-----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, CDFBPxSDlrO6yL/40uCyKNT0qSOIpqhEgUknwSbekJkbulvH9BAEIlutSa9ecxPE nIRGjy16NDWsV0Fn3btHiA== 0000891618-99-001505.txt : 19990413 0000891618-99-001505.hdr.sgml : 19990413 ACCESSION NUMBER: 0000891618-99-001505 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19990226 FILED AS OF DATE: 19990412 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOLECTRON CORP CENTRAL INDEX KEY: 0000835541 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 942447045 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11098 FILM NUMBER: 99591817 BUSINESS ADDRESS: STREET 1: 777 GIBRALTAR DR CITY: MILPITAS STATE: CA ZIP: 95035 BUSINESS PHONE: 4089578500 MAIL ADDRESS: STREET 1: 777 GIBRALTAR DR CITY: MILPITAS STATE: CA ZIP: 95035 10-Q 1 FORM 10-Q FOR PERIOD ENDED 2/26/99 1 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 FEBRUARY 26, 1999. [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO _________ COMMISSION FILE NUMBER 1-11098 SOLECTRON CORPORATION (Exact Name of Registrant as specified in its Charter) Delaware 94-2447045 (State or other jurisdiction (IRS Employer of Incorporation or Organization) Identification Number) 777 Gibraltar Drive, Milpitas, California 95035 (Address of principal executive offices and Zip Code) Registrant's telephone number, including area code: (408) 957-8500 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. At March 31, 1999, 252,314,362 shares of Common Stock of the Registrant were outstanding. 2 SOLECTRON CORPORATION INDEX TO FORM 10-Q PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets at February 28, 1999 and August 31, 1998 3 Condensed Consolidated Statements of Income for the three months and six months ended February 28, 1999 and 1998 4 Condensed Consolidated Statements of Cash Flows for the six months ended February 28, 1999 and 1998 5 - 6 Notes to Condensed Consolidated Financial Statements 7 - 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 - 28 Item 3. Quantitative and Qualitative Disclosures About 28 Market Risk PART II. OTHER INFORMATION Item 1. Legal Proceedings 29 Item 2. Changes in Securities 29 Item 3. Defaults Upon Senior Securities 29 Item 4. Submission of Matters to a Vote of Security Holders 29 - 30 Item 5. Other Information 30 Item 6. Exhibits and Reports on Form 8-K 30 - 31 Signature 32
2 3 ITEM 1. FINANCIAL STATEMENTS SOLECTRON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In millions)
February 28, August 31, 1999 1998 ------------ ---------- ASSETS Current assets: Cash, cash equivalents and short-term investments $ 736.6 $ 308.8 Accounts receivable, net 877.9 670.2 Inventories 929.4 788.5 Prepaid expenses and other current assets 135.8 120.0 -------- -------- Total current assets 2,679.7 1,887.5 Net property and equipment 559.2 448.0 Other assets 144.6 75.0 -------- -------- Total assets $3,383.5 $2,410.5 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt $ 11.4 $ -- Accounts payable 769.8 666.5 Accrued employee compensation 69.8 72.1 Accrued expenses 53.0 34.9 Other current liabilities 42.4 67.3 -------- -------- Total current liabilities 946.4 840.8 Long-term debt 1,140.0 385.5 Other long-term liabilities 7.2 2.9 -------- -------- Total liabilities 2,093.6 1,229.2 -------- -------- Commitments Stockholders' equity: Common stock 0.1 0.1 Additional paid-in capital 560.8 510.8 Retained earnings 806.7 677.4 Accumulated other comprehensive income - cumulative translation adjustment (77.7) (7.0) -------- -------- Total stockholders' equity 1,289.9 1,181.3 -------- -------- Total liabilities and stockholders' equity $3,383.5 $2,410.5 ======== ========
See accompanying notes to condensed consolidated financial statements. 3 4 SOLECTRON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share data)
Three Months Ended Six Months Ended February 28, February 28, ------------------------- ------------------------- 1999 1998 1999 1998 -------- -------- -------- -------- Net sales $1,908.1 $1,186.8 $3,853.8 $2,323.6 Cost of sales 1,729.7 1,060.7 3,499.5 2,073.7 -------- -------- -------- -------- Gross profit 178.4 126.1 354.3 249.9 Operating expenses: Selling, general and administrative 69.4 48.0 140.2 99.9 Research and Development 7.5 4.9 15.4 9.3 Acquisition costs 2.9 -- 2.9 -- -------- -------- -------- -------- Operating income 98.6 73.2 195.8 140.7 Interest income 5.1 6.5 9.5 13.0 Interest expense (9.5) (6.3) (15.0) (12.8) -------- -------- -------- -------- Income before income taxes 94.2 73.4 190.3 140.9 Income tax expense 28.7 24.6 60.9 47.2 -------- -------- -------- -------- Net income $ 65.5 $ 48.8 $ 129.4 $ 93.7 ======== ======== ======== ======== Net income per share: Basic $ 0.28 $ 0.21 $ 0.55 $ 0.41 ======== ======== ======== ======== Diluted $ 0.26 $ 0.20 $ 0.52 $ 0.39 ======== ======== ======== ======== Shares used to compute net income per share: Basic 238.1 230.8 237.5 230.2 ======== ======== ======== ======== Diluted 261.6 252.3 259.8 252.2 ======== ======== ======== ========
See accompanying notes to condensed consolidated financial statements. 4 5 SOLECTRON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)
Six Months Ended February 28, ------------------------ 1999 1998 -------- -------- Cash flows from operating activities: Net income $ 129.4 $ 93.7 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 82.3 61.2 Tax benefit associated with the exercise of stock options 14.5 0.3 Other (1.1) 7.8 Changes in operating assets and liabilities: Accounts receivable (222.4) (61.2) Inventories (133.1) (87.4) Prepaid expenses and other current assets (16.0) (10.8) Accounts payable 106.4 59.3 Accrued expenses and other current liabilities (7.9) (8.1) -------- -------- Net cash (used in) provided by operating activities (47.9) 54.8 -------- -------- Cash flows from investing activities: Sales and maturities of short-term investments 93.2 137.5 Purchases of short-term investments (282.5) (162.4) Acquisition of manufacturing location (100.5) -- Capital expenditures (222.8) (143.5) Proceeds from sale of property and equipment 10.2 18.3 Other (3.9) (1.5) -------- -------- Net cash used in investing activities (506.3) (151.6) -------- --------
(continued on next page) 5 6 SOLECTRON CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (In millions)
Six Months Ended February 28, ---------------------- 1999 1998 ------ ------ Cash flows from financing activities: Net proceeds from short-term debt 11.4 -- Net proceeds from long-term debt 732.6 -- Repayments of long-term debt -- (2.0) Net proceeds from sale of common stock 35.4 16.6 Other 6.3 (0.1) ------ ------ Net cash provided by financing activities 785.7 14.5 ------ ------ Effect of exchange rate changes on cash and cash equivalents 6.9 0.6 ------ ------ Net increase (decrease) in cash and cash equivalents 238.4 (81.7) Cash and cash equivalents at beginning of period 225.2 225.1 ------ ------ Cash and cash equivalents at end of period $463.6 $143.4 ====== ====== SUPPLEMENTAL DISCLOSURES Cash paid during the period: Income taxes $ 47.1 $ 37.8 Interest $ 13.2 $ 2.4 Non-cash investing and financing activities: Issuance of common stock upon conversion of long-term debt $ 0.1 $ --
See accompanying notes to condensed consolidated financial statements. 6 7 SOLECTRON CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - Basis of Presentation The accompanying unaudited condensed consolidated balance sheets as of February 28, 1999 and August 31, 1998, and the related unaudited condensed consolidated statements of income for the three- and six-month periods ended February 28, 1999 and 1998, and the unaudited condensed consolidated statements of cash flows for the six months ended February 28, 1999 and 1998 have been prepared on substantially the same basis as the annual consolidated financial statements. Management believes the financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company's financial position, operating results and cash flows for the periods presented. The results of operations for the three- and six-month periods ended February 28, 1999 are not necessarily indicative of results to be expected for the entire year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended August 31, 1998 included in the Company's Annual Report to Stockholders. For clarity of presentation, the Company has indicated its second fiscal quarters as ending on February 28, and its fiscal year as ending on August 31, whereas in fact, the Company's second quarter of fiscal 1999 ended on February 26, 1999, its second quarter of fiscal 1998 ended on February 27, 1998 and its 1998 fiscal year ended on August 28, 1998. NOTE 2 - Inventories Inventories consisted of (in millions):
February 28, August 31, 1999 1998 ------------ ---------- Raw materials $ 702.6 $ 577.8 Work-in-process 226.8 210.7 -------- -------- Total $ 929.4 $ 788.5 ======== ========
NOTE 3 - Net Income Per Share Basic net income per share is calculated using the weighted average number of common shares outstanding during the period. Diluted net income per share is calculated using the weighted average number of common shares plus dilutive common equivalent shares outstanding during the period. Common equivalent shares consist of stock options that are computed using the treasury stock method and shares issuable upon conversion of the Company's outstanding convertible subordinated notes. The shares issuable upon conversion of the Company's convertible senior notes were not included in the calculation because the effect would have been antidilutive. Share and per-share data presented reflect the two-for-one stock split effective February 24, 1999. The following table sets forth the computation of basic and diluted net income per share for the three- and six-month periods ended February 28, 1999 and 1998. 7 8
Three Months Ended Six Months Ended February 28, February 28, -------------------- ------------------- 1999 1998 1999 1998 ------ ------ ------ ------ (in millions, except per share data) Net income - basic $ 65.5 $ 48.8 $129.4 $ 93.7 Interest expense from convertible subordinated notes, net of taxes 2.5 2.4 4.9 4.8 ------ ------ ------ ------ Net income - diluted $ 68.0 $ 51.2 $134.3 $ 98.5 ====== ====== ====== ====== Weighted average shares - basic 238.1 230.8 237.5 230.2 Common stock equivalents - stock options 9.9 7.9 8.7 8.4 Common shares issuable upon assumed conversion of convertible subordinated notes 13.6 13.6 13.6 13.6 ------ ------ ------ ------ Weighted average shares - diluted 261.6 252.3 259.8 252.2 ====== ====== ====== ====== Net income per share - basic $ 0.28 $ 0.21 $ 0.55 $ 0.41 ====== ====== ====== ====== Net income per share - diluted $ 0.26 $ 0.20 $ 0.52 $ 0.39 ====== ====== ====== ======
For the three- and six-month periods ended February 28, 1999, options to purchase 660,000 shares of common stock with exercise prices greater than the average fair market value of the Company's stock for the period of $41.19 and $33.86, respectively, were not included in the calculation because the effect would have been antidilutive. For the three- and six-month periods ended February 28, 1998, options to purchase 2.7 million shares of common stock with exercise prices greater than the average fair market value of the Company's stock for the period of $20.12 and $20.41, respectively, were not included in the calculation because the effect would have been antidilutive. Note 4 - Comprehensive income Effective in the first quarter of fiscal 1999, the Company adopted Statement of Financial Accounting Standards No. 130 (SFAS No. 130), "Reporting Comprehensive Income," which requires the Company to report and display certain information related to comprehensive income. Comprehensive income includes net income and other comprehensive income. Other comprehensive income is classified separately into foreign currency items, minimum pension liability adjustments, and unrealized gains and losses on certain investments in debt and equity securities. Solectron's other comprehensive income is comprised solely of foreign currency translation adjustments. The components of comprehensive income were as follows: 8 9
Three Months Ended Six Months Ended February 28, February 28, --------------------- --------------------- 1999 1998 1999 1998 ------ ------ ------ ------ (in millions) Net income $ 65.5 $ 48.8 $129.4 $ 93.7 Other comprehensive income (loss) foreign currency translation adjustments (72.9) (3.5) (70.7) 1.0 ------ ------ ------ ------ Comprehensive income (loss) $ (7.4) $ 45.3 $ 58.7 $ 94.7 ====== ====== ====== ======
For both the three- and six-month periods of fiscal 1999, the loss in foreign currency translation was primarily due to the recent devaluation of the Brazilian Real. In addition, the foreign currency translation adjustments are not currently adjusted for income taxes since they relate to investments which are permanent in nature. NOTE 5 - Asset Securitization & Accounts Receivable Financing The Company has an asset securitization arrangement with a bank under which it may sell up to $220 million of eligible accounts receivable. The arrangement expires in August 1999 and is subject to certain financial covenants and management representations. During the second quarter of fiscal year 1999, the Company borrowed $72 million against its eligible accounts receivable under the arrangement and paid off the amount within the same quarter. NOTE 6 - Commitments The Company leases various facilities under operating lease agreements. The facility leases expire at various dates through 2006. Substantially all leases require the Company to pay property taxes, insurance and normal maintenance costs. Payments under certain leases are periodically adjusted based on LIBOR rates. The leases for certain Solectron's facilities in Milpitas and San Jose, California; Everett, Washington; and Suwanee, Georgia, provide the Company with the option at the end of each of the leases of either acquiring the property at its original cost or arranging for the property to be acquired. The Company is contingently liable under a first loss clause for a decline in market value of these leased facilities totaling up to $143 million in the event the Company does not purchase the properties at the end of the respective lease terms. The Company must also maintain compliance with financial covenants similar to its credit facilities. In fiscal 1998, Solectron entered into an arrangement with a third-party leasing company under which the Company sold fixed assets with a carrying value of approximately $31.3 million and leased them back from the leasing company. The Company is accounting for these leases as operating leases. Future minimum payments related to lease obligations are $39.5 million, $29.8 million, $20.9 million, $65.1 million and $44.9 million in each of the years in the five-year period ending August 31, 2003 and an aggregate $2.6 million for periods after that date. 9 10 NOTE 7 - Acquisitions of IBM Assets in Texas On February 1, 1999, the Company acquired IBM's Electronic Card Assembly and Test (ECAT) manufacturing assets in Austin, Texas. Additionally, the Company acquired the non-exclusive rights to use certain IBM intellectual property. The total purchase price for the manufacturing assets and intellectual property rights was approximately $75 million, subject to adjustment. The transaction was accounted for as a purchase of assets, and the purchase price was allocated to the assets acquired based on the relative fair values of the assets at the date of acquisition. Under the terms of the agreements, Solectron will provide printed circuit board (PCB) assembly for motherboards used in IBM's mobile products manufactured worldwide for the next three years. This includes physical design, early prototyping, new product launch, PCB assembly and test, volume production, end-of-life support, field return services and life-cycle management. Solectron will also provide IBM's worldwide design teams a full range of integrated New Product Introduction (NPI) services which involve pre-manufacturing support, such as design and layout, component and concurrent engineering, test development, prototype, procurement and assembly. In addition, the Company has hired approximately 1,300 IBM design, test, and manufacturing associates. Note 8 - Convertible Debt In January 1999, Solectron issued 1,656,000 zero-coupon convertible senior notes to qualified institutional investors in a private placement at an issue price of $452.89 per note which resulted in gross proceeds to the Company approximately $750 million. These notes are unsecured and unsubordinated indebtedness of the Company with a maturity value aggregating $1.656 billion. There will be no interest payment by the Company prior to maturity. Each note has a yield of 4% with a maturity value of $1,000 on January 27, 2019. The Company is amortizing the issue discount using the effective interest method over the term of the notes. Each note is convertible at any time by the holder at a conversion rate of 7.472 shares per note, adjusted for the two-for-one stock split effective February 24, 1999. Holders may require the Company to purchase all or a portion of their notes on January 27, 2002 and January 27, 2009, at a price of $510.03 and $672.97 per note, respectively. Also, each holder may require the Company to repurchase all or a portion of such holder's notes upon a change in control of the Company occurring on or before January 27, 2002. The Company, at its option, may redeem all or a portion of the notes at any time on or after January 27, 2003. In addition, the Company has agreed to file with the Securities Exchange Commission (SEC) within 90 days and to use reasonable efforts to have declared effective within 180 days after the issuance, a registration statement under the Securities Act to register resales of the notes and the common stock issuable upon conversion thereof. Such registration statement was filed with the SEC on April 7, 1999. 10 11 In February 1996, the Company issued convertible subordinated notes for an aggregate principal amount of $230 million. The notes are in denominations of and have a maturity value of $1,000 each, payable on March 1, 2006. Interest is payable semi-annually at 6%. Each note is convertible at any time by the holder into shares of common stock at a conversion price of $16.90 per share as adjusted for the two-for-one stock split effective February 24, 1999. The notes are redeemable at the option of the Company beginning on March 3, 1999. During February and March 1999, all of the convertible subordinated notes were voluntarily converted into 5,914 and 13,603,514 shares of common stock, respectively. 11 12 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements contained in the following Management's Discussion and Analysis of Financial Condition and Results of Operations, including, without limitation, statements containing the words "believes," "anticipates," "estimates," "expects," and words of similar import, constitute forward-looking statements which involve risks and uncertainties. Solectron's actual results could differ materially from those anticipated in these forward looking statements as a result of certain factors, including those factors set forth under "Trends and Uncertainties" below. General Solectron's net sales are derived from sales to electronics systems original equipment manufacturers (OEMs). The majority of Solectron's customers compete in the networking, data and voice communications, workstation, personal computer and computer peripheral segments of the electronics industry. The Company provides integrated solutions that span the entire product life cycle - from pre-production planning and design, to manufacturing, distribution and end-of-life product service and support. Solectron offers its customers competitive outsourcing advantages, such as access to advanced manufacturing technologies, shortened time-to-market, reduced cost of production and more effective asset utilization. A discussion of some of the potential fluctuations in operating results is included under "Trends and Uncertainties." The Company has manufacturing operations in locations throughout the world, including North America, Europe, Asia/Pacific and Latin America. Solectron also has its Asia/Pacific headquarters office in Taipei, Taiwan and program offices located in Japan and Israel. The Company's subsidiaries, Force Computers and Fine Pitch Technologies, are both headquartered in San Jose, California. Force's European headquarters and a significant portion of its operations are located in Munich, Germany. In addition to its headquarters' locations, Force has sales support offices in various locations in the United States and internationally. During 1997, the Company established a strategic, global manufacturing partnership with Ericsson Telecom AB's Business Area Infocom Systems (Ericsson). The Company established a New Product Introduction center in Sweden, and production from certain Ericsson plants worldwide was transferred to Solectron manufacturing sites around the world. In October 1997, Solectron acquired certain assets, primarily equipment and inventory, of Ericsson's printed circuit board assembly operation located in Sao Paulo, Brazil. In addition, Solectron's subsidiary, Solectron Brasil Ltda., hired approximately 370 associates formerly employed by Ericsson Telecomunicacoes S.A. in Brazil. In April 1998, the Company acquired NCR Corporation's (NCR) manufacturing assets in three cities for a purchase price of approximately $91 million. The acquisition was accounted for as a purchase of assets and the purchase price was allocated to the assets acquired based on the relative fair values of the assets at the date of acquisition. Under the terms of the agreement, NCR will outsource the manufacturing of certain computer components to Solectron for at least five years. Solectron also hired approximately 1,200 NCR manufacturing and related support associates. 12 13 In June 1998, the Company acquired International Business Machines Corporation's (IBM) Electronic Card Assembly and Test (ECAT) manufacturing assets in Charlotte, North Carolina and non-exclusive rights to certain IBM intellectual property for a purchase price of approximately $96 million. The acquisition was accounted for as a purchase of assets and the purchase price was allocated to the assets acquired, including the intellectual property rights, based on their relative fair values at the date of acquisition. Under the terms of the agreement, Solectron hired approximately 700 IBM manufacturing and related support associates and the Company will provide printed circuit board assembly services to IBM in North America for the next three years. In addition, IBM has made available to Solectron 115 patents and 51 disclosures (collectively the intellectual property rights) covering a wide spectrum of technologies and capabilities. IBM will also provide to Solectron failure analysis and characterization tools for process development and manufacturing, including fault detection and isolation. In October 1998, the Company acquired the wireless telephone manufacturing assets of Mitsubishi Consumer Electronics America, Inc.'s (MCEA) Cellular Mobile Telephone (CMT) division in Braselton, Georgia. MCEA is a subsidiary of Mitsubishi Electric Corporation (Mitsubishi). The acquisition was accounted for as a purchase of assets and the purchase price of approximately $25 million was allocated to the acquired assets based on their relative fair values at the date of acquisition. Under the terms of the agreement, the Company will provide MCEA-CMT with a full range of manufacturing services for five years, including New Product Introduction management, printed circuit board assembly and full systems assembly for MCEA's branded and private-label cellular products sold within North America. In addition, Solectron hired approximately 400 MCEA-CMT manufacturing and support associates. Also in October 1998, the Company signed a definitive agreement with Ingram Micro Inc. under which the two companies entered into a strategic alliance to provide global build-to-order and configure-to-order assembly services for personal computers, servers and related products in the United States, Canada, Europe, Asia and Latin America. The alliance will be managed by both companies under a joint management matrix that will include a sales and marketing staff, program management, materials management, information technology resources and test and process engineers and will, in most part, utilize existing facilities, systems and personnel. The companies expect that shipments to customers will begin in the second quarter of calendar 1999. On February 1, 1999, the Company acquired IBM's Electronic Card Assembly and Test (ECAT) manufacturing assets in Austin, Texas and non-exclusive rights to certain IBM intellectual property for a purchase price of approximately $75 million, subject to adjustment. The transaction was accounted for as a purchase of assets, and the purchase price was allocated to the assets acquired based on the relative fair values of the assets at the date of acquisition. Under the terms of the agreements, Solectron will provide printed circuit board (PCB) assembly for motherboards used in IBM's mobile products manufactured worldwide for the next three years. This includes physical design, early prototyping, new product launch, PCB assembly and test, volume production, end-of-life support, field return services and life-cycle management. Solectron will also provide IBM's worldwide design teams a full range of integrated New Product Introduction (NPI) services which involve pre-manufacturing support, such as design and layout, component and concurrent engineering, test development, prototype, procurement and assembly. In addition, the Company has hired approximately 1,300 IBM design, test, and manufacturing associates. 13 14 Results of Operations The electronics industry is subject to rapid technological change, product obsolescence and price competition. These and other factors affecting the electronics industry, or any of Solectron's major customers in particular, could have an adverse material effect on Solectron's results of operations. See "Trends and Uncertainties -- Potential Fluctuations in Operating Results" and "Competition" for further discussion of potential fluctuations in operating results. The following table sets forth, for the periods indicated, certain items in the Consolidated Statements of Income as a percentage of net sales. The financial information and the discussion below should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto.
Three Months Ended Six Months Ended February 28, February 28, ---------------------- ---------------------- 1999 1998 1999 1998 ------ ------ ------ ------ Net sales 100.0% 100.0% 100.0% 100.0% Cost of sales 90.7 89.4 90.8 89.2 ------ ------ ------ ------ Gross profit 9.3 10.6 9.2 10.8 Operating expenses: Selling, general and administrative 3.6 4.0 3.6 4.3 Research and development 0.4 0.4 0.4 0.4 Acquisition costs 0.2 -- 0.1 -- ------ ------ ------ ------ Operating income 5.1 6.2 5.1 6.1 Net interest income (expense) (0.2) -- (0.1) -- ------ ------ ------ ------ Income before income taxes 4.9 6.2 5.0 6.1 Income taxes 1.5 2.1 1.6 2.1 ------ ------ ------ ------ Net income 3.4% 4.1% 3.4% 4.0% ====== ====== ====== ======
Net Sales Net sales for the three- and six-month periods of fiscal 1999 grew to $1.9 billion and $3.9 billion, respectively, increases of 60.8% and 65.9%, respectively, compared to the corresponding periods in fiscal 1998. The sales growth was primarily attributable to significant increases in sales volume from both existing and new customers worldwide, as well as from the acquisitions of Ericsson, NCR, and IBM ECAT in Charlotte, North Carolina during fiscal 1998 and Mitsubishi in the first quarter of fiscal 1999. Sales resulting from the acquisition of IBM ECAT in Austin, Texas on February 1, 1999 were not recognized in the second quarter of fiscal 1999 since the Company's Texas site reports consistently its results one month in arrears. Within the Americas, the acquired sites from NCR and IBM ECAT in Charlotte and the new site in Mexico were the largest contributors to the strong growth in the fiscal 1999 periods as compared to the fiscal 14 15 1998 periods. The sales growth at the Texas site was particularly strong resulting from new programs. The Milpitas, California site also experienced sales growth, although the demand increase was partially offset by the planned transfer of personal computer printed circuit board programs and computer peripherals systems assembly programs to Mexico and networking business to Penang, which are a part of management's efforts to improve global load balancing through specific product program transitioning. Sales of the Company's European and Asian operations increased in fiscal 1999 periods over the same periods of fiscal 1998 principally as a result of core business growth and new accounts. In addition, the sales growth at the Penang site was significant due primarily to increased demand from personal computer customers and networking business transferred in from California. The growth at the Scotland site was also strong primarily due to increased demand from its telecommunications customers. Although the Company does not currently anticipate any future decline in sales, to lessen the potential impact of any possible future declines related to customers within any particular region or market segment, the Company is committed to seeking diversification of its customer base among many countries, market segments and product lines within market segments. Several of the Company's customers accounted for more than 10% of the Company's net sales in the three- and six-month periods of fiscal 1999 and 1998. The following table details these customers and the percentage of net sales attributed to them.
