined therein being used herein as therein defined) between 3Com Corporation (the "Tenant"), and you. 2. Annex 1 attached hereto sets forth financial data and computations evidencing the Tenant's compliance with certain covenants of the Lease Agreement, all of which data and computations are complete, true and correct. 3. To the knowledge of Tenant no Default or Event of Default under the Lease Agreement has occurred and is continuing. 4. The representations of Tenant set forth in the Lease Agreement are true and correct in all material respects as of the date hereof as though made on and as of the date hereof. Executed this _____ day of ______________, ____. 3Com Corporation Name:_________________________ Title:________________________ [cc all Participants] Annex 1 To Compliance Certificate For the _________________ Ended ________________, ____ I. PARAGRAPH 9.(ac)(i): Quick Ratio A. Unencumbered Cash and Cash Equivalents and other "Quick Assets" as defined in Paragraph 9.(ac)(i) of the Lease: $_____________ B. "Current Liabilities" as defined in Paragraph 9.(ac)(i) of the Lease: $_____________ C. Ratio of A to B: _____ to 1.00 F. Minimum ratio computed as provided in Paragraph 9.(ac)(i) of the Lease: 1.00 to 1.00 II. PARAGRAPH 9.(ac)(ii): Maximum Senior Debt to Capitalization A. Total "Debt" as defined in Paragraph 1.(ae) of Tenant and its consolidated Subsidiaries: $_____________ B. "Subordinated Debt" as defined in Paragraph 9.(ac)(ii) of the Lease: $_____________ C. "Senior Debt" as defined in Paragraph 9.(ac)(ii) of the Lease (A - B): $_____________ D. Consolidated Tangible Net Worth (from calculation below): $_____________ E. Capitalization as defined in Paragraph 9.(ac)(ii) of the Lease (A + D): $_____________ F. Ratio of B to E: _____ to 1.00 D. Maximum ratio: 0.35 to 1.00 III. PARAGRAPH 9.(ac)(iii): Minimum Tangible Net Worth A. Reported stockholders equity: $_____________ B. "Intangible Assets" as defined in Paragraph 9.(ac)(iii) of the Lease: $_____________ D. Consolidated Tangible Net Worth (A - B): $_____________ E. Minimum computed as provided in Paragraph 9.(ac)(iii) of the Lease: $_____________ IV. PARAGRAPH 9.(ac)(iv): Fixed Charge Ratio A. "Adjusted EBIT" as defined in Paragraph 9.(ac)(iv) of the Lease: $_____________ B. "Fixed Charges" as defined in Paragraph 9.(ac)(iv) of the Lease: $_____________ C. Ratio of A to B: _____ to 1.00 D. Minimum ratio: 2.00 to 1.00 Exhibit F CERTIFICATE OF TENANT'S CALCULATION OF THE SPREAD BNP Leasing Corporation c/o Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Jennifer Cho or Will La Herran Re: 3Com Lease Agreement (Rolling Meadows Site) Gentlemen: I, the undersigned, the [chief financial officer, controller, treasurer or the assistant treasurer] of 3Com Corporation, do hereby certify, represent and warrant that: 1. This Certificate is furnished pursuant to subparagraph 9.(w)(iv) of that certain Lease Agreement dated as of August 11, 1997 (the "Lease Agreement," the terms defined therein being used herein as therein defined) between 3Com Corporation, and you. 2. Annex 1 attached hereto sets forth financial data and computations evidencing the Tenant's computation of the Spread, all of which data and computations are complete, true and correct. Executed this _____ day of ______________, ____. 3Com Corporation Name:_________________________ Title:________________________ [cc all Participants] Annex 1 To Certificate of Tenant's Calculation of the Spread As of the ________________, ____ I. S&P'S RATING OF TENANT'S SENIOR UNSECURED DEBT: _____________ II. MOODY'S RATING OF TENANT'S SENIOR UNSECURED DEBT: _____________ III. CALCULATION OF TENANT'S DEBT TO CAPITAL RATIO: _____________ A. Funded "Senior Debt" as defined in Paragraph 9.(ac)(ii) of the Lease: $_____________ B. Other outstanding Debt as defined in Paragraph 1.(ae) of the Lease: $_____________ C. Outstanding "Subordinated Debt" as defined in Paragraph 9.(ac)(ii) of the Lease: $_____________ D. Debt for purposes of this ratio (A + B - C): $_____________ E. Reported stockholders equity: $_____________ F. "Intangible Assets" as defined in Paragraph 9.(ac)(iii) of the Lease: $_____________ G. Consolidated Tangible Net Worth (E - F): $_____________ H. Capital for purposes of this test (A + B + G): $_____________ I. D divided by H: _____________ III. SPREAD AS DEFINED IN PARAGRAPH 1.(cn) OF THE LEASE: _____________ Exhibit G LIST OF ENVIRONMENTAL REPORTS As used in this Lease, "Environmental Report" means, collectively, the following reports provided to Landlord by 3COM or acquired by Landlord from its own consultants: 1. ENSR Consulting, Phase I Environmental Due Diligence Assessment, AT&T Facility, 3800 Golf Road, Rolling Meadows, Illinois, June, 1994 2. Kemper Risk Management, Asbestos Survey, AT&T Facility, 3800 Golf Road, Rolling Meadows, Illinois, September 7, 1995 3. Specification Report for Removal of Underground Storage Tanks, AT&T Facility, 3800 Golf Road, Rolling Meadows, Illinois, July 1, 1993 4. Letter from IEPA Regarding Certification Notice of Tank Removal, AT&T Facility, 3800 Golf Road, Rolling Meadows, Illinois, September 2, 1994 5. Letter to IEPA for withdrawal of EMSA Notification with Certificate of Removal, AT&T Facility, 3800 Golf Road, Rolling Meadows, Illinois, July 12, 1994 6. Suburban Laboratories Final Report on On-Site Water Wells 7. Heritage Remediation, Site Classification Report, AT&T Facility, 3800 Golf Road, Rolling Meadows, Illinois, January 11, 1994 8. Heritage Remediation, Underground Storage Tank Removal and Remediation Document, AT&T Facility, 3800 Golf Road, Rolling Meadows, Illinois, June 20, 1994 9. Pioneer Environmental, Phase II Subsurface Investigation, AT&T Facility, 3800 Golf Road, Rolling Meadows, Illinois, August 16, 1995 10. Keter, Asbestos Reports: * Comprehensive Survey * Asbestos Removal Reports * Asbestos Clearance Tests Completed in 1995 and 1996 11. Gaia Tech, Phase I Environmental Site Assessment, Former AT&T Facility, 3800 Golf Road, Rolling Meadows, Illinois, July 9, 1997 Exhibit H Estoppel From Contractors _________, 199__ BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd Cox Re: Assignment of Construction Contract Ladies and Gentlemen: The undersigned hereby confirms, warrants and represents to BNP Leasing Corporation, a Delaware corporation ("BNP"), and covenants with BNP as follows: 1. The undersigned has entered into that certain [Construction Contract] (the "Construction Contract") by and between the undersigned and 3Com Corporation ("Tenant") dated ___________________, 199___ for the construction of the multiuse complex to be constructed on the campus leased by Tenant (the "Improvements") located on the land described in Exhibit A attached hereto and made a part hereof for all purposes (the "Land" and, together with the Improvements and any other improvements now on or constructed in the future on the Land, being herein collectively referred to as the "Project"). 2. The undersigned has been advised that BNP owns the Land. 3. The undersigned has also received a copy of the Lease Agreement dated as of August 11, 1997 (the "Lease"), pursuant to which BNP is leasing the Project to Tenant, and BNP has agreed, subject to the terms and conditions of the Lease, to provide a construction allowance for Tenant's construction of the Improvements. The Lease also requires Tenant to fulfill all obligations of the ["Owner"] under the Construction Contract and related documents and to indemnify BNP against any liability arising thereunder, all as more particularly provided in the Lease, reference to which is hereby made for all purposes. 4. A complete and correct copy of the Construction Contract is attached to this letter. The Construction Contract is in full force and effect and has not been modified or amended. 5. The undersigned has not sent to Tenant or received from Tenant any notice of default or any other notice for the purpose of terminating the Construction Contract, nor is there any existing circumstance or event which, but for the elapse of time or otherwise, would constitute a default by the undersigned or the ["Owner"] under the Construction Contract. The undersigned acknowledges and agrees that: a) BNP shall not be held liable for, and the undersigned shall not assert, any claims, demands or liabilities against BNP or, except for any statutory lien rights, against the Project arising under or in any way relating to the Construction Contract; provided, this paragraph will not prohibit the undersigned from asserting any claims or making demands under the Construction Contract if BNP elects in writing, pursuant to Paragraph b) below, to assume the Construction Contract in the event Tenant's right to possession of the Land is terminated, in which event BNP shall be liable thereunder for (but only for) any acts or omissions on the part of BNP occurring after the date on which BNP notifies the undersigned of BNP's election to assume the Construction Contract. b) Upon any termination of Tenant's right to possession of the Project under the Lease, including but not limited to any eviction of Tenant resulting from an Event of Default (as defined in the Lease), BNP may, by notice to the undersigned and without the necessity of the execution of any other document, assume Tenant's rights and obligations under the Construction Contract, cure any defaults by Tenant thereunder and enforce the Construction Contract and all rights of the ["Owner"] thereunder. Within ten (10) days of receiving notice from BNP that Tenant's right to possession has been terminated, the undersigned shall send to BNP a written estoppel letter stating: (i) that the undersigned has not performed any act or executed any other instrument which invalidates or modifies the Construction Contract in whole or in part (or, if so, the nature of such modification); (ii) that the Construction Contract is valid and subsisting and in full force and effect; (iii) that there are no defaults or events of default then existing under the Construction Contract and no event has occurred which with the passage of time or the giving of notice, or both, would constitute such a default or event of default (or, if there is a default, the nature of such default in detail); (iv) that the construction contemplated by the Construction Contract is proceeding in a satisfactory manner in all material respects (or if not, a detailed description of all significant problems with the progress of construction); (v) a reasonably detailed report of the then critical dates projected by the undersigned for work and deliveries required to complete the construction project; (vi) the total amount paid for construction through the date of the letter; (vii) the estimated total cost of completing such construction as of the date of the letter, together with a current draw schedule; and (viii) any other information BNP may request to allow it to decide whether to assume the Construction Contract. BNP shall have thirty (30) days from receipt of such written certificate containing all such requested information to decide whether to assume the Construction Contract. If BNP fails to assume the Construction Contract within such time, the undersigned agrees that BNP shall not be liable for (and the undersigned shall not assert or bring any action against BNP or, except for any statutory lien rights not waived, against the Land or improvements thereon for) any damages or other amounts resulting from the breach or termination of the Construction Contract or under any other theory of liability of any kind or nature, but rather the undersigned shall look solely to Tenant and any statutory lien rights not waived for the recovery of any such damages or other amounts. c) If BNP notifies the undersigned that BNP shall not assume the Construction Contract pursuant to the preceding paragraph following the termination of Tenant's right to possession of the Project under the Lease, the undersigned shall immediately discontinue the work under the Construction Contract and remove its personnel from the Project, and BNP shall be entitled to take exclusive possession of the Project and all or any part of the equipment and materials delivered or en route to the Project. The undersigned shall also, upon request by BNP, deliver and assign to BNP all plans and specifications and other contract documents previously delivered to the undersigned (except that the undersigned may keep an original set of the Construction Contract and other contract documents executed by Tenant), all other material relating to the work which belongs to BNP or Tenant, and all papers and documents relating to governmental permits, orders placed, bills and invoices, lien releases and financial management under the Construction Contract. Notwithstanding the undersigned's receipt of any notice from BNP that BNP declines to assume the Construction Contract, the undersigned shall for a period not to exceed fifteen (15) days after receipt of such notice take such steps, at BNP's expense, as are reasonably necessary to preserve and protect work completed and in progress and to protect materials, equipment and supplies at the site or in transit. d) No action taken by BNP or the undersigned with respect to the Construction Contract shall prejudice any other rights or remedies of BNP or the undersigned provided by law, by the Lease, by the Construction Contract or otherwise against Tenant. e) The undersigned agrees promptly to notify BNP of any material default or claimed material default by Tenant under the Construction Contract, describing with particularity the default and the action the undersigned believes is necessary to cure the same. The undersigned will send any such notice to BNP prominently marked "URGENT - NOTICE OF TENANT'S DEFAULT UNDER CONSTRUCTION AGREEMENT WITH 3COM CORPORATION - ROLLING MEADOWS, ILLINOIS" at the address specified for notice below (or at such other addresses as BNP shall designate in notice sent to the undersigned), by certified or registered mail, return receipt requested. Following receipt of such notice, the undersigned will permit BNP or its designee to cure any such default within the time period reasonably required for such cure, but in no event less than thirty (30) days. If it is necessary or helpful to take possession of all or any portion of the Project to cure a default by Tenant under the Construction Contract, the time permitted by the undersigned for cure by BNP will include the time necessary to terminate Tenant's right to possession of the Project and evict Tenant, provided that BNP commences the steps required to exercise such right within sixty (60) days after it is entitled to do so under the terms of the Lease and applicable law. If the undersigned incurs additional costs due to the extension of the aforementioned cure period, the undersigned shall be entitled to an equitable adjustment to the price of the Construction Contract for such additional costs. f) Any notice or communication required or permitted hereunder shall be given in writing, sent by (a) personal delivery or (b) expedited delivery service with proof of delivery or (c) United States mail, postage prepaid, registered or certified mail or (d) telegram, telex or telecopy, addressed as follows: To the undersigned: _____________________________ ______________________________ ______________________________ To BNP: BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 g) The undersigned acknowledges that it has all requisite authority to execute this letter. The undersigned further acknowledges that BNP has requested this letter, and is relying on the truth and accuracy of the representations made herein, in connection with BNP's decision to advance funds for construction under the Lease with Tenant. Very truly yours, _____________________________ By:______________________________ Name:_________________________ Title:________________________ Tenant joins in the execution of this letter solely for the purpose of evidencing its consent hereto, including its consent to the provisions that would allow, but not require, BNP to assume the Construction Contract in the event Tenant is evicted from the Project. 