Three Months Ended Six Months Ended February 28, February 28, --------------------- --------------------- 1999 1998 1999 1998 ------ ------ ------ ------ Hewlett-Packard Company(HP) 11.6% 13.8% 11.9% 14.6% Cisco Systems, Inc. 10.8% 11.4% 10.1% 10.3% Sun Microsystems, Inc. * 12.3% * 11.2%
- ----------- * Less than 10% No other customer accounted for more than 10% of net sales during any of the periods presented. Solectron's top ten customers accounted for 72.8% and 67.1% of consolidated net sales in the first six months of fiscal 1999 and 1998, respectively. Solectron is still dependent upon continued revenues from HP and the rest of its top ten customers and there can be no guarantee that these or any other customers will not increase or decrease as a percentage of consolidated net sales either individually or as a group. Consequently, any material decrease in sales to these or other customers could have an adverse material effect on Solectron's results of operations. In the first half of fiscal 1999, international locations contributed 39.4% of consolidated net sales compared to 34.5% in the same period of fiscal 1998. In addition to the sales growth factors for Europe and Asia noted above, the Company's international sales also benefited from the addition of the Mexico and Brazil sites during the first quarter of fiscal 1998 and the acquisition of the Ireland site from NCR in April 1998. As a result of Solectron's international sales and facilities, Solectron's operations are subject to risks of doing business abroad. 15 16 While to date these dynamics have not had an adverse material effect on Solectron's results of operations, there can be no assurance that there will not be such an impact in the future. See "Trends and Uncertainties -- International Operations" for a further discussion of potential fluctuations in operating results associated with the risks of doing business abroad. Solectron's operations in Milpitas, California contributed a substantial portion of Solectron's net sales and operating income during the first half of fiscal 1999 and fiscal 1998. Although management has been undertaking deliberate actions to achieve improved global load balancing by transferring certain projects from the Milpitas site to other sites worldwide, the performance of the Milpitas operation is expected to continue as a significant factor in the overall financial performance of Solectron. Any adverse material change to the customer base, product mix, efficiency, or other attributes of this site could have an adverse material effect on Solectron's consolidated results of operations. Solectron believes that its ability to continue to achieve growth will depend upon growth in sales to existing customers for their current and future product generations, successful marketing to new customers and future geographic expansion. Customer contracts can be canceled and volume levels can be changed or delayed. The timely replacement of delayed, canceled or reduced orders with new business cannot be assured. In addition, there can be no assurance that any of Solectron's current customers will continue to utilize Solectron's services. Because of these factors, there can be no assurance that Solectron's historical revenue growth rate will continue. See "Trends and Uncertainties" for a discussion of certain factors affecting the management of growth, geographic expansion and potential fluctuations in sales and results of operations. Gross Profit The gross margin percentage declined to 9.2% for the first half of fiscal 1999 period from 10.8% for the same period of fiscal 1998. The decrease was primarily attributable to a shift toward higher volume projects and systems build projects which typically yield lower margins. Also, gross margins of the newly acquired NCR operations are lower than the overall average margins of the rest of the Company primarily due to the fact that the majority of its net sales are derived from systems integration activities, which normally generate lower gross margins than printed circuit board assembly. For the foreseeable future, Solectron's gross margin is expected to depend primarily on product mix, production efficiencies, utilization of manufacturing capacity, start-up and integration costs of new and acquired businesses, the percentage of sales derived from systems build projects, pricing within the electronics industry and the cost structure at individual sites. Over time, gross margins at the individual sites and for the Company as a whole may continue to fluctuate. The Company anticipates that a larger percentage of its sales may be derived from systems build projects in future periods. Systems build projects typically have lower gross margin percentages than printed circuit board assembly projects. Increases in systems build business, additional costs associated with new projects and price erosion within the electronics industry could adversely affect the Company's gross margin. Additionally, changes in product mix could cause the Company's gross margin to fluctuate. Also, while the availability of raw materials appears adequate to meet the Company's current revenue projections for the foreseeable future, component availability is still subject to lead 16 17 time and other constraints that could possibly limit the Company's revenue growth. Because of these factors and others discussed under "Trends and Uncertainties" below, there can be no assurance that the Company's gross margin will not fluctuate or decrease in future periods. Selling, General and Administrative Expenses In absolute dollars, selling, general and administrative (SG&A) expenses increased 44.6% and 40.3%, respectively, for the three- and six-months of fiscal 1999 over the same periods of fiscal 1998. The increase in fiscal 1999 period was primarily due to investment in infrastructure such as personnel and related departmental expenses at all manufacturing locations as well as continuing investment in information systems to support the increased size and complexity of the Company's business. As a percentage of net sales, SG&A expenses were 3.6% for both the three- and six-month periods in the fiscal 1999 and 4.0% and 4.3%, respectively, in the comparable fiscal 1998 periods. The primary reason for the fiscal 1999 decrease in SG&A expenses as a percentage of net sales is the significant increase in the sales base offset partially by the costs associated with investments in starting up new sites and investments in the Company's information systems. The Company anticipates SG&A expenses will continue to increase in terms of absolute dollars in the future, and may possibly increase as a percentage of net sales, as the Company continues to build the infrastructure necessary to support its current and prospective business. Research and Development Expenses With the exception of its Force Computers operation, the Company's research and development (R&D) activities have been focused primarily on the development of prototype and engineering design capabilities, fine pitch interconnecting technologies (which include ball-grid array, tape-automated bonding, multichip modules, chip-on-flex, chip-on-board and flip chip), high reliability environmental stress test technology and the implementation of environmentally friendly assembly processes, such as VOC-free and no-clean. Force's R&D efforts are concentrated on new product development and improvement of product designs through improvements in functionality and the use of microprocessors in embedded applications. Research and development expenses, as a percentage of net sales, were 0.4% in each of the fiscal 1999 and fiscal 1998 periods. In absolute dollars, R&D expenses increased 52.7% and 65.8%, respectively, for the three- and six-month periods of fiscal 1999 over the same periods in fiscal 1998. The increases were primarily due to increased R&D expenditures at Force. The Company expects that R&D expenses will increase in absolute dollars in the future and may possibly increase as a percentage of net sales as Force continues to invest in its R&D efforts and additional R&D projects are undertaken at certain sites. Acquisition Costs A one-time charge for acquisition costs of approximately $2.9 million related to personnel benefit expenses was incurred as a result of the acquisition of IBM ECAT operations in Austin, Texas on February 1, 1999. Net Interest Income (Expense) Net interest expense was $4.4 million and $5.5 million, respectively, for the three- and six-month periods of fiscal 1999 compared to net interest income of $0.2 million for the same periods of fiscal 1998. The interest expense in the fiscal 1999 periods included $6.2 million per quarter of interest expense for the Company's 6% convertible 17 18 subordinated notes and 7 3/8% senior notes, as well as one-month interest expense of $2.6 million resulting from the new issuance of zero-coupon convertible senior notes. The net interest expense primarily reflects the interest expense associated with the Company's long-term debt offset by interest income earned on undeployed cash and investments and the capitalization of interest expense. In the first half of fiscal 1999, the Company capitalized $2.4 million of interest expense related to the costs of computer software developed for internal use and the facility construction projects at the Brazil and China sites. Solectron expects to utilize more of the undeployed cash during fiscal 1999 in order to fund anticipated future growth. See "Trends and Uncertainties - -- Management of Growth," and "Potential Fluctuations in Operating Results." Income Taxes Income taxes increased to $60.9 million in the first half of fiscal 1999 from $47.2 million in the fiscal 1998 period primarily due to increased income before income taxes. For the first half of fiscal 1999, Solectron's effective income tax rate was 32.0% compared to 33.5% for the corresponding period in fiscal 1999. While the Company's effective tax rate is substantially affected by the proportion of income before taxes derived from domestic and international operations, the tax rate reduction in fiscal 1999 resulted from increased income before taxes from the foreign operations which have been taxed at a lower rate than in the United States. This is primarily due to the tax holiday granted to the Company's Malaysia sites. The Malaysian tax holiday is effective through January 31, 2002, subject to certain conditions. The Company has also been granted various tax holidays in China, which are effective for various terms and are subject to certain conditions. Liquidity and Capital Resources Working capital was $1.7 billion at February 28, 1999 compared to $1.0 billion at the end of fiscal 1998. During the same period, cash, cash equivalents and short-term investments increased to $736.6 million from $308.8 million. The increase was primarily due to proceeds from the completion of the private placement of the 4% yield zero-coupon convertible senior notes, offset by required investments in working capital and capital expenditures to support sales growth. The notes have a maturity date in January 2019, and no interest payment will be made during the term. In addition, the Company used approximately $25 million for the purchase of manufacturing assets of MCEA's CMT division in the first quarter of fiscal 1999 and approximately $75 million for the acquisition of manufacturing assets and rights to certain intellectual property from IBM ECAT in Austin, Texas during the second quarter of fiscal 1999. As Solectron continues to grow, it is expected that the Company will require greater amounts of working capital to support its operations. The Company believes that its current level of working capital and the Company's available credit facilities will provide adequate working capital for the foreseeable future. However, the Company may need to raise additional funds to finance more rapid expansion, including establishing new locations or financing additional acquisitions. There can be no assurance that such funds, if needed, will be available on terms acceptable to the Company or at all. Inventory levels fluctuate directly with the volume of the Company's manufacturing. Changes or significant fluctuations in product market demands can cause fluctuations in inventory levels which may result in changes in levels of inventory turns and liquidity. Historically, the Company has been able to manage its inventory levels with regard to 18 19 these fluctuations. However, should material fluctuations occur in product demand, the Company could experience slower turns and reduced liquidity. In the first half of fiscal 1999, the Company invested approximately $223 million in capital expenditures. A large portion of these expenditures related to the purchase of new equipment, primarily surface mount assembly and test equipment, to meet current and expected production levels, as well as to replace or upgrade older equipment which was retired or sold. Significant expenditures were also made for the acquisition of land and buildings for the Company's manufacturing sites, principally in Brazil and Mexico. The Company expects total capital expenditures in fiscal 1999 to be in the range of $275 million to $325 million. In addition to working capital as of February 28, 1999, which includes cash and cash equivalents of $463.6 million and short-term investments of $273.0 million, the Company has available a $100 million unsecured multicurrency revolving credit facility and a $220 million asset securitization arrangement. Both of these facilities are subject to financial covenants. The Company also has approximately $93 million in unused foreign credit facilities available. "Year 2000" Issues The Company is aware of and is addressing the issues associated with the programming code in existing computer systems as the year 2000 approaches. The Year 2000 problem is pervasive and complex, as many computer systems, manufacturing equipment and industrial control systems will be affected in some way by the rollover of the two-digit year value to 00. Systems that do not properly recognize such dates could generate erroneous information or cause a system to fail. The Year 2000 issue creates risk for the Company from unforeseen problems in its own systems and from third parties with whom the Company deals on business transactions worldwide. Failures of the Company's and/or third parties' computer systems, manufacturing equipment and industrial control systems would have an adverse material impact on the Company's ability to conduct its business. The Company has formed a worldwide task force and has implemented a comprehensive program to analyze the Company's internal systems as well as all external systems (such as vendor, customer, banking systems, etc.) upon which the Company is dependent, to identify and evaluate any potential Year 2000 issues. This task force meets regularly and tracks progress against the program, modifying it as needed to help ensure timely completion. The Company is committed to achieving Year 2000 compliance; however, because a significant portion of the problem is external to the Company and therefore outside of its direct control, there can be no assurance that the Company will be fully or even significantly Year 2000 compliant at the critical juncture. In addition, as full testing of Year 2000 functionality must occur in a simulated environment, the Company will not be able to test full system Year 2000 interfaces and capabilities prior to the Year 2000. As of February 28, 1999, the Company had completed an inventory, assessment and, for the most part, remediation of internal systems, hardware, software, manufacturing equipment and embedded chips in industrial control instruments. Each of these items was identified as mission critical, mission essential, mission impaired or mission non-critical. The Company is in the process of prioritizing and evaluating 19 20 mission critical and mission essential items, identifying fixes and resources as appropriate, and performing and testing corrective measures. While the Company believes that its evaluation has been comprehensive, there can be no assurance that all systems critical to Year 2000 compliance have been identified, or that the corrective actions identified will be completed on time. As of February 28, 1999, the Company had inventoried every key supplier of goods and services to the Company, and considered the potential impact on the Company and its customers of Year 2000 compliance by these suppliers. Also, the Company had evaluated the key suppliers' responses to its mailing surveys and is in the process of auditing these suppliers. The Company plans to disqualify potentially non-compliant sources, look for alternative sources and re-qualify new suppliers to help mediate potential business disruptions. The Company is also involved with various geographic Year 2000 consortiums worldwide, with the intent to leverage contacts and information for commonly used suppliers and services such as utility companies. In addition, the Company is in the process of reviewing EDI linkages and data transmission for its customers and suppliers. While the Company believes that it will be able to qualify alternative suppliers as needed, until all supplier and customer survey responses have been received and evaluated, the Company can not fully evaluate the extent of potential problems and the costs associated with corrective actions. The Company estimates the cost to complete its current compliance program to be in the range of $28 million to $42 million. Of this amount, approximately $7 million is associated with the replacement of capital equipment, of which approximately half is being purchased to replace non-compliant systems that would not otherwise have been replaced at this time. The variability in these estimates depends largely on the response from the Company's suppliers and the extent to which supplier re-qualification is needed. Cost estimates will also be re-evaluated as the status of the overall compliance program is updated. There can be no assurance that actual costs will not be materially higher than currently anticipated. A significant portion of these costs is not likely to be incremental costs to the Company, but rather will represent the redeployment of existing information technology resources. Certain other information technology projects have been delayed due to the focus on Year 2000 issues. The potential costs of the redeployment of personnel and delays in implementing other projects is not known but could be substantial. The total amount spent on the compliance program this fiscal year through February 28, 1999 was $11 million, of which $7 million pertained to payroll costs for personnel involved in the program and costs of outside consultants, and $4 million principally pertained to the replacement of capital equipment. Prior to fiscal 1999, costs of software and hardware applications incurred for Year 2000 compliance were not material and related payroll costs for the Company's information systems group were not tracked separately. Although the Company has identified general contingency plans, such as the replacement and re-qualification of suppliers, the stockpiling of supplies and purchase of generators, a formal contingency plan will not be established until July of 1999 when the audit of suppliers is expected to be completed. The Company is unable to determine what effect the failure of systems because of Year 2000 issues by the Company or its suppliers or customers would have, but any significant failures could have an adverse material effect on the Company's results of operations and financial condition. 20 21 Trends and Uncertainties Customer Concentration; Dependence on the Electronics Industry In the first half of fiscal 1999 and for the full years of fiscal 1998, 1997 and 1996, the Company's ten largest customers accounted for as much as 72.8% of consolidated net sales. The Company is dependent upon continued revenues from its top ten customers. Any material delay, cancellation or reduction of orders from these or other significant customers could have an adverse material effect on the Company's results of operations. During the first half of fiscal 1999, HP and Cisco accounted for 11.9% and 10.1%, respectively, of net sales compared to 14.6% for HP and 10.3% for Cisco during the same period of fiscal 1998. During fiscal 1998, HP, Cisco and Sun accounted for 13.9%, 10.7% and 10.5%, respectively, of net sales, compared to 13.5% for HP and less than 10% for each of Cisco and Sun during fiscal 1997. There can be no assurance that the Company will continue to do business with HP, Cisco, Sun or any other customers. The percentage of the Company's sales to its major customers may fluctuate from period to period. Significant reductions in sales to any of these customers would have an adverse material effect on the Company's results of operations. The Company has long-term contracts (generally for terms of three to five years) with Ericsson, NCR, IBM and Mitsubishi under which these customers have committed to source production of certain products and components from the Company. However, these commitments to source production do not include firm volume purchase commitments. In addition, the Company has no firm long-term volume purchase commitments from its other customers, and over the past few years has experienced reduced lead times in customer orders. Also, customer contracts can be canceled and volume levels can be changed or delayed. The timely replacement of canceled, delayed or reduced contracts with new business cannot be assured. These risks are increased because a majority of the Company's sales are to customers in the electronics industry, which is subject to rapid technological change and product obsolescence. The factors affecting the electronics industry in general, or any of the Company's major customers in particular, could have an adverse material effect on the Company's results of operations. There can be no assurance that sales to customers within any particular market segment will not experience decreases which could have an adverse material effect on the Company's sales. Management of Growth; Geographic Expansion The Company has experienced substantial growth over the last five fiscal years, with net sales increasing from $1.5 billion in fiscal 1994 to $5.3 billion in fiscal year 1998. Additionally, Solectron reported net sales of $3.9 billion for the first half of fiscal 1999. In recent years, the Company has acquired or established facilities in many locations. In the first quarter of fiscal 1998, the Company announced the opening of its Asia/Pacific headquarters office in Taipei, Taiwan, began operations in Guadalajara, Mexico, and as further discussed in "Partnership with Ericsson and Related Transactions," established a manufacturing facility near Sao Paulo, Brazil and opened a New Product Introduction center in Sweden. In April 1998, the Company announced plans to open a manufacturing facility in Timisoara, Romania, and in May 1998, announced the establishment of a program office in Israel. In addition, in April, June and October 1998, the Company completed its acquisitions of certain manufacturing assets from NCR, IBM and 21 22 Mitsubishi, respectively. (See "Acquisition of NCR, IBM and Mitsubishi Assets.") In October 1998, the Company signed a definitive agreement with Ingram Micro, Inc. under which the two companies entered into a strategic alliance. (See "Alliance with Ingram Micro.") In the first quarter of fiscal 1999, the Company announced plans to build new manufacturing facilities in Romania and Suwanee, Georgia. On February 1, 1999, it signed agreements with IBM to acquire IBM's Electronic Card Assembly and Test (ECAT) manufacturing assets in Austin, Texas. (See "Acquisition of NCR, IBM and Mitsubishi Assets.") During March 1999, the Company announced the grand opening of the first phase of its new facility in Brazil. The Company continually evaluates growth and acquisition opportunities and may pursue additional opportunities over time. There can be no assurance that the Company's historical revenue growth will continue or that the Company will successfully manage the facilities in China, Mexico, Brazil and Romania, the partnership with and acquisitions from Ericsson, the acquisitions from NCR, IBM and Mitsubishi, the alliance with Ingram Micro or any other businesses or assets it may acquire in the future. As the Company manages its existing operations and expands geographically, it may experience certain inefficiencies as it integrates new operations and manages geographically dispersed operations. In addition, the Company's results of operations could be adversely affected if its new facilities do not achieve growth sufficient to offset increased expenditures associated with geographic expansion. The Company's expenses and working capital requirements will continue to increase as the new facilities become fully operational. Should the Company increase its expenditures in anticipation of a future level of sales that does not materialize, its profitability would be adversely affected. On occasion, customers may require rapid increases in production that can place an excessive burden on the Company's resources. Partnership with Ericsson and Related Transactions During 1997, the Company established a strategic, global manufacturing partnership with Ericsson Telecom AB's Business Area Infocom Systems. The Company established a New Product Introduction center in Sweden, and production from certain Ericsson plants worldwide was transferred to Solectron manufacturing sites around the world. In October 1997, Solectron acquired certain assets, primarily equipment and inventory, of Ericsson's printed circuit board assembly operation located in Brazil. In addition, Solectron's subsidiary, Solectron Brasil Ltda., hired approximately 370 associates formerly employed by Ericsson Telecomunicacoes S.A. in Brazil. Under the terms of the agreement, Ericsson contracted for Solectron's services from Solectron Brasil Ltda. through September 1999. Thereafter, Solectron will bear the risk of filling the manufacturing capacity at the site with renewed business from Ericsson and new business from other customers. The transactions with Ericsson entail a number of risks, including successfully managing the integration of the operations, retention of key associates, integrating purchasing operations and information systems, managing an increasingly larger and more geographically disparate business and renewing the Ericsson business or replacing it with new business after expiration of the Ericsson commitment. In addition, the completion of the transactions with Ericsson has increased Solectron's expenses and working capital requirements and there is no assurance that Solectron will achieve sufficient revenue to offset the increased expenses. There can be no assurance that Solectron will successfully manage the risks of these transactions. 22 23 Acquisitions of NCR, IBM and Mitsubishi Assets On April 27, 1998, the Company acquired NCR's manufacturing assets in three cities, two in the United States and one in Ireland, for a purchase price of approximately $91 million. As part of the transaction, Solectron hired approximately 1,200 NCR manufacturing and related support associates currently employed at these locations. Under the terms of the agreement, NCR will outsource the manufacturing of certain computer, computer peripheral and server components to Solectron for at least five years. Thereafter, Solectron will bear the risk of filling the manufacturing capacity at the sites with renewed business from NCR and new business from other customers. On June 1, 1998, the Company acquired IBM's ECAT manufacturing assets in Charlotte, North Carolina and non-exclusive rights to certain IBM intellectual property for a purchase price of approximately $96 million. Under the terms of the agreement, Solectron hired approximately 700 IBM manufacturing and related support associates and the Company will provide printed circuit board assembly services to IBM in North America for the next three years. In addition, IBM has made available to Solectron 115 patents and 51 disclosures (collectively the intellectual property rights) covering a wide spectrum of technologies and capabilities. IBM will also provide to Solectron failure analysis and characterization tools for process development and manufacturing, including fault detection and isolation. On October 1, 1998, the Company acquired the wireless telephone manufacturing assets of Mitsubishi Consumer Electronics America, Inc.'s (MCEA) Cellular Mobile Telephone (CMT) division in Braselton, Georgia. MCEA is a subsidiary of Mitsubishi Electric Corporation (Mitsubishi). The purchase price was approximately $25 million. Under the terms of the agreement, the Company will provide MCEA-CMT with a full range of manufacturing services for five years, including New Product Introduction management, printed circuit board assembly and full systems assembly for MCEA's branded and private-label cellular products sold within North America. In addition, Solectron hired approximately 400 MCEA-CMT manufacturing and support associates. On February 1, 1999, the Company acquired IBM's ECAT manufacturing assets in Austin, Texas and non-exclusive rights to use certain IBM intellectual property for a purchase price of approximately $75 million, subject to adjustment. Under the terms of the agreements, Solectron will provide printed circuit board (PCB) assembly for motherboards used in IBM's mobile products manufactured worldwide for the next three years. This includes physical design, early prototyping, new product launch, PCB assembly and test, volume production, end-of-life support, field return services and life-cycle management. Solectron will also provide IBM's worldwide design teams a full range of integrated New Product Introduction (NPI) services which involve pre-manufacturing support, such as design and layout, component and concurrent engineering, test development, prototype, procurement and assembly. Additionally, the Company has hired approximately 1,300 IBM design, test, and manufacturing associates. The transactions with NCR, IBM and Mitsubishi entail a number of risks, including successfully managing the integration of the operations, retention of key associates, integrating purchasing operations and information systems, managing an increasingly larger and more geographically disparate business, obtaining customers other than NCR, IBM and Mitsubishi for these facilities and renewing each of the NCR, 23 24 IBM and Mitsubishi business or replacing it with new business after expiration of NCR's, IBM's and Mitsubishi's respective commitments. In addition, the transactions with NCR, IBM and Mitsubishi will increase Solectron's expenses and working capital requirements and there is no assurance that Solectron will achieve sufficient revenue to offset the increased expenses. There can be no assurance that Solectron will successfully manage the risks of these transactions. Alliance with Ingram Micro On October 1, 1998, the Company announced that it signed a definitive agreement with Ingram Micro Inc. under which the two companies entered into a strategic alliance to provide global build-to-order and configure-to-order assembly services for personal computers, servers and related products in the United States, Canada, Europe, Asia and Latin America. The alliance will be managed by both companies under a joint management matrix that will include a sales and marketing staff, program management, materials management, information technology resources and test and process engineers and will, in most part, utilize existing facilities, systems and personnel. The alliance with Ingram Micro entails a number of risks, including successfully establishing the joint management matrix for the alliance, retention of key associates, integrating purchasing operations and information systems and obtaining customers for the services to be provided by the alliance. In addition, the alliance with Ingram Micro will increase Solectron's expenses and working capital requirements and there is no assurance that Solectron will achieve sufficient revenue to offset the increased expenses. There can be no assurance that Solectron will successfully manage the risks of this alliance or that the terms of the alliance will be finalized. International Operations As a result of its international sales and facilities, the Company's operations are subject to risks of doing business abroad, including but not limited to, fluctuations in the value of currency, export duties, changes to import and export regulations (including quotas), possible restrictions on the transfer of funds, associate turnover, labor unrest, longer payment cycles, greater difficulty in collecting accounts receivable, the burdens and costs of compliance with a variety of foreign laws and in certain parts of the world, political instability. In addition, the Company has operations in several locations that are considered to have highly inflationary economies or volatile currencies, including Mexico, Brazil, China and Romania. In fact, the Company recorded a $77.7 million cumulative foreign exchange translation loss on its balance sheet as of February 28, 1999 which was primarily the result of the recent devaluation of the Brazilian Real. While, to date, these factors have not had a significant adverse impact on the Company's results of operations, there can be no assurance that there will not be such an impact. Furthermore, while the Company may adopt measures to reduce the impact of losses resulting from volatile currencies and other risks of doing business abroad, no assurance may be given that such measures will be adequate. Southeast Asia and Latin America are currently experiencing currency, economic and political instability. To date, the Company's operations have not experienced significant adverse effects from this instability. However, to the extent the Company's worldwide customers sell the products manufactured by Solectron into the Southeast Asia and Latin America markets, the customers' sales may be adversely affected, which 24 25 could decrease demand for the Company's manufacturing services. The Company cannot predict whether such a decrease in demand will materialize and if it does, whether it will have an adverse material effect on the Company's results of operations. The Malaysian government recently adopted currency exchange controls, including controls on ringgit held outside Malaysia, and established a fixed exchange rate for the ringgit against the U.S. dollar. The Company does not hold ringgit outside of Malaysia and therefore will not be affected by these controls. The fixed exchange rate, when applied to local expenses denominated in ringgit, will result in higher expenses when translated to U.S. dollars. However, such local expenses represent a small percentage of the Company's total costs and therefore the Company's results of operations will not be significantly affected in the near future. The long term impact of such controls is not predictable due to dynamic economic conditions that also affect or are affected by other regional or global economies. The Company has been granted a tax holiday for its Malaysia sites which is effective through January 31, 2002, subject to certain conditions. The Company has also been granted various tax holidays in China. These tax holidays are effective for various terms and are subject to certain conditions. There is no assurance that the current tax holidays will not be terminated or modified or that any future tax holidays that the Company may seek will be granted. If the current tax holidays are terminated or modified or if additional tax holidays are not granted in the future, the Company's effective income tax rate would likely increase. Foreign Exchange Rate Sensitivity The Company does not use derivative financial instruments for speculative purposes. The Company's policy is to hedge its foreign currency denominated transactions in a manner that substantially offsets the effects of changes in foreign currency exchange rates. The Company uses foreign currency borrowings and foreign currency forward contracts to hedge the currency risks of transactions denominated in foreign currencies. Gains and losses on these foreign currency hedges are generally offset by corresponding losses and gains on the underlying transaction. The Company does not hold or issue foreign exchange contracts for trading purposes. At February 28, 1999, all of its foreign currency hedging contracts mature in three months or less and there were no material deferred gains or losses. In addition, the Company's international operations in some instances act as a natural hedge because both operating expenses and a portion of sales are denominated in local currency. In these instances including the Company's experience involving the recent devaluation of the Brazilian Real, although an unfavorable change in the exchange rate of a foreign currency against the U.S. dollar will result in lower sales when translated to U.S. dollars, operating expenses will also be lower in these circumstances. However, because less than 10% of net sales are denominated in currencies other than the U.S. dollar, the Company does not believe its total exposure to be significant. (See "International Operations.") Euro Conversion Issues Effective January 1, 1999, 11 of the 15 member countries of the European Union (the participating countries) established fixed conversion rates between their existing sovereign currencies and the euro. For three years after the introduction of the euro, the participating countries 25 26 can perform financial transactions in either the euro or their original local currencies. This will result in a fixed exchange rate among the participating countries, whereas the euro (and the participating countries' currencies in tandem) will continue to float freely against the U.S. dollar and other currencies of non-participating countries. The Company has a task force which is constantly evaluating the effects of the euro conversion on the Company. Solectron does not believe that significant modifications of its information technology systems are needed in order to handle euro transactions and reporting, and the Company is in the process of evaluating its tax positions and all outstanding contracts in currencies of the participating countries to determine the effects, if any, of the euro conversion. The Company does not expect the euro conversion to have a significant impact on its derivatives as the Company has already modified its hedging policies to take the euro conversion into account. While the Company currently believes that the effects of the conversion do not have a significant adverse material effect on the Company's business and operations, there can be no assurances that such conversion will not have an adverse material effect on the Company's results of operations and financial position due to competitive and other factors that may be affected by the conversion that cannot be predicted by the Company. Availability of Components A substantial portion of the Company's net sales is derived from turnkey manufacturing in which the Company provides both materials procurement and assembly. In turnkey manufacturing, the Company potentially bears the risk of component price increases, which could adversely affect the Company's gross profit margins. At various times there have been shortages of components in the electronics industry. If significant shortages of components should occur, the Company may be forced to delay manufacturing and shipments, which could have an adverse material effect on the Company's results of operations. Potential Fluctuations in Operating Results The Company's operating results are affected by a number of factors, including the mix of turnkey and consignment projects, the mix of printed circuit board assembly and systems build projects, capacity utilization, price competition, the degree of automation that can be used in the assembly process, the efficiencies that can be achieved by the Company in managing inventories and fixed assets, the timing of orders from major customers, fluctuations in demand for customer products, the timing of expenditures in anticipation of increased sales, customer product delivery requirements, and increased costs and shortages of components or labor. Turnkey manufacturing currently represents a substantial portion of Solectron's sales. Turnkey projects, in which Solectron procures some or all of the components necessary for production, typically generate higher net sales and higher gross profits with lower gross margin percentages than consignment projects due to the inclusion in Solectron's operating results of sales and costs associated with the purchase and sale of components. Solectron assembles products with varying degrees of material content, which may cause Solectron's gross margin to fluctuate. In addition, the degree of start-up costs and inefficiencies associated with new sites and new customer projects may affect Solectron's gross margin. All of these factors can cause fluctuations in the Company's operating results. 26 27 Interest Rate Sensitivity The primary objective of the Company's investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, the Company maintains its portfolio of cash-equivalents and short-term investments in a variety of securities, including both government and corporate obligations, certificates of deposit and money market funds. As of February 28, 1999, approximately 66% of the Company's portfolio mature in less than 6 months. Because the Company's investments are diversified and of relatively short maturity, a hypothetical 10% increase in interest rates would not have a material effect on the Company's financial position. The Company has entered into an interest rate swap transaction under which Solectron pays a fixed rate of interest hedging against the variable interest rates charged by the lessor for the facility lease at Milpitas, California. The interest rate swap expires in the year of 2002 which coincides with the maturity date of the lease term. As the Company intends to hold the interest rate swap until the maturity date, the Company is not subject to market risk. In fact, such interest rate swap has fixed the interest rate for the facility lease reducing interest rate risk. The Company's debt instruments are subject to fixed interest rates and, in the case of the convertible notes, to fixed conversion ratios into the Company's common stock. In addition, the amount of principal to be repaid at maturity is also fixed. Therefore, the Company is not subject to market risk from its debt instruments. Competition The electronics manufacturing services industry is comprised of a large number of companies, several of which have achieved substantial market share. The Company also faces competition from current and prospective customers that evaluate Solectron's capabilities against the merits of manufacturing products internally. Solectron competes with different companies depending on the type of service or geographic area. Certain competitors may have greater manufacturing, financial, research and development and/or marketing resources than the Company. The Company believes that the primary bases of competition in its targeted markets are manufacturing technology, quality, responsiveness, the provision of value-added services and price. To be competitive, the Company must provide technologically advanced manufacturing services, high product quality levels, flexible delivery schedules and reliable delivery of finished products on a timely and price competitive basis. The Company currently may be at a competitive disadvantage as to price when compared to manufacturers with lower cost structures, particularly with respect to manufacturers with established facilities where labor costs are lower. Intellectual Property Protection The Company's ability to compete may be affected by its ability to protect its proprietary information. The Company holds a limited number of U.S. patents related to the process and equipment used in its surface mount technology. The Company's subsidiary, Force Computers, also holds a number of patents related to VME technology. The Company believes these patents are valuable. However, there can be no assurance that these patents will provide meaningful protection for the Company's manufacturing process and equipment innovations or Force's technology. 27 28 There can be no assurance that third parties will not assert infringement claims against the Company or its customers in the future, either against the patents the Company holds itself or against the IBM patents and other intellectual property rights that the Company has the right to practice. In the event a third party does assert an infringement claim, the Company may be required to expend significant resources to develop a non-infringing manufacturing process or technology or to obtain licenses to the manufacturing process or technology that is the subject of litigation. There can be no assurance that the Company would be successful in such development or that any such licenses would be available on commercially acceptable terms, if at all. In addition, such litigation could be lengthy and costly and could have an adverse material effect on the Company's financial condition regardless of the outcome of such litigation. Environmental Compliance The Company is subject to a variety of environmental regulations relating to the use, storage, discharge and disposal of hazardous chemicals used during its manufacturing process. Any failure by the Company to comply with present and future regulations could subject it to future liabilities or the suspension of production. In addition, such regulations could restrict the Company's ability to expand its facilities or could require the Company to acquire costly equipment or to incur other significant expenses to comply with environmental regulations. Dependence on Key Personnel and Skilled Associates The Company's continued success depends to a large extent upon the efforts and abilities of key managerial and technical associates. The loss of services of certain key personnel could have an adverse material effect on the Company. The Company's business also depends upon its ability to continue to attract and retain senior managers and skilled associates. Failure to do so could adversely affect the Company's operations. Possible Volatility of Market Price of Common Stock The trading price of the common stock is subject to significant fluctuations in response to variations in quarterly operating results, general conditions in the electronics industry and other factors. In addition, the stock market is subject to price and volume fluctuations that affect the market price for many high technology companies in particular, and that often are unrelated to operating performance. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See Management's Discussion and Analysis of Financial Condition and Results of Operations "Trends and Uncertainties -- Interest Rate Sensitivity" and "-- Foreign Exchange Rate Sensitivity." 28 29 SOLECTRON CORPORATION AND SUBSIDIARIES Part II. OTHER INFORMATION Item 1: Legal Proceedings None 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 Company held its Annual Meeting of Stockholders on January 12, 1999. b) At the meeting, the following proposals received the votes listed below: Proposal I: Election of ten (10) Directors Dr. Koichi Nishimura Votes for: 105,947,215 Votes withheld: 370,481 Dr. Winston H. Chen Votes for: 105,958,550 Vote withheld: 359,146 Richard A. D'Amore Votes for: 105,963,938 Votes withheld: 353,758 Charles A. Dickinson Votes for: 105,992,337 Votes withheld: 325,359 Heinz Fridrich Votes for: 105,956,128 Votes withheld: 361,568 Dr. Philip Gerdine Votes for: 105,998,670 Votes withheld: 319,026 William Hasler Votes for: 105,675,397 Votes withheld: 642,299 Dr. Kenneth E. Haughton Votes for: 105,953,453 Votes withheld: 364,243 Dr. Paul R. Low Votes for: 105,890,522 Votes withheld: 427,174 Osamu Yamada Votes for: 105,958,180 Votes withheld: 359,516
29 30 Proposal II: Approval of an amendment to the Company's Certification of Incorporation increasing the number of authorized shares of Common Stock of the Company from 200,000,000 to 400,000,000 shares Votes for: 102,660,341 Votes against: 3,512,413 Abstentions: 144,942 Proposal III: Approval of an amendment to the Company's 1992 Stock Option Plan to increase the number of shares reserved for issuance by 5,700,000 shares Votes for: 61,582,606 Votes against: 44,487,757 Abstentions: 247,333 Proposal IV: Approval of ratification of the appointment of KPMG Peat Marwick LLP as independent accountants of the Company for the fiscal year ended August 31, 1999 Votes for: 105,694,561 Votes against: 156,197 Abstentions: 466,938 Item 5: Other Information None Item 6: Exhibits and Reports on Form 8-K (a) Exhibits 3.1 Certificate of Incorporation of the Company 3.2 Bylaws of the Company 10.1 Amended and Restated Lease Agreement between BNP Leasing Corporation and Solectron Washington, Inc., dated July 1, 1998 10.2 Amended and Restated Purchase Agreement between BNP Leasing Corporation and Solectron Washington, Inc., dated July 1, 1998 10.3 Amended and Restated Guaranty from Solectron Corporation in favor of BNP Leasing Corporation, effective as of July 1, 1998 10.4 Amended and Restated Lease Agreement between BNP Leasing Corporation and Force Computers, Inc., dated July 16, 1998 10.5 Amended and Restated Purchase Agreement between BNP Leasing Corporation and Force Computers, Inc., dated July 16, 1998 10.6 Amended and Restated Guaranty from Solectron Corporation in favor of BNP Leasing Corporation, effective as of July 16, 1998 30 31 10.7 Lease Agreement between BNP Leasing Corporation and Solectron Georgia Corporation, dated October 20, 1998 10.8 Purchase Agreement between BNP Leasing Corporation and Solectron Georgia Corporation, dated October 20, 1998 10.9 Guaranty from Solectron Corporation in favor of BNP Leasing Corporation, effective as of October 20, 1998 27.1 Financial Data Schedule - Six Months Ended February 26, 1999 27.2 Amended Financial Data Schedule - Twelve Months Ended August 28, 1998 27.3 Amended Financial Data Schedule - Twelve Months Ended August 29, 1997 27.4 Amended Financial Data Schedule - Twelve Months Ended August 30, 1996 27.5 Amended Financial Data Schedule - Six Months Ended February 27, 1998 27.6 Amended Financial Data Schedule - Six Months Ended February 28, 1997 (b) Reports on Form 8-K On January 26, 1999, the Company filed a Current Report on Form 8-K regarding the offer and sale of convertible senior notes. On February 18, 1999, the Company filed a Current Report on Form 8-K regarding the redemption of its 6 percent convertible subordinated notes. 31 32 SOLECTRON CORPORATION SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SOLECTRON CORPORATION (Registrant) Date: April 12, 1999 By: /s/ Susan Wang ---------------------------------------- Susan S. Wang Senior Vice President, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) 32 33 Index to Exhibits
Exhibit # Document - --------- -------------------------------------------------------------------- 3.1 Certificate of Incorporation of the Company 3.2 Bylaws of the Company 10.1 Amended and Restated Lease Agreement between BNP Leasing Corporation and Solectron Washington, Inc., dated July 1, 1998 10.2 Amended and Restated Purchase Agreement between BNP Leasing Corporation and Solectron Washington, Inc., dated July 1, 1998 10.3 Amended and Restated Guaranty from Solectron Corporation in favor of BNP Leasing Corporation, effective as of July 1, 1998 10.4 Amended and Restated Lease Agreement between BNP Leasing Corporation and Force Computers, Inc., dated July 16, 1998 10.5 Amended and Restated Purchase Agreement between BNP Leasing Corporation and Force Computers, Inc., dated July 16, 1998 10.6 Amended and Restated Guaranty from Solectron Corporation in favor of BNP Leasing Corporation, effective as of July 16, 1998 10.7 Lease Agreement between BNP Leasing Corporation and Solectron Georgia Corporation, dated October 20, 1998 10.8 Purchase Agreement between BNP Leasing Corporation and Solectron Georgia Corporation, dated October 20, 1998 10.9 Guaranty from Solectron Corporation in favor of BNP Leasing Corporation, effective as of October 20, 1998 27.1 Financial Data Schedule - Six Months Ended February 26, 1999 27.2 Amended Financial Data Schedule - Twelve Months Ended August 28, 1998 27.3 Amended Financial Data Schedule - Twelve Months Ended August 29, 1997 27.4 Amended Financial Data Schedule - Twelve Months Ended August 30, 1996 27.5 Amended Financial Data Schedule - Six Months Ended February 27, 1998 27.6 Amended Financial Data Schedule - Six Months Ended February 28, 1997
EX-3.1 2 CERTIFICATE OF INCORPORATION OF THE COMPANY 1 EXHIBIT 3.1 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION Solectron Corporation, a corporation organized and existing under the by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That at a meeting of the Board of Directors of Solectron Corporation, resolutions were duly adopted setting forth a proposed amendment to the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows: RESOLVED, That the Certificate of Incorporation of this corporation be amended by changing the Article Fourth thereof so that, as amended, said Article shall be and read as follows: "This corporation is authorized to issue two classes of shares: Common Stock and Preferred Stock. The total number of shares which this corporation is authorized to issue is four hundred one million two hundred thousand (401,200,000) shares. The number of shares of Common Stock authorized is four hundred million (400,000,000) shares, $.001 par value. The number of shares of Preferred Stock authorized is one million two hundred thousand (1,200,000) shares, $.001 par value. The shares of Preferred Stock authorized by this Certificate of Amendment of Certificate of Incorporation may be issued from time to time in one or more series. For any wholly unissued series of Preferred Stock, the Board of Directors is hereby authorized to fix and alter the dividend rights, dividend rates, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions), redemption prices, liquidation preferences, the number of shares constituting any such series and the designation thereof, or any of them. 2 For any series of Preferred Stock having issued and outstanding shares, the Board of Directors is hereby authorized to increase or decrease the number of shares of such series when the number of shares of such series was originally fixed by the Board of Directors, but such increase or decrease shall be subject to the limitations and restrictions stated in the resolution of the Board of Directors originally fixing the number of shares of such series. If the number of shares of any series is so decreased, then the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series." SECOND: That thereafter, pursuant to resolution of its Board of Directors, an annual meeting of the stockholders of said corporation was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which meeting the necessary number of shares as required by statute were voted in favor of the amendment. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said Solectron Corporation has caused this certificate to be signed by Susan Wang, its Senior Vice President, Chief Financial Officer and Secretary, this 27th day of January, 1999. By: /s/ SUSAN WANG ------------------------------------- Susan Wang Senior Vice President, Chief Financial Officer and Secretary -2- 3 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION Solectron Corporation, a corporation organized and existing under the by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That at a meeting of the Board of Directors of Solectron Corporation, resolutions were duly adopted setting forth a proposed amendment to the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows: RESOLVED, That the Certificate of Incorporation of this corporation be amended by changing the Article Fourteenth thereof so that, as amended said Article shall be and read as follows: "Stockholders of the Corporation may take action by written consent in lieu of a meeting." SECOND: That thereafter, pursuant to resolution of its Board of Directors, an annual meeting of the stockholders of said corporation was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. 4 IN WITNESS WHEREOF, said Solectron Corporation has caused this certificate to be signed by Susan Wang, its Senior Vice President, Chief Financial Officer and Secretary, this 30th day of January, 1998. By: /s/ SUSAN WANG ------------------------------------- Susan Wang Senior Vice President, Chief Financial Officer and Secretary -2- 5 EXHIBIT A CORRECTED CERTIFICATE OF INCORPORATION OF SOLECTRON CORPORATION FIRST: The name of the Corporation is Solectron Corporation (the "Corporation"). SECOND: The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: This corporation is authorized to issue two classes of shares: Common Stock and Preferred Stock. The total number of shares which this corporation is authorized to issue is two hundred one million two hundred thousand (201,200,000) shares. The number of shares of Common Stock authorized is two hundred million (200,000,000) shares, $.001 par value. The number of shares of Preferred Stock authorized is one million two hundred thousand (1,200,000) shares, $.001 par value. The shares of Preferred Stock authorized by this Certificate of Incorporation may be issued from time to time in one or more series. For any wholly unissued series of Preferred Stock, the Board of Directors is hereby authorized to fix and alter the dividend rights, dividend rates, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions), redemption prices, liquidation preferences, the number of shares constituting any such series and the designation thereof, or any of them. For any series of Preferred Stock having issued and outstanding shares, the Board of Directors is hereby authorized to increase or decrease the number of shares of such series when the number of shares of such series was originally fixed by the Board of Directors, but such increase or decrease shall be subject to the limitations and restrictions stated in the resolution of the Board of Directors originally fixing the number of shares of such series. If the number of shares of any series is so decreased, then the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series. 6 FIFTH: The name and mailing address of the incorporator are as follows:
NAME MAILING ADDRESS ---- --------------- Susan Wang Solectron Corporation 847 Gibraltar Drive, Building 5 Milpitas, CA 95035
SIXTH: The Corporation is to have perpetual existence. SEVENTH: Elections of directors need not be by written ballot unless a stockholder demands election by written ballot at the meeting and before voting begins. EIGHTH: A. At each annual meeting of stockholders, directors of the Corporation shall be elected to hold office until the expiration of the term for which they are elected, and until their successors have been duly elected and qualified; except that if any such election shall not be so held, such election shall take place at a stockholders' meeting called and held in accordance with the Delaware General Corporation Law. B. Vacancies occurring on the Board of Directors may be filled by vote of a majority of the remaining members of the Board of Directors, although less than a quorum, at a meeting of the Board of Directors. A person so elected by the Board of Directors to fill a vacancy shall hold office until the next succeeding annual meeting of stockholders of the Corporation at which the directorship is to be elected and until his or her successor shall have been duly elected and qualified. NINTH: The number of directors which constitute the whole Board of Directors of the Corporation shall be designated in the Bylaws of the Corporation. TENTH: In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter, amend or repeal the Bylaws of the Corporation. ELEVENTH: A. To the fullest extent permitted by the Delaware General Corporation Law as the same exists or as it may hereafter be amended, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. B. Neither any amendment nor repeal of this Article, nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article, shall eliminate or reduce the effect of this Article in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. -2- 7 TWELFTH: At the election of directors of the Corporation, each holder of stock of any class or series shall be entitled to as many votes as shall equal the number of votes which (except for such provision as to cumulative voting) he would be entitled to cast for the election of directors with respect to his shares of stock multiplied by the number of directors to be elected by him, and he may cast all of such votes for a single director or may distribute them among the number to be voted for, or for any two or more of them as he may see fit, so long as the name of the candidate for director shall have been placed in nomination prior to the voting and the stockholder, or any other holder of the same class or series of stock, has given notice at the meeting prior to the voting of the intention to cumulate votes. THIR- Meetings of stockholders may be held within or without the State of TEENTH: Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside of the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation. FOUR- Stockholders of the Corporation may not take action by written consent TEENTH: in lieu of a meeting but must take any actions at a duly called annual or special meeting. FIF- Advance notice of stockholder nomination for the election of directors TEENTH: and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation. SIX- The Corporation reserves the right to amend, alter, change or repeal TEENTH: any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. -3- EX-3.2 3 BYLAWS OF THE COMPANY 1 EXHIBIT 3.2 CERTIFICATE OF AMENDMENT TO THE BYLAWS OF SOLECTRON CORPORATION The undersigned, being the Secretary of Solectron Corporation, a Delaware corporation, hereby certifies that the Board of Directors of the Corporation approved an amendment to the Bylaws of the Corporation that reads as follows, effective as of the date indicated below: "3.2 NUMBER OF DIRECTORS The Board of Directors shall consist of ten (10) members. The number of directors may be changed by an amendment to this Bylaw, duly adopted by the Board of Directors or by the stockholders, or by duly adopted amendment to the certificate of incorporation." Date: May 13, 1998 /s/ SUSAN WANG ------------------------------------ Susan Wang, Secretary 2 CERTIFICATE OF AMENDMENT TO THE BYLAWS OF SOLECTRON CORPORATION The undersigned, being the Secretary of Solectron Corporation, a Delaware corporation, hereby certifies that Article IV, Section 4.1 of the Bylaws of this Corporation was amended by the Board of Directors effective January 13, 1999 to provide in its entirety as follows: "4.1 COMMITTEES OF DIRECTORS The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, with each committee to consist of one or more of the directors of the corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors or in the bylaws of the corporation, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) amend the certificate of incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors as provided in Section 151(a) of the General Corporation Law of Delaware, fix any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation), (ii) adopt an agreement of merger or consolidation under Sections 251 or 252 of the General Corporation Law of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets (iv) recommend to the stockholders a dissolution of the corporation or a revocation of a dissolution, or (v) amend the bylaws of the corporation; and, unless the board resolution establishing the committee, the bylaws or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law of Delaware." /s/ SUSAN WANG ------------------------------------ Susan Wang, Secretary 3 AMENDED AND RESTATED BYLAWS OF SOLECTRON CORPORATION ARTICLE I CORPORATE OFFICES 1.1 REGISTERED OFFICE The registered office of the corporation in the State of Delaware shall be in the City of Wilmington, County of New Castle, State of Delaware. The name of the registered agent of the corporation at such location is CT Corporation. 1.2 OTHER OFFICES The Board of Directors may at any time establish other offices at any place or places where the corporation is qualified to do business. ARTICLE II MEETINGS OF STOCKHOLDERS 2.1 PLACE OF MEETINGS Meetings of stockholders shall be held at the principal executive office of the corporation, within or outside the State of Delaware, unless some other appropriate and convenient location be designated for that purpose from time to time by the Board of Directors. 2.2 ANNUAL MEETING Annual meetings of the Stockholders shall be held, each year, at the time and on the day as designated by resolution of the Board of Directors. At the annual meeting, the stockholders shall elect a Board of Directors, consider reports of the affairs of the corporation and transact such other business as may be properly brought before the meeting. 4 2.3 SPECIAL MEETINGS A special meeting of the stockholders may be called at any time by the Board of Directors, the Chairman of the Board, the President, the Secretary, or holders of shares entitled to cast not less than ten (10) percent of the votes at the meeting. Except as next provided, notice shall be given as for the annual meeting. Upon receipt of a written request addressed to the Chairman, President, or Secretary, mailed or delivered personally to such officer by any person (other than the Board) entitled to call a special meeting of stockholders, such officer shall cause notice to be given, to the stockholders entitled to vote, that a meeting will be held at a time requested by the person or persons calling the meeting, not less than twenty five nor more than sixty days after the receipt of such request. 2.4 NOTICE OF STOCKHOLDERS' MEETINGS All notices of meetings with stockholders shall be in writing and shall be sent or otherwise given in accordance with Section 2.6 of these bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, date, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Notice of meetings, annual or special, shall be given in writing not less than ten (10) nor more than sixty (60) days before the date of the meeting, to stockholders entitled to vote thereat by the Secretary or an assistant secretary, or if there be no such officer, or in the case of his neglect or refusal, by any director or stockholder. Such notices or any reports shall be given personally or by mail or other means of written communication and shall be sent to the stockholder's address appearing on the books of the corporation, or supplied by him to the corporation for the purpose of notice. Notice of any meeting of stockholders shall specify the place, the day and the hour of meeting, and (1) in case of a special meeting, the general nature of the business to be transacted and no other business may be transacted, or (2) in the case of an annual meeting, those matters which the Board at date of mailing, intends to present for action by the stockholders. At any meetings where directors are to be elected, notice shall include the names of the nominees, if any, intended at date of Notice to be presented by management for election. If a shareholder supplies no address, notice shall be deemed to have been given to him if mailed to the place where the principal executive office of the Company, inside or outside the State of Delaware, is situated, or published at least once in some newspaper of general circulation in the County of said principal office. -2- 5 2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS To be properly brought before an annual meeting or special meeting, nominations for the election of director or other 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) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a stockholder. For such nominations or other business to be considered properly brought before the meeting by a stockholder such stockholder must have given timely notice and in proper form of his intent to bring such business before such meeting. To be timely, such stockholder's notice must be delivered to or mailed and received by the Secretary of the corporation not less than ninety (90) days prior to the meeting; provided, however, that in the event that less than one-hundred (100) days notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. To be in proper form, a stockholder's notice to the secretary shall set forth: (i) the name and address of the stockholder who intends to make the nominations or propose the business and, as the case may be, the name and address of the person or persons to be nominated or the nature of the business to be proposed; (ii) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and, if applicable, intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice or introduce the business specified in the notice; (iii) if applicable, a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (iv) such other information regarding each nominee or each matter of business to be proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, or the matter been proposed, or intended to be proposed by the Board of Directors; and (v) if applicable, the consent of each nominee to serve as director of the corporation if so elected. The chairman of the meeting may refuse to acknowledge the nomination of any person or the proposal of any business not made in compliance with the foregoing procedure. -3- 6 2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the corporation. An affidavit of the Secretary or an assistant secretary or of the transfer agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. 2.7 QUORUM The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum is not present or represented at any meeting of the stockholders, then the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed. If a quorum be initially present, the stockholders may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum, if any action taken is approved by a majority of the stockholders required initially to constitute a quorum. When a quorum is present or represented at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, by express provisions of the statutes or of the certificate of incorporation, a different vote is required, in which case such express provision shall govern and control the decision of the question. 2.8 ADJOURNED MEETING; NOTICE When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than forty-five (45) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. -4- 7 2.9 VOTING The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.12 and Section 2.14 of these bylaws, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgers and joint owners of stock and to voting trusts and other voting agreements). Except as may otherwise be provided in the certificate of incorporation or the last paragraph of this Section 2.9, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder. At a stockholders' meeting at which directors are to be elected, or at elections held under special circumstances, a stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a number of votes greater than the number of votes which such stockholder normally is entitled to cast). Each holder of stock of any class or series who elects to cumulate votes shall be entitled to as many votes as equals the number of votes which (absent this provision as to cumulative voting) he would be entitled to cast for the election of directors with respect to his shares of stock multiplied by the number of directors to be elected by him, and he may cast all of such votes for a single director or may distribute them among the number to be voted for, or for any two or more of them, as he may see fit, so long as the name of the candidate for director shall have been placed in nomination prior to the voting and the stockholder, or any other holder of the same class or series of stock, has given notice at the meeting prior to the voting of the intention to cumulate votes. 2.10 WAIVER OF NOTICE Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws. 2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING Unless otherwise provided in the certificate of incorporation, any action required by this chapter to be taken at any annual or special meeting of stockholders of a corporation, or any action that may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice, and without a vote if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of -5- 8 votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. If the action which is consented to is such as would have required the filing of a certificate under any section of the General Corporation Law of Delaware if such action had been voted on by stockholders at a meeting thereof, then the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written notice and written consent have been given as provided in Section 228 of the General Corporation Law of Delaware. 2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof or entitled to express consent or dissent to corporate action in writing without a meeting (if otherwise permitted by these bylaws and the corporation's certificate of incorporation), or entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall be not more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. If the Board of Directors does not so fix a record date, the fixing of such record date shall be governed by the provisions of Section 213 of the General Corporation Law of Delaware. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. 