3Com Corporation By:______________________________ Name:_________________________ Title:________________________ Exhibit I Estoppel From Architects/Engineers _________, 199__ BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd Cox Re: Assignment of Construction Contract Ladies and Gentlemen: The undersigned hereby confirms, warrants and represents to BNP Leasing Corporation, a Delaware corporation ("BNP"), and covenants with BNP as follows: 1. The undersigned has entered into that certain [Architect's/Engineer's Agreement] (the "Agreement") by and between the undersigned and 3Com Corporation ("Tenant") dated ____________________, 199___ for the [design] of the multiuse complex to be constructed on the Santa Clara campus leased by Tenant (the "Improvements") located on the land described in Exhibit A attached hereto and made a part hereof for all purposes (the "Land" and, together with the Improvements and any other improvements now on or constructed in the future on the Land, being herein collectively referred to as the "Project"). 2. The undersigned has been advised that BNP owns the Land. 3. The undersigned has also received a copy of the Lease Agreement dated as of August 11, 1997 (the "Lease"), pursuant to which BNP is leasing the Project to Tenant, and BNP has agreed, subject to the terms and conditions of the Lease, to provide a construction allowance for Tenant's construction of the Improvements. The Lease also requires Tenant to fulfill all obligations of the ["Owner"] under the Agreement and related documents and to indemnify BNP against any liability arising thereunder, all as more particularly provided in the Lease, reference to which is hereby made for all purposes. 4. A complete and correct copy of the Agreement is attached to this letter. The Agreement is in full force and effect and has not been modified or amended. 5. The undersigned has not sent to Tenant or received from Tenant any notice of default or any other notice for the purpose of terminating the Agreement, nor is there any existing circumstance or event which, HEADER FOLLOWS THIS COMMENT BOX -- MOVE TO FIT PAGE NUMBERINGbut for the elapse of time or otherwise, would constitute a default by the undersigned or the ["Owner"] under the Agreement. The undersigned acknowledges and agrees that: a) BNP shall not be held liable for, and the undersigned shall not assert, any claims, demands or liabilities against BNP or, except for any statutory lien rights, against the Project arising under or in any way relating to the Agreement; provided, this paragraph will not prohibit the undersigned from asserting any claims or making demands under the Agreement if BNP elects in writing, pursuant to Paragraph b) below, to assume the Agreement in the event Tenant's right to possession of the Land is terminated, in which event BNP shall be liable thereunder for (but only for) any acts or omissions on the part of BNP occurring after the date on which BNP notifies the undersigned of BNP's election to assume the Agreement. b) Upon any termination of Tenant's right to possession of the Project under the Lease, including but not limited to any eviction of Tenant resulting from an Event of Default (as defined in the Lease), BNP may, by notice to the undersigned and without the necessity of the execution of any other document, assume Tenant's rights and obligations under the Agreement, cure any defaults by Tenant thereunder and enforce the Agreement and all rights of the ["Owner"] thereunder. Within ten (10) days of receiving notice from BNP that Tenant's right to possession has been terminated, the undersigned shall send to BNP a written estoppel letter stating: (i) that the undersigned has not performed any act or executed any other instrument which invalidates or modifies the Agreement in whole or in part (or, if so, the nature of such modification); (ii) that the Agreement is valid and subsisting and in full force and effect; (iii) that there are no defaults or events of default then existing under the Agreement and no event has occurred which with the passage of time or the giving of notice, or both, would constitute such a default or event of default (or, if there is a default, the nature of such default in detail); (iv) that the construction contemplated by the Agreement is proceeding in a satisfactory manner in all material respects (or if not, a detailed description of all significant problems with the progress of construction); (v) a reasonably detailed report of the then critical dates projected by the undersigned for work and deliveries required to complete the Project; (vi) the total amount paid for construction through the date of the letter; (vii) the estimated total cost of completing such construction as of the date of the letter, together with a current draw schedule; and (viii) any other information BNP may request to allow it to decide whether to assume the Agreement. BNP shall have thirty (30) days from receipt of such written certificate containing all such requested information to decide whether to assume the Agreement. If BNP fails to assume the Agreement within such time, the undersigned agrees that BNP shall not be liable for (and the undersigned shall not assert or bring any action against BNP or, except for any statutory lien rights not waived, against the Land or improvements thereon for) any damages or other amounts resulting from the breach or termination of the Agreement or under any other theory of liability of any kind or nature, but rather the undersigned shall look solely to Tenant and any statutory lien rights not waived for the recovery of any such damages or other amounts. c) If BNP notifies the undersigned that BNP shall not assume the Agreement pursuant to the preceding paragraph following the termination of Tenant's right to possession of the Project under the Lease, the undersigned shall immediately discontinue the work under the Agreement and remove its personnel from the Project, and BNP shall be entitled to take exclusive possession of the Project and all or any part of the equipment and materials delivered or en route to the Project. The undersigned shall also, upon request by BNP, deliver and assign to BNP all plans and specifications and other contract documents previously delivered to the undersigned (except that the undersigned may keep an original set of the Agreement and other contract documents executed by Tenant), all other material relating to the work which belongs to BNP or Tenant, and all papers and documents relating to governmental permits, orders placed, bills and invoices, lien releases and financial management under the Agreement. Notwithstanding the undersigned's receipt of any notice from BNP that BNP declines to assume the Agreement, the undersigned shall for a period not to exceed fifteen (15) days after receipt of such notice take such steps, at BNP's expense, as are reasonably necessary to preserve and protect work completed and in progress and to protect materials, equipment and supplies at the site or in transit. d) No action taken by BNP or the undersigned with respect to the Agreement shall prejudice any other rights or remedies of BNP or the undersigned provided by law, by the Lease, by the Agreement or otherwise against Tenant. e) The undersigned agrees promptly to notify BNP of any material default or claimed material default by Tenant under the Agreement, describing with particularity the default and the action the undersigned believes is necessary to cure the same. The undersigned will send any such notice to BNP prominently marked "URGENT - NOTICE OF TENANT'S DEFAULT UNDER AGREEMENT WITH 3COM CORPORATION - ROLLING MEADOW, ILLINOIS" at the address specified for notice below (or at such other addresses as BNP shall designate in notice sent to the undersigned), by certified or registered mail, return receipt requested. Following receipt of such notice, the undersigned will permit BNP or its designee to cure any such default within the time period reasonably required for such cure, but in no event less than thirty (30) days. If it is necessary or helpful to take possession of all or any portion of the Project to cure a default by Tenant under the Agreement, the time permitted by the undersigned for cure by BNP will include the time necessary to terminate Tenant's right to possession of the Project and evict Tenant, provided that BNP commences the steps required to exercise such right within sixty (60) days after it is entitled to do so under the terms of the Lease and applicable law. f) Any notice or communication required or permitted hereunder shall be given in writing, sent by (a) personal delivery or (b) expedited delivery service with proof of delivery or (c) United States mail, postage prepaid, registered or certified mail or (d) telegram, telex or telecopy, addressed as follows: To the undersigned: _____________________________ ______________________________ ______________________________ To BNP: BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 g) The undersigned acknowledges that it has all requisite authority to execute this letter. The undersigned further acknowledges that BNP has requested this letter, and is relying on the truth and accuracy of the representations made herein, in connection with BNP's decision to advance funds for construction under the Lease with Tenant. Very truly yours, ______________________________ By:___________________________ Name:______________________ Title:_____________________ Tenant joins in the execution of this letter solely for the purpose of evidencing its consent hereto, including its consent to the provisions that would allow, but not require, BNP to assume the Agreement in the event Tenant is evicted from the Project. 3Com Corporation By:______________________________ Name:_________________________ Title:________________________ Exhibit J Draw Request Forms ________, 199__ BNP Leasing Corporation c/o Banque Nationale de Paris 180 Montgomery Street San Francisco, California 94104 Attention: Ms. Jennifer Cho Re: Construction Advance Request No. __________ by 3Com Corporation Ladies and Gentlemen: Reference is made to the Lease Agreement between BNP Leasing Corporation (herein "Landlord") and 3Com Corporation (herein "Tenant") dated as of August 11, 1997 (herein "the Lease"). Capitalized terms defined in the Lease and used but not defined in this letter are intended to have the meanings assigned to them in the Lease. Tenant hereby makes request for a Construction Advance in the amount of $________________ (herein the "Current Advance"). Included herewith are: 1. An Application and Certificate for Payment based on AIA Form G702 (herein the "Contractor's Application") from Tenant's general contractor, attached to which is a schedule of values listing all subcontractors, suppliers and other parties to whom the general contractor has or will make payments from the draw requested in the Contractor's Application. The Contractor's Application evidences an obligation incurred by (and previously paid by) Tenant for construction of Improvements and for which Tenant is entitled to reimbursement from the Current Advance. 2. A list of any costs paid by Tenant, other than to the general contractor, for which Tenant is entitled to reimbursement from the proceeds of the Current Advance (herein the "Other Costs List"). 3. Invoices and requests for payments from the subcontractors and others entitled to payment from the general contractor for construction and related work covered by the Contractor's Application; excluding, however, invoices or requests from some or all subcontractors and others that, according to the Contractor's Application, are to be paid less than $300,000 from the draw requested in Contractor's Application. Such invoices and requests for payments are consistent with the detail shown in the schedule of values attached to the Contractor's Application. 4. Invoices or other evidence of the costs (if any) included in the Other Costs List. 5. A list of any "checks on hold" (i.e., payments withheld from subcontractors or suppliers by Tenant's general contractor because of some defect or deficiency in the payee's request for payment or in the work or materials provided by the payee) in excess of $50,000. 