2.13 PROXIES Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for him by a written proxy, signed by the stockholder and filed with the Secretary, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if the stockholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the stockholder or the stockholder's attorney-in-fact. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(e) of the General Corporation Law of Delaware. -6- 9 2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any 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 list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of stockholders or the books of the corporation, or to vote in person or by proxy at any meeting of stockholders and of the number of shares held by each such stockholder. 2.15 CONDUCT OF BUSINESS Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in his absence by the President, or in his absence by a Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting. The chairman of any meeting of stockholders shall determine the order of business and the procedures at the meeting, including such matters as the regulation of the manner of voting and conduct of business. ARTICLE III DIRECTORS 3.1 POWERS Subject to the provisions of the General Corporation Law of Delaware and any limitations in the certificate of incorporation or these bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board of Directors. Each director shall exercise such powers and otherwise perform such duties in good faith, in the manner such director believes to be in the best interests of the corporation, and with such care, including reasonable inquiry, using ordinary prudence, as a person in a like position would use under similar circumstances. -7- 10 3.2 NUMBER OF DIRECTORS The Board of Directors shall consist of eight (8) members. The number of directors may be changed by an amendment to this bylaw, duly adopted by the Board of Directors or by the stockholders, or by a duly adopted amendment to the certificate of incorporation. 3.3 ELECTION QUALIFICATION AND TERM OF OFFICE OF DIRECTORS Except as provided in Section 3.4 of these bylaws, at each annual meeting of stockholders, directors of the corporation shall be elected to hold office until the expiration of the term for which they are elected, and until their successors have been duly elected and qualified; except that if any such election shall not be so held, such election shall take place at a stockholders' meeting called and held in accordance with the Delaware General Corporation Law. The term of office of a director shall begin immediately after election. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws, wherein other qualifications for directors may be prescribed. Election of directors need not be by written ballot unless a stockholder demands election by written ballot at the meeting and before voting begins. 3.4 RESIGNATION AND VACANCIES Any director may resign at any time upon written notice to the corporation. Any vacancy occurring in the Board of Directors because of resignation or death of a director may be filled by a majority of the remaining members of the Board of Directors, although such majority is less than a quorum, or by a sole remaining director, and each director so elected shall hold office until his successor is elected at the next succeeding annual meeting of stockholders at which the class to which the directorship belongs is to be elected or at a special meeting called for that purpose. Unless otherwise provided in the certificate of incorporation or these bylaws: (i) Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. (ii) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected. If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or -8- 11 guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the General Corporation Law of Delaware. If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole board (as constituted immediately prior to any such increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten (10) percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the General Corporation Law of Delaware as far as applicable. 3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE The Board of Directors of the corporation may hold meetings, both regular and special, either within or outside the State of Delaware, at such place as is designated in the notice of the meeting. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any 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 in a meeting shall constitute presence in person at the meeting. Accurate minutes of any meeting of the Board of Directors or any committee thereof shall be maintained by the Secretary or other office designated for that purpose. 3.6 FIRST MEETINGS The first meeting of each newly elected Board of Directors shall be held immediately following the adjournment of the annual meetings of the stockholders. 3.7 REGULAR MEETINGS Regular meetings of the Board of Directors may be held without notice at the corporate offices or such other place, within or without the State of Delaware, at such time and place as the Board designates. 3.8 SPECIAL MEETINGS; NOTICE Special meetings of the Board may be called at any time by the President or, if he is absent or unable or refuses to act, by any vice president or the Secretary or by any two directors, or by one director if only one is provided. -9- 12 At least forty-eight (48) hours notice of the time and place of special meetings shall be delivered personally to the directors or personally communicated to them by a corporate officer by telephone or telegraph. If the notice is sent to a director by letter, it shall be addressed to him at his address as it is shown upon the records of the corporation (or if it is not so shown on such records or is not readily ascertainable, at the place in which the meetings of the directors are regularly held). In case such notice is mailed, it shall be deposited in the United States mail, postage prepaid, in the place in which the principal executive office of the corporation is located, at least four (4) days prior to the time of the holding of the meeting. Such mailing, telegraphing, telephoning or delivery as above provided shall be due, legal and personal notice to such director. When all of the directors are present at any directors' meeting, however called or noticed, and either (i) sign a written consent thereto on the records of such meeting, or (ii) if a majority of the directors is present and if those not present sign a waiver of notice of such meeting or a consent to holding the meeting or an approval of the minutes thereof, whether prior to or after the holding of such meeting, which said waiver, consent or approval shall be filed with the Secretary of the corporation or (iii) if a director attends a meeting without notice, but without protesting, prior thereto or at its commencement, the lack of notice to him, then the transactions thereof are as valid as if had at a meeting regularly called and noticed. 3.9 QUORUM A majority of the number of directors as fixed by the certificate of incorporation or bylaws, shall be necessary to constitute a quorum for the transaction of business, and the action of a majority of the directors present at any meeting at which there is a quorum, when duly assembled, is valid as a corporate act; provided that a minority of the directors, in the absence of a quorum, may adjourn from time to time, but may not transact any business. A meeting at which a quorum is initially present may continue to transact business, notwithstanding the withdrawal of directors, if any action taken is approved by a majority of the required quorum for such meeting. 3.10 WAIVER OF NOTICE Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws. -10- 13 3.11 ADJOURNED MEETING; NOTICE Notice of the time and place of holding an adjourned meeting need not be given to absent directors if the time and place be fixed at the meeting adjourned and held within twenty-four (24) hours, but if adjourned more than twenty-four (24) hours, notice shall be given to all directors not present at the time of the adjournment. 3.12 CONDUCT OF BUSINESS Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if any, or in his absence by the President, or in their absence by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting. The chairman of any meeting shall determine the order of business and the procedures at the meeting. 3.13 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the Board or committee. 3.14 FEES AND COMPENSATION OF DIRECTORS Directors, as such, shall not receive any stated salary for their services, but by resolution of the Board, a fixed sum and expense of attendance, if any, may be allowed for attendance at each regular and special meeting of the Board; provided that nothing herein contained shall be construed to preclude any director from serving the Company in any other capacity and receiving compensation therefor. 3.15 APPROVAL OF LOANS TO OFFICERS The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this section shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. -11- 14 3.16 REMOVAL OF DIRECTORS Unless otherwise restricted by statute, by the certificate of incorporation or by these bylaws, any director or the entire Board of Directors may be removed with or without cause by the holders of a majority of the shares then entitled to vote at an election of directors; provided, however, that, so long as stockholders of the corporation are entitled to cumulative voting, no individual director may be removed without cause (unless the entire board is removed) if the number of votes cast against such removal would be sufficient to elect the director if then cumulatively voted at an election of the class of directors of which the director is a part. Whenever the holders of any class or series are entitled to elect one or more directors by the certificate of incorporation, such director or directors may be removed without cause only if there are sufficient votes by the holders of the outstanding shares of that class or series. A vacancy created by the removal of a director may be filled only by the approval of the stockholders. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director's term of office. 3.17 ADVISORY DIRECTORS The Board of Directors from time to time may elect one or more persons to be Advisory Directors who shall not by such appointment be members of the Board of Directors. Advisory Directors shall be available from time to time to perform special assignments specified by the President, to attend meetings of the Board of Directors upon invitation and to furnish consultation to the Board. The period during which the title shall be held may be prescribed by the Board of Directors. If no period is prescribed, the title shall be held at the pleasure of the Board. ARTICLE IV COMMITTEES 4.1 COMMITTEES OF DIRECTORS The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, with each committee to consist of two or more of the directors of the corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors or in the bylaws of the corporation, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may -12- 15 require it; but no such committee shall have the power or authority to (i) amend the certificate of incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors as provided in Section 151(a) of the General Corporation Law of Delaware, fix any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation), (ii) adopt an agreement of merger or consolidation under Sections 251 or 252 of the General Corporation Law of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets (iv) recommend to the stockholders a dissolution of the corporation or a revocation of a dissolution, or (v) amend the bylaws of the corporation; and, unless the board resolution establishing the committee, the bylaws or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law of Delaware. 4.2 COMMITTEE MINUTES Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. 4.3 MEETINGS AND ACTION OF COMMITTEES Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Section 3.5 (place of meetings and meetings by telephone), Section 3.7 (regular meetings), Section 3.8 (special meetings and notice), Section 3.9 (quorum), Section 3.10 (waiver of notice), Section 3.11 (adjournment and notice of adjournment), Section 3.12 (conduct of business) and Section 3.13 (action without a meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the Board of Directors and its members; provided, however, that the time of regular meetings of committees may also be called by resolution of the Board of Directors and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board of Directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws. ARTICLE V OFFICERS 5.1 OFFICERS The officers of the corporation shall be chairman of the board or a president or both, a secretary, and a chief financial officer. The corporation may also have, at the discretion of the Board -13- 16 of Directors, one or more vice presidents, one or more assistant secretaries, and any such other officers as may be appointed in accordance with the provisions of Section 5.2 of these bylaws. Any number of offices may be held by the same person. 5.2 ELECTION OF OFFICERS Except as otherwise provided in this Section 5.2, the officers of the corporation shall be chosen annually by the Board of Directors, and each shall hold his office until he shall resign or shall be removed or otherwise disqualified to serve, or his successor shall be elected and qualified. The Board of Directors may appoint such officers and agents of the business as the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the Board of Directors may from time to time determine. Any vacancy occurring in any office of the corporation shall be filled in the manner prescribed in the Bylaws for regular appointments to such office. 5.3 REMOVAL AND RESIGNATION OF OFFICERS Any officer may be removed, either with or without cause, by an affirmative vote of the majority of the Board of Directors at any regular or special meeting of the Board or, except in the case of an officer chosen by the Board of Directors, by any officer upon whom such power of removal may be conferred by the Board of Directors or, in the case of an officer appointed by the President, by the President. Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. 5.4 CHAIRMAN OF THE BOARD The Chairman of the Board, if such an officer be elected, shall, if present, preside at meetings of the Board of Directors and exercise and perform such other powers and duties as may from time to time be assigned to him by the Board of Directors or as may be prescribed by these bylaws. 5.5 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, unless otherwise determined by the Board of Directors, shall be the 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 the officers of the corporation. He shall preside at all meetings of the stockholders and, in the absence or nonexistence of a chairman of the board, at all meetings of the Board of Directors. He -14- 17 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 these bylaws. 5.6 VICE PRESIDENTS 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, a Vice President designated by the Board of Directors, shall perform all 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 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, these bylaws, the President or the Chairman of the Board. 5.7 SECRETARY The Secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the Board of Directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and stockholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors' meetings or committee meetings, the number of shares present or represented at stockholders' meetings, and the proceedings thereof. The Secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation's transfer agent or registrar, as determined by resolution of the Board of Directors, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors required to be given by law or by these bylaws. He shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by these bylaws. 5.8 CHIEF FINANCIAL OFFICER The Chief Financial Officer shall keep and maintain, or cause to be kept and maintained in accordance with generally accepted accounting principles, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings and shares. The books of account shall at all reasonable times be open to inspection by any director. -15- 18 The Chief Financial Officer shall deposit all monies and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the Board of Directors. He shall disburse the funds of the corporation as may be ordered by the Board of Directors, shall render to the President and 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 these bylaws. ARTICLE VI INDEMNITY 6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS The corporation shall, to the maximum extent and in the manner permitted by the General Corporation Law of Delaware, indemnify each of its directors and officers against expenses (including attorneys' fees), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 6.1, a "director" or "officer" of the corporation includes any person (i) who is or was a director or officer of the corporation, (ii) who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, including, without limitation, any direct or indirect subsidiary of the corporation, or (iii) who was a director or officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation. 6.2 INDEMNIFICATION OF OTHERS The corporation shall have the power, to the extent and in the manner permitted by the General Corporation Law of Delaware, to indemnify each of its employees and agents (other than directors and officers) against expenses (including attorneys' fees), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 6.2, an "employee" or "agent" of the corporation (other than a director or officer) includes any person (i) who is or was an employee or agent of the corporation, (ii) who is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including, without limitation, any direct or indirect subsidiary of the corporation, or (iii) who was an employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation. -16- 19 6.3 INSURANCE The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of the General Corporation Law of Delaware and this Section 6. 6.4 PAYMENT OF EXPENSES IN ADVANCE Expenses incurred in defending any civil or criminal action or proceeding for which indemnification is required pursuant to Section 6.1, or for which indemnification is permitted pursuant to Section 6.2 following authorization thereof by the Board of Directors, may be paid by the corporation in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of the indemnified party to repay such amount if it shall ultimately be determined that the indemnified party is not entitled to be indemnified as authorized in this Section 6. 6.5 INDEMNITY NOT EXCLUSIVE The indemnification provided by this Section 6 shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, to the extent that such additional rights to indemnification are authorized in the certificate of incorporation. 6.6 CONFLICTS No indemnification or advance shall be made under this Section 6, except where such indemnification or advance is mandated by law or the order, judgment or decree of any court of competent jurisdiction, in any circumstance where it appears: (a) That it would be inconsistent with a provision of the certificate of incorporation, these bylaws, a resolution of the stockholders or an agreement in effect at the time of the accrual of the alleged cause of the action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnification; or (b) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement. -17- 20 ARTICLE VII RECORDS AND REPORTS 7.1 MAINTENANCE AND INSPECTION OF RECORDS The corporation shall, either at its principal executive office or at such place or places as designated by the Board of Directors, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these bylaws as amended to date, accounting books, and other records. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business. 7.2 INSPECTION BY DIRECTORS Any director shall have the right to examine the corporation's stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper. 7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS The Chairman of the Board, the President, any Vice President, the Chief Financial Officer, the Secretary, or any other person authorized by the Board of Directors or the President or a Vice President, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority. -18- 21 7.4 SUBSIDIARY CORPORATIONS Shares of this corporation owned by a subsidiary shall not be entitled to vote on any matter. A subsidiary for these purposes is defined as a corporation, the shares of which possessing more than 25% of the total combined voting power of all classes of shares entitled to vote, are owned directly or indirectly through one or more subsidiaries. ARTICLE VIII GENERAL MATTERS 8.1 STOCK CERTIFICATES; PARTLY PAID SHARES The shares of a corporation shall be represented by certificates, provided that the Board of Directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates and, upon request, every holder of uncertificated shares, shall be entitled to have a certificate signed by, or in the name of the corporation by the Chairman of the Board of Directors, or the President or Vice President, and by the Chief Financial Officer or the secretary of such corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, or upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon. 8.2 LOST CERTIFICATES Except as provided in this Section 8.2, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and canceled at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnity it against any claim that may be -19- 22 made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares. 8.3 CONSTRUCTION; DEFINITIONS Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Delaware General Corporation Law shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term "person" includes both a corporation and a natural person. 8.4 DIVIDENDS The directors of the corporation, subject to any restrictions contained in the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock pursuant to the General Corporation Law of Delaware. Dividends may be paid in cash, in property, or in shares of the corporation's capital stock. The directors of the corporation may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. 8.5 FISCAL YEAR The fiscal year of the corporation shall be fixed by resolution of the Board of Directors and may be changed by the Board of Directors. 8.6 SEAL The corporation may adopt a corporate seal, which may be altered at pleasure, and may use the same by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. 8.7 TRANSFER OF STOCK Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction in its books. 8.8 STOCK TRANSFER AGREEMENTS The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the General Corporation Law of Delaware. -20- 23 8.9 REGISTERED STOCKHOLDERS The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. 8.10 EXECUTION OF CONTRACTS The Board of Directors, except as in the Bylaws otherwise provided, may authorize any officer or officers, agent or agents, to enter into any contract or execute and instrument in the name of and on behalf of the corporation. Such authority may be general or confined to specific instances. Unless so authorized by the Board of Directors, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or agreement, or to pledge its credit, or to render it liable for any purpose or to any amount, except as provided in Sec. 142 of Delaware General Corporation Law. ARTICLE IX AMENDMENTS The original or other bylaws of the corporation may be adopted, amended or repealed by a majority of the stockholders entitled to vote; provided, however, that the corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws. Whenever an amendment or new bylaw is adopted, it shall be copied in the book of bylaws with the original bylaws, in the appropriate place. If any bylaw is repealed, the fact of repeal with the date of the meeting at which the repeal was enacted or written assent was filed shall be stated in said book. ARTICLE X DISSOLUTION If it should be deemed advisable in the judgment of the Board of Directors of the corporation that the corporation should be dissolved, the Board, after the adoption of a resolution to that effect by a majority of the whole Board at any meeting called for that purpose, shall cause notice to be mailed to each stockholder entitled to vote thereon of the adoption of the resolution and of a meeting of stockholders to take action upon the resolution. -21- 24 At the meeting a vote shall be taken for and against the proposed dissolution. If a majority of the outstanding stock of the corporation entitled to vote thereon votes for the proposed dissolution, then a certificate stating that the dissolution has been authorized in accordance with the provisions of Section 275 of the General Corporation Law of Delaware and setting forth the names and residences of the directors and officers shall be executed, acknowledged, and filed and shall become effective in accordance with Section 103 of the General Corporation Law of Delaware. Upon such certificate's becoming effective in accordance with Section 103 of the General Corporation Law of Delaware, the corporation shall be dissolved. ARTICLE XI CUSTODIAN 11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES The Court of Chancery, upon application of any stockholder, may appoint one or more persons to be custodians and, if the corporation is insolvent, to be receivers, of and for the corporation when: (i) at any meeting held for the election of directors the stockholders are so divided that they have failed to elect successors to directors whose terms have expired or would have expired upon qualification of their successors; or (ii) the business of the corporation is suffering or is threatened with irreparable injury because the directors are so divided respecting the management of the affairs of the corporation that the required vote for action by the Board of Directors cannot be obtained and the stockholders are unable to terminate this division; or (iii) the corporation has abandoned its business and has failed within a reasonable time to take steps to dissolve, liquidate or distribute its assets. 11.2 DUTIES OF CUSTODIAN The custodian shall have all the powers and title of a receiver appointed under Section 291 of the General Corporation Law of Delaware, but the authority of the custodian shall be to continue the business of the corporation and not to liquidate its affairs and distribute its assets, except when the Court of Chancery otherwise orders and except in cases arising under Sections 226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware. -22- 25 CERTIFICATE OF ADOPTION OF AMENDED AND RESTATED BY LAWS OF SOLECTRON CORPORATION Certificate by Secretary of Adoption by Incorporator The undersigned hereby certifies that she is the duly elected, qualified, and acting Secretary of Solectron Corporation and that the foregoing Amended and Restated Bylaws, comprising twenty-two (22) pages, were adopted as the Bylaws of the corporation on January 14, 1998, by the Board of Directors. IN WITNESS WHEREOF, the undersigned has hereunto set her hand and affixed the corporate seal this 14th day of January 1998. /s/ SUSAN WANG ------------------------------------ Susan Wang, Secretary 26 AMENDED AND RESTATED BYLAWS OF SOLECTRON CORPORATION Effective as of January 14, 1998 27
TABLE OF CONTENTS PAGE ---- ARTICLE I CORPORATE OFFICES ............................................................ 1 1.1 REGISTERED OFFICE ............................................................ 1 1.2 OTHER OFFICES ................................................................ 1 ARTICLE II MEETINGS OF STOCKHOLDERS ..................................................... 1 2.1 PLACE OF MEETINGS ............................................................ 1 2.2 ANNUAL MEETING ............................................................... 1 2.3 SPECIAL MEETINGS ............................................................. 2 2.4 NOTICE OF STOCKHOLDERS' MEETINGS ............................................. 2 2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS .............. 3 2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE ................................. 4 2.7 QUORUM ....................................................................... 4 2.8 ADJOURNED MEETING; NOTICE .................................................... 4 2.9 VOTING ....................................................................... 5 2.10 WAIVER OF NOTICE ............................................................. 5 2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING ...................... 5 2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS .................. 6 2.13 PROXIES ...................................................................... 6 2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE ........................................ 7 2.15 CONDUCT OF BUSINESS .......................................................... 7 ARTICLE III DIRECTORS .................................................................... 7 3.1 POWERS ....................................................................... 7 3.2 NUMBER OF DIRECTORS .......................................................... 8 3.3 ELECTION QUALIFICATION AND TERM OF OFFICE OF DIRECTORS ....................... 8 3.4 RESIGNATION AND VACANCIES .................................................... 9 3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE ..................................... 9 3.6 FIRST MEETINGS ............................................................... 9 3.7 REGULAR MEETINGS ............................................................. 9 3.8 SPECIAL MEETINGS; NOTICE ..................................................... 9 3.9 QUORUM ....................................................................... 10 3.10 WAIVER OF NOTICE ............................................................. 10 3.11 ADJOURNED MEETING; NOTICE .................................................... 11 3.12 CONDUCT OF BUSINESS .......................................................... 11 3.13 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING ............................ 11 3.14 FEES AND COMPENSATION OF DIRECTORS ........................................... 11
-i- 28 TABLE OF CONTENTS (CONTINUED) 3.15 APPROVAL OF LOANS TO OFFICERS ................................................ 11 3.16 REMOVAL OF DIRECTORS ......................................................... 12 3.17 ADVISORY DIRECTORS ........................................................... 12 ARTICLE IV COMMITTEES ................................................................... 12 4.1 COMMITTEES OF DIRECTORS ...................................................... 12 4.2 COMMITTEE MINUTES ............................................................ 13 4.3 MEETINGS AND ACTION OF COMMITTEES ............................................ 13 ARTICLE V OFFICERS ..................................................................... 13 5.1 OFFICERS ..................................................................... 13 5.2 ELECTION OF OFFICERS ......................................................... 14 5.3 REMOVAL AND RESIGNATION OF OFFICERS .......................................... 14 5.4 CHAIRMAN OF THE BOARD ........................................................ 14 5.5 PRESIDENT .................................................................... 14 5.6 VICE PRESIDENTS .............................................................. 15 5.7 SECRETARY .................................................................... 15 5.8 CHIEF FINANCIAL OFFICER ...................................................... 15 ARTICLE VI INDEMNITY .................................................................... 16 6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS .................................... 16 6.2 INDEMNIFICATION OF OTHERS .................................................... 16 6.3 INSURANCE .................................................................... 17 6.4 PAYMENT OF EXPENSES IN ADVANCE ............................................... 17 6.5 INDEMNITY NOT EXCLUSIVE ...................................................... 17 6.6 CONFLICTS .................................................................... 17 ARTICLE VII RECORDS AND REPORTS .......................................................... 18 7.1 MAINTENANCE AND INSPECTION OF RECORDS ........................................ 18 7.2 INSPECTION BY DIRECTORS ...................................................... 18 7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS ............................... 18 7.4 SUBSIDIARY CORPORATIONS ...................................................... 19
-ii- 29 TABLE OF CONTENTS (CONTINUED) ARTICLE VIII GENERAL MATTERS ............................................................... 19 8.1 STOCK CERTIFICATES; PARTLY PAID SHARES ....................................... 19 8.2 LOST CERTIFICATES ............................................................ 19 8.3 CONSTRUCTION; DEFINITIONS .................................................... 20 8.4 DI6DENDS ..................................................................... 20 8.5 FISCAL YEAR .................................................................. 20 8.6 SEAL ......................................................................... 20 8.7 TRANSFER OF STOCK ............................................................ 20 8.8 STOCK TRANSFER AGREEMENTS .................................................... 20 8.9 REGISTERED ................................................................... 21 8.10 EXECUTION OF CONTRACTS ....................................................... 21 ARTICLE IX AMENDMENTS ................................................................... 21 ARTICLE X DISSOLUTION .................................................................. 21 ARTICLE XI CUSTODIAN .................................................................... 22 11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES .................................. 22 11.2 DUTIES OF CUSTODIAN .......................................................... 22
-iii- EX-10.1 4 AMENDED AND RESTATED LEASE AGREEMENT 1 EXHIBIT 10.1 ================================================================================ $25,000,000 AMENDED AND RESTATED LEASE AGREEMENT BETWEEN BNP LEASING CORPORATION ("BNPLC") AND SOLECTRON WASHINGTON, INC. ("SOLECTRON") JULY 1, 1998 (EVERETT, WASHINGTON) ================================================================================ PURSUANT TO AND AS MORE PARTICULARLY PROVIDED IN SUBPARAGRAPH 26 OF THIS LEASE, THIS LEASE AND THE PURCHASE AGREEMENT REFERENCED HEREIN ARE TO CONSTITUTE, FOR INCOME TAX PURPOSES ONLY, A FINANCING ARRANGEMENT OR CONDITIONAL SALE. AS PROVIDED IN SUBPARAGRAPH 26 OF THIS LEASE, BNPLC AND SOLECTRON EXPECT THAT SOLECTRON (AND NOT BNPLC) SHALL BE TREATED AS THE TRUE OWNER OF THE PROPERTY FOR INCOME TAX PURPOSES, THEREBY ENTITLING SOLECTRON (AND NOT BNPLC) TO TAKE DEPRECIATION DEDUCTIONS AND OTHER TAX BENEFITS AVAILABLE TO THE OWNER. 2 TABLE OF CONTENTS
Page ---- 1. TERM.................................................................................2 2. NO LEASE TERMINATION.................................................................3 (a) Status of Lease...............................................................3 (b) Waiver by Solectron...........................................................3 3. USE AND CONDITION OF THE PROPERTY....................................................4 (a) Use...........................................................................4 (b) Condition of the Property.....................................................4 (c) Consideration for and Scope of Waiver.........................................5 4. RENT.................................................................................5 (a) Base Rent Generally...........................................................5 (b) Calculation of and Due Dates for Base Rent....................................5 (i) Amount Payable On the Base Rent Commencement Date......................5 (ii) Determination of Payment Due Dates After the Base Rent Commencement Date.................................................5 (iii) Base Rent Formula......................................................6 (c) Additional Rent...............................................................6 (d) Commitment Fees...............................................................6 (e) Administrative Agency Fees....................................................7 (f) No Demand or Setoff...........................................................7 (g) Default Interest and Order of Application.....................................7 5. PAYMENT OF EXECUTORY COSTS AND LOSSES RELATED TO THE PROPERTY........................7 (a) "Net" Lease Generally.........................................................7 (b) Impositions...................................................................7 (c) Increased Costs; Capital Adequacy Charges.....................................8 (d) Solectron's Payment of Other Losses; General Indemnification..................8 (e) Withholding Taxes............................................................11 6. CONSTRUCTION........................................................................12 (a) Advances; Outstanding Construction Allowance.................................12 (b) Calculation of Carrying Costs................................................12 (c) Limits on the Amount of Carrying Costs................................13 (d) Construction Projects........................................................13 (i) Preconstruction Approvals by BNPLC....................................13 (ii) Scope Changes.........................................................14 (iii) Failure by BNPLC to Respond to a Request for Approval.................14 (iv) Responsibility for Construction.......................................14 (v) Construction Warranty by Solectron....................................15