6. An up-to-date list of the names and addresses of any subcontractors that have actually filed a claim of lien against the Leased Property, together with, to the extent not already provided with a prior request for a Construction Advance, a copy of the claim of lien filed. 7. A certification of an officer of Tenant as required by Paragraph 6.(c)(viii) of the Lease. We hereby confirm that Landlord will not be responsible for the application of any funds advanced to Tenant or to any other party at our request. Sincerely, 3Com Corporation By:______________________________ Name:_________________________ Title:________________________ cc: BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd Cox Clint Shouse Thompson & Knight, a Professional Corporation 3300 First City Center 1700 Pacific Avenue Dallas, Texas 75201 Construction Advance Certificate Pursuant to Paragraph 6.(c)(viii) of the Lease dated as of August 11, 1997 (the "Lease") between 3Com Corporation ("Tenant") and BNP Leasing Corporation ("Landlord"), Tenant does hereby represent, warrant and certify to Landlord in connection with Tenant's request for Construction Advance No. __________ that: a) no Event of Default has occurred and is continuing, b) the representations and warranties of Tenant contained in the Lease are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof, subject only to the following exceptions: [LIST EXCEPTIONS HERE, OR IF THERE ARE NO EXCEPTIONS, INSERT "NONE"] c) Construction of the Designated Improvements has commenced and is progressing without any significant continuing interruption in a good and workmanlike manner and substantially in accordance with the requirements of the Lease and all Applicable Laws and Tenant has corrected or is diligently pursuing the correction of any significant defect in such construction, d) all costs and expenses for which Tenant is requesting reimbursement by the Construction Advance referenced above constitute actual costs and expenses incurred by Tenant for the Designated Improvements or for property taxes or assessments assessed against and paid with respect to the Leased Property, and e) Potential Lien Claimants have been paid all sums for which prior Construction Advances have been advanced, and the advance being requested will not result in an excess of $3,000,000 or more of (1) the total cost of work with respect to which Potential Lien Claimants could have asserted a lien against the Leased Property and for which Construction Advances have been advanced by Landlord, over (2) the cost of such work for which Tenant has provided to Landlord unconditional statutory lien releases from all Potential Lien Claimants. Capitalized terms used herein which are defined in the Lease but not in this Certificate shall have the meanings assigned to them in the Lease. In witness whereof, this Certificate is executed by an officer of 3Com Corporation as of ______________, 19___. 3Com Corporation By:______________________________ Name:_________________________ Title:________________________ List of Liens For Which a Claim of Lien Has Actually Been Filed (Construction Advance Request No. ________) Liens for which a claim of lien has actually been filed are as follows: 1. 2. 3. Other Costs List (Construction Advance Request No. ________) Costs paid - other than to Tenant's general contractor - by Tenant and for which Tenant is entitled to reimbursement from the Current Advance being requested are as follows: 1. 2. 3. Exhibit K Notice to Accelerate the Carrying Costs Accrual Termination Date BNP Leasing Corporation c/o Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Jennifer Cho or Will La Herran Re: Lease Agreement/3COM (Rolling Meadows Site) Gentlemen: This notice is furnished pursuant to subparagraph 1.(q) of that certain Lease Agreement dated as of August 11, 1997 (the "Lease Agreement," the terms defined therein being used herein as therein defined) between 3Com Corporation and you. I, the undersigned, the [chief financial officer, controller, treasurer or the assistant treasurer] of 3Com Corporation, do hereby notify you that 3COM Corporation irrevocably elects to accelerate the Carrying Costs Accrual Termination Date and thereby accelerate the commencement of Base Rent accruals and the termination of accruals of Carrying Costs. Because of this notice, the Carrying Costs Accrual Termination Date will occur on the next following Advance Date that is at least ten (10) days after the date you receive this notice. Executed this _____ day of ______________, ____. 3Com Corporation Name:_________________________ Title:________________________ [cc all Participants] Exhibit L Notice of LIBOR Period Election BNP Leasing Corporation c/o Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Jennifer Cho or Will La Herran Re: Lease Agreement dated as of August 11, 1997, between 3COM Corporation, as tenant, and BNP Leasing Corporation, as landlord Gentlemen: Capitalized terms used in this letter are intended to have the meanings assigned to them in the Lease referenced above. This letter constitutes notice to you that the LIBOR Period Election under the Lease shall be: ________________ month(s), beginning with the first Base Rent Period that commences on or after: ______________, ____. NOTE: YOU SHALL BE ENTITLED TO DISREGARD THIS NOTICE IF THE NUMBER OF MONTHS SPECIFIED ABOVE IS NOT A PERMITTED NUMBER UNDER THE DEFINITION OF "LIBOR PERIOD ELECTION" IN THE LIST OF DEFINED TERMS ATTACHED TO THE LEASE, OR IF THE DATE SPECIFIED ABOVE CONCERNING THE COMMENCEMENT OF THE LIBOR PERIOD ELECTION IS LESS THAN TEN BUSINESS DAYS AFTER YOUR RECEIPT OF THIS NOTICE. HOWEVER, WE ASK THAT YOU NOTIFY US IMMEDIATELY IF FOR ANY REASON YOU BELIEVE THIS NOTICE IS DEFECTIVE. Executed this _____ day of ______________, 19___. 3COM CORPORATION Name:_________________________ Title:________________________ [cc all Participants] Schedule 1 LIST OF APPROVED PARTICIPANTS "Approved Participants" as used in this Lease will include the existing Participants, Banque Nationale de Paris and ABN Amro Bank N.V., and the following prospective participants, to the extent that any one or more of the following may at the request of Landlord become parties to the Participation Agreement and the Pledge Agreement by executing supplements to those agreements as therein provided: Credit Suisse First Boston Industrial Bank of Japan, Limited Mellon Bank, N.A. Societe Generale The Toronto-Dominion Bank The Bank of Nova Scotia Union Bank of California EX-10 11 EXHIBIT 10.22 The transactions contemplated in this Purchase Agreement have been made possible by the following banks, acting in the capacities indicated: Banque Nationale de Paris, ABN Amro Bank N.V., as Administrative/Documentation as Syndication Agent and Agent and Arranger Co-Arranger $95,000,000 PURCHASE AGREEMENT BETWEEN BNP LEASING CORPORATION, AS SELLER AND 3COM CORPORATION, AS PURCHASER EFFECTIVE AS OF AUGUST 11, 1997 (Rolling Meadows Site) PURCHASE AGREEMENT This PURCHASE AGREEMENT (this "Agreement") is made as of August 11, 1997, by 3COM CORPORATION, a Delaware corporation ("3COM") and BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"). R E C I T A L S --------------- A. BNPLC is acquiring the land described in Exhibit A attached hereto and the improvements and fixtures located thereon, if any, and is leasing the same to 3COM pursuant to that certain Lease Agreement dated as of the date hereof (as from time to time supplemented, amended or restated, the "Lease"). (The land described in Exhibit A and any and all other real or personal property from time to time covered by the Lease and included within the "Leased Property" as defined therein are hereinafter collectively referred to as the "Property".) B. BNPLC is also concurrently herewith receiving a separate environmental indemnity from 3COM pursuant to an Environmental Indemnity Agreement (as from time to time supplemented, amended or restated, the "Environmental Indemnity") between 3COM and BNPLC dated as of the date hereof. C. 3COM has requested an option to purchase the Property, which BNPLC is willing to provide on and subject to the terms and conditions set out herein. NOW, THEREFORE, in consideration of the above recitals and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Definitions. As used herein, the terms "3COM", "BNPLC", "Lease", "Leased Property", "Property", and "Environmental Indemnity" shall have the meanings indicated above; terms with initial capitals defined in the Lease and used but not defined herein shall have the meanings assigned to them in the Lease; and the terms listed immediately below shall have the following meanings: "Applicable Purchaser" means any third party designated by 3COM to purchase the interest of BNPLC in the Property as provided in Paragraph 2(a)(ii) below. "Deposit Taker" shall have the meaning assigned to it in the Pledge Agreement. "Deposit Taker Losses" shall have the meaning assigned to it in the Pledge Agreement. "Designated Sale Date" means the earlier of: (1) the effective date of any termination of the Lease by 3COM pursuant to Paragraph 2 thereof; (2) any date designated by BNPLC in a written notice given by BNPLC to 3COM when an Event of Default by 3COM is continuing, provided the notice of the date so designated is given by BNPLC at least thirty (30) days before the date so designated; or (3) the first Business Day in September, 2002. "Direct Payments to Participants" means the amounts paid or required to be paid directly to Participants on the Designated Sale Date as provided in Section 6.2 of the Pledge Agreement at the direction of and for 3COM by the collateral agent appointed pursuant to the Pledge Agreement from all or any part of the Collateral described therein. "Fair Market Value" means the fair market value of the Property on or about the Designated Sale Date (calculated under the assumptions, whether or not then accurate, that 3COM has maintained the Property in compliance with all Applicable Laws [including Environmental Laws]; that 3COM has completed the construction of any Improvements which was commenced prior to the Designated Sale Date; that all such Improvements are self-sufficient in the sense that any easements or offsite facilities needed for their use will be available at no additional cost to the owner of the Improvements; that 3COM has repaired and restored the Property after any damage following fire or other casualty; that 3COM has restored the remainder of the Property after any partial taking by eminent domain; that 3COM has completed any contests of and paid any taxes due [other than Excluded Taxes] or other amounts secured by or allegedly secured by a lien against the Property other than Prohibited Encumbrances; that no conditions or circumstances on or about the Property [such as the presence of an endangered species] is discovered that will impede the use or any development of the Property permitted by the Lease; that any use or development of the Property as permitted by the Lease will not be hindered or delayed because of the limited availability of utilities or water; that without undue cost or delay any purchaser paying fair market value for the Property can obtain any necessary permits or licenses needed to use the Property for the purposes permitted by the Lease; and that 3COM has cured any title defects affecting the Property other than Prohibited Encumbrances, all in accordance with the standards and requirements of the Lease as though the Lease were continuing in force) as determined by an independent MAI appraiser selected by BNPLC, which appraiser must have five (5) years or more experience appraising similar properties in Illinois. "Qualified Deposit Taker" means one of the fifty largest (measured by total assets) U.S. banks, or one of the one hundred largest (measured by total assets) banks in the world, with debt ratings of at least (i) A- (in the case of long term debt) and A-1 (in the case of short term debt) or the equivalent thereof by Standard and Poor's Corporation, and (ii) A (in the case of long term debt) and P-1 (in the case of short term debt) or the equivalent thereof by Moody's Investor Service, Inc. The parties believe it improbable that the ratings systems used by Standard and Poor's Corporation and by Moody's Investor Service, Inc. will be discontinued or changed, but if such ratings systems are discontinued or changed, 3COM shall be entitled to select and use a comparable ratings systems as a substitute for the S&P Rating or the Moody Rating, as the case may be, for purposes of determining the status of any bank as a Qualified Deposit Taker. "Purchase Price" means an amount equal to Stipulated Loss Value outstanding on the Designated Sale Date, plus all costs and expenses (including appraisal costs, withholding taxes (if any), documentary or transfer taxes, and reasonable Attorneys' Fees, as defined in the Lease) incurred in connection with any sale of the Property by BNPLC hereunder or in connection with collecting sales proceeds due hereunder, less the aggregate amounts (if any) of Direct Payments to Participants and Deposit Taker Losses. "Prohibited Encumbrance" means any lien or other title defect encumbering the Property that is claimed by BNPLC itself or lawfully claimed by a third party through or under BNPLC, including any judgment lien lawfully filed against BNPLC and including any tax lien assessed because of BNPLC's failure to pay Excluded Taxes, but excluding the Lease and any lien or other title defect that (i) is a Permitted Encumbrance (as defined in the Lease), regardless of whether claimed by, through or under BNPLC, (ii) is claimed by, through or under 3COM or any of the Participants approved by 3COM (other than Landlord's Parent), or (iii) exists because of any breach by 3COM of the Lease, because of anything done or not done by BNPLC in an effort to satisfy subparagraph 9(b) of the Lease, or because of anything done or not done by BNPLC at the request of 3COM. "Remarketing Notice" shall have the meaning assigned to it in Paragraph 2(b)(1) below. "Required Documents" means the special warranty deed and other documents that BNPLC must tender pursuant to Paragraph 3 below. "Shortage Amount" means any amount payable to BNPLC by 3COM, rather than by the Applicable Purchaser, pursuant to clause 2(a)(ii) below. 2. 3COM's Options and Obligations on the Designated Sale Date. (a) Choices. On the Designated Sale Date 3COM shall have the right and the obligation to either: (i) purchase BNPLC's interest in the Property and in Escrowed Proceeds, if any, for a net cash price equal to the Purchase Price; or (ii) cause the Applicable Purchaser to purchase BNPLC's interest in the Property and in Escrowed Proceeds, if any, for a net cash price not less than the lesser of (a) the Fair Market Value of the Property, (b) fifteen percent (15%) of Stipulated Loss Value outstanding immediately prior to the purchase or (c) the Purchase Price. If, however, the Fair Market Value is less than fifteen percent (15%) of Stipulated Loss Value and less than the Purchase Price, BNPLC may elect to keep the Property and any Escrowed Proceeds rather than sell to the Applicable Purchaser, in which case 3COM shall pay BNPLC an amount equal to (A) eighty-five percent (85%) of Stipulated Loss Value, less (B) the sum of (x) any Escrowed Proceeds then held and to be retained by BNPLC, (y) any Direct Payments to Participants and (z) any Deposit Taker Losses. Unless BNPLC elects to keep the Property pursuant to the preceding sentence, 3COM must make a supplemental payment to BNPLC on the Designated Sale Date equal to the excess (if any) of the Purchase Price over the net cash price actually paid to BNPLC on the Designated Sale Date by the Applicable Purchaser for BNPLC's interest in the Property and in Escrowed Proceeds, if any. However, provided no Event of Default has occurred and is continuing under the Lease, and provided further that neither 3COM nor any Applicable Purchaser has failed to pay any amount required to be paid by this Agreement on the date such amount first became due, any supplemental payment required by the preceding sentence shall not exceed (1) eighty-five percent (85%) of Stipulated Loss Value on the Designated Sale Date, less (2) any Direct Payments to Participants and any Deposit Taker Losses. Any supplemental payment payable to BNPLC by 3COM, rather than by the Applicable Purchaser, pursuant to this clause (ii) is hereinafter referred to as the "Shortage Amount." If the net cash price actually paid by the Applicable Purchaser to BNPLC exceeds the Purchase Price and all other sums that are then due from 3COM to BNPLC, 3COM shall be entitled to such excess. If any amount payable to BNPLC pursuant to this subparagraph 2(a) is not actually paid to BNPLC on the Designated Sale Date, 3COM shall pay interest on the past due amount computed at the Default Rate from the Designated Sale Date. However, 3Com shall be entitled to a reduction of the interest required by the preceding sentence equal to the Base Rent, if any, paid by 3Com as provided in Paragraph 17 of the Lease for any holdover period after the Designated Sale Date. (b) Election by 3COM. 3COM shall have the right to elect whether it will satisfy the obligations set out in clause (i) or (ii) of the preceding Paragraph 2(a); provided, however, that the following conditions are satisfied: (1) To give BNPLC the opportunity to have the Fair Market Value determined by an appraiser as provided in the definition of Fair Market Value above before the Designated Sale Date, 3COM must, unless 3COM concedes that Fair Market Value will not be less than fifteen percent (15%) of Stipulated Loss Value on the Designated Sale Date, provide BNPLC with a Remarketing Notice. "Remarketing Notice" means a notice given by 3COM to BNPLC (and to each of the Participants) no earlier than one hundred eighty (180) days before the Designated Sale Date and no later than ninety (90) days before the Designated Sale Date, specifying that 3COM does not concede that the Fair Market Value is equal to or greater than fifteen percent (15%) of the Stipulated Loss Value. A Remarketing Notice will be required only if 3COM does not concede that Fair Market Value will equal or exceed fifteen percent (15%) of Stipulated Loss Value on the Designated Sale Date. But if for any reason (including but not limited to any acceleration of the Designated Sale Date pursuant to clause (2) of the definition of Designated Sale Date above) 3COM fails to provide a Remarketing Notice within the time periods specified in the definition of Remarketing Notice above, Fair Market Value shall, for purposes of this Agreement, be deemed to be no less than fifteen percent (15%) of Stipulated Loss Value on the Designated Sale Date. (2) To give BNPLC the opportunity to prepare the Required Documents before the Designated Sale Date, 3COM must, if it is to elect to satisfy the obligations set forth in clause (ii) of Paragraph 2(a), irrevocably specify an Applicable Purchaser in notice to BNPLC given at least seven (7) days prior to the Designated Sale Date. If for any reason 3COM fails to so specify an Applicable Purchaser, 3COM shall be deemed to have irrevocably elected to satisfy the obligations set forth in clause (i) of Paragraph 2(a). (c) Termination of 3COM's Option To Purchase. Without limiting BNPLC's right to require 3COM to satisfy the obligations imposed by Paragraph 2(a), 3COM shall have no further option hereunder to purchase the Property if either: (1) 3COM shall have elected to satisfy its obligations under clause (ii) of Paragraph 2(a) on a Designated Sale Date and BNPLC shall have elected to keep the Property on such Designated Sale Date in accordance with clause (ii) of Paragraph 2(a); or (2) 3COM shall have failed on a Designated Sale Date to make or cause to be made all payments to BNPLC required by this Agreement or by the Lease and such failure shall have continued beyond the thirty (30) day period for tender specified in the next sentence. If BNPLC does not receive all payments due under the Lease and all payments required hereunder on a Designated Sale Date, 3COM may nonetheless tender to BNPLC the full Purchase Price and all amounts then due under the Lease, together with interest on the total Purchase Price computed at the Default Rate from the Designated Sale Date to the date of tender, and if presented with such a tender within thirty (30) days after the applicable Designated Sale Date, BNPLC must accept it and promptly thereafter deliver any Escrowed Proceeds and a deed and all other Required Documents listed in Paragraph 3. (d) Payment to BNPLC. All amounts payable under the preceding Paragraphs 2(a) or 2(c) by 3COM and, if applicable, by the Applicable Purchaser must be paid directly to BNPLC, and no payment to any other party shall be effective for the purposes of this Agreement. In addition to the payments required under Paragraph 2(a) hereunder, on the Designated Sale Date 3COM must pay all amounts then due to BNPLC under the Lease. BNPLC will remit any excess amounts due 3COM pursuant to the last sentence of clause (ii) of Paragraph 2(a) promptly after BNPLC's receipt of the same and in no event later than thirty (30) days thereafter. (e) Effect of Options on Subsequent Title Encumbrances. It is the intent of BNPLC and 3COM that any conveyance of the Property to 3COM or any Applicable Purchaser pursuant to this Agreement shall cut off and terminate any interest in the Property claimed by, through or under BNPLC, including the Participants (but not any unsatisfied obligations to BNPLC under the Lease, the Environmental Indemnity or this Agreement), including but not limited to any Prohibited Encumbrances and any leasehold or other interests conveyed by BNPLC in the ordinary course of BNPLC's business. Anyone accepting or taking any interest in the Property by or through BNPLC after the date of this Agreement shall acquire such interest subject to the rights and options granted 3COM hereby. Further, 3COM and any Applicable Purchaser shall be entitled to pay any payment required by this Agreement for the purchase of the Property directly to BNPLC notwithstanding any prior conveyance or assignment by BNPLC, voluntary or otherwise, of any right or interest in this Agreement or the Property, and neither 3COM nor any Applicable Purchaser shall be responsible for the proper distribution or application of any such payments by BNPLC. 3. Terms of Conveyance Upon Purchase. Immediately after receipt of all payments to BNPLC required pursuant to the preceding Paragraph 2, BNPLC must, unless it is to keep the Property as permitted by Paragraph 2(a)(ii), deliver all Escrowed Proceeds, if any, and convey all of its right, title and interest in the Property by special warranty deed to 3COM or the Applicable Purchaser, as the case may be, subject only to the Permitted Encumbrances (as defined in the Lease) and any other encumbrances that do not constitute Prohibited Encumbrances. However, such conveyance shall not include the right to receive any payment under the Lease then due BNPLC or that may become due thereafter because of any expense or liability incurred by BNPLC resulting in whole or in part from events or circumstances occurring before such conveyance. All costs of such purchase and conveyance of every kind whatsoever, both foreseen and unforeseen, shall be the responsibility of the purchaser, and the form of special warranty deed used to accomplish such conveyance shall be substantially in the form attached as Exhibit B. With such special warranty deed, BNPLC shall also tender to 3COM or the Applicable Purchaser, as the case may be, the following, each fully executed and, where appropriate, acknowledged on BNPLC's behalf by an officer of BNPLC: (1) a Bill of Sale and Assignment of Contract Rights and Intangible Assets in the form attached as Exhibit D, (2) an Acknowledgment of Disclaimer of Representations and Warranties, in the form attached as Exhibit E, which 3COM or the Applicable Purchaser must execute and return to BNPLC, (3) a Secretary's Certificate in the form attached as Exhibit G, (4) a letter to the title insurance company insuring title to the Property in the form attached as Exhibit H, (5) a certificate concerning tax withholding in the form attached as Exhibit I, and (6) to the extent required by local or state taxing authorities, real estate transfer tax declarations in standard form like those executed by Seller in connection with the closing of its sale of the Property to BNPLC under the Existing Contract. 4. Survival of 3COM's Obligations. (a) Status of this Agreement. Except as expressly provided in the last sentence of this subparagraph and elsewhere herein, this Agreement shall not terminate, nor shall 3COM have any right to terminate this Agreement, nor shall 3COM be entitled to any reduction of the Purchase Price hereunder, nor shall the obligations of 3COM to BNPLC under Paragraph 2 be affected by reason of (i) any damage to or the destruction of all or any part of the Property from whatever cause, (ii) the taking of or damage to the Property or any portion thereof under the power of eminent domain or otherwise for any reason, (iii) the prohibition, limitation or restriction of 3COM's use of all or any portion of the Property or any interference with such use by governmental action or otherwise, (iv) any eviction of 3COM or any party claiming under 3COM by paramount title or otherwise, (v) 3COM's prior acquisition or ownership of any interest in the Property, (vi) any default on the part of BNPLC under this Agreement, the Lease or any other agreement to which BNPLC is a party, or (vii) any other cause, whether similar or dissimilar to the foregoing, any existing or future law to the contrary notwithstanding. It is the intention of the parties hereto that the obligations of 3COM hereunder (including 3COM's obligation to make payments under - and, if applicable, to cause the Applicable Purchaser to make payments under - Paragraph 2) shall be separate and independent of the covenants and agreements of BNPLC. Accordingly, the Purchase Price and the Shortage Amount, as the case may be under Paragraph 2, shall continue to be payable in all events, and the obligations of 3COM hereunder shall continue unaffected by any breach of this Agreement by BNPLC. However, nothing in this subparagraph, nor the performance without objection by 3COM of its obligations hereunder, shall be construed as a waiver by 3COM of any right 3COM may have at law or in equity, following any failure by BNPLC to tender a special warranty deed and the other Required Documents as required by Paragraph 3 upon the tender by 3COM and/or the Applicable Purchaser of the payments required by Paragraph 2 and of the other documents to be executed in favor of BNPLC at the closing of the sale hereunder, to (i) recover monetary damages proximately caused by such failure of BNPLC if BNPLC does not cure the failure within thirty (30) days after 3COM demands a cure by written notice to BNPLC, or (ii) a decree compelling performance of BNPLC's obligation to so tender a special warranty deed and the Required Documents. (b) Remedies Under the Lease and the Environmental Indemnity. No repossession of or re-entering upon the Property or exercise of any other remedies available under the Lease or the Environmental Indemnity shall relieve 3COM of its liabilities and obligations hereunder, all of which shall survive the exercise of remedies under the Lease and Environmental Indemnity. 3COM acknowledges that the consideration for this Agreement is separate and independent of the consideration for the Lease and the Environmental Indemnity, and 3COM's obligations hereunder shall not be affected or impaired by any event or circumstance that would excuse 3COM from performance of its obligations under the Lease or the Environmental Indemnity. 5. Remedies Cumulative. No right or remedy herein conferred upon or reserved to BNPLC is intended to be exclusive of any other right or remedy BNPLC has with respect to the Property, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity or by statute. In addition to other remedies available under this Agreement, either party shall be entitled, to the extent permitted by applicable law, to a decree compelling performance of any of the other party's agreements hereunder. 