3 (vi) Value Added...........................................................15 (vii) Estoppel Letters Required.............................................15 (viii) Advances Not a Waiver.................................................16 (e) Conditions to Solectron's Right to Receive Construction Advances.............16 (i) Prior Notice..........................................................16 (ii) Amount of the Advances................................................16 a) Limit Dependent Upon the Maximum Construction Allowance.........16 b) Limit Dependent Upon Costs Previously Incurred by Solectron.....16 c) Limit Dependent Upon Projected Costs Yet to be Incurred.........16 d) Minimum Amount Imposed for Administrative Convenience...........16 (iii) Insurance.............................................................17 a) Title Insurance.................................................17 b) Builder's Risk Insurance........................................17 (iv) Progress of Construction..............................................17 (v) Evidence of Costs and Expenses to be Reimbursed.......................17 (vi) No Sale of BNPLC's Interest...........................................17 (vii) No Landlord's Election to Continue Construction or Event of Default...17 (viii) Certificate of No Default and Other Matters...........................17 (ix) Funding by Participants...............................................18 (f) Breakage Costs for Construction Advances Requested But Not Taken.............19 (g) Completion Notice............................................................19 (h) Landlord's Election to Continue Construction.................................19 (i) Take Control of the Property..........................................20 (ii) Continuation of Construction..........................................20 (iii) Arrange for Turnkey Construction......................................21 (iv) Suspension or Termination of Construction.............................21 7. OTHER OBLIGATIONS OF AND LIMITED REPRESENTATIONS BY BNPLC...........................21 (a) Cooperation of BNPLC to Facilitate Construction and Development..............21 (b) Actions Permitted by Solectron Without BNPLC's Consent.......................23 (c) Waiver of Landlord's Liens...................................................23 (d) Limited Representations by BNPLC Concerning Accounting Matters...............24 (e) Other Limited Representations by BNPLC.......................................25 (i) No Default or Violation...............................................25 (ii) No Suits..............................................................25 (iii) Enforceability........................................................25 (iv) Organization..........................................................25 (v) Not a Foreign Person..................................................25 (f) Keeping Proprietary Information Confidential.................................26 8. STATUS OF PROPERTY ACQUIRED WITH FUNDS PROVIDED BY BNPLC............................26 9. ENVIRONMENTAL.......................................................................27 (a) Environmental Covenants by Solectron.........................................27 (b) Right of BNPLC to do Remedial Work Not Performed by Solectron................27 (c) Environmental Inspections and Reviews........................................28 (d) Communications Regarding Environmental Matters...............................28 10. INSURANCE REQUIRED AND CONDEMNATION.................................................29
(ii) 4
(a) Liability Insurance..........................................................29 (b) Property Insurance...........................................................29 (c) Failure to Obtain Insurance..................................................30 (d) Condemnation.................................................................30 11. APPLICATION OF INSURANCE AND CONDEMNATION PROCEEDS..................................31 (a) Collection of Insurance and Condemnation Proceeds Generally..................31 (b) Administration of Remaining Proceeds; Solectron's Obligation to Restore......31 (c) Special Provisions Concerning Event of Defaults and Qualified Payments.......32 (d) Takings of All or Substantially All of the Property..........................32 (e) Waiver of Subrogation........................................................32 12. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF SOLECTRON CONCERNING THE PROPERTY............................................................................33 (a) Compliance with Covenants and Laws...........................................33 (b) Operation of Property........................................................33 (c) Debts for Construction, Maintenance, Operation or Development................34 (d) Repair, Maintenance, Alterations and Additions...............................34 (e) Compliance With Permitted Encumbrances and Development Contracts.............35 (f) Modification of Permitted Encumbrances and Development Contracts.............35 (g) Books and Records Concerning the Property....................................35 13. ASSIGNMENT AND SUBLETTING BY SOLECTRON..............................................35 (a) BNPLC's Consent Required.....................................................35 (b) Standard for BNPLC's Consent to Assignments and Certain Other Matters........36 (c) Consent Not a Waiver.........................................................36 14. ASSIGNMENT BY BNPLC.................................................................36 (a) Restrictions on Transfers....................................................36 (b) Effect of Permitted Transfer or other Assignment by BNPLC....................36 15. BNPLC'S RIGHT OF ACCESS.............................................................37 16. OTHER REPRESENTATIONS, WARRANTIES AND COVENANTS OF SOLECTRON........................37 (a) Negative Covenants...........................................................37 (i) Multi employer ERISA Plans............................................37 (ii) Prohibited ERISA Transaction..........................................38 (b) Financial Statements; Required Notices; Certificates as to Default...........38 (c) No Default or Violation......................................................39 (d) No Suits.....................................................................39 (e) Enforceability...............................................................39 (f) Financial Matters............................................................39 (g) Organization.................................................................40 (h) ERISA........................................................................40 (i) Use of Proceeds..............................................................40 (j) Investment Company Act.......................................................40 (k) Omissions....................................................................40 (l) Not a Foreign Person.........................................................40 (m) Further Assurances...........................................................41
(iii) 5
17. EVENTS OF DEFAULT...................................................................41 (a) Definition of Events of Default..............................................41 18. REMEDIES............................................................................43 (a) Basic Remedies...............................................................43 (b) Enforceability...............................................................45 (c) Remedies Cumulative..........................................................45 19. DEFAULT BY BNPLC....................................................................45 20. QUIET ENJOYMENT.....................................................................45 21. SURRENDER UPON TERMINATION..........................................................46 22. HOLDING OVER BY SOLECTRON...........................................................46 23. INDEPENDENT OBLIGATIONS EVIDENCED BY THE PURCHASE AGREEMENT AND CLOSING CERTIFICATE.46 24. WAIVER OF JURY TRIAL................................................................47 25. MISCELLANEOUS.......................................................................47 (a) Notices......................................................................47 (b) Severability.................................................................49 (c) No Merger....................................................................49 (d) No Implied Waiver............................................................49 (e) NO IMPLIED REPRESENTATIONS BY BNPLC..........................................49 (f) Entire Agreement.............................................................49 (g) Binding Effect...............................................................50 (h) Time is of the Essence.......................................................50 (i) Governing Law................................................................50 (j) Paragraph Headings...........................................................50 (k) Other Terms and References...................................................50 (l) Not a Partnership, Etc.......................................................50 26. INCOME TAX REPORTING................................................................50 27. PROPRIETARY INFORMATION AND CONFIDENTIALITY.........................................52
(iv) 6 EXHIBITS AND SCHEDULES Exhibit A....................................................................Legal Description Exhibit B...........................................................Permitted Encumbrance List Exhibit C......................................Description of the initial Construction Project Exhibit D.........................................................Contractor's Estoppel Letter Exhibit E..........................................................Architect's Estoppel Letter Exhibit F...................................................................Draw Request Forms Exhibit G.......................................Standard Notice of Request for Action by BNPLC Exhibit H....................................Notice of Request Requiring an Expedited Response Exhibit I................................................................Intentionally Deleted Exhibit J...............................................................Compliance Certificate Exhibit K...........................................................Libor Period Election Form Schedule 1.......................................................List of Development Documents Schedule 2...........................List of Claims Pending or Threatened Against the Property List of Defined Terms.......................................................Shared Definitions
(v) 7 AMENDED AND RESTATED LEASE AGREEMENT This AMENDED AND RESTATED LEASE AGREEMENT (this "LEASE"), by and between BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"), and SOLECTRON WASHINGTON, INC., a California corporation ("SOLECTRON"), is dated as of July 1, 1998, the Effective Date. ("EFFECTIVE Date" and other capitalized terms used and not otherwise defined in this Lease are intended to have the meanings assigned to them in the List of Defined Terms attached to and made a part of this Lease.) RECITALS Pursuant to the Existing Contract, which covers the Land described in Exhibit A, BNPLC acquired the Land and any appurtenances thereto from Seller on or about December 1, 1997. Contemporaneously with the purchase of the Land, BNPLC leased it to Solectron pursuant to a Lease Agreement dated as of December 1, 1997 (the "PRIOR LEASE"). This Lease is intended to amend, restate and replace the Prior Lease in its entirety as of the Effective Date. GRANTING CLAUSES In consideration of the rent to be paid and the covenants and agreements to be performed by Solectron, as hereinafter set forth, BNPLC does hereby LEASE, DEMISE and LET unto Solectron for the term hereinafter set forth all right, title and interest of BNPLC, now owned or hereafter acquired, in and to: (1) the Land; (2) any and all Improvements; (3) all easements and other rights appurtenant to the Land or to the Improvements, whether now owned or hereafter acquired by BNPLC; and (4) (A) any land lying within the right-of-way of any street, open or proposed, adjoining the Land, (B) any sidewalks and alleys adjacent to the Land and (C) any strips and gores between the Land and abutting land. BNPLC's interest in all property described in clauses (1) through (4) above are hereinafter referred to collectively as the "REAL PROPERTY". To the extent, but only to the extent, that assignable rights or interests in, to or under the following have been or will be acquired by BNPLC under the Existing Contract or acquired by BNPLC pursuant to Paragraph 8 below, BNPLC also hereby grants and assigns to Solectron for the term of this Lease the right to use and enjoy (and, in the case of contract rights, to enforce) such rights or interests of BNPLC: 8 (a) any goods, equipment, furnishings, furniture and other tangible 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; (b) the benefits, if any, conferred upon the owner of the Real Property by the Permitted Encumbrances and Development Documents; and (c) any permits, licenses, franchises, certificates, and other rights and privileges against third parties related to the Real Property. Such rights and interests of BNPLC, whether now existing or hereafter arising, are hereinafter collectively called the "PERSONAL PROPERTY". The Real Property and the Personal Property are hereinafter sometimes collectively called the "PROPERTY." However, the leasehold estate conveyed hereby and Solectron's rights hereunder are expressly made subject and subordinate to the terms and conditions of this Lease, to the matters listed in Exhibit B and all other Permitted Encumbrances, and to any other claims or encumbrances not constituting Liens Removable by BNPLC. GENERAL TERMS AND CONDITIONS The Property is leased by BNPLC to Solectron and is accepted and is to be used and possessed by Solectron upon and subject to the following terms and conditions: 1. TERM. The term of this Lease (the "TERM") shall commence on and include the Effective Date, and end on the first Business Day of July, 2003, unless sooner terminated as expressly herein provided. Solectron shall be entitled to accelerate the Designated Sale Date (and thus accelerate the purchase of BNPLC's interest in the Property by Solectron or by an Applicable Purchaser pursuant to the Purchase Agreement) by sending a notice to BNPLC as provided in clause (2) of the definition of "Designated Sale Date" in the List of Defined Terms. In the event, because of Solectron's election to so accelerate the Designated Sale Date or for any other reason, the Designated Sale Date occurs before the end of the scheduled Term, Solectron may terminate this Lease on or after the Designated Sale Date; provided, however, as a condition to any such termination by Solectron, Solectron must have done the following prior to the termination: (a) purchased or caused an Applicable Purchaser to purchase the Property pursuant to the Purchase Agreement and satisfied all of Solectron's other obligations under the Purchase Agreement; (b) paid to BNPLC all Base Rent, all Commitment Fees, all Administrative Agency Fees and all other Rent accrued through the Designated Sale Date; and (c) paid any Breakage Costs caused by BNPLC's sale of the Property pursuant to the Purchase Agreement. The Term may be extended at the option of Solectron 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, BNPLC and Solectron must have agreed in writing upon, and received the written consent and approval of BNPLC's Parent and all other Participants to (1) a corresponding extension not only to the date for the expiration of the Term specified above in this Section, 2 9 but also to the date specified in clause (1) of the definition of Designated Sale Date in the List of Defined Terms attached hereto, and (2) an adjustment to the Rent that Solectron 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 BNPLC and Solectron, each in its sole and absolute discretion; (B) there must be no Event of Default continuing hereunder at the time of Solectron'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 BNPLC and Solectron must have agreed upon the Rent required for any extension of the Term, neither Solectron nor BNPLC is willing to submit itself to a risk of liability or loss of rights hereunder for being judged unreasonable. Accordingly, both Solectron and BNPLC 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 Solectron 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 Solectron shall continue without interruption and without any loss of priority over other interests in or claims against the Property that may be created or arise after the date hereof and before the extension. 2. NO LEASE TERMINATION. (a) Status of Lease. Except as expressly provided herein, this Lease shall not terminate, nor shall Solectron have any right to terminate this Lease, nor shall Solectron be entitled to any abatement of the Rent, nor shall the obligations of Solectron under this Lease be excused, for any reason whatsoever, including any of the following: (i) any damage to or the destruction of all or any part of the Property from whatever cause, (ii) the taking of the Property or any portion thereof by eminent domain or otherwise for any reason, (iii) the prohibition, limitation or restriction of Solectron'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 Solectron or of anyone claiming through or under Solectron (provided, that if Solectron is wrongfully evicted by BNPLC or by any third party lawfully exercising its rights under a Lien Removable by BNPLC, then Solectron will have the remedies described in Paragraph 19 below), (v) any default on the part of BNPLC under this Lease or under any other agreement to which BNPLC and Solectron are parties, (vi) the inadequacy in any way whatsoever of the design, construction, assembly or installation of any improvements, fixtures or tangible personal property included in the Property, it being understood that BNPLC has not made, does not make and will not make any representation express or implied as to the adequacy thereof, (vii) any latent or other defect in the Property or any change in the condition thereof or the existence with respect to the Property of any violations of Applicable Laws or (viii) any other cause whether similar or dissimilar to the foregoing. It is the intention of the parties hereto that the obligations of Solectron hereunder shall be separate and independent of the covenants and agreements of BNPLC, that the Base Rent and all other sums payable by Solectron hereunder shall continue to be payable in all events and that the obligations of Solectron 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. (b) Waiver by Solectron. Without limiting the foregoing, Solectron waives to the extent permitted by Applicable Laws, except as otherwise expressly provided herein, all rights to which Solectron 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 Property or any part thereof or (ii) to any abatement, suspension, deferment or reduction of the Rent. 3 10 However, nothing in this Paragraph 2 shall be construed as a waiver by Solectron of any right Solectron may have at law or in equity to the following remedies, whether because of BNPLC's failure to remove a Lien Removable by BNPLC or because of any other default by BNPLC under this Lease that continues beyond the period for cure provided in Paragraph 19: (i) the recovery of monetary damages, (ii) injunctive relief in case of the violation, or attempted or threatened violation, by BNPLC of any of the express covenants, agreements, conditions or provisions of this Lease which are binding upon BNPLC (including the confidentiality provisions set forth in subparagraph 7.(f) below), or (iii) a decree compelling performance by BNPLC of any of the express covenants, agreements, conditions or provisions of this Lease which are binding upon BNPLC. 3. USE AND CONDITION OF THE PROPERTY. (a) Use. Subject to the Permitted Encumbrances, the Development Documents and the terms hereof, Solectron may use and occupy the Property during the Term, but only for the following purposes and other lawful purposes incidental thereto: (i) manufacturing, engineering, assembly, warehousing and laboratory-based research and development of circuit boards, computer-related and other electronic products; (ii) administrative and office space; (iii) cafeteria, library, and other support function uses that Solectron may provide to its employees; and (iv) other lawful uses approved in advance and in writing by BNPLC, which approval will not be unreasonably withheld after completion of the initial Construction Project (but Solectron acknowledges that BNPLC's withholding of such approval shall be reasonable if BNPLC determines in good faith that (i) giving the approval may materially increase BNPLC's risk of liability for any existing or future environmental problem, or (ii) giving the approval is likely to substantially increase BNPLC's administrative burden of complying with or monitoring Solectron's compliance with the requirements of this Lease). Although the term "products" in this subparagraph may include products designed to detect, monitor, neutralize, handle or process Hazardous Substances, the use of the Property by Solectron shall not include bringing Hazardous Substances onto the Property for the purpose of testing or demonstrating any such products. (b) Condition of the Property. SOLECTRON ACKNOWLEDGES THAT IT HAS CAREFULLY AND FULLY INSPECTED THE PROPERTY AND ACCEPTS THE PROPERTY 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. SOLECTRON ALSO ACCEPTS THE PROPERTY WITHOUT ANY COVENANT, REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, BY BNPLC OR ITS AFFILIATES REGARDING THE TITLE THERETO OR THE RIGHTS OF ANY PARTIES IN POSSESSION OF ANY PART THEREOF, EXCEPT AS EXPRESSLY SET FORTH IN PARAGRAPH 20. BNPLC 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 PROPERTY OR FOR ANY VIOLATIONS WITH RESPECT THERETO OF APPLICABLE LAWS. NOR SHALL BNPLC BE REQUIRED TO FURNISH TO SOLECTRON ANY FACILITIES OR SERVICES OF ANY KIND, INCLUDING WATER, STEAM, HEAT, GAS, AIR CONDITIONING, ELECTRICITY, LIGHT OR POWER. 4 11 (c) Consideration for and Scope of Waiver. The provisions of subparagraph 3.(b) above have been negotiated by BNPLC and Solectron after due consideration for the Rent payable hereunder and are intended to be a complete exclusion and negation of any representations or warranties of BNPLC or its Affiliates, express or implied, with respect to the Property that may arise pursuant to any law now or hereafter in effect or otherwise, except as expressly set forth herein. However, such exclusion of representations and warranties by BNPLC and its Affiliates is not intended to impair any representations or warranties made by other parties, including any architects, engineers or contractors engaged to work on Construction Projects, the benefit of which is to pass to Solectron during the Term because of the definition of Personal Property and Property above. 4. RENT. (a) Base Rent Generally. On the Base Rent Commencement Date and on each Base Rent Date through the end of the Term, Solectron shall pay BNPLC rent ("BASE RENT"). Each payment of Base Rent must be received by BNPLC no later that 10:00 a.m. (Central time) on the date it becomes due; if received after 10:00 a.m. (Central time) it will be considered for purposes of this Lease as received on the next following Business Day. BNPLC shall notify Solectron of the amount of each payment of Base Rent (calculated as provided in subparagraph 4.(b)) at least three days before the date upon which it first becomes due. However, any failure by BNPLC to so notify Solectron shall not constitute a waiver of BNPLC's right to payment, but absent such notice Solectron shall not be in default for any underpayment resulting therefrom if Solectron, in good faith, reasonably estimates the payment required, makes a timely payment of the amount so estimated and corrects any underpayment within three Business Days after being notified by BNPLC of the underpayment. (b) Calculation of and Due Dates for Base Rent. Payments of Base Rent shall be calculated and become due as follows: (i) Amount Payable On the Base Rent Commencement Date. The Base Rent payable on the Base Rent Commencement Date shall equal the difference (if any) between (a) the total amount that would have been added to the Outstanding Construction Allowance as Carrying Costs on such date if not for the limit set forth in subparagraph 6.(c), and (b) the Carrying Costs actually added on such date to the Outstanding Construction Allowance. (ii) Determination of Payment Due Dates After the Base Rent Commencement Date. For all Base Rent Periods subject to a LIBOR Period Election of one month 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 Solectron or any Applicable Purchaser purchases BNPLC'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 BNPLC under the Purchase Agreement. (iii) Base Rent Formula. Each installment of Base Rent payable for any Base Rent Period shall equal: 5 12 - Stipulated Loss Value on the first day of such Base Rent Period, times - the sum of (a) the Effective Rate with respect to such Base Rent Period, plus (b) the Spread for the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, times - the number of days in the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, divided by - three hundred sixty. Assume, only for the purpose of illustration: that prior to the first day of a Base Rent Period subject to a LIBOR Period Election of one month the Construction Allowance has been fully funded, but a total of $10,000,000 of Qualified Payments have been received by BNPLC, leaving a Stipulated Loss Value of $15,000,000; that the Effective Rate for such Base Rent Period is 6%; that the Spread for such period is thirty-two and one-half basis points (32.5/100 of 1%); and that such Base Rent Period contains exactly thirty days. Under such assumptions, the Base Rent for the hypothetical Base Rent Period will equal: $15,000,000 x (6% + .325%) x 30/360 = $79,062.50 (c) Additional Rent. All amounts which Solectron is required to pay to or on behalf of BNPLC 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", and together Base Rent and Additional Rent are herein sometimes called "RENT"). (d) Commitment Fees. For each Construction Period Solectron shall pay BNPLC a fee (a "COMMITMENT FEE") equal to: - twelve and one-half basis points (12.5/100 of 1%), times an amount equal to: (i) the Maximum Construction Allowance, less (ii) the Funded Construction Allowance on the first day of such Construction Period; times - the number of days in such Construction Period; divided by - three hundred sixty. Solectron shall pay Commitment Fees in arrears on the first Business Day of February, May, August and November of each calendar year, beginning with August 1, 1998 and continuing regularly throughout the Term so long as Commitment Fees have accrued and remain unpaid. However, 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. With the first payment of Commitment Fees required under this Lease, calculated as described above, Solectron shall also pay Commitment Fees accrued but unpaid under and as defined in the Prior Lease. 6 13 (e) Administrative Agency Fees. Upon execution and delivery of this Lease by BNPLC, and again on each anniversary of the date hereof, Solectron shall pay to BNPLC an administrative fee (an "ADMINISTRATIVE AGENCY FEE") in the amount set forth in the letter agreement dated as of April 22, 1998 between BNPLC, Solectron and Guarantor and other affiliates of Solectron. Each Administrative Agency Fee shall represent Additional Rent for the Construction Period or Base Rent Period during which it is paid. (f) Demand or Setoff. Except as expressly provided herein, Solectron shall pay all Rent without notice or demand and without counterclaim, deduction, setoff or defense. (g) Default 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. BNPLC shall be entitled to apply any amounts paid by or on behalf of Solectron against any Rent then past due in the order the same became due or in such other order as BNPLC may elect. 5. PAYMENT OF EXECUTORY COSTS AND LOSSES RELATED TO THE PROPERTY. (a) "Net" Lease Generally. It is the intention of BNPLC and Solectron that the Base Rent, Commitment Fees, Administrative Agency Fees and other payments herein specified shall be absolutely net to BNPLC and that Solectron shall pay all costs, expenses and obligations of every kind relating to the Property or this Lease which may arise or become due, including: (i) any taxes payable by virtue of BNPLC's receipt of amounts paid to or on behalf of BNPLC in accordance with this Paragraph 5; (ii) any amount for which BNPLC is or becomes liable with respect to the Permitted Encumbrances or the Development Documents; and (iii) any costs incurred by BNPLC (including Attorneys' Fees) because of BNPLC's acquisition or ownership of any interest in the Property or because of this Lease or the transactions contemplated herein. However, the preceding sentence shall not be construed to make Solectron liable for (1) damages, costs, expenses or obligations suffered by BNPLC because of (and attributed by any applicable principles of comparative fault to) BNPLC's own Established Misconduct, (2) Excluded Taxes, (3) withholding of taxes permitted by subparagraph 5.(e) or (4) general overhead or internal administrative expenses of BNPLC or any other Interested Party, except to the extent allowed by subparagraph 5.(c)(i) because of changes described in that subparagraph after the Effective Date. (b) Impositions. Solectron shall pay or cause to be paid prior to delinquency all ad valorem taxes assessed against the Property and other Impositions. If requested by BNPLC from time to time, Solectron shall furnish BNPLC with receipts showing payment of all Impositions at least ten days prior to the applicable default date therefor. Notwithstanding the foregoing, Solectron may in good faith, by appropriate proceedings, contest the validity, applicability or amount of any asserted Imposition, and pending such contest Solectron shall not be deemed in default hereunder because of the Imposition if (1) Solectron diligently prosecutes such contest to completion in a manner reasonably satisfactory to BNPLC, and (2) Solectron 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, in any event each such contest shall be concluded and the contested Impositions must be paid by Solectron prior to the earlier of (i) the date that any criminal action is overtly threatened or instituted against BNPLC or its directors, officers or employees because of the nonpayment thereof 7 14 or (ii) the date any writ or order is issued under which any property owned or leased by BNPLC (including the Property) may be seized or sold or any other action is taken or overtly threatened against BNPLC or against any property owned or leased by BNPLC because of the nonpayment thereof, or (iii) any Designated Sale Date upon which, for any reason, Solectron or an Affiliate of Solectron or any Applicable Purchaser shall not purchase BNPLC's interest in the Property pursuant to the Purchase Agreement for a net price to BNPLC (when taken together with any additional payments made by Solectron pursuant to Paragraph 1(a)(ii) of the Purchase Agreement, in the case of a purchase by an Applicable Purchaser) equal to Stipulated Loss Value. (c) Increased Costs; Capital Adequacy Charges. (i) If, after the Effective Date, there shall be any increase in the cost to BNPLC's Parent or any other Participant agreeing to make or making, funding or maintaining advances to BNPLC in connection with the Property because of any Banking Rules Change, then Solectron shall from time to time, pay to BNPLC for the account of BNPLC's Parent or such other Participant, as the case may be, additional amounts sufficient to compensate BNPLC's Parent or the Participant for such increased cost. A certificate as to the amount of such increased cost, submitted to BNPLC and Solectron by BNPLC's Parent or the other Participant, shall be conclusive and binding upon Solectron, absent clear and demonstrable error. (ii) BNPLC's Parent or any other Participant may demand additional payments ("CAPITAL ADEQUACY CHARGES") if BNPLC's Parent or the other Participant determines that any Banking Rules Change 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 advances made or to be made to BNPLC to permit BNPLC to maintain BNPLC's investment in the Property or to make Construction Advances. To the extent that BNPLC's Parent or another Participant demands Capital Adequacy Charges as compensation for the additional capital requirements reasonably allocable to such investment or advances, Solectron shall pay to BNPLC for the account of BNPLC's Parent or the other Participant, as the case may be, the amount so demanded. (iii) Any amount to be paid by Solectron under this subparagraph 5.(c) shall be due within ten days after a demand for such payment is made upon Solectron. (d) Solectron's Payment of Other Losses; General Indemnification. (i) Except for costs paid by BNPLC with the proceeds of the Initial Funding Advance as part of the Transaction Expenses, all Losses (including Environmental Losses) asserted against or incurred or suffered by BNPLC or other Interested Parties at any time and from time to time by reason of, in connection with or arising out of (A) their ownership or alleged ownership of any interest in the Property or the Rents, (B) the use and operation of the Property, (C) the negotiation or administration of this Lease, the Closing Certificate, or the Purchase Agreement, (D) the making of Funding Advances, (E) any Construction Project, (F) the breach by Solectron of this Lease or any other document executed by Solectron in connection herewith, (G) any failure of the Property or Solectron itself to comply with Applicable Laws, (H) Hazardous Substance Activities, including those occurring prior to the Effective Date, or (I) any bodily or personal injury or death or property damage occurring in or upon or in the vicinity of the Property through any cause whatsoever, shall be paid by Solectron, and Solectron shall indemnify and defend BNPLC and other Interested Parties from and against all such Losses. (However, the indemnity in the preceding sentence shall not be construed to make Solectron liable to both BNPLC and any Participant or other party claiming through BNPLC for the same costs, expenses or damages, nor for any allocation of general overhead or internal administrative expenses of BNPLC, BNPLC's Parent or any 8 15 other Interested Party except to the extent allowed by subparagraph 5.(c)(i) because of a Banking Rules Change after the date of this Lease.) (ii) SUBJECT ONLY TO SUBPARAGRAPH 5.(d)(vi), THE INDEMNITIES AND RELEASES PROVIDED HEREIN FOR THE BENEFIT OF BNPLC AND OTHER INTERESTED PARTIES, INCLUDING THE INDEMNITY SET FORTH IN THE PRECEDING SUBPARAGRAPH 5.(D)(I), SHALL APPLY EVEN IF AND WHEN THE SUBJECT MATTERS OF THE INDEMNITIES AND RELEASES ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OR STRICT LIABILITY OF BNPLC OR ANOTHER INTERESTED PARTY. (iii) Costs and expenses for which Solectron shall be responsible pursuant to this subparagraph 5.(d) will include appraisal fees, filing and recording fees, inspection fees, survey fees, taxes, brokerage fees and commissions, abstract fees, title policy fees, Uniform Commercial Code search fees, escrow fees and Attorneys' Fees incurred by BNPLC with respect to the Property, whether such costs and expenses are incurred at the time of execution of this Lease or at any time during the Term. Such costs and expenses will also include Attorneys' Fees or other costs incurred to evaluate lien releases and other information submitted by Solectron with requests for Construction Advances. (iv) Subject to the limitations set forth in subparagraph 5.(d)(vi), Solectron's obligations under this subparagraph 5.(d) shall survive the termination or expiration of this Lease. Any amount to be paid by Solectron under this subparagraph 5.(d) shall be due within ten days after a demand for such payment is made upon Solectron. (v) If an Interested Party notifies Solectron of any claim or proceeding included in, or any investigation or allegation concerning, Losses for which Solectron is responsible pursuant to this subparagraph 5.(d), Solectron shall assume on behalf of the Interested Party and conduct with due diligence and in good faith the investigation and defense thereof and the response thereto with counsel selected by Solectron, but reasonably satisfactory to the Interested Party; provided, that the Interested 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, proceeding, investigation or allegation involves both Solectron and the Interested Party and the Interested 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 Solectron, then the Interested Party shall have the right to select separate counsel to participate in the investigation and defense of and response to such claim, proceeding, investigation or allegation on its own behalf, and Solectron shall pay or reimburse the Interested Party for all Attorney's Fees incurred by the Interested Party because of the selection of such separate counsel. If Solectron fails to assume promptly (and in any event within fifteen days after being notified of the applicable claim, proceeding, investigation or allegation) the defense of the Interested Party, then the Interested Party may contest (or settle, with the prior written consent of Solectron, which consent will not be unreasonably withheld) the claim, proceeding, investigation or allegation at Solectron's expense using counsel selected by the Interested Party. Moreover, if any such failure by Solectron continues for thirty days or more after Solectron is notified of any such claim, proceeding, investigation or allegation, the Interested Party may elect not to contest or continue contesting the same and instead settle (or pay in full) all claims related thereto without Solectron's consent and without releasing Solectron from any obligations to the Interested Party under this subparagraph 5.(d) so long as, in the written opinion of reputable counsel to the Interested Party, the settlement (or payment in full) is clearly advisable. 9 16 (vi) Notwithstanding the foregoing, Solectron shall not be required by this subparagraph 5.(d) or by subparagraph 5.(a) to pay: a) costs and expenditures incurred or paid by or on behalf of BNPLC after any Landlord's Election to Continue Construction to complete or continue construction as provided in subparagraph 6.(h), to the extent that such costs and expenditures are considered to be Construction Advances pursuant to subparagraph 6.(h); b) Losses incurred or suffered by Participants in connection with their negotiation or execution of the Participation Agreement (or supplements making them parties thereto) or in connection with any due diligence they may undertake before entering into the Participation Agreement; c) Excluded Taxes; d) Losses incurred or suffered by any Interested Party that are proximately caused by (and attributed by any applicable principles of comparative fault to) the Established Misconduct of that Interested Party; or e) Losses incurred or suffered by any Interested Party after, and not proximately caused by events or circumstances that actually or allegedly occurred or existed on or before, the later of the dates upon which (i) this Lease terminates or expires, or (ii) Solectron surrenders possession of the Property. Further, if an Interested Party receives a written notice of Losses that such Interested Party believes are covered by the indemnity in subparagraph 5.(d)(i), then such Interested Party will be expected to promptly furnish a copy of such notice to Solectron. The failure to so provide a copy of the notice to Solectron shall not excuse Solectron from its obligations under subparagraph 5.(d)(i); provided, that if Solectron is unaware of the matters described in the notice and such failure renders unavailable defenses that Solectron might otherwise assert, or precludes actions that Solectron might otherwise take, to minimize its obligations, then Solectron shall be excused from its obligation to indemnify such Interested Party (and any Affiliate of such Interested Party) against the Losses, if any, which would not have been incurred or suffered but for such failure. For example, if BNPLC fails to provide Solectron with a copy of a notice of an obligation covered by the indemnity set out in subparagraph 5.(d)(i) and Solectron is not otherwise already aware of such obligation, and if as a result of such failure BNPLC becomes liable for penalties and interest covered by the indemnity in excess of the penalties and interest that would have accrued if Solectron had been promptly provided with a copy of the notice, then Solectron will be excused from any obligation to BNPLC (or any Affiliate of BNPLC) to pay the excess. (e) Withholding Taxes. Notwithstanding anything else to the contrary in this Paragraph 5, but subject to the provisions of this subparagraph 5.(e), to the extent required by law Solectron may deduct United States and Washington withholding taxes imposed as a way of collecting or in lieu of Excluded Taxes on payments of Base Rent, Commitment Fees, Administrative Agency Fees, any interest payable pursuant to subparagraph 4.(g) or any additional compensation claimed by BNPLC pursuant to subparagraph 5.(c)(ii) (collectively, "INCOME PAYMENTS") from Income Payments, without obligation to gross up, indemnify or otherwise increase payments in consequence thereof. Such withholding, without obligation to gross up, indemnify or otherwise increase payments in consequence thereof, will be permitted if, but only if: 10 17 (i) in the case of withholding for Excluded Taxes imposed by the United States of America, the Person entitled to receive Income Payments (whether BNPLC, as the original landlord named herein, or an assignee of the original landlord's rights hereunder, a "PAYEE") is not exempt from withholding by reason of having been organized under the laws of the United States of America or any State thereof, and such Person shall not have provided Solectron with three counterparts of each of the forms prescribed by the Internal Revenue Service (Form 1001 or 4224, or successor forms, as the case may be) claiming for Payee an exemption from federal withholding on all Income Payments; (ii) in the case of withholding for Excluded Taxes imposed by the State of Washington, the Payee is not exempt from withholding by reason of having been qualified to do business in Washington or otherwise, and such Person shall not have provided Solectron with three (3) counterparts of the forms (if any) prescribed by the Washington taxing authorities claiming for Payee an exemption from Washington withholding on all Income Payments; (iii) at least thirty days prior to any withholding from or reduction of Income Payments, Solectron shall have notified the Payee that Solectron believes the withholding is required and permitted by this subparagraph; and (iv) the withholding taxes on the Income Payments would have been assessed even if the applicable taxing authorities had characterized the transactions evidenced by this Lease and the Purchase Agreement as a financing arrangement. Any Payee exempt from withholding for Excluded Taxes imposed by the United States of America by reason of having been organized under the laws of the United States of America or any State thereof shall provide to Solectron statements conforming to the requirements of Treasury Regulation 1.1441-5(b) or any successor thereto (which statements may be made on a Form W-9). If Solectron shall ever be required to pay Excluded Taxes that BNPLC has failed to pay when due because of Solectron's failure to withhold from payments made under this Lease, BNPLC shall reimburse Solectron for such Excluded Taxes and for any penalties or interest thereon charged to Solectron. Nothing in this subparagraph 5.(e) shall excuse Solectron from its obligation under subparagraph 5.(c)(i) to compensate BNPLC for increased costs attributable to any change in law relating to withholding taxes after the Effective Date. 6. CONSTRUCTION. (a) Advances; Outstanding Construction Allowance. Subject to the conditions set forth below, BNPLC shall make advances ("CONSTRUCTION ADVANCES") on Advance Dates from time to time as requested by Solectron to pay or reimburse Solectron for Commitment Fees and costs of the initial Construction Project not already paid or reimbursed from the Initial Funding Advance. Costs for which Solectron may request Construction Advances pursuant to this subparagraph will include not only hard costs incurred to construct the Improvements described in Exhibit C, but also the following costs to the extent reasonably incurred in connection with the initial Construction Project: - soft costs, such as architectural fees, consulting fees, Attorneys' Fees, design costs, fees and costs paid in connection with obtaining project permits and approvals required by governmental authorities or the Development Documents (including application and processing fees), and the Commitment Fees to the extent that Solectron from time to time 11 18 requests payment of the Commitment Fees in any written request for any Construction Advance, - environmental investigation, protection and remediation costs, - site preparation costs, and - costs of offsite and other public improvements required as conditions of governmental approvals for the initial Construction Project. As used herein, references to the "OUTSTANDING CONSTRUCTION ALLOWANCE" mean the amount on the date in question (but not less than zero) equal to: (A) the total Construction Advances made hereunder by or on behalf of BNPLC on or prior to the date in question, plus (B) all Carrying Costs added hereunder on or prior to the date in question, less (C) any funds received and applied as Qualified Payments on or prior to the date in question; provided, that BNPLC will not be under any obligation to readvance any portion of the Construction Allowance repaid by Qualified Payments. Charges ("CARRYING COSTS") shall accrue as described below for each Construction Period 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). Notwithstanding the foregoing, if for any reason Stipulated Loss Value (and thus the Outstanding Construction Allowance included as a component thereof) must be determined as of any date between Advance Dates, the Outstanding Construction Allowance determined on such date shall include not only Carrying Costs added on or before the immediately preceding Advance Date computed as described below, but also Carrying Costs accruing on and after such preceding Advance Date to but not including the date in question. (b) Calculation of Carrying Costs. Carrying Costs shall accrue for each Construction Period and shall equal: - Stipulated Loss Value on the first day of such Construction Period, times - the sum of (a) the Effective Rate with respect to such Construction Period, plus (b) the Spread for such Construction Period, times - the number of days in the period from and including the preceding Advance Date to but not including the Advance Date upon which the period ends, divided by - three hundred sixty. Assume, only for the purpose of illustration: that on the first day of such Construction Period Stipulated Loss Value is $15,000,000; that the Effective Rate for the Construction Period is 6%; that the Spread for such Construction Period is thirty-two and one-half basis points (32.5/100 of 1%); and that such Construction Period contains exactly thirty days. Under such assumptions, the Carrying Costs for the hypothetical Construction Period will equal: $15,000,000 x (6% + .325%) x 30/360 = $79,062.50 (c) Limits on the Amount of Carrying Costs. Notwithstanding the foregoing, however, Solectron agrees that Carrying Costs added to the Outstanding Construction Allowance on the Base Rent 12 19 Commencement Date shall not exceed the amount that can be added without causing the Funded Construction Allowance to exceed the Maximum Construction Allowance. The limits set forth in the preceding sentence are imposed because the Construction Allowance available under this Lease is limited (prior to any Landlord's Election to Continue Construction) to the Maximum Construction Allowance. (d) Construction Projects. (i) Preconstruction Approvals by BNPLC. Prior to the execution of this Lease, Solectron submitted and obtained BNPLC's approval of descriptions of the initial Construction Project that Solectron expects to construct with the Construction Allowance. Solectron shall submit and obtain BNPLC's written approval of plans or renderings for any subsequent Construction Project prior to commencement of the subsequent Construction Project. Absent any prior Landlord's Election to Continue Construction or the occurrence and continuation of an Event of Default, BNPLC may disapprove of such plans or renderings only if BNPLC believes in good faith that the Construction Project proposed by Solectron will (1) fail to satisfy the requirements set forth in subparagraph 6.(d)(vi), (2) change the general character of the Property from that needed to accommodate the uses permitted by subparagraph 3.(a) or (3) cause Solectron or the Property to violate some other express provision of this Lease; but no approval given by BNPLC in connection with any Construction Project, prior to or after the Effective Date, shall constitute a waiver of subparagraph 6.(d)(vi) or of any other provision of this Lease. Any items hereafter submitted by Solectron to satisfy this subparagraph shall be sufficiently detailed to allow BNPLC to make a reasonable determination of whether the applicable Construction Project will satisfy subparagraph 6.(d)(vi), but need not include all detailed construction specifications and drawings of the work to be included in the Construction Project. All Construction Projects commenced by Solectron, including the initial Construction Project (which is described in Exhibit C), and all construction contracts and other agreements executed or adopted by Solectron in connection therewith, must be not materially inconsistent with the plans or other items heretofore or hereafter submitted to and approved by BNPLC as described above in this subparagraph, except to the extent otherwise provided by any Scope Changes approved by BNPLC as described below and except as otherwise provided in subparagraph 6.(h) if BNPLC should make a Landlord's Election to Continue Construction. (ii) Scope Changes. Before making a Scope Change to any Construction Project, Solectron shall provide to BNPLC a reasonably detailed written description of the Scope Change, a revised construction budget and a copy of any changes to the drawings, plans and specifications for the Improvements required in connection therewith, all of which must be approved in writing by BNPLC (or by any construction representative appointed by BNPLC from time to time) before the Scope Change is implemented. BNPLC may disapprove of any Scope Change to any Construction Project if (and, in the case of a Construction Project other than the initial Construction Project, only if) (A) any Event of Default has occurred and is continuing, (B) any prior Landlord's Election to Continue Construction has occurred, or (C) BNPLC believes in good faith that the Construction Project proposed by Solectron, as modified by the Scope Change, will (1) fail to satisfy the requirements set forth in subparagraph 6.(d)(vi), (2) change the general character of the Property from that needed to accommodate the uses permitted by subparagraph 3.(a) or (3) cause Solectron or the Property to violate some other express provision of this Lease; but in any event BNPLC's approval shall not constitute a waiver of subparagraph 6.(d)(vi) or of any other provision of this Lease. (iii) Failure by BNPLC to Respond to a Request for Approval. If Solectron submits any request for BNPLC's approval of a Construction Project or a Scope Change pursuant to the preceding 13 20 subparagraphs after the completion of the initial Construction Project and more than twenty-four months before the scheduled end of the Term, yet BNPLC fails to respond to such request within twenty days after BNPLC's receipt of the request, then Solectron may proceed as if BNPLC had approved the applicable Construction Project or Scope Change; provided, however: a) Solectron may not proceed if any Event of Default has occurred and is continuing or any prior Landlord's Election to Continue Construction has occurred. b) Solectron must notify BNPLC that Solectron will proceed with the Construction Project or Scope Change, notwithstanding BNPLC's failure to respond, and in the notice Solectron must certify that in Solectron's good faith judgement BNPLC cannot, in accordance with the criteria specified in subparagraph 6.(d)(i) or subparagraph 6.(d)(ii), as the case may be, decline to give its approval. c) If Solectron does proceed without BNPLC's express approval, BNPLC may at any time within six months prior to the scheduled end of the Term obtain an appraisal of the Property in form and scope reasonably satisfactory to BNPLC from an independent MAI Certified General Real Estate Appraiser satisfactory to BNPLC, and if the appraisal indicates that the Construction Project for which Solectron requested the approval did not (or when completed will not) satisfy the requirements of subparagraph 6.(d)(vi), then Solectron must upon demand pay to BNPLC as a Qualified Payment any amount needed to reduce the sum of (A) Stipulated Loss Value, plus (B) Carrying Costs (if any) projected by BNPLC to accrue prior to completion of the applicable Construction Project, to no more than one hundred sixty-seven percent (167%) of the market value of the Property indicated by such appraisal. (iv) Responsibility for Construction. Subject to BNPLC's rights under subparagraph 6.(h), Solectron shall have sole responsibility for contracting for and administering all Construction Projects, it being understood that although title to all Improvements will pass directly to BNPLC (as more particularly provided in Paragraph 8), BNPLC's obligation with respect to Construction Projects 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 require BNPLC to make advances as a third party beneficiary of this Lease or otherwise. (v) Construction Warranty by Solectron. Notwithstanding delays beyond Solectron's control, and even if the Construction Allowance is not sufficient to pay for completion of the initial Construction Project, Solectron warrants that on the Designated Sale Date it shall have (1) caused the initial Construction Project and any subsequent Construction Projects which are commenced prior to such date to have been completed in a good and workmanlike manner, substantially in accordance with Applicable Laws, and otherwise in compliance with (x) the provisions of this Lease, (y) the material provisions of the Permitted Encumbrances and (z) the material provisions of the Development Documents, and (2) obtained with respect to then existing Improvements any final certificates of occupancy required for the use and occupancy thereof. (The warranty set forth in the preceding sentence is hereinafter called the "CONSTRUCTION Warranty", and any payments required from Solectron to BNPLC as compensation for the diminution in value to BNPLC's interest in the Property caused solely by reason of Solectron's failure to perform the Construction Warranty are hereinafter called "CONSTRUCTION WARRANTY PAYMENTS".) However, without limiting Solectron's other obligations under this Lease, the Purchase Agreement or the Closing Certificate (including, for example, obligations to pay Base Rent or reimburse BNPLC for 14 21 Impositions), Solectron's aggregate liability for any Construction Warranty Payments that become due because of Solectron's failure to complete the initial Construction Project shall be limited to: (a) 100% less the Residual Risk Percentage, times (b) the total of all Construction Advances and Carrying Costs and any other costs or expenditures not considered Construction Advances that may have been incurred by or on behalf of BNPLC to continue or complete construction of the initial Construction Project after a Landlord's Election to Continue Construction as contemplated in subparagraph 6.(h), computed as of the earlier of the date upon which the initial Construction Project is finally complete or the date upon which BNPLC obtains a judgment for such Construction Warranty Payments. Further, in no event will any Construction Warranty Payments required by this Lease, when added to the payments received by BNPLC under the Purchase Agreement (exclusive of any interest accruing after the Designated Sale Date on past due payments under the Purchase Agreement), exceed the payments to which BNPLC is entitled on the Designated Sale Date according to the Purchase Agreement. (vi) Value Added. Each Construction Project undertaken and administered by Solectron (in contrast to the initial Construction Project if the construction thereof is continued by BNPLC as provided in subparagraph 6.(h) after a Landlord's Election to Continue Construction), upon completion and taken as a whole, must enhance the value of the Property such that the market value of BNPLC's interest in the Property shall be no less than sixty percent (60%) of Stipulated Loss Value when the Construction Project is complete. (vii) Estoppel Letters Required. Within thirty days after any written request by BNPLC, Solectron shall, with respect to each material general construction contract for the initial Construction Project and any material subsequent Construction Projects, cause the contractor thereunder to execute and deliver to BNPLC an estoppel letter substantially in the form of Exhibit D attached hereto. Within thirty days after any written request by BNPLC, Solectron shall also cause the architect and engineer under any material architectural or engineering contract for the initial Construction Project and any material subsequent Construction Project to execute and deliver to BNPLC an estoppel letter substantially in the form of Exhibit E attached hereto. (viii) Advances Not a Waiver. No funding of Construction Advances and no failure of BNPLC to object to any Construction Project proposed or constructed by Solectron shall constitute a waiver by BNPLC of the requirements contained in this subparagraph 6.(d). (e) Conditions to Solectron's Right to Receive Construction Advances. BNPLC's obligation to provide Construction Advances to Solectron from time to time under this Paragraph 6 shall be subject to the following terms and conditions, all of which terms and conditions are intended for the sole benefit of BNPLC, and none of which terms and conditions shall limit in any way the right of BNPLC to treat costs or expenditures incurred or paid by or on behalf of it as Construction Advances pursuant to subparagraph 6.(h): (i) Prior Notice. Solectron must make a request in substantially the form attached to this Lease as Exhibit F for any Construction Advance at least five Business Days prior to the Advance Date upon which the advance is to be paid. BNPLC shall consider in good faith any changes to the Construction Advance request forms attached hereto that Solectron may reasonably request for a particular Construction 15 22 Project, provided the requested changes do not impair BNPLC's rights or create or increase any liability BNPLC may have in connection with the applicable Construction Project. (ii) Amount of the Advances. a) Limit Dependent Upon the Maximum Construction Allowance. Solectron shall not be entitled to require any Construction Advance that would cause the Funded Construction Allowance to exceed the Maximum Construction Allowance. b) Limit Dependent Upon Costs Previously Incurred by Solectron. Solectron shall not be entitled to require any Construction Advance in excess of (1) the actual costs and expenses previously incurred or paid by Solectron (in addition to expenses already included in Transaction Expenses) for the preparation, negotiation and execution of this Lease, the Closing Certificate, and the Purchase Agreement, for Commitment Fees and for the initial Construction Project (including soft costs and other costs listed in subparagraph 6.(a)), less (2) the sum of all prior Construction Advances made under this Paragraph 6 to Solectron as reimbursement for such costs and expenses. c) Limit Dependent Upon Projected Costs Yet to be Incurred. Solectron shall not be entitled to require any Construction Advance that would cause the cost of completing the initial Construction Project, as reasonably estimated by BNPLC in good faith, to exceed the difference computed by subtracting (1) the Carrying Costs then projected by BNPLC to be added to the Construction Allowance, from (2) the excess, if any, of the Maximum Construction Allowance over the Funded Construction Allowance. d) Minimum Amount Imposed for Administrative Convenience. Solectron shall not request any Construction Advance (other than the final Construction Advance) for an amount less than $500,000. (iii) Insurance. Solectron shall have obtained and provided certificates (or, in the case of clause a) below, title policies or binders) reasonably satisfactory to BNPLC evidencing insurance covering the Property as follows (in addition to the liability insurance required under subparagraph 10.(a)): 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 the amount of no less than $21,000,000, in form and substance reasonably satisfactory to BNPLC, written by one or more title insurance companies reasonably satisfactory to BNPLC and insuring BNPLC's fee interest in the Land and Improvements to be constructed on the Land; and b) Builder's Risk Insurance. Builder's Completed Value Risk and such other hazard insurance as is reasonably required to protect BNPLC's and Solectron's interests in the Improvements under construction against risks of physical loss, such insurance to be maintained by Solectron at all times until completion of the initial Construction Project or any subsequent Construction Projects in accordance with the standards and requirements for such insurance that Solectron would observe with respect to the construction of any substantial improvements on land owned by it or its Affiliates. 16 23 (iv) Progress of Construction. Each Construction Project which has commenced but not yet been completed shall be progressing in a good and workmanlike manner and substantially in accordance with Applicable Laws, with Permitted Encumbrances, with Development Documents and with the requirements of this Lease, and Solectron shall have corrected or be diligently pursuing the correction of any significant defect in the construction thereof of which Solectron has received notice. (v) Evidence of Costs and Expenses to be Reimbursed. To the extent contemplated by the Construction Advance request forms attached as Exhibit F, or otherwise reasonably required by BNPLC at the time a Construction Advance is to be made, Solectron shall have submitted invoices, requests for payment from contractors and other evidence that the costs and expenses for which Solectron requests reimbursement constitute actual costs and expenses incurred by Solectron for a Construction Project. (vi) No Sale of BNPLC's Interest. No sale of BNPLC's interest in the Property shall have occurred pursuant to the Purchase Agreement. (vii) No Landlord's Election to Continue Construction or Event of Default. No prior Landlord's Election to Continue Construction shall have occurred, and no Event of Default shall have occurred and be continuing. (viii) Certificate of No Default and Other Matters. Solectron shall have provided to BNPLC, with the notice requesting the Construction Advance described in clause (i) above, a current certificate of an officer of Solectron in the form included in Exhibit F and shall have provided a copy of such certificate to the Participants. Without limiting the foregoing, BNPLC may decline to advance any amount when Solectron is unable to truthfully certify, as contemplated in Exhibit F, that no liens are being asserted against any part of or interest in the Property that in the aggregate secure or allegedly secure more than $5,000,000 of claims by Potential Lien Claimants, regardless of whether any such liens have caused an Event of Default to occur hereunder or are being contested by Solectron as permitted by subparagraph 12.(c). (As used in this subparagraph a lien will be considered as "being asserted" if a claim of lien relating thereto shall have been recorded and not discharged by payment or settlement.) (ix) Funding by Participants. None of the Participants or their successors under the Participation Agreement shall have failed to advance to BNPLC their pro rata shares of the Construction Advance being requested. However, any such failure shall excuse BNPLC's obligation to provide the Construction Advance requested only to the extent of the funds that the applicable Participant or Participants should have advanced (but did not advance) to BNPLC, and in the event of any such failure: a) BNPLC will immediately notify Solectron if any Participant refuses or fails to advance its pro rata share of any Construction Advance, but BNPLC will not in any event be liable to Solectron for BNPLC's failure to do so. b) BNPLC will, to the extent possible, postpone reductions of Construction Advances because of the failure by any one or more Participants ("NONFUNDING PARTICIPANTS") to make required advances under the Participation Agreement (a "PARTICIPANT DEFAULT") 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 BNPLC on the basis of such adjusted Percentages, in each case as provided in the Participation Agreement; however, so long as a Participant Default continues, no Construction Advance shall be required that would cause the 17 24 Outstanding Construction Allowance to exceed (1) the Maximum Construction Allowance available under this Lease, less (2) all amounts that should have been, but because of a continuing Participant Default have not been, advanced by any one or more of the Participants to BNPLC under the Participation Agreement with respect to Construction Advances. c) Further, after a Participant Default, and so long as no Event of Default has occurred and is continuing, BNPLC shall do the following as reasonably requested by Solectron, provided that nothing in this provision shall require BNPLC to take any action that would violate Applicable Laws, that would constitute a breach of BNPLC's obligations under the Participation Agreement, or that would require BNPLC to waive any rights or remedies it has under this Lease, the Purchase Agreement, the Closing Certificate, the Guaranty or BNPLC's other agreements with Solectron or Guarantor concerning the Property: (1) BNPLC shall promptly make a written demand upon the Nonfunding Participants for the cure of the Participant Default. (2) BNPLC shall, to the extent BNPLC has the right to do so under the Participation Agreement, decline to allow the Nonfunding Participants to exercise voting, consent or notification rights under the Participation Agreement. (3) BNPLC shall not unreasonably withhold its approval for the substitution of any new participant proposed by Solectron for Nonfunding Participants, if (A) the proposed substitution does not require BNPLC to waive rights against the Nonfunding Participants, (B) the new participant will agree (by executing supplement to the Participation Agreement as provided in the Participation Agreement) to provide funds to replace the payments that would otherwise be required of the Nonfunding Participants with respect to future Construction Advances, (C) the new participant (or Solectron) provides the funds (if any) needed to terminate the Nonfunding Participants' rights to receive payments of "Net Cash Flow" (as defined in the Participation Agreement) that BNPLC will be required to pay the new participant under the terms of the substitution reasonably proposed by Solectron, (D) the new participant (or Solectron) provides and agrees in writing to provide funds needed to reimburse BNPLC for any and all Losses incurred by BNPLC in connection with or because of the substitution of the new participant for the Nonfunding Participants, including any cost of defending and paying any claim asserted by Nonfunding Participants because of the substitution (but not including any liability of BNPLC to the Nonfunding Participants for damages caused by BNPLC's bad faith or gross negligence in the performance of BNPLC's obligations to the Nonfunding Participants), (E) the obligations of BNPLC to the new participant per dollar of the new participant's "investment" (it being understood that such investment will be computed in a manner consistent with the examples set forth in Exhibit A of the Participation Agreement, but net of reimbursements to BNPLC under clause (D) preceding) shall not exceed the obligations per dollar of investment by the Nonfunding Participants that BNPLC would have had to the Nonfunding Participants if there had been no Participant Default, and (F) 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). 18 25 (f) Breakage Costs for Construction Advances Requested But Not Taken. If Solectron requests but thereafter declines to accept any Construction Advance, or if Solectron requests a Construction Advance that it is not permitted to take because of its failure to satisfy any of the conditions specified in subparagraph 6.(e), Solectron shall pay upon demand any resulting Breakage Costs. However, for purposes of this subparagraph, a request for a Construction Advance by Solectron will be considered as if it had never been made if BNPLC and each Participant actually receives written notice from Solectron, no later than four Business Days prior to the Advance Date upon which the requested advance is to be made, stating that Solectron unconditionally rescinds the request. (g) Completion Notice. Solectron shall provide a notice (a "COMPLETION NOTICE") to BNPLC promptly after construction of the initial Construction Project is substantially complete, advising BNPLC of the substantial completion. (h) Landlord's Election to Continue Construction. Without limiting BNPLC's other rights and remedies under this Lease, and without terminating this Lease or Solectron's obligations hereunder or under any of the other documents referenced herein, if any Event of Default occurs before Solectron completes the initial Construction Project, BNPLC shall be entitled (but not obligated) to take whatever action it deems necessary or appropriate by the use of legal proceedings or otherwise to continue or complete the construction of the initial Construction Project in a manner substantially consistent (to the extent practicable under Applicable Laws) with the general description of the initial Construction Project set forth in Exhibit C and the permitted use of the Property set forth in subparagraph 3.(a). (As used herein, "LANDLORD'S ELECTION TO CONTINUE CONSTRUCTION" means any election by BNPLC to continue or complete the construction of the initial Construction Project pursuant to the preceding sentence.) After giving Solectron no less than ninety days notice that BNPLC is considering a Landlord's Election to Continue Construction (which notice must reference this subparagraph 6.(h) and state that it is given pursuant to this subparagraph), BNPLC may do any one or more of the following pursuant to this subparagraph without further notice and regardless of whether any Event of Default is then continuing: (i) Take Control of the Property. BNPLC may cause Solectron and any contractors or other parties on the Property to vacate the Property until the initial Construction Project is complete or BNPLC elects to no longer continue work on the initial Construction Project. (ii) Continuation of Construction. BNPLC may perform or cause to be performed any work to complete or continue the construction of the initial Construction Project. In this regard, so long as work ordered or undertaken by BNPLC is substantially consistent (to the extent practicable under Applicable Laws) with the general description of the initial Construction Project set forth in Exhibit C and the permitted use of the Property set forth in subparagraph 3.