6. No Implied Waiver. The failure of either party to this Agreement to insist at any time upon the strict performance of any covenant or agreement of the other party or to exercise any remedy contained in this Agreement shall not be construed as a waiver or a relinquishment thereof for the future. The waiver by either party of or redress for any violation of any term, covenant, agreement or condition contained in this Agreement shall not prevent a subsequent act, which would have originally constituted a violation, from having all the force and effect of an original violation. No express waiver by either party shall affect any condition other than the one specified in such waiver and that one only for the time and in the manner specifically stated. A receipt by BNPLC of any payment hereunder with knowledge of the breach of this Agreement shall not be deemed a waiver of such breach, and no waiver by either party of any provision of this Agreement shall be deemed to have been made unless expressed in writing and signed by the waiving party. 7. Attorneys' Fees and Legal Expenses. If either party commences any legal action or other proceeding to enforce any of the terms of this Agreement or the documents and agreements referred to herein, or because of any breach by the other party or dispute hereunder or thereunder, the successful or prevailing party, shall be entitled to recover from the nonprevailing party all Attorneys' Fees incurred in connection therewith, whether or not such controversy, claim or dispute is prosecuted to a final judgment. Any such Attorneys' Fees incurred by either party in enforcing a judgment in its favor under this Agreement shall be recoverable separately from such judgment, and the obligation for such Attorneys' Fees is intended to be severable from other provisions of this Agreement and not to be merged into any such judgment. 8. Estoppel Certificate. 3COM and BNPLC will each, upon not less than twenty (20) days' prior written request by the other, execute, acknowledge and deliver to the requesting party a written statement certifying that this Agreement is unmodified and in full effect (or, if there have been modifications, that this Agreement is in full effect as modified, and setting forth such modification) and either stating that no default exists hereunder or specifying each such default of which the signer may have knowledge. Any such statement may be relied upon by any Participant or prospective purchaser or assignee of BNPLC with respect to the Property. Neither 3COM nor BNPLC shall be required to provide such a certificate more frequently than once in any six month period; provided, however, that if either party determines that there is a significant business reason for requiring a current certificate, including, without limitation, the need to provide such a certificate to a prospective purchaser or assignee, the other shall provide a certificate upon request whether or not it had provided a certificate within the prior six month period. 9. Notices. Each provision of this Agreement referring to the sending, mailing or delivery of any notice or referring to the making of any payment to BNPLC, shall be deemed to be complied with when and if the following steps are taken: (a) All payments required to be made by 3COM or the Applicable Purchaser to BNPLC hereunder shall be paid to BNPLC in immediately available funds by wire transfer to: Federal Reserve Bank of San Francisco Account: Banque Nationale de Paris ABA #: 121027234 Reference: 3COM (Rolling Meadows Site) or at such other place and in such other manner as BNPLC may designate in a notice to 3COM (provided BNPLC will not unreasonably designate a method of payment other than wire transfer). Time is of the essence as to all payments to BNPLC under this Agreement. Any payments required to be made by BNPLC to 3COM pursuant to the last sentence of clause (ii) of Paragraph 2(a) shall be paid to 3COM in immediately available funds at the address of 3COM set forth below or as 3COM may otherwise direct by written notice sent in accordance herewith. (b) All notices, demands and other communications to be made hereunder to the parties hereto shall be in writing (at the addresses set forth below) and shall be given by any of the following means: (A) personal service, with proof of delivery or attempted delivery retained; (B) electronic communication, whether by telex, telegram or telecopying (if confirmed in writing sent by United States first class mail, return receipt requested); or (C) registered or certified first class mail, return receipt requested. Such addresses may be changed by notice to the other parties given in the same manner as provided above. Any notice or other communication sent pursuant to clause (A) or (C) hereof shall be deemed received (whether or not actually received) upon first attempted delivery at the proper notice address on any Business Day between 9:00 A.M. and 5:00 P.M., and any notice or other communication sent pursuant to clause (B) hereof shall be deemed received upon dispatch by electronic means. Address of BNPLC: BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd Cox Telecopy: (214) 969-0060 With a copy to: Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention:Jennifer Cho or William J. La Herran Telecopy: (415) 296-8954 And with a copy to: Clint Shouse Thompson & Knight, P.C. 1700 Pacific Avenue Suite 3300 Dallas, Texas 75201 Telecopy: (214) 969-1550 Address of 3COM: 3Com Corporation 5400 Bayfront Plaza Santa Clara, California 95052 Attn: Legal Dept. Mail Stop 1308 Telecopy: (408) 764-6434 With copies to: 3Com Corporation 5400 Bayfront Plaza Santa Clara, California 95052 Attn: Real Estate Dept. Mail Stop 1220 Telecopy: (408) 764-5718; and 3Com Corporation 5400 Bayfront Plaza Santa Clara, California 95052 Attn: Treasury Dept. Mail Stop 1307 Telecopy: (408) 764-8403; and Gray Cary Ware & Freidenrich 400 Hamilton Avenue Palo Alto, California 94301 Attn: Jonathan E. Rattner, Esq. Telecopy: (415) 328-3029 10. Severability. Each and every covenant and agreement of 3COM contained in this Agreement is, and shall be construed to be, a separate and independent covenant and agreement. If any term or provision of this Agreement or the application thereof to any person or circumstances shall to any extent be invalid and unenforceable, the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby. Further, the obligations of 3COM hereunder, to the maximum extent possible, shall be deemed to be separate, independent and in addition to, not in lieu of, the obligations of 3COM under the Lease. In the event of any inconsistency between the terms of this Agreement and the terms and provisions of the Lease, the terms and provisions of this Agreement shall control. 11. Entire Agreement. This Agreement and the documents and agreements referred to herein set forth the entire agreement between the parties concerning the subject matter hereof and no amendment or modification of this Agreement shall be binding or valid unless expressed in a writing executed by both parties hereto. 12. Paragraph Headings. The paragraph headings contained in this Agreement are for convenience only and shall in no way enlarge or limit the scope or meaning of the various and several paragraphs hereof. 13. Gender and Number. Within this Agreement, words of any gender shall be held and construed to include any other gender and words in the singular number shall be held and construed to include the plural, unless the context otherwise requires. 14. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE UNDER AND SHALL BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS. 15. Successors and Assigns. The terms, provisions, covenants and conditions hereof shall be binding upon 3COM and BNPLC and their respective permitted successors and assigns and shall inure to the benefit of 3COM and BNPLC and all permitted transferees, mortgagees, successors and assignees of 3COM and BNPLC with respect to the Property; provided, that the rights of BNPLC hereunder shall not pass to 3COM or any Applicable Purchaser or any subsequent owner claiming through them. Prior to the Designated Sale Date BNPLC may transfer, assign and convey, in whole or in part, the Property and any and all of its rights under this Agreement (subject to the terms of this Agreement) by any conveyance that constitutes a Permitted Transfer, but not otherwise. If BNPLC sells or otherwise transfers the Property and assigns its rights under this Agreement and the Lease pursuant to a Permitted Transfer, then to the extent BNPLC's successor in interest confirms its liability for the obligations imposed upon BNPLC by this Agreement and the Lease on and subject to the express terms set out herein and therein, BNPLC shall thereby be released from any further obligations thereafter arising under this Agreement and the Lease, and 3COM will look solely to each successor in interest of BNPLC for performance of such obligations. 16. WAIVER OF JURY TRIAL. BNPLC AND 3COM EACH HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THE LEASE, THIS AGREEMENT OR ANY OTHER DOCUMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION AND THE RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without limitation, contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. 3COM and BNPLC each acknowledge that this waiver is a material inducement to enter into a business relationship, that each has already relied on the waiver in entering into this Agreement and the other documents referred to herein, and that each will continue to rely on the waiver in their related future dealings. 3COM and BNPLC each further warrant and represent that it has reviewed this waiver with its legal counsel, and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LEASE, THIS AGREEMENT OR THE ENVIRONMENTAL INDEMNITY. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. 17. Security for 3COM's Obligations. 3COM's obligations under this Agreement are secured by the Pledge Agreement, reference to which is hereby made for a description of the Collateral covered thereby and the rights and remedies provided to BNPLC thereby. Although the collateral agent appointed for BNPLC as provided in the Pledge Agreement shall be entitled to hold all Collateral as security for the full and faithful performance by 3COM of 3COM's covenants and obligations under this Agreement, the Collateral shall not be considered an advance payment of the Purchase Price or any Shortage Amount or a measure of BNPLC's damages should 3COM breach this Agreement. If 3COM does breach this Agreement and fails to cure the same within any time specified herein for the cure, BNPLC may, from time to time, without prejudice to any other remedy and without notice to 3COM, require the collateral agent to immediately apply the proceeds of any disposition of the Collateral (and any cash included in the Collateral) to amounts then due hereunder from 3COM. If BNPLC assigns its interest in the Property before the Designated Sale Date, BNPLC may also assign BNPLC's interest in the Collateral to the assignee. 18. Replacement of Participants Proposed by 3COM. So long as no Event of Default has occurred and is continuing, BNPLC shall not unreasonably withhold its approval for a substitution under the Participation Agreement of a new Participant proposed by 3COM for any Participant, the Deposit Taker for whom has ceased to be a Qualified Deposit Taker; provided, however, that (A) the proposed substitution can be accomplished without a release or breach by BNPLC of its rights and obligations under the Participation Agreement or the "Underlying Documents" described therein (including this Purchase Agreement); (B) the new Participant will agree (by executing Supplements to the Participation Agreement and Pledge Agreement as therein contemplated and by other agreements as may be reasonably required by BNPLC and 3COM) to become a party to the Participation Agreement and to the Pledge Agreement, to designate a Qualified Deposit Taker as the Deposit Taker for it under the Pledge Agreement and to accept a Percentage under the Participation Agreement equal to the Percentage of the Participant to be replaced; (C) the new Participant (or 3COM) will provide the funds required to pay the termination fee by Section 6.4 of the Participation Agreement to accomplish the substitution; (D) 3COM (or the new Participant) agrees in writing to indemnify and defend BNPLC for any and all Losses incurred by BNPLC in connection with or because of the substitution, including the cost of preparing supplements to the Participation Agreement and the Pledge Agreement and including any cost of defending and paying any claim asserted by the Participant to be replaced because of the substitution (but not including any liability of BNPLC to such Participant for damages caused by BNPLC's bad faith or gross negligence in the performance of BNPLC's obligations under the Participation Agreement prior to the substitution); and (E) the new Participant shall be a reputable financial institution having a net worth of no less than seven and one half percent (7.5%) of total assets and total assets of no less than $10,000,000,000.00 (all according to then recent audited financial statements). BNPLC shall attempt in good faith to assist (and cause its Affiliate, Banque Nationale de Paris, to attempt in good faith to assist) 3COM in identifying a new Participant that 3COM may propose to substitute for an existing Participant pursuant to this Paragraph, as 3COM may reasonably request from time to time. However, in no event shall BNPLC itself, or any of its Affiliates, be required to take the Percentage of any Participant to be replaced. 19. Security for BNPLC's Obligations. To secure 3COM's right to recover any damages caused by a breach of Paragraph 3 by BNPLC, including any such breach caused by a rejection or termination of this Agreement in any bankruptcy or insolvency proceeding instituted by or against BNPLC, as debtor, BNPLC does hereby grant to 3COM a mortgage, lien and security interest against all rights, title and interests of BNPLC from time to time in and to the Property. 3COM may enforce such mortgage, lien and security interest judicially after any such breach by BNPLC, but not otherwise. 