(a), BNPLC shall have complete discretion to: a) proceed with construction according to such plans and specifications as BNPLC may from time to time approve; b) establish and extend construction deadlines as BNPLC from time to time deems appropriate; c) hire, fire and replace architects, engineers, contractors, construction managers and other consultants as BNPLC from time to time deems appropriate, without obligation to use, consider or compensate architects, engineers, contractors, construction managers or other consultants previously selected or engaged by Solectron; 19 26 d) determine the compensation that any architect, engineer, contractor, construction manager or other consultant engaged by BNPLC will be paid, and the terms and conditions that will govern the payment of such compensation (including whether payment will be due in advance, over the course of construction or on some other basis and including whether contracts will be let on a fixed price basis, a cost plus a fee basis or some other basis), as BNPLC from time to time deems appropriate; e) pay, settle or compromise existing or future bills and claims which are or may be liens against the Property or as BNPLC considers necessary or desirable for the completion of the initial Construction Project or the removal of any clouds on title to the Property; f) prosecute and defend all actions or proceedings in connection with the construction of the initial Construction Project; g) select and change interior and exterior finishes for the Improvements and landscaping as BNPLC from time to time deems appropriate; and h) generally do anything that Solectron itself might have done or asked BNPLC to do pursuant to subparagraphs 7.(a) or 7.(b) if Solectron had satisfied or obtained BNPLC's waiver of the conditions specified therein. (iii) Arrange for Turnkey Construction. Without limiting the generality of the foregoing, BNPLC may engage any contractor or real estate developer BNPLC believes to be reputable to take over and complete construction of the initial Construction Project on a "turnkey" basis. (iv) Suspension or Termination of Construction. Notwithstanding any Landlord's Election to Continue Construction, BNPLC may subsequently elect at any time to suspend or terminate further construction without obligation to Solectron. For purposes of this Lease and the Purchase Agreement (including the determination of the Outstanding Construction Allowance and other amounts dependent upon the Outstanding Construction Allowance, like Stipulated Loss Value and the Break Even Price), after any Landlord's Election to Continue Construction and the expiration of the ninety-day notice period described above in this subparagraph 6.(h), all costs and expenditures incurred or paid by or on behalf of BNPLC to complete or continue construction as provided in this subparagraph shall be considered Construction Advances, regardless of whether they cause the Outstanding Construction Allowance to exceed the Maximum Construction Allowance. Further, as used in the preceding sentence, "costs incurred" by BNPLC will include costs that BNPLC has become obligated to pay to any third party that is not an Affiliate of BNPLC (including any contractor), even if the payments for which BNPLC has become so obligated will constitute prepayments for work or services to be rendered after payment and notwithstanding that BNPLC's obligations for the payments may be conditioned upon matters beyond BNPLC's control. For example, even if a construction contract between BNPLC and a contractor excused BNPLC from making further progress payments to the contractor upon Solectron's breach of the Purchase Agreement, the obligation to make a progress payment would nonetheless be "incurred" by BNPLC, for purposes of determining whether BNPLC has incurred costs considered to be Construction Advances, when BNPLC's obligation to pay it became subject only to Solectron's compliance with the Purchase Agreement or other conditions beyond BNPLC's control. If and to the extent BNPLC does incur costs considered as Construction Advances under this subparagraph, but (1) BNPLC does not actually pay the costs and after incurring them BNPLC is fully and finally excused from the obligation to pay them 20 27 for any reason other than a breach by Solectron of this Lease, the Closing Certificate or the Purchase Agreement, or (2) BNPLC receives a refund of such costs, then the costs BNPLC is excused from paying or refunded to BNPLC shall be considered Qualified Payments BNPLC's rights under this subparagraph 6.(h) shall be deemed to be powers coupled with an interest which cannot be revoked. 7. OTHER OBLIGATIONS OF AND LIMITED REPRESENTATIONS BY BNPLC. (a) Cooperation of BNPLC to Facilitate Construction and Development. During the Term BNPLC shall take any action reasonably requested by Solectron to facilitate the construction or use of the Property permitted by this Lease; provided, however, that: (i) This subparagraph 7.(a) shall not impose upon BNPLC the obligation to take any action that can be taken by Solectron, Solectron's Affiliates or anyone else other than BNPLC as the owner of the Land, the Improvements or any other interests in the Property. (ii) BNPLC shall not be required by this subparagraph 7.(a) to make any payment to another Person unless BNPLC shall first have received funds from Solectron, in excess of any other amounts due from Solectron hereunder, sufficient to make the payment. (This clause (ii) will not be construed as limiting the right of Solectron to obtain additional Construction Advances, on and subject to the terms and conditions set forth in Paragraph 6, for payments Solectron itself may pay or incur an obligation to pay to another Person.) (iii) BNPLC shall have no obligations whatsoever under this subparagraph at any time after a Landlord's Election to Continue Construction or when an Event of Default shall have occurred and be continuing. (iv) Solectron must request any action to be taken by BNPLC pursuant to this subparagraph, and such request must be specific and in writing, if required by BNPLC at the time the request is made. A suggested form for such a request is attached as Exhibit G. (v) No action may be required of BNPLC pursuant to this subparagraph 7.(a) that could constitute a violation of any Applicable Laws or compromise or constitute a waiver of BNPLC's rights under other provisions of this Lease, the Closing Certificate or the Purchase Agreement or that for any other reason is reasonably objectionable to BNPLC. The actions BNPLC shall take pursuant to this subparagraph 7.(a) if reasonably requested by Solectron will include, subject to the conditions listed in the proviso above, joining in or consenting to any (I) grant of easements, licenses, rights of way, and other rights in the nature of easements encumbering the Real Property, (II) release or termination of easements, licenses, rights of way or other rights in the nature of easements which are for the benefit of the Real Property or any portion thereof, (III) dedication or transfer of portions of the Land not improved with a building, for road, highway or other public purposes, (IV) agreements (other than with Solectron or its Affiliates) for the use and maintenance of common areas, for reciprocal rights of parking, for ingress and egress and for amendments to any Permitted Encumbrances or Development Documents (including amendments to the Development Documents that Solectron may reasonably request to facilitate construction or development on land owned by it or its Affiliates other than the Land), (V) instruments necessary or desirable for the exercise or 21 28 enforcement of rights under the Permitted Encumbrances, the Development Documents or any contract, permit, license, franchise or other right included within the term "Property", (VI) permit applications or other documents reasonably required to accommodate the construction or alteration of Improvements otherwise permitted by this Lease, (VII) confirmations of Solectron's rights under any particular provisions of this Lease which Solectron may wish to provide to a third party, (IX) execution or filing of a tract or parcel map subdividing the Real Property into lots or parcels or reconfiguring existing parcels, (X) agreements providing development incentives or tax abatements with respect to the Property. However, the determination of whether any such action is reasonably requested or reasonably objectionable to BNPLC may depend in whole or in part upon the extent to which the requested action shall result in a lien to secure payment or performance obligations against BNPLC's interest in the Property, shall cause a decrease in the value of the Property to less than sixty percent (60%) of Stipulated Loss Value after any Qualified Payments that may result from such action are taken into account, or shall impose upon BNPLC any present or future obligations greater than the obligations BNPLC is willing to accept in reliance on the indemnifications provided by Solectron hereunder. Upon request by Solectron, BNPLC shall also provide 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), certifying the dates to which the Base Rent and other amounts payable by Solectron hereunder have been paid, stating whether BNPLC is aware of any default by Solectron that may exist hereunder and confirming BNPLC's agreements concerning landlord's liens and other matters set forth in subparagraph 7.(c); it being intended that any such statement by BNPLC may be relied upon by anyone with whom Solectron may intend to enter into an agreement for construction of the Improvements or other significant agreements concerning the Property. Any Losses incurred by BNPLC because of any action taken pursuant to this subparagraph 7.(a) shall be covered by the indemnification set forth in subparagraph 5.(d). Further, for purposes of such indemnification, any action taken by BNPLC will be deemed to have been made at the request of Solectron if made pursuant to any request of counsel to or any officer of Solectron (or with their knowledge, and without their objection) in connection with the execution or administration of this Lease or the Purchase Agreement. To avoid construction delays or for other reasonable cause, Solectron may ask BNPLC for an expedited response to any request for action made by Solectron pursuant to this subparagraph 7.(a) by delivering such request with a notice substantially in the form attached hereto as Exhibit H. BNPLC shall endeavor in good faith to respond promptly to any such notice after the receipt of any such notice by an officer of BNPLC. (b) Actions Permitted by Solectron Without BNPLC's Consent. No refusal by BNPLC to execute or join in the execution of any agreement, application or other document requested by Solectron pursuant to the preceding subparagraph 7.(a) shall preclude Solectron from itself executing such agreement, application or other document; provided, that in doing so Solectron is not purporting to act for BNPLC and does not thereby create or expand any obligations or restrictions that encumber the Property. Further, subject to the other terms and conditions of this Lease, Solectron shall be entitled to do any of the following in Solectron's own name and to the exclusion of BNPLC during the Term without any notice to or consent of BNPLC so long as no Landlord's Election to Continue Construction has occurred, so long as no Event of Default has occurred and is continuing and so long as Solectron is not purporting to act for BNPLC and does not thereby create or expand any obligations or restrictions that encumber the Property: (i) perform obligations arising under and exercise and enforce the rights of Solectron or the owner of the Real Property under the Development Documents and Permitted Encumbrances; 22 29 (ii) perform obligations arising under and exercise and enforce the rights of Solectron or the owner of the Real Property with respect to any other contracts or documents (such as building permits) included within the Personal Property; and (iii) recover and retain any monetary damages or other benefit inuring to Solectron or the owner of the Real Property through the enforcement of any rights, contracts or other documents included within the Personal Property (including the Development Documents and Permitted Encumbrances); provided, that to the extent any such monetary damages may become payable as compensation for an adverse impact on value of the Property, the rights of BNPLC and Solectron hereunder with respect to the collection and application of such monetary damages shall be the same as for condemnation proceeds payable because of a taking of all or any part of the Property. (c) Waiver of Landlord's Liens. BNPLC waives any security interest, statutory landlord's lien or other interest BNPLC may have in or against computer equipment and other tangible personal property placed on the Land from time to time that Solectron or its Affiliates own or lease from other lessors; provided, however, that BNPLC does not waive its interest in or rights with respect to equipment or other property included within the "Property" as described in Paragraph 8. Although computer equipment or other tangible personal property may be "bolted down" or otherwise firmly affixed to Improvements, it shall not by reason thereof become part of the Improvements if it can be removed without causing structural or other material damage to the Improvements and without rendering HVAC or other major building systems inoperative and if it does not otherwise constitute "Property" as provided in Paragraph 8. (d) Limited Representations by BNPLC Concerning Accounting Matters. BNPLC is not expected or required to represent or warrant that this Lease or the Purchase Agreement will qualify for any particular accounting treatment under GAAP. However, to permit Solectron to determine for itself the appropriate accounting for this Lease and the Purchase Agreement, BNPLC does represent to Solectron as of the Effective Date: (i) Equity capital invested in BNPLC is greater than three percent (3%) of the aggregate of all lease funding amounts (including participations) of BNPLC. Such equity capital investments constitute equity in legal form and are reflected as shareholders' equity in the financial statements and accounting records of BNPLC. (ii) BNPLC is one hundred percent (100%) owned by French American Bank Corporation, which is one hundred percent (100%) owned by BNPLC's Parent. (iii) BNPLC leases properties of substantial value to more than fifteen tenants. (iv) All parties to whom BNPLC has any material obligations known to BNPLC are (and are expected to be) Affiliates of BNPLC's Parent, Participants, or participants with BNPLC in other leasing deals or loans made by BNPLC, or other tenants or borrowers in such other leasing deals or loans. (v) BNPLC has substantial assets in addition to the Property, assets which BNPLC believes to have a value far in excess of the value of the Property. (vi) Other than any Funding Advances provided from time to time by Participants under the Participation Agreement, BNPLC expects to obtain all Funding Advances from Banque Nationale de Paris 23 30 or other Affiliates of BNPLC (including Funding Advances to cover Carrying Costs and other amounts to be capitalized as part of the Outstanding Construction Allowance, and assuming that Solectron uses the Maximum Construction Allowance under this Lease), and to the extent that Banque Nationale de Paris or such other Affiliates themselves borrow or accept bank deposits to obtain the funds needed to provide such Funding Advances, the obligation to repay such funds shall not be limited, by agreement or corporate structure, to payments collected from Solectron or otherwise recovered from the Property. (vii) BNPLC has not obtained residual value insurance or a residual value guarantee from any third party to ensure the recovery of its investment in the Property. (viii) BNPLC does not intend to take any action during the term of this Lease that would change, or anticipate any change in, any of the facts listed above in this subparagraph. Solectron shall have the right to ask BNPLC questions from time to time concerning BNPLC's financial condition, concerning matters relevant to the proper accounting treatment of this Lease on Solectron's financial statements and accounting records (including the amount of BNPLC's equity capital as a percentage of the aggregate of all lease funding amounts [including participations] by BNPLC) or concerning BNPLC's ability to perform under this Lease or the Purchase Agreement, to which questions BNPLC shall promptly respond. Such response, however, may be limited to a statement that BNPLC will not provide requested information; provided, however, BNPLC must notify Solectron in writing if at any time during the Term BNPLC ceases to be 100% owned, directly or indirectly, by Banque Nationale de Paris, or if at any time during the Term BNPLC believes it could not represent that the statements in clauses (i), (v) and (vii) above continue to be accurate, whether because of a change in the capital structure of BNPLC, a purchase of residual value insurance with respect to the Property or otherwise. (e) Other Limited Representations by BNPLC. BNPLC represents that: (i) No Default or Violation. The execution, delivery and performance by BNPLC of this Lease and the Purchase Agreement do not and will not constitute a breach or default under any material contract or agreement to which BNPLC is a party or by which BNPLC is bound and do not, to the knowledge of BNPLC, violate or contravene any law, order, decree, rule or regulation to which BNPLC is subject. (As used in this subparagraph 7.(e), "BNPLC'S KNOWLEDGE" means the present actual knowledge of Lloyd Cox, the current officer of BNPLC having primary responsibility for the negotiation of this Lease.) (ii) No Suits. There are no judicial or administrative actions, suits, proceedings or investigations pending or, to BNPLC's knowledge, threatened against BNPLC that are reasonably likely to affect BNPLC's interest in the Property or the validity, enforceability or priority of this Lease or the Purchase Agreement, and BNPLC 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 BNPLC or its interest in the Property. (iii) Enforceability. The execution, delivery and performance of this Lease and the Purchase Agreement by BNPLC are duly authorized, are not in contravention of or conflict with any term or provision of BNPLC's articles of incorporation or bylaws and do not, to BNPLC'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 Agreement are valid, binding and legally enforceable obligations of BNPLC except as such enforcement is affected by bankruptcy, 24 31 insolvency and similar laws affecting the rights of creditors, generally, and equitable principles of general application; provided, BNPLC makes no representation or warranty that conditions imposed by zoning ordinances or other state or local Applicable Laws to the purchase, ownership, lease or operation of the Property have been satisfied. (iv) Organization. BNPLC is duly incorporated and legally existing under the laws of Delaware and is duly qualified to do business in the State of Washington. BNPLC has or will obtain on a timely basis, at Solectron's expense to the extent so provided in the other provisions of this Lease, all requisite power and all governmental certificates of authority, licenses, permits, qualifications and other documentation necessary to own and lease the Property and to perform its obligations under this Lease. (v) Not a Foreign Person. BNPLC is not a "foreign person" within the meaning of Sections 1445 and 7701 of the Code (i.e., BNPLC 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). (f) Keeping Proprietary Information Confidential. BNPLC agrees to use reasonable precautions to keep confidential any "proprietary information" (as defined in Paragraph 27) that BNPLC may receive from Solectron or otherwise discover with respect to Solectron or Solectron's business pursuant to this Lease or any investigation by BNPLC hereunder, except for disclosures: (i) specifically and previously authorized in writing by Solectron; (ii) to any permitted assignee of BNPLC as to any interest in the Property so long as the assignee has agreed in writing to use its reasonable efforts to keep such information confidential in accordance with the terms of this subparagraph; (iii) to legal counsel, accountants, auditors, environmental consultants and other professional advisors to BNPLC so long as BNPLC shall inform such persons in writing (if practicable) of the confidential nature of such information and shall direct them to treat such information confidentially; (iv) to regulatory officials having jurisdiction over BNPLC or BNPLC's Parent (provided that the disclosing party shall request confidential treatment of the disclosed information, if practicable); (v) as required by legal process (provided that the disclosing party shall request confidential treatment of the disclosed information, if practicable); (vi) of information which has previously become publicly available through the actions or inactions of a Person other than BNPLC not, to BNPLC's knowledge, in breach of an obligation of confidentiality to Solectron; and (vii) to any Participant so long as the Participant has not repudiated the confidentiality provision concerning Solectron's proprietary information set forth in the Participation Agreement. 8. STATUS OF PROPERTY ACQUIRED WITH FUNDS PROVIDED BY BNPLC. Subject in each case to Solectron's rights under the other provisions of this Lease, all Improvements constructed during the term of this Lease shall be owned by BNPLC and shall constitute "Property" covered by this Lease. Further, subject in each case to Solectron's rights under the other provisions of this Lease, all furnishings, furniture, chattels, permits, licenses, franchises, certificates and other personal property of whatever nature shall have been acquired on behalf of BNPLC by Solectron, shall be owned by BNPLC and shall constitute "Property" covered by this Lease, to the extent heretofore or hereafter acquired, in whole or in part, with any portion of the Initial Funding Advance provided to Solectron or with any Construction Advances or other funds for which Solectron has received or hereafter receives reimbursement from the Initial Funding Advance or Construction Advances, as shall all renewals or replacements of or substitutions for any such Property. Solectron shall not authorize or permit the transfer of title to the Improvements or to any other such Property to pass through Solectron or Solectron's Affiliates before it is transferred to BNPLC from contractors, suppliers, vendors or other third Persons. Nothing herein shall constitute authorization of Solectron by BNPLC to bind BNPLC to any construction contract or other agreement with a third Person, but any construction contract or other agreement executed by Solectron for the acquisition or 25 32 construction of Improvements or other components of the Property may provide for the transfer of title as required by the preceding sentence. Upon request of BNPLC made when any Event of Default has occurred and is continuing, Solectron shall deliver to BNPLC an inventory describing all significant items of Personal Property (and, in the case of tangible personal property, showing the make, model, serial number and location thereof) other than Improvements, with a certification by Solectron that such inventory is true and complete and that all items specified in the inventory are covered by this Lease free and clear of any Lien other than the Permitted Encumbrances or Liens Removable by BNPLC. 9. ENVIRONMENTAL. (a) Environmental Covenants by Solectron. Solectron covenants that: (i) Solectron shall not conduct or permit others to conduct Hazardous Substance Activities, except Permitted Hazardous Substance Use and Remedial Work. (ii) Solectron shall not discharge or permit the discharge of anything on or from the Property that would require any permit under applicable Environmental Laws, other than (1) storm water runoff, (2) waste water discharges through a publicly owned treatment works, (3) discharges that are a necessary part of any Remedial Work, and (4) other similar discharges consistent with the definition herein of Permitted Hazardous Substance Use, in each case in strict compliance with Environmental Laws. (iii) Following any discovery that Remedial Work is required by Environmental Laws or otherwise reasonably required, and to the extent not inconsistent with the other provisions of this Lease, Solectron shall promptly perform and diligently and continuously pursue such Remedial Work, in each case in strict compliance with Environmental Laws. (iv) If requested by BNPLC in connection with any significant Remedial Work required by this subparagraph, Solectron shall retain an independent Environmental Consultant or Industrial Hygienist, as appropriate, to evaluate any significant new information generated during Solectron's implementation of the Remedial Work and to discuss with Solectron whether such new information indicates the need for any additional measures that Solectron should take to protect the health and safety of persons (including, without limitation, employees, contractors and subcontractors and their employees) or to protect the environment. Solectron shall implement any such additional measures to the extent required with respect to the Property by Environmental Laws or otherwise reasonably required and to the extent not inconsistent with the other provisions of this Lease. (b) Right of BNPLC to do Remedial Work Not Performed by Solectron. If Solectron's failure to cure any breach of the covenants set forth in subparagraph 9.(a) continues beyond the Environmental Cure Period (as defined below), BNPLC may, in addition to any other remedies available to it, after notifying Solectron of the Remedial Work BNPLC believes is needed, conduct all or any part of the Remedial Work. To the extent that Remedial Work done by BNPLC pursuant to the preceding sentence (including any removal of Hazardous Substances) is reasonably required, or is required or believed by BNPLC in good faith to be required by Applicable Law or by any demand, regulation or guideline of any governmental authority (whether or not having the force of law), the cost thereof shall be a demand obligation owing by Solectron to BNPLC. As used in this subparagraph, "ENVIRONMENTAL CURE PERIOD" means the period ending on the earlier of: (1) one hundred twenty days after Solectron is notified of the breach which must be cured within such period, (2) the date that any writ or order is issued for the levy or sale of any property owned by BNPLC (including the Property) because of such 26 33 breach, (3) the date that any criminal action is overtly threatened or instituted against BNPLC or any of its directors, officers or employees because of such breach, or (4) any Designated Sale Date upon which, for any reason, Solectron or an Affiliate of Solectron or any Applicable Purchaser shall not purchase BNPLC's interest in the Property pursuant to the Purchase Agreement for a net price to BNPLC (when taken together with any additional payments made by Solectron pursuant to Paragraph 1(a)(ii) of the Purchase Agreement, in the case of a purchase by an Applicable Purchaser) equal to Stipulated Loss Value. (c) Environmental Inspections and Reviews. BNPLC reserves the right to retain an Environmental Consultant or Industrial Hygienist to review any report prepared by Solectron or to conduct BNPLC's own investigation to confirm whether Solectron is complying with the requirements of this Paragraph 9. Solectron grants to BNPLC and to BNPLC's agents, employees, consultants and contractors the right during reasonable business hours and after reasonable notice to enter upon the Property to inspect the Property and to perform such tests as BNPLC deems necessary or appropriate to review or investigate Hazardous Substances in, on, under or about the Property or any discharge or suspected discharge of Hazardous Substances into groundwater or surface water from the Property. Solectron shall promptly reimburse BNPLC for the reasonable fees of its Environmental Consultants and Industrial Hygienists and the costs of any such inspections and tests; provided, however, BNPLC's right to reimbursement for the reasonable fees of any consultant engaged as provided in this subparagraph or for the costs of any inspections or test undertaken as provided in this subparagraph shall be limited to the following circumstances: (1) an Event of Default shall have occurred; (2) BNPLC shall have retained the consultant to establish the condition of the Property just prior to any conveyance thereof pursuant to the Purchase Agreement or just prior to the expiration of this Lease; (3) BNPLC shall have retained the consultant to satisfy any regulatory requirements applicable to BNPLC or its Affiliates; or (4) BNPLC shall have retained the consultant because BNPLC has been notified of a violation of Environmental Laws concerning the Property or BNPLC otherwise reasonably believes that Solectron has not complied with the requirements of this Paragraph 9. (d) Communications Regarding Environmental Matters. (i) Solectron shall immediately advise BNPLC and Participants of (1) any discovery of any event or circumstance which would render any of the representations of Solectron herein or in the Closing Certificate concerning environmental matters materially inaccurate or misleading if made at the time of such discovery and assuming that Solectron was aware of all relevant facts, (2) any Remedial Work (or change in Remedial Work) required or undertaken by Solectron or its Affiliates in response to any (A) discovery of any Hazardous Substances on, under or about the Property other than Permitted Hazardous Substances or (B) any claim for damages resulting from Hazardous Substance Activities, (3) Solectron's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property which would or could reasonably be expected to cause the Property or any part thereof to be subject to any ownership, occupancy, transferability or use restrictions under Environmental Laws, or (4) any investigation or inquiry of any failure or alleged failure by Solectron to comply with Environmental Laws affecting the Property by any governmental authority responsible for enforcing Environmental Laws. In such event, Solectron shall deliver to BNPLC within thirty days after BNPLC's request (or such longer period as may be reasonably required, but in any event within ninety days after BNPLC's request), a preliminary written environmental plan setting forth a general description of the action that Solectron proposes to take with respect thereto, if any, to bring the Property into compliance with Environmental Laws or to correct any breach by Solectron of this Paragraph 9, including any proposed Remedial 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 BNPLC may reasonably request. 27 34 (ii) Solectron shall provide BNPLC and Participants with copies of all material written communications with federal, state and local governments, or agencies relating to the matters listed in the preceding clause (i). Solectron shall also provide BNPLC and Participants with copies of any correspondence from third Persons which threaten litigation over any significant failure or alleged significant failure of Solectron to maintain or operate the Property in accordance with Environmental Laws. (iii) Prior to Solectron's submission of a Material Environmental Communication to any governmental or regulatory agency or third party, Solectron shall, to extent practicable, deliver to BNPLC and Participants a draft of the proposed submission (together with the proposed date of submission), and in good faith assess and consider any comments of BNPLC regarding the same. Promptly after BNPLC's request, Solectron shall meet with BNPLC to discuss the submission, shall provide any additional information reasonably requested by BNPLC and shall provide a written explanation to BNPLC addressing the issues raised by comments (if any) of BNPLC regarding the submission, including a reasoned analysis supporting any decision by Solectron not to modify the submission in accordance with comments of BNPLC. 10. INSURANCE REQUIRED AND CONDEMNATION. (a) Liability Insurance. Throughout the Term Solectron shall maintain commercial general liability insurance against claims for bodily and personal injury, death and property damage occurring in or upon or resulting from any occurrence in or upon the Property, in standard form and with an insurance company or companies reasonably acceptable to BNPLC (and BNPLC may reasonably require that such insurance be provided through insurance or reinsurance 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 VI or better), such insurance to afford immediate protection, to the limit of not less than $20,000,000 combined single limit for bodily and personal injury, death and property damage in respect of any one accident or occurrence, with not more than $3,000,000 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, but such coverage or the amount thereof shall in no way limit such indemnifications. The policy evidencing such insurance shall name as additional insureds BNPLC and all Participants of which Solectron has been notified (including BNPLC's Parent). Solectron shall maintain with respect to each policy or agreement evidencing such commercial general liability insurance such endorsements as may be reasonably required by BNPLC and shall at all times deliver and maintain with BNPLC written confirmation (in form reasonably satisfactory to BNPLC) 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 thirty days notice to BNPLC. Not less than thirty days prior to the expiration date of each policy of insurance required of Solectron pursuant to this subparagraph, Solectron shall deliver to BNPLC a certificate evidencing a paid renewal policy or policies. (b) Property Insurance. Throughout the Term Solectron will keep all Improvements (including all alterations, additions and changes made to the Improvements) insured under an "all-risk" property insurance policy (not excluding from coverage perils normally included within the definitions of extended coverage, vandalism, malicious mischief and, if the Property is in a flood zone, flood) in the amount no less than eighty percent (80%) of the replacement value (exclusive of land, foundation, footings, excavations and grading) 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. Subject to the reasonable approval of BNPLC, Solectron will be responsible for determining the amount of property insurance to be maintained from time to time, but Solectron must maintain such coverage on an agreed value basis to eliminate the effects of coinsurance. Such 28 35 insurance must be issued by an insurance company or companies reasonably acceptable to BNPLC, and BNPLC may reasonably require that the insurance or reinsurance companies providing such insurance be rated by the A.M. Best Company of Oldwick, New Jersey as having (1) a policyholder's rating of A- or better, (2) a reported financial information rating of no less than VI, and (3) in the case of each such company, a reported financial information rating which indicates an adjusted policyholders' surplus equal to or greater than the underwriting exposure that such company has under the insurance or reinsurance it is providing for the Property. Any deductible applicable to such insurance shall not exceed $3,000,000. Such insurance shall cover not only the value of Solectron's interest in the Improvements, but also the interest of BNPLC, and such insurance shall include provisions that BNPLC must be notified at least thirty days prior to any cancellation or reduction of insurance coverage. The policies under which Solectron maintains such insurance may be "blanket" policies covering not only the Property but other properties occupied or owned by Solectron; however, all policies must provide that proceeds paid thereunder with respect to the Property will be payable to BNPLC and Solectron as their interests may appear, it being understood between BNPLC and Solectron that such proceeds shall be paid to BNPLC as Escrowed Proceeds and will be applied in accordance with Paragraph 11 of this Lease. In the event any of the Property is destroyed or damaged by fire, explosion, windstorm, hail or by any other casualty against which insurance shall have been required hereunder, (i) BNPLC may, but shall not be obligated to, make proof of loss if not made promptly by Solectron after notice from BNPLC, (ii) each insurance company concerned is hereby authorized and directed to make payment for such loss directly to BNPLC for application as required by Paragraph 11, and (iii) BNPLC may settle, adjust or compromise any and all claims for loss, damage or destruction under any policy or policies of insurance (provided, that so long as no Landlord's Election to Continue Construction shall have occurred and no Event of Default shall have occurred and be continuing, BNPLC must obtain Solectron's consent to any such settlement). If any casualty shall result in damage to or loss or destruction of the Property, Solectron shall give immediate notice thereof to BNPLC and Paragraph 11 shall apply. Notwithstanding the foregoing, however, Solectron shall have the right as Solectron deems appropriate to settle, adjust or compromise any insurance claim for damage to the Property that cannot reasonably be asserted for more than $3,000,000 so long as no Landlord's Election to Continue Construction shall have occurred and no Event of Default shall have occurred and be continuing; and Solectron may directly receive and hold the proceeds of such claim so long as no Landlord's Election to Continue Construction shall have occurred and no Event of Default shall have occurred and be continuing and so long as Solectron applies such proceeds as required by subparagraph 11.