3COM waives any right it has to seek a deficiency judgement against BNPLC in any action brought for a judicial foreclosure of such mortgage, lien and security interest, and in connection therewith, BNPLC hereby acknowledges that it shall have no right of redemption following any such judicial foreclosure. Contemporaneously with the execution of this Agreement, 3COM and BNPLC will execute a memorandum of this Agreement which is in recordable form and which specifically references the mortgage, lien and security interest granted in this Paragraph, and 3COM shall be entitled to record such memorandum at any time prior to the Designated Sale Date. 20. Not a Partnership, Etc. NOTHING IN THIS PURCHASE AGREEMENT IS INTENDED TO BE OR TO CREATE ANY PARTNERSHIP, JOINT VENTURE, OR OTHER JOINT ENTERPRISE BETWEEN BNPLC AND 3COM. NEITHER THE EXECUTION OF THIS PURCHASE AGREEMENT NOR THE ADMINISTRATION OF THIS PURCHASE AGREEMENT OR OTHER DOCUMENTS REFERENCED HEREIN BY BNPLC, NOR ANY OTHER RIGHT, DUTY OR OBLIGATION OF BNPLC UNDER OR PURSUANT TO THIS PURCHASE AGREEMENT OR SUCH DOCUMENTS IS INTENDED TO BE OR TO CREATE ANY FIDUCIARY OBLIGATIONS OF BNPLC TO 3COM. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties have executed this Purchase Agreement as of August 11, 1997. "BNPLC" BNP LEASING CORPORATION, a Delaware corporation By: /s/ Lloyd G. Cox ---------------------------- Lloyd G. Cox, Vice President [Continuation of signature pages to Purchase Agreement dated to be effective August 11, 1997] "3COM" 3COM CORPORATION, a Delaware corporation By: /s/ Mark D. Michael --------------------------- Mark D. Michael, SVP, General Counsel & Secretary Exhibit A Legal Description PARCEL 1: Lot 1 in 3800 Golf Road Subdivision of part of Fractional Section 7, Township 41 North, Range 11, East of the Third Principal Meridian, according to the plat recorded January 31, 1996 as Document No. 96080514, in Cook County, Illinois. PARCEL 2: Easement for the benefit of Parcel 1 aforesaid, to go upon Lot 2 in 3800 Golf Road Subdivision aforesaid, for the purpose of performing work of construction and maintenance of Berm if such work is not timely performed by the owner of said Lot 2, as granted in paragraph 9.4 of Article 9 of the Declaration and Grant of Easements, Covenants and Restrictions executed by AT&T Corp., a New York corporation, dated January 26, 1996 and recorded February 9, 1996 as Document No. 96110279, in Cook County, Illinois. Exhibit B Prepared by: Clint Shouse Thompson & Knight, P.C. 1700 Pacific Avenue Suite 3300 Dallas, Texas 75201 After Recording Return to: ________________________________ ________________________________ ________________________________ Attention:______________________ Above Space for Recorder's Use P.I.N. Nos.: 08-07-401-006-0000; 08-07-402-010-0000; 08-07-402-013-0000; 08-07-403-004-0000; 08-07-403-009-0000 Property Address: 3800 Golf Road, Rolling Meadows, Illinois SPECIAL WARRANTY DEED THIS INDENTURE, made this _________ day of __________, 1997, between BNP LEASING CORPORATION, a Delaware corporation ("Grantor"), and [3COM OR THE APPLICABLE PURCHASER, AS THE CASE MAY BE] having an office at ________________________ ("Grantee"), WITNESSETH, that the Grantor for and in consideration of the sum of [INSERT AMOUNT] and other good and valuable consideration in hand paid to Grantor by Grantee, the receipt and sufficiency of which are hereby acknowledged, and by these presents does REMISE, RELEASE, ALIEN, AND CONVEY unto Grantee, FOREVER, all of the real estate, situated in the County of Cook and State of Illinois known and described as 3800 Golf Road, Rolling Meadows, Illinois and legally described in Annex A attached hereto and made a part hereof (the "Property"), together with any buildings and other improvements situated thereon, any fixtures and other property affixed thereto and all right, title, and interest of Grantor in and to adjacent streets, alleys, and rights-of-way; provided, however, this conveyance is made by Grantor and accepted by Grantee subject to the following, as well as the Permitted Encumbrances described on Annex B (collectively, the "Permitted Encumbrances"): 1. Real Estate Taxes not yet due and payable; 2. General or Special Assessments due and payable after the date hereof; and 3. Encroachments, variations in area or in measurements, boundary line disputes, roadways and other matters not of record which would be disclosed by a survey and inspection of the property conveyed hereby. TO HAVE AND TO HOLD the Property, together with all and singular the rights and appurtenances thereto belonging unto Grantee, its successors and assigns, forever, and Grantor does hereby bind Grantor and Grantor's successors and assigns to WARRANT AND FOREVER defend all and singular the said premises unto Grantee, its successors and assigns against every person whomsoever lawfully claiming, or to claim the same, or any part thereof by, through or under Grantor, but not otherwise; subject, however, to the Permitted Encumbrances. Except as expressly set forth in the preceding sentence, Grantor makes no warranty of title, express or implied. IN WITNESS WHEREOF, said Grantor has caused its name to be signed to these presents by its ___________, as of the day and year first above written. BNP LEASING CORPORATION a Delaware corporation By:________________________________ Its:_______________________________ STATE OF TEXAS ) ) SS COUNTY OF DALLAS ) The foregoing instrument was acknowledged before me this __________ day of ______________ , ___________, by __________________, ________________ of BNP Leasing Corporation, a Delaware corporation, on behalf of the corporation. ______________________________________ NOTARY PUBLIC My Commission Expires on _____________________. MAIL SUBSEQUENT TAX BILLS TO: ________________________________ ________________________________ ________________________________ ________________________________ Annex A LEGAL DESCRIPTION PARCEL 1: Lot 1 in 3800 Golf Road Subdivision of part of Fractional Section 7, Township 41 North, Range 11, East of the Third Principal Meridian, according to the plat recorded January 31, 1996 as Document No. 96080514, in Cook County, Illinois. PARCEL 2: Easement for the benefit of Parcel 1 aforesaid, to go upon Lot 2 in 3800 Golf Road Subdivision aforesaid, for the purpose of performing work of construction and maintenance of Berm if such work is not timely performed by the owner of said Lot 2, as granted in paragraph 9.4 of Article 9 of the Declaration and Grant of Easements, Covenants and Restrictions executed by AT&T Corp., a New York corporation, dated January 26, 1996 and recorded February 9, 1996 as Document No. 96110279, in Cook County, Illinois. Annex B Permitted Encumbrances [NOTE: TO THE EXTENT THAT SPECIFIC ENCUMBRANCES (OTHER THAN "PROHIBITED LIENS") ARE IDENTIFIED IN ADDITION TO THOSE DESCRIBED BELOW, SUCH ADDITIONAL ENCUMBRANCES WILL BE ADDED TO THE LIST BELOW AND THIS "NOTE" WILL BE DELETED BEFORE THIS DEED IS ACTUALLY EXECUTED AND DELIVERED BY BNPLC. SUCH ADDITIONAL ENCUMBRANCES WOULD INCLUDE ANY NEW ENCUMBRANCES APPROVED BY BNPLC AS "PERMITTED ENCUMBRANCES" FROM TIME TO TIME BECAUSE OF 3COM'S REQUEST FOR BNPLC'S CONSENT OR APPROVAL TO AN ADJUSTMENT AS PROVIDED IN THE LEASE.] This conveyance is subject to any encumbrances that do not constitute "Prohibited Encumbrances" (as defined in the Purchase Agreement pursuant to which this Deed is being delivered), including county and city taxes for the Fiscal Year 1997, a lien not yet due or payable, and including the following matters to the extent the same are still valid and in force: 1. Declaration of Restrictions dated July 7, 1965 and recorded November 8, 1965 as Document No. 19654849 and amended by Document No. 22518743 made by Chicago Title and Trust Company, an Illinois corporation, as Trustee under Trust Agreement dated June 15, 1960 known as Trust No. 42370, American National Bank of Chicago, a National Banking Association, as Trustee under Trust Agreement dated December 17, 1958 and known as Trust No. 14073 and Western Electric Co., Inc., New York, relating to construction, materials, location, area, height and approval of plans of buildings to be erected on the land and other property; specific uses of the land; lot size, weed control, landscaping; signs and control of junk and debris. Note: the rights of Chicago Title and Trust Company as Trustee under Trust Agreement dated June 15, 1960 and known as Trust No. 42370 were assigned to Chemplex Company by Assignment and Notice dated March 7, 1969 and recorded April 30, 1969 as Document No. 20826795. Note: said instrument contains no provision for a forfeiture of or reversion of title in case of breach of condition. 2. The Land falls in Drainage District No. 1 of the Township of Elk Grove, Cook County, Illinois. 3. Covenants and conditions contained in the Deed dated March 4, 1970 and recorded July 16, 1971 as Document No. 21549676 from the Corporation of Illinois, for the use of the Department of Public Works and Buildings to Western Electric Company, Inc., a New York corporation, that the Land shall not be used as a junkyard of for advertising of any kind except "on premises signs" as defined in the Rules and Regulations for Outdoor Advertising on Interstate Highways promulgated by the Department of Public Works and Buildings, State of Illinois, revised January 3, 1966, as amended: and there is no access to, from or over the Land to and from the public highway lying adjoining to said Land and known as F.A.I. Route 90 previously declared a freeway nor will access be permitted in the future to, from or over the Land to and from said public highway, which instrument does not contain a reverter clause. (Affects that part of the Land lying westerly of a line 400 feet easterly of the center line of Rohlwing Road) 4. Grant from Western Electric Company, Inc., a New York corporation, to Northern Illinois Gas Company, an Illinois corporation, contained in the Easement Agreement dated July 25, 1972 and recorded August 4, 1972 as Document No. 22002493, of a nonexclusive perpetual right of ingress and egress to Northern's Dubuque right-of-way line together with the right to use as working space in connection with construction and maintenance of existing and future pipelines, now located or to be constructed on Northern's Dubuque right-of-way, in, under, over and across Western's parcel described as follows, as shown on Plat of Survey dated December 27, 1968 prepared by Albert C. Schmitt, Registered Land Surveyor, marked Exhibit A and attached thereto; and the covenants and conditions therein contained. (Affects that part of Section 7, Township 41 North, Range 11 East of the Third Principal Meridian, in Cook County, Illinois. Bounded and described as follows: commencing at the concrete right-of-way monument at the intersection of the north line of the south 1/2 of the south 1/2 of said Section 7, with the easterly line of the Illinois Toll Road; thence North 86 29' 43" East along said north line a distance of 326.18 feet to an iron stake for a point of beginning; thence North 62 21' 31" East along a straight line a distance of 424.07 feet to a point; thence South 32 29' 31" West along a straight line a distance of 214.33 feet to a point on said north line of the south 1/2 of the south 1/2 of Section 7; thence South 86 29' 43" West along said north line a distance of 261.02 feet to the point of beginning) (Affects Westerly part of the Land) 5. Terms, provisions, conditions and limitations of the Declaration of Grant of Easements, Covenants and Restrictions for ingress and egress and for public utilities and drainage, etc., recorded February 9, 1996 as Document No. 96110279. 6. Terms, provisions, conditions and limitations of the Declaration of Restrictive Covenant made by AT&T Technologies, Inc., recorded March 18, 1996 as Document No. 88113916. 7. 20 foot water pipeline easement as disclosed by Document No. 27362784 also as depicted on Plat of 3800 Golf Road Subdivision recorded January 31, 1996 as Document No. 96080514. 8. Terms, provisions, and conditions relating to the easement described as Parcel 2, contained in the instrument creating said easement. 9. Public utilities and drainage easement over the Easterly line of Lot 1 as shown on Plat of 3800 Golf Road Subdivision recorded January 31, 1996 as Document No. 96080514. 10. The Plat of Subdivision recorded January 31, 1996 as Document No. 96080514 includes a certification by the surveyor that the Land is located within a Special Flood Area as identified by the Federal Emergency Management Agency. EXHIBIT C [Intentionally deleted.] Exhibit D BILL OF SALE, ASSIGNMENT OF CONTRACT RIGHTS AND INTANGIBLE ASSETS Reference is made to that certain Agreement for Purchase and Sale of Real Estate dated June 20, 1997 (the "Agreement") between 3Com Corporation, a Delaware Corporation, and 3800 Golf Company, L.L.C. ("Seller"), pursuant to which 3Com Corporation named BNP LEASING CORPORATION ("Assignor") as its designee and Seller conveyed to Assignor the real property described in Annex A attached hereto (the "Property"). Assignor hereby sells, transfers and assigns unto [3COM OR THE APPLICABLE PURCHASER, AS THE CASE MAY BE], a _____________ ("Assignee"), all of Assignor's right, title and interest in and to the following property, if any, to the extent such property is assignable: (a) any warranties, guaranties, indemnities and claims Assignor may have under the Agreement or under any document delivered by Seller thereunder to the extent related to the Property; (b) all licenses, permits or similar consents (excluding any prepaid utility reservations) from third parties to the extent related to the Property; (c) any pending or future award made because of any condemnation affecting the Property or because of any conveyance to be made in lieu thereof, and any unpaid award for damage to the Property and any unpaid proceeds of insurance or claim or cause of action for damage, loss or injury to the Property; (d) any goods, equipment, furnishings, furniture, chattels and personal property of whatever nature that are located on or about the Property; and (e) any general intangibles, permits, licenses, franchises, certificates, and other rights and privileges owned by Assignor and used solely in connection with, or relating solely to, the Property, including any such rights and privileges conveyed to Assignor pursuant to the Agreement; but excluding any rights or privileges of Assignor under (i) the Environmental Indemnity, as defined in that certain Purchase Agreement between Assignor and 3Com Corporation dated as of August 11, 1997 (the "Purchase Agreement") (pursuant to which this document is being delivered), (ii) the Lease, as defined in the Purchase Agreement, to the extent rights under the Lease relate to the period ending on the date hereof, whether such rights are presently known or unknown, including rights of the Assignor to be indemnified against claims of third parties as provided in the Lease which may not presently be known, and including rights to recover any accrued unpaid rent under the Lease which may be outstanding as of the date hereof, (iii) agreements between Assignor and Participants, as defined in the Lease, or any modification or extension thereof, and (iv) any other instrument being delivered to Assignor contemporaneously herewith pursuant to the Purchase Agreement. Assignor does for itself and its heirs, executors and administrators, covenant and agree to warrant and defend the title to the property assigned herein against the just and lawful claims and demands of any person claiming under or through Assignor, but not otherwise; excluding, however, any claim or demand arising by, through or under [3COM]. Assignee hereby assumes and agrees to keep, perform and fulfill Assignor's obligations, if any, relating to any permits or contracts, under which Assignor has rights being assigned herein. Executed: ______________________ , _____. ASSIGNOR: BNP LEASING CORPORATION a Delaware corporation By:______________________________________ Its:_____________________________________ ASSIGNEE: [3COM, OR THE APPLICABLE PURCHASER], a _________ corporation By:_____________________________________ Its:____________________________________ Annex A Legal Description PARCEL 1: Lot 1 in 3800 Golf Road Subdivision of part of Fractional Section 7, Township 41 North, Range 11, East of the Third Principal Meridian, according to the plat recorded January 31, 1996 as Document No. 96080514, in Cook County, Illinois. PARCEL 2: Easement for the benefit of Parcel 1 aforesaid, to go upon Lot 2 in 3800 Golf Road Subdivision aforesaid, for the purpose of performing work of construction and maintenance of Berm if such work is not timely performed by the owner of said Lot 2, as granted in paragraph 9.4 of Article 9 of the Declaration and Grant of Easements, Covenants and Restrictions executed by AT&T Corp., a New York corporation, dated January 26, 1996 and recorded February 9, 1996 as Document No. 96110279, in Cook County, Illinois. Exhibit E Acknowledgment of Disclaimer of Representations and Warranties THIS ACKNOWLEDGMENT OF DISCLAIMER OF REPRESENTATIONS AND WARRANTIES (this "Certificate") is made as of ___________________, ____, by [3COM or the Applicable Purchaser, as the case may be], a ___________________ ("Grantee"). Contemporaneously with the execution of this Certificate, BNP Leasing Corporation, a Delaware corporation ("BNPLC"), is executing and delivering to Grantee (1) a Corporation Grant Deed and (2) a Bill of Sale, Assignment of Contract Rights and Intangible Assets (the foregoing documents and any other documents to be executed in connection therewith are herein called the "Conveyancing Documents" and any of the properties, rights or other matters assigned, transferred or conveyed pursuant thereto are herein collectively called the "Subject Property"). Notwithstanding any provision contained in the Conveyancing Documents to the contrary, Grantee acknowledges that BNPLC makes no representations or warranties of any nature or kind, whether statutory, express or implied, with respect to environmental matters or the physical condition of the Subject Property, and Grantee, by acceptance of the Conveyancing Documents, accepts the Subject Property "AS IS," "WHERE IS," "WITH ALL FAULTS" and without any such representation or warranty by Grantor as to environmental matters, the physical condition of the Subject Property, compliance with subdivision or platting requirements or construction of any improvements. Without limiting the generality of the foregoing, Grantee hereby further acknowledges and agrees that warranties of merchantability and fitness for a particular purpose are excluded from the transaction contemplated by the Conveyancing Documents, as are any warranties arising from a course of dealing or usage of trade. Grantee hereby assumes all risk and liability (and agrees that BNPLC shall not be liable for any special, direct, indirect, consequential, or other damages resulting or arising from or relating to the ownership, use, condition, location, maintenance, repair, or operation of the Subject Property, except for damages proximately caused by (and attributed by any applicable principles of comparative fault to) the wilful misconduct, Active Negligence or gross negligence of BNPLC, its agents or employees. As used in the preceding sentence, "Active Negligence" of a party means, and is limited to, the negligent conduct of activities actually on or about the Property by that party in a manner that proximately causes actual bodily injury or property damage to be incurred. "Active negligence" shall not include (1) any negligent failure of BNPLC to act when the duty to act would not have been imposed but for BNPLC's status as owner of the Subject Property or as a party to the transactions pursuant to which BNPLC is delivering this instrument (the "Applicable Transactions"), (2) any negligent failure of any other party to act when the duty to act would not have been imposed but for such party's contractual or other relationship to BNPLC or participation or facilitation in any manner, directly or indirectly, of the Applicable Transactions, or (3) the exercise in a lawful manner by BNPLC (or any party lawfully claiming through or under BNPLC) of any remedy provided in connection with the Applicable Transactions. The provisions of this Certificate shall be binding on Grantee, its successors and assigns and any other party claiming through Grantee. Grantee hereby acknowledges that BNPLC is entitled to rely and is relying on this Certificate. EXECUTED as of ________________, ____. _________________________________ _____________________, a ________ By:______________________________ Name:_________________________ Title:________________________ Exhibit F [Intentionally deleted.] Exhibit G SECRETARY'S CERTIFICATE The undersigned, __________________ Secretary of BNP Leasing Corporation, a Delaware corporation (the "Corporation"), hereby certifies as follows: 1. That he is the duly, elected, qualified and acting Secretary [or Assistant Secretary] of the Corporation and has custody of the corporate records, minutes and corporate seal. 2. That the following named persons have been properly designated, elected and assigned to the office in the Corporation as indicated below; that such persons hold such office at this time and that the specimen signature appearing beside the name of such officer is his or her true and correct signature. [The following blanks must be completed with the names and signatures of the officers who will be signing the deed and other Required Documents on behalf of the Corporation.] Name Title Signature - ---- ----- --------- ____________________ ____________________ ____________________ ____________________ ____________________ ____________________ 3. That the resolutions attached hereto and made a part hereof were duly adopted by the Board of Directors of the Corporation in accordance with the Corporation's Articles of Incorporation and Bylaws. Such resolutions have not been amended, modified or rescinded and remain in full force and effect. IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal of the Corporation on this ______, day of ____________, ________. ______________________________ [signature] CORPORATE RESOLUTIONS OF BNP LEASING CORPORATION WHEREAS, pursuant to that certain Purchase Agreement (herein called the "Purchase Agreement") dated as of August 11, 1997, by and between BNP Leasing Corporation (the "Corporation") and [3COM OR THE APPLICABLE PURCHASER AS THE CASE MAY BE] ("Purchaser"), the Corporation agreed to sell and Purchaser agreed to purchase or cause the Applicable Purchaser (as defined in the Purchase Agreement) to purchase the Corporation's interest in the property (the "Property") located in Rolling Meadows, Illinois, more particularly described therein. NOW THEREFORE, BE IT RESOLVED, that the Board of Directors of the Corporation, in its best business judgment, deems it in the best interest of the Corporation and its shareholders that the Corporation convey the Property to Purchaser or the Applicable Purchaser pursuant to and in accordance with the terms of the Purchase Agreement. RESOLVED FURTHER, that the proper officers of the Corporation, and each of them, are hereby authorized and directed in the name and on behalf of the Corporation to cause the Corporation to fulfill its obligations under the Purchase Agreement. RESOLVED FURTHER, that the proper officers of the Corporation, and each of them, are hereby authorized and directed to take or cause to be taken any and all actions and to prepare or cause to be prepared and to execute and deliver any and all deeds and other documents, instruments and agreements that shall be necessary, advisable or appropriate, in such officer's sole and absolute discretion, to carry out the intent and to accomplish the purposes of the foregoing resolutions. Exhibit H BNP LEASING CORPORATION 717 N. HARWOOD SUITE 2630 DALLAS, TEXAS 75201 ____________, ______ [Title Insurance Company] _________________ _________________ _________________ Re: Recording of Grant Deed to [3COM or the Applicable Purchaser] ("Purchaser") Ladies and Gentlemen: BNP Leasing Corporation has executed and delivered to Purchaser a Grant Deed in the form attached to this letter. You are hereby authorized and directed to record the Grant Deed at the request of Purchaser. Sincerely, Exhibit I FIRPTA STATEMENT Section 1445 of the Internal Revenue Code of 1986, as amended, provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person. To inform [3COM or the Applicable Purchaser] (the "Transferee") that withholding of tax is not required upon the disposition of a real property interest by transferor, BNP Leasing Corporation (the "Seller"), the undersigned hereby certifies the following on behalf of the Seller: 1. The Seller is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations); 2. The United States employer identification number for the Seller is _____________________; 3.The office address of the Seller is ______________ __________________________________________. The Seller understands that this certification may be disclosed to the Internal Revenue Service by the Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both. The Seller understands that the Transferee is relying on this affidavit in determining whether withholding is required upon said transfer. The Seller hereby agrees to indemnify and hold the Transferee harmless from and against any and all obligations, liabilities, claims, losses, actions, causes of action, demands, rights, damages, costs, and expenses (including but not limited to court costs and attorneys' fees) incurred by the Transferee as a result of any false misleading statement contained herein. Under penalties of perjury I declare that I have examined this certification and to the best of my knowledge and belief it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of the Seller. Dated: ___________, ____. By:________________________________ Name:___________________________ Title:__________________________ EX-10 12 EXHIBIT 10.23 FIRST AMENDMENT TO CREDIT AGREEMENT THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the "Amendment"), dated as of August 28, 1997, is entered into by and among 3COM CORPORATION (the "Company"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for itself and the Banks (the "Agent"), and the several financial institutions party to the Credit Agreement (collectively, the "Banks"). RECITALS A. The Company, Banks, and Agent are parties to a Credit Agreement dated as of December 20, 1996 (the "Credit Agreement"), pursuant to which the Agent and the Banks have extended certain credit facilities to the Company and its Subsidiaries. B. The Company has requested that the Banks agree to certain amendments of the Credit Agreement. C. The Banks are willing to amend the Credit Agreement, subject to the terms and conditions of this Amendment. NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Defined Terms. Unless otherwise defined herein, capitalized terms used herein shall have the meanings, if any, assigned to them in the Credit Agreement. 