(b). (c) Failure to Obtain Insurance. If Solectron fails to obtain any insurance or to provide confirmation of any such insurance as required by this Lease, BNPLC shall be entitled (but not required) to obtain the insurance that Solectron has failed to obtain or for which Solectron has not provided the required confirmation and, without limiting BNPLC's other remedies under the circumstances, BNPLC may require Solectron to reimburse BNPLC for the cost of such insurance and to pay interest thereon computed at the Default Rate from the date such cost was paid by BNPLC until the date of reimbursement by Solectron. (d) Condemnation. Immediately upon obtaining knowledge of the institution of any proceedings for the condemnation of the Property or any portion thereof, or any other similar governmental or quasi-governmental proceedings arising out of injury or damage to the Property or any portion thereof, each party shall notify the other (provided, however, BNPLC shall have no liability for its failure to provide such notice) of the pendency of such proceedings. Solectron shall, at its expense, diligently prosecute any such proceedings and shall consult with BNPLC, 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 Property and all judgments, decrees and awards for injury or damage to the 29 36 Property shall be paid to BNPLC as Escrowed Proceeds for application as provided in Paragraph 11. BNPLC is hereby authorized, in the name of Solectron, at any time when an Event of Default shall have occurred and be continuing, or otherwise with Solectron's prior consent, to execute and deliver valid acquittances for, and to appeal from, any such judgment, decree or award concerning condemnation of any of the Property. BNPLC 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, Solectron shall have the right as Solectron deems appropriate to settle, adjust or compromise any claim for any taking of less than all or substantially all of the Property if the claim cannot reasonably be asserted for more than $3,000,000 and if no Landlord's Election to Continue Construction shall have occurred and no Event of Default shall have occurred and be continuing; and Solectron may directly receive and hold the proceeds of any such claim so long as no Landlord's Election to Continue Construction shall have occurred and no Event of Default shall have occurred and be continuing and so long as Solectron applies such proceeds as required by subparagraph 11.(b). 11. APPLICATION OF INSURANCE AND CONDEMNATION PROCEEDS. (a) Collection of Insurance and Condemnation Proceeds Generally. Subject to BNPLC's rights under this Paragraph 11, and so long as no Landlord's Election to Continue Construction shall have occurred and no Event of Default shall have occurred and be continuing, Solectron shall be entitled to use all property insurance and condemnation proceeds payable with respect to the Property during the Term for the restoration and repair of the Property or any remaining portion thereof. Except as provided in the last sentence of subparagraph 10.(b) and the last sentence of subparagraph 10.(d), all insurance and condemnation proceeds received with respect to the Property (including proceeds payable under any insurance policy covering the Property which is maintained by Solectron) shall be paid to BNPLC and then applied as follows: (i) First, such proceeds shall be used to reimburse BNPLC 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 BNPLC as Escrowed Proceeds and used to reimburse Solectron for the actual cost of the repair, restoration or replacement of the Property. However, any Remaining Proceeds not needed for such purpose shall be applied by BNPLC as Qualified Payments, as provided in subparagraph 11.(c), after Solectron notifies BNPLC that they are not needed for repairs, restoration or replacement. (b) Administration of Remaining Proceeds; Solectron's Obligation to Restore. Any Remaining Proceeds held by BNPLC as Escrowed Proceeds shall be deposited by BNPLC in an interest bearing account as provided in the definition of Escrowed Proceeds in the attached List of Defined Terms and shall be paid to Solectron or to third parties as Solectron may direct as the applicable repair, restoration or replacement progresses and upon compliance by Solectron with such terms, conditions and requirements as may be reasonably imposed by BNPLC, but in no event shall BNPLC be required to pay Escrowed Proceeds to Solectron in excess of the actual cost to Solectron of the applicable repair, restoration or replacement, as evidenced by invoices or other documentation reasonably satisfactory to BNPLC, it being understood that BNPLC may retain and apply any such excess as a Qualified Payment. In any event, Solectron 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 in the attached List of Defined Terms. Further, notwithstanding 30 37 the inadequacy of the Remaining Proceeds held by BNPLC as Escrowed Proceeds, if any, or anything herein to the contrary, Solectron must, after any taking of less than all or substantially all of the Property by condemnation and after any damage to the Property by fire or other casualty, either: (i) promptly restore or improve the Property or the remainder thereof to a value no less than sixty percent (60%) of Stipulated Loss Value (computed after the application of any Remaining Proceeds as a Qualified Payment) and to a reasonably safe and sightly condition; or (ii) promptly restore the Property to a reasonably safe and sightly condition and pay to BNPLC for application as a Qualified Payment the amount (if any), as determined by BNPLC, needed to reduce Stipulated Loss Value (computed after the application of such amount and any available Remaining Proceeds as Qualified Payments) to no more than one hundred sixty-seven percent (167%) of the then-current market value of the Property or remainder thereof. (c) Special Provisions Concerning Event of Defaults and Qualified Payments. If an Event of Default shall have occurred and be continuing, then notwithstanding the foregoing, BNPLC shall be entitled to receive and collect all insurance or condemnation proceeds payable with respect to the Property, and BNPLC shall be entitled to either, at the discretion of BNPLC, (A) hold all Remaining Proceeds as Escrowed Proceeds until paid to Solectron as reimbursement for the actual and reasonable cost of repairing, restoring or replacing the Property when Solectron has completed such repair, restoration or replacement, or (B) apply such proceeds as Qualified Payments when and to the extent deemed appropriate by BNPLC. When no Landlord's Election to Continue Construction shall have occurred and no Event of Default shall have occurred and be continuing, BNPLC shall apply any Remaining Proceeds paid to it (or other amounts available for application as a Qualified Payment) as a Qualified Payment on any date that BNPLC is directed to do by a notice from Solectron; provided, that if such a notice from Solectron specifies an effective date for a Qualified Payment that is less than five Business Days after BNPLC's actual receipt of the notice, BNPLC may postpone the date of the Qualified Payment to any date not later than five Business Days after BNPLC's receipt of the notice. In any event, except when BNPLC is required by the preceding sentence to apply Remaining Proceeds or other amounts as a Qualified Payment on an Advance Date or Base Rent Date, BNPLC may deduct Breakage Costs incurred in connection with any Qualified Payment from the Remaining Proceeds or other amounts available for application as the Qualified Payment, and Solectron will reimburse BNPLC upon request for any such Breakage Costs that BNPLC incurs but does not deduct. (d) Takings of All or Substantially All of the Property. In the event of any taking of all or substantially all of the Property, BNPLC 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 Property by condemnation exceeds the sum of the Remaining Proceeds resulting from such condemnation, then BNPLC shall be entitled to recover the excess from Solectron upon demand as an additional Qualified Payment, whereupon this Lease shall terminate. Any taking of so much of the Real Property as, in BNPLC's reasonable good faith judgment, makes it impracticable to restore or improve the remainder thereof as required by part (1) of subparagraph 11.(b) shall be considered a taking of substantially all the Property for purposes of this Paragraph 11. (e) Waiver of Subrogation. Without limiting Solectron's obligations to make repairs under other provisions of this Lease, BNPLC and Solectron each waive any right of recovery against the other, and the other's agents, officers or employees, for any damage to the Property or to the personal property situated from time 31 38 to time in or on the Real 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 11.(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 subparagraph. Solectron shall cause the insurance policies required of Solectron by this Lease to be properly endorsed, if necessary, to prevent any loss of coverage because of the waivers set forth in this subparagraph. If such endorsements are not available at commercially reasonable rates, the waivers set forth in this subparagraph shall be ineffective to the extent that such waivers would cause required insurance with respect to the Property to be impaired. 12. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF SOLECTRON CONCERNING THE PROPERTY. Solectron represents, warrants and covenants as follows: (a) Compliance with Covenants and Laws. The use of the Property permitted by this Lease complies, or will comply after Solectron obtains available permits as the tenant under this Lease, in all material respects with all Applicable Laws. Solectron has obtained or will promptly obtain all utility, building, health and operating permits as may be required by any governmental authority or municipality having jurisdiction over the Property for the construction contemplated herein and the use of the Property permitted by this Lease. (b) Operation of Property. Solectron shall operate the Property in a good and workmanlike manner and in a manner that causes it to comply in all material respects with Applicable Laws. (For purposes of this Lease, "material" noncompliance with Applicable Law will include any noncompliance, the correction of which has been requested by a governmental authority, or because of which a threat of action against the Property or BNPLC has been asserted by a governmental authority.) Solectron shall not use or occupy or allow the use or occupancy of the Property in any manner which violates any Applicable Law in any material respect 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 could, individually or in the aggregate, reduce the value of the Property and leave the Property with a value of less than sixty percent (60%) of Stipulated Loss Value, Solectron shall not: (i) initiate or permit any zoning reclassification of the Property; (ii) seek any variance under existing zoning ordinances applicable to the Property; (iii) use or permit the use of the 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 Property; or (v) consent to the annexation of the Property to any municipality. If a change in the zoning or other Applicable Laws affecting the permitted use or development of the Property shall occur that BNPLC determines will reduce the then-current market value of the Property, and if after such reduction the then-current market value of the Property shall be less than sixty percent (60%) of Stipulated Loss Value in the reasonable judgment of BNPLC, then Solectron shall before the Designated Sale Date pay BNPLC an amount equal to such excess for application as a Qualified Payment. Solectron shall not cause or consent to any drilling or exploration for, or extraction, removal or production of, minerals from the surface or subsurface of the Property. If Solectron receives a notice or claim from any federal, state or other governmental authority that the Property is not in compliance with any Applicable Law in any material respect, or that any action may be taken against BNPLC because the Property does not comply with any Applicable Law, Solectron shall promptly furnish a copy of such notice or claim to BNPLC. Notwithstanding the foregoing, Solectron may in good faith, by appropriate proceedings, contest the validity and applicability of any Applicable Law with respect to the Property, and pending such contest Solectron shall not be deemed in default hereunder because of the violation of such Applicable Law, if Solectron diligently prosecutes such contest to completion in a manner reasonably satisfactory to BNPLC, and if Solectron promptly causes the Property to comply with any such Applicable Law upon a final determination by a court of competent 32 39 jurisdiction that the same is valid and applicable to the Property; provided, however, in any event such contest shall be concluded and the violation of such Applicable Law must be corrected by Solectron and any claims asserted against BNPLC or the Property because of such violation must be paid by Solectron, all prior to the earlier of (i) the date that any criminal action is overtly threatened or instituted against BNPLC or any of its directors, officers or employees because of such violation, (ii) the date that any action is taken or overtly threatened by any governmental authority against BNPLC or any property owned by BNPLC (including the Property) because of such violation, or (iii) any Designated Sale Date upon which, for any reason, Solectron or an Affiliate of Solectron or any Applicable Purchaser shall not purchase BNPLC's interest in the Property pursuant to the Purchase Agreement for a net price to BNPLC (when taken together with any additional payments made by Solectron pursuant to Paragraph 1(a)(ii) of the Purchase Agreement, in the case of a purchase by an Applicable Purchaser) equal to Stipulated Loss Value. (c) Debts for Construction, Maintenance, Operation or Development. Solectron shall cause all debts and liabilities incurred in the construction, maintenance, operation or development of the Property, including all debts and liabilities for labor, material and equipment and all debts and charges for utilities servicing the Property, to be promptly paid; provided, nothing in this subparagraph will be construed to make Solectron liable for Liens Removable by BNPLC or Excluded Taxes. Notwithstanding the foregoing, Solectron 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 Solectron shall not be deemed in default under this subparagraph because of the contested lien if (1) within thirty days after being asked to do so by BNPLC, Solectron bonds over to BNPLC's reasonable satisfaction all such contested liens against the Property alleged to secure an amount in excess of $5,000,000 (individually or in the aggregate), (2) Solectron diligently prosecutes such contest to completion in a manner reasonably satisfactory to BNPLC, and (3) Solectron 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 must be paid by Solectron prior to the earlier of (i) the date that any criminal action is overtly threatened or instituted against BNPLC or its directors, officers or employees because of the nonpayment thereof, (ii) the date that any writ or order is issued under which the Property or any other property in which BNPLC has an interest may be seized or sold or any other action is taken or overtly threatened against BNPLC or any property in which BNPLC has an interest because of the nonpayment thereof, or (iii) any Designated Sale Date upon which, for any reason, Solectron or an Affiliate of Solectron or any Applicable Purchaser shall not purchase BNPLC's interest in the Property pursuant to the Purchase Agreement for a net price to BNPLC (when taken together with any additional payments made by Solectron pursuant to Paragraph 1(a)(ii) of the Purchase Agreement, in the case of a purchase by an Applicable Purchaser) equal to Stipulated Loss Value. (d) Repair, Maintenance, Alterations and Additions. Solectron shall keep the Property in good order, operating condition and appearance, causing all necessary repairs, renewals and replacements to be promptly made, and will not allow any of the Property to be materially misused, abused or wasted. To the extent that any of the following could, individually or in the aggregate, reduce the value of the Property and leave the Property with a value of less than sixty percent (60%) of Stipulated Loss Value, Solectron shall not: (i) fail to promptly replace any worn-out fixtures or material items of tangible Personal Property covered by this Lease with fixtures or other tangible Personal Property comparable to the replaced fixtures or Personal Property when new, (ii) remove from the Property any fixtures or tangible Personal Property of significant value covered by this Lease except such as are replaced by Solectron by articles of equal suitability and value, free and clear of any Lien other than Permitted Encumbrances or Liens Removable by BNPLC, or (iii) make any significant alterations to any 33 40 Improvements after they are completed. Without limiting the foregoing, Solectron will notify BNPLC before making any alterations to the Improvements which could materially reduce the market value of the Property or which change the general character of the Property or which impair in any significant manner the useful life or utility of any Improvements. Nothing in this subparagraph is intended to limit Solectron's rights and obligations under other provisions of this Lease with respect to the construction of the initial or any subsequent Construction Project permitted by other provisions of this Lease. (e) Compliance With Permitted Encumbrances and Development Contracts. Solectron shall comply with and will cause to be performed all of the covenants, agreements and obligations imposed upon the owner of any interest in the Property by the Permitted Encumbrances or the Development Contracts. Without limiting the foregoing, Solectron shall cause all amounts to be paid when due, the payment of which is secured by any Lien against the Property created by the Permitted Encumbrances. (f) Modification of Permitted Encumbrances and Development Contracts. Solectron shall not enter into, initiate, approve or consent to any modification of any Permitted Encumbrance or Development Contract that would create or expand or purport to create or expand obligations or restrictions which would encumber the Property without the prior consent of BNPLC. Whether BNPLC must give any such consent requested by Solectron during the term of this Lease shall be governed by subparagraph 7.(a). (g) Books and Records Concerning the Property. Solectron shall keep books and records that are accurate and complete in all material respects for the Property and will, subject to Paragraph 27, permit all such books and records (including 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 BNPLC. 13. ASSIGNMENT AND SUBLETTING BY SOLECTRON. (a) BNPLC's Consent Required. Without the prior consent of BNPLC, Solectron shall not assign, transfer, mortgage, pledge or hypothecate this Lease or any interest of Solectron hereunder and shall not sublet all or any part of the Property, by operation of law or otherwise; provided, that, so long as no Landlord's Election to Continue Construction has occurred and no Event of Default has occurred and is continuing, Solectron shall be entitled without the consent of BNPLC to (1) assign Solectron's rights under this Lease and the Purchase Agreement to an Affiliate of Solectron (including any Affiliate of Solectron that is the surviving entity after a merger permitted by subsection 3.04(a) of Schedule A attached to the Guaranty) pursuant to a written assignment unconditionally providing that the Affiliate assumes Solectron's obligations hereunder and thereunder and (unless Solectron has been merged into the Affiliate pursuant to a merger permitted by subsection 3.04(a) of Schedule A attached to the Guaranty) that Solectron ratifies and confirms for the benefit of BNPLC Solectron's responsibility and liability to BNPLC under this Lease and the Purchase Agreement, and (2) sublet all or any portion of the Property if: (i) any sublease by Solectron is made expressly subject and subordinate to the terms hereof; (ii) no sublease purports to grant the subtenant thereunder rights to use or occupy the Property after the expiration or termination of this Lease, other than rights expressly conditioned upon a purchase by Solectron of the Property pursuant to the Purchase Agreement; 34 41 (iii) the uses permitted by such sublease are limited to uses expressly permitted by subparagraph 3.(a) above; and (iv) less than forty-nine percent (49%) of any completed Improvements are at any time subleased by Solectron to anyone other than its own Affiliates. (b) Standard for BNPLC's Consent to Assignments and Certain Other Matters. Consents and approvals of BNPLC which are required by this Paragraph 13 will not be unreasonably withheld, but Solectron acknowledges that BNPLC's withholding of such consent or approval shall be reasonable if BNPLC determines in good faith that (1) giving the approval may materially increase BNPLC's risk of liability for any existing or future environmental problem, (2) giving the approval is likely to substantially increase BNPLC's administrative burden of complying with or monitoring Solectron's compliance with the requirements of this Lease, or (3) any transaction for which Solectron has requested the consent or approval would negate Solectron'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 BNPLC to a sale, assignment, transfer, mortgage, pledge or hypothecation of this Lease or Solectron's interest hereunder, and no assignment or subletting of the Property or any part thereof in accordance with this Lease or otherwise with BNPLC's consent, shall release Solectron from liability hereunder; and any such consent shall apply only to the specific transaction thereby authorized and shall not relieve Solectron from any requirement of obtaining the prior consent of BNPLC to any further sale, assignment, transfer, mortgage, pledge or hypothecation of this Lease or any interest of Solectron hereunder. 14. ASSIGNMENT BY BNPLC. (a) Restrictions on Transfers. Except by a Permitted Transfer, BNPLC shall not assign, transfer, mortgage, pledge, encumber or hypothecate this Lease or the Purchase Agreement or any interest of BNPLC in and to the Property during the Term without the prior consent of Solectron. (b) Effect of Permitted Transfer or other Assignment by BNPLC. If, without breaching subparagraph 14.(a), BNPLC sells or otherwise transfers the Property and assigns all of its rights under this Lease and the Purchase Agreement, and if BNPLC's successor in interest to all such rights assumes in writing for the benefit of Solectron BNPLC's obligations under this Lease and the Purchase Agreement on and subject to the express terms and conditions set out herein and therein, then BNPLC shall thereby be released from any obligations arising after such assumption under this Lease (other than any liability for a breach of the landlord's obligation to provide Construction Advances) or under the Purchase Agreement, and Solectron shall look solely to each successor in interest of BNPLC for performance of such obligations. 15. BNPLC'S RIGHT OF ACCESS. (a) BNPLC and BNPLC's representatives may enter the Property, after three Business Days advance notice to Solectron (except in the event of an emergency, when no advance notice will be required), for the purpose of performing any work BNPLC is authorized to undertake by the next subparagraph or for the purpose confirming whether Solectron has complied with the requirements of this Lease at any time BNPLC may reasonably question such compliance. So long as Solectron remains in possession of the Property, BNPLC or BNPLC's representative will, before making any such inspection or performing any such work on the Property, if then 35 42 requested to do so by Solectron to maintain security: (i) sign in at Solectron's security or information desk if Solectron has such a desk on the premises, (ii) wear a visitor's badge or other reasonable identification provided by Solectron when BNPLC or BNPLC's representative first arrives at the Property, (iii) permit an employee of Solectron to observe such inspection or work, and (iv) comply with other similar reasonable nondiscriminatory security, health or safety requirements of Solectron, as Solectron may establish from time to time in accordance with good industry practices, provided that such other requirements do not, individually or in the aggregate, substantially interfere with or delay inspections or work of BNPLC authorized by this Lease. (b) If Solectron fails to perform any act or to take any action which hereunder Solectron is required to perform or take, or to pay any money which hereunder Solectron is required to pay, and if such failure or action constitutes an Event of Default or causes BNPLC or any director, officer, employee or Affiliate of BNPLC to be overtly threatened with criminal prosecution or renders BNPLC's interest in the 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, BNPLC may, perform or cause to be performed such act or take such action or pay such money. Any expenses so incurred by BNPLC, and any money so paid by BNPLC, shall be a demand obligation owing by Solectron to BNPLC. Further, BNPLC, 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 BNPLC to do any work which under any provision of this Lease Solectron may be required to perform, and the performance thereof by BNPLC shall not constitute a waiver of Solectron's default. BNPLC may during the progress of any such work permitted by BNPLC hereunder on or in the Property keep and store upon the Property all necessary materials, tools, and equipment. BNPLC shall not in any event be liable for inconvenience, annoyance, disturbance, loss of business, or other damage to Solectron or the subtenants of Solectron by reason of making such repairs or the performance of any such work on or in the Property, or on account of bringing materials, supplies and equipment into or through the 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 [and attributed by any applicable principles of comparative fault to] the Established Misconduct of BNPLC), and the obligations of Solectron under this Lease shall not thereby be excused in any manner. 16. OTHER REPRESENTATIONS, WARRANTIES AND COVENANTS OF SOLECTRON. Solectron represents, warrants and covenants as follows: (a) Negative Covenants. Without the prior written consent of BNPLC in each case, neither Solectron nor any of its Affiliates shall: (i) Multi employer ERISA Plans. Incur or permit any Affiliate to incur any obligation to contribute to any "Multi employer plan" as defined in Section 4001 of ERISA. (ii) Prohibited ERISA Transaction. Enter into any transaction which would cause this Lease, the Purchase Agreement, the Closing Certificate or any other document executed in connection herewith (or any exercise of BNPLC's rights hereunder or thereunder) to constitute a non-exempt prohibited transaction under ERISA. (b) Financial Statements; Required Notices; Certificates as to Default. To the extent not so delivered by Guarantor, Solectron shall deliver to BNPLC and to each Participant of which Solectron has been notified: 36 43 (i) copies of all financial statements, certificates, notices and other information that Guarantor is required to provide by Part 2 of Schedule A attached to the Guaranty prior to the deadlines for delivery established thereunder; (ii) together with the annual and quarterly financial statements furnished in accordance with subparagraph 16.(b)(i), a certificate of a Responsible Financial Officer of Guarantor in the form attached hereto as Exhibit J certifying (a) that no Event of Default or material Default by Solectron has occurred and is continuing (or, if an Event of Default or material Default by Solectron has occurred, stating the nature thereof and the action which Solectron proposes to take with respect thereto), (b) that the representations and warranties by Guarantor and Solectron contained in the provisions referenced in Exhibit J from this Lease, the Closing Certificate, the Purchase Agreement and the Guaranty are true and correct in all material respects on and as of the date of such certificate as though made on and as of such date, or, if not then true and correct, a brief statement as to why such representations are no longer true and correct, and (c) the accuracy of computations attached thereto demonstrating compliance by Guarantor with the financial covenants established in Schedule A attached to the Guaranty; (iii) as soon as possible and in any event within five days after the occurrence of each Event of Default or material Default known to a Responsible Financial Officer of Guarantor, a statement setting forth details of such Event of Default or material Default and the action which Solectron has taken and proposes to take with respect thereto; (iv) as soon as practicable and in any event within thirty days after a Responsible Financial Officer of Solectron knows or has reason to know that any ERISA Termination Event with respect to any Plan has occurred, a statement of a Responsible Financial Officer of Solectron describing such ERISA Termination Event and the action, if any, which Solectron proposes to take with respect thereto; (v) upon request by BNPLC, a statement by Solectron and Guarantor in writing certifying that this Lease and the Guaranty are unmodified and in full effect (or, if there have been modifications, that this Lease and the Guaranty are in full effect as modified, and setting forth such modifications) and the dates to which the Base Rent, Commitment Fees and Administrative Agency Fees have been paid and either stating that no default exists hereunder or specifying each such default; it being intended that any such statement may be relied upon by any prospective purchaser or mortgagee of the Property or any prospective Participant; (vi) promptly after any change in the rating of the Index Debt of Guarantor by S&P or Moody's, which will result in a change in the Spread (as defined in the List of Defined Terms), a certificate of a Responsible Financial Officer of Guarantor advising BNPLC of the ratings after the change; and (vii) such other information respecting the condition or operations, financial or otherwise, of Solectron, of its Affiliates or of the Property as BNPLC or any Participant may from time to time reasonably request. BNPLC is hereby authorized to deliver a copy of any information or certificate delivered to it pursuant to this subparagraph 16.(b) to any Participant and to any regulatory body having jurisdiction over BNPLC, BNPLC's Parent or any other Participant that requires or requests it. 37 44 (c) No Default or Violation. The execution, delivery and performance by Solectron of this Lease do not and will not constitute a breach or default under any other material agreement or contract to which Solectron is a party or by which Solectron is bound or which affects the Property, and do not violate or contravene any law, order, decree, rule or regulation to which Solectron is subject, and such execution, delivery and performance by Solectron 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, Solectron's property pursuant to the provisions of any of the foregoing. (d) No Suits. Except as disclosed in Schedule 2, there are no judicial or administrative actions, suits, proceedings or investigations pending or, to Solectron's knowledge, threatened that will adversely affect the Property or the validity, enforceability or priority of this Lease, and Solectron 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 use, occupancy or operation of the Property. No condemnation or other like proceedings are pending or, to Solectron's knowledge, threatened against the Property. (e) Enforceability. The execution, delivery and performance by Solectron of this Lease and the Purchase Agreement 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 Solectron's articles of incorporation or bylaws. This Lease and the Purchase Agreement are valid, binding and legally enforceable obligations of Solectron in accordance with its 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. (f) Financial Matters. Solectron is not "insolvent" on the date hereof (that is, the sum of Solectron's absolute and contingent liabilities, including the obligations of Solectron under this Lease, does not exceed the fair market value of Solectron's assets) and has no outstanding liens, suits, garnishments or court actions which could render Solectron insolvent or bankrupt. Solectron's capital is adequate for the businesses in which Solectron is engaged and intends to be engaged. Solectron has not incurred (whether hereby or otherwise), nor does Solectron intend to incur or believe that it will incur, debts which will be beyond its ability to pay as such debts mature. There has not been filed by or, to Solectron's knowledge, against Solectron 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 Solectron or any significant portion of Solectron'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 BNPLC relating to Solectron are true, correct and complete in all material respects. (g) Organization. Solectron is duly incorporated and legally existing under the laws of the State of California and is duly qualified to do business in the State of Washington. Solectron 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 fulfill its obligations under this Lease. Solectron has the corporate power and adequate authority, rights and franchises to own Solectron's property and to carry on Solectron's business as now conducted and is duly qualified and in good standing in each state in which the character of Solectron's business makes such qualification necessary or, if it is not so qualified in a state other than Washington, such failure does not have a material adverse effect on the properties, assets, operations or businesses of Solectron and its Subsidiaries, taken as a whole. 38 45 (h) ERISA. Solectron is not and will not become an "employee benefit plan" (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA. The assets of Solectron do not and will not in the future constitute "plan assets" of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101. Solectron is not and will not become a "governmental plan" within the meaning of Section 3(32) of ERISA. Transactions by or with Solectron are not subject to state statutes regulating investments of and fiduciary obligations with respect to governmental plans. No ERISA Termination Event has occurred with respect to any Plan of Solectron and Solectron and all its Affiliates are in compliance with ERISA. Neither Solectron nor any of its Affiliates is required to contribute to, or has any other absolute or contingent liability in respect of, any "Multi employer plan" as defined in Section 4001 of ERISA. As of the Effective Date no "accumulated funding deficiency" (as defined in Section 412(a) of the Code) exists with respect to any Plan of Solectron, whether or not waived by the Secretary of the Treasury or his delegate, and the current value of the benefits of each Plan of Solectron, if any, equals or is less than the current value of such Plan's assets available for the payment of such benefits. (i) Use of Proceeds. In no event shall the funds from the Initial Funding Advance or any Construction Advance be used (nor have they been used) directly or indirectly for personal, family, household or agricultural purposes or for the purpose, whether immediate, incidental or ultimate, of purchasing, acquiring or carrying any "margin stock" or any "margin securities" (as such terms are defined respectively in Regulation U and Regulation G promulgated by the Board of Governors of the Federal Reserve System) or to extend credit to others directly or indirectly for the purpose of