2. Amendments to Credit Agreement. (a) Section 1.01 of the Credit Agreement shall be amended at the defined term "Applicable Rate" by amending and restating such defined term in its entirety as follows: "'Applicable Rate' means, for any day, with respect to any Offshore Rate Loan or Base Rate Loan and the commitment and letter of credit fees payable hereunder, as the case may be, the lower of the applicable rates per annum set forth in the chart below under the caption "Base Rate Margin," "Offshore Rate Margin," "Commitment Fee," "Performance Standby Letter of Credit Fee," and "Financial Standby Letter of Credit Fee," as the case may be, based upon the respective Performance Levels in effect under Test I or Test II; provided, however, that Performance Level 1and Performance Level 2 shall apply only if both Test I and Test II are each met for such Performance Levels. Performance Level 1 - ------------------- Test I Adjusted Leverage Ratio < 0.10 to 1.00 and Test II Rating of A or A2 or better Interest Margin Base Rate Margin 0.00000% Interest Margin Offshore Rate Margin 0.20000% Commitment Fee 0.06500% Performance Standby Letter of Credit Fee 0.10000% Financial Standby Letter of Credit Fee 0.20000% Performance Level 2 - ------------------- Test I Adjusted Leverage Ratio < 0.10 to 1.00 and Test II Rating of A- or A3 Interest Margin Base Rate Margin 0.00000% Interest Margin Offshore Rate Margin 0.22500% Commitment Fee 0.07500% Performance Standby Letter of Credit Fee 0.11250% Financial Standby Letter of Credit Fee 0.22500% Performance Level 3 - ------------------- Test I Adjusted Leverage Ratio < 0.10 to 1.00 or Test II Rating of BBB+ or Baa1 Interest Margin Base Rate Margin 0.00000% Interest Margin Offshore Rate Margin 0.25000% Commitment Fee 0.08500% Performance Standby Letter of Credit Fee 0.12500% Financial Standby Letter of Credit Fee 0.25000% Performance Level 4 - ------------------- Test I Adjusted Leverage Ratio < 0.25 to 1.00 but >= .10 to 1.00 or Test II Rating of BBB or Baa2 Interest Margin Base Rate Margin 0.00000% Interest Margin Offshore Rate Margin 0.31250% Commitment Fee 0.10000% Performance Standby Letter of Credit Fee 0.15625% Financial Standby Letter of Credit Fee 0.31250% Performance Level 5 - ------------------- Test I Adjusted Leverage Ratio < 0.30 to 1.00 but >= 0.25 to 1.00 or Test II Rating of BBB- or Baa3 Interest Margin Base Rate Margin 0.00000% Interest Margin Offshore Rate Margin 0.37500% Commitment Fee 0.12500% Performance Standby Letter of Credit Fee 0.18750% Financial Standby Letter of Credit Fee 0.37500% Performance Level 6 - ------------------- Test I Adjusted Leverage Ratio >= 0.30 to 1.00 or Test II Rating of BB+ or Ba1 or lower Interest Margin Base Rate Margin 0.00000% Interest Margin Offshore Rate Margin 0.50000% Commitment Fee 0.17500% Performance Standby Letter of Credit Fee 0.25000% Financial Standby Letter of Credit Fee 0.50000% The applicable Performance Level under Test I as of any day shall be determined by reference to the Adjusted Leverage Ratio as of the last day of the fiscal quarter most recently ended on or prior to such day, and any change in the Test I Performance Level shall become effective upon the delivery to the Agent of the Compliance Certificate required to accompany the financial statements delivered pursuant to Section 7.01 upon which such change is based, which Compliance Certificate shall set forth in reasonable detail the calculation of the Adjusted Leverage Ratio. In the event the financial statements required to be delivered under Section 7.01 (or the Compliance Certificate required to accompany such statements) are not delivered on or prior to the date due, the Adjusted Leverage Ratio shall be deemed to be at Performance Level 6 for purposes of Test I during the period from the applicable due date to the date when such financial statements and the accompanying Compliance Certificate are delivered. The applicable Performance Level under Test II as of any day shall be determined by reference to the Ratings by Moody's and S&P, respectively, applicable on such day to the Index Debt. For purposes of determining such Performance Level, (a) if either Moody's or S&P shall not have in effect a Rating for the Index Debt, then the Applicable Rates shall be determined solely with reference to the available Rating; (b) if the Ratings established or deemed to have been established by Moody's and S&P for the Index Debt shall indicate different Performance Levels, the Applicable Rate shall be based on the higher of the two Ratings; and (c) if the Rating established or deemed to have been established by Moody's or S&P for the Index Debt shall be changed (other than as a result of a change in the rating system of Moody's or S&P), such change shall be effective as of the date on which it is first announced by the applicable rating agency. If the rating system of Moody's or S&P shall change, or if both such rating agencies shall cease to be in the business of rating corporate debt obligations, the Company and the Banks shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of Ratings from such rating agencies and, pending the effectiveness of any such amendment, the Applicable Rate shall be determined at any time solely by reference to the Test I Performance Level in effect at such time. Each change in the Applicable Rate shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. Notwithstanding the foregoing, at any time prior to the time the first delivery of financial statements under Section 7.01 after the Effective Date, as defined in the First Amendment to Credit Agreement among the Company, the Agent and the Banks, the Applicable Rate shall be determined as if the Adjusted Leverage Ratio were at Performance Level 4." (b) Section 8.16 of the Credit Agreement shall be amended and restated in its entirety so as to read as follows: "8.16 Tangible Net Worth. The Company shall not permit its Tangible Net Worth, on a consolidated basis, at the end of any fiscal quarter to be less than the sum of (i) $1,800,000,000, plus (ii) 50% of the Company's consolidated net income (but without deducting any net losses for any period) earned in each fiscal quarter, starting with the quarter ending August 31, 1997, and ending with the quarter which, at such time, is the most recently ended fiscal quarter, less (iii) (without duplication) 100% of restructuring and acquisition charges related to Acquisitions permitted hereunder (if they are expensed in the same fiscal quarter as such Acquisition is completed) from and after the Closing Date." (c) Schedule 2 to the Compliance Certificate shall be amended and restated in its entirety so as to read as set forth in Schedule 2 attached hereto. 3. Representations and Warranties. The Company hereby represents and warrants to the Agent and the Banks as follows: (a) No Default or Event of Default has occurred and is continuing. (b) The execution, delivery and performance by the Company of this Amendment have been duly authorized by all necessary corporate and other action and do not and will not require any registration with, consent or approval of, notice to or action by, any Person (including any Governmental Authority) in order to be effective and enforceable. The Credit Agreement as amended by this Amendment constitutes the legal, valid and binding obligations of the Company, enforceable against it in accordance with its respective terms, without defense, counterclaim or offset. (c) All representations and warranties of the Company contained in the Credit Agreement, as amended hereby, are true and correct. (d) The Company is entering into this Amendment on the basis of its own investigation and for its own reasons, without reliance upon the Agent, the Banks or any other Person. 4. Effective Date. This Amendment will become effective as of the date first above written (the "Effective Date"), provided that the Agent has received from the Company and each of the Banks a duly executed original (or, if elected by the Agent, an executed facsimile copy) of this Amendment. 5. Reservation of Rights. The Company acknowledges and agrees that the execution and delivery by the Agent and the Banks of this Amendment shall not be deemed to create a course of dealing or otherwise obligate the Agent or the Banks to execute similar amendments under the same or similar circumstances in the future. 6. Miscellaneous. (a) Except as herein expressly amended, all terms, covenants and provisions of the Credit Agreement are and shall remain in full force and effect and all references therein to such Credit Agreement shall henceforth refer to the Credit Agreement as amended by this Amendment. This Amendment shall be deemed incorporated into, and a part of, the Credit Agreement. (b) This Amendment shall be binding upon and inure to the benefit of the parties hereto and thereto and their respective successors and assigns. No third party beneficiaries are intended in connection with this Amendment. (c) This Amendment shall be governed by and construed in accordance with the law of the State of California. (d) This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Each of the parties hereto understands and agrees that this document (and any other document required herein) may be delivered by any party thereto either in the form of an executed original or an executed original sent by facsimile transmission to be followed promptly by mailing of a hard copy original, and that receipt by the Agent of a facsimile transmitted document purportedly bearing the signature of a Bank or the Company shall bind such Bank or the Company, respectively, with the same force and effect as the delivery of a hard copy original. Any failure by the Agent to receive the hard copy executed original of such document shall not diminish the binding effect of receipt of the facsimile transmitted executed original of such document of the party whose hard copy page was not received by the Agent. (e) This Amendment, together with the Credit Agreement, contains the entire and exclusive agreement of the parties hereto with reference to the matters discussed herein and therein. This Amendment supersedes all prior drafts and communications with respect thereto. This Amendment may not be amended except in accordance with the provisions of Section 11.01 of the Credit Agreement. (f) If any term or provision of this Amendment shall be deemed prohibited by or invalid under any applicable law, such provision shall be invalidated without affecting the remaining provisions of this Amendment or the Credit Agreement, respectively. (g) The Company covenants to pay to or reimburse the Agent, upon demand, for all costs and expenses (including reasonable Attorney Costs) incurred in connection with the development, preparation, negotiation, execution and delivery of this Amendment. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment as of the date first above written. 3COM CORPORATION By: /s/ Mark D. Michael ---------------------------- Mark D. Michael Title: SVP, General Counsel & Secretary By: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: /s/ Roger J. Fleischmann ------------------------------- Roger J. Fleischmann Title: Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank By: /s/ Roger J. Fleischmann ------------------------------- Roger J. Fleischmann Title: Vice President ALLIED IRISH BANKS, p.l.c. By: /s/ Martin Slattery ---------------------------- Martin Slattery Title: Senior Manager CITICORP USA, INC. By: /s/ Steven R. Victorin ---------------------------- Steven R. Victorin Title: Attorney-in-Fact MARINE MIDLAND BANK By: /s/ William Holland ---------------------------- William Holland Title: Vice President MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ Kathryn Sayko-Yanes ---------------------------- Kathryn Sayko-Yanes Title: Vice President THE CHASE MANHATTAN BANK By: /s/ Joan F. Garvin ---------------------------- Joan F. Garvin Title: Managing Director Date: , For the fiscal quarter/year ended , Schedule 2 to the Compliance Certificate ($ in 000's) 1/ Actual Required/Permitted 1. Section 8.15 Adjusted Leverage Ratio. The ratio of: A. Adjusted Total Debt: the difference of: (i) Indebtedness 2/ plus _______ (ii) Guaranty Obligations 2/ plus _______ (iii) Synthetic Lease Obligations plus _______ (iv) L/C Obligations less _______ (v) Existing Subordinated Debt _______ (i)+(ii)+(iii)+(iv)-(v) = _______ B. Total Capital: the sum of: (i) Adjusted Total Debt (from A above) _______ plus (ii) Existing Subordinated Debt _______ plus (iii) Shareholders' Equity _______ (i)+(ii)+(iii) = _______ A _____ = _______ Not greater than 0.35 B 2. Section 8.16 Tangible Net Worth. Tangible Net Worth Not to be less than the sum of: The difference of: A. $1,800,000,000 A. gross book value of assets plus less ____ B. 50% of consolidated net income, commencing with B. goodwill, licensing the fiscal quarter ending agreements, patents, 8/31/97 and thereafter (not trademarks, trade names, reduced by any quarterly organization expense, loss) ____ treasury stock, unamortized debt discount and premium, less deferred charges, and other like intangibles ____ C. (without duplication) all restructuring and less acquisition charges related to permitted C. applicable reserves ____ Acquisitions and expended in same fiscal less quarter as related Acquisitions from and D. liabilities (including after the Closing Date ____ accrued and deferred income taxes and the Existing A + B - C = ____ Subordinated Debt) _______ = A - B - C - D = _______ 3. Company to report on compliance with Sections 8.01(j), 8.01(k), 8.01(q), 8.01(r), 8.02(c), 8.02(d), 8.02(e), 8.03, 8.04(e) and 8.10(f) in such reasonable detail as the Agent, at the request of any Bank, may request from time to time ____________ 1/ All items determined on a consolidated basis and in accordance with GAAP, consistently applied. 2/ See definition of Adjusted Total Debt for certain items excluded. EX-18 13 Exhibit 18.1 LETTER RE CHANGE IN ACCOUNTING PRINCIPLE 3Com Corporation 5400 Bayfront Plaza Santa Clara, California Dear Sirs/Madams: At your request, we have read the description included in your Quarterly Report on Form 10-Q to the Securities and Exchange Commission for the quarter ended August 31, 1997, of the facts relating to the Company's adoption during the quarter of a different fixed asset capitalization policy. We believe, on the basis of the facts so set forth and other information furnished to us by appropriate officials of the Company, that the accounting change described in your Form 10-Q is to an alternative accounting principle that is preferable under the circumstances. We have not audited any consolidated financial statements of 3Com Corporation and its consolidated subsidiaries as of any date or for any period subsequent to May 31, 1997. Therefore, we are unable to express, and we do not express, an opinion on the facts set forth in the above-mentioned Form 10-Q, on the related information furnished to us by officials of the Company, or on the financial position, results of operations, or cash flows of 3Com Corporation and its consolidated subsidiaries as of any date or for any period subsequent May 31, 1997. Yours truly, /s/Deloitte & Touche LLP San Jose, California October 13, 1997 EX-27 14
5 1,000 3-MOS MAY-31-1998 AUG-31-1997 517,657 490,830 1,139,798 (64,212) 410,715 3,026,942 1,058,772 (437,659) 3,703,738 1,171,004 0 1,447,639 0 0 860,068 3,703,738 1,600,862 1,600,862 832,808 1,134,115 615,220 7,883 4,641 (160,998) (14,178) (146,820) 0 0 0 (146,820) (0.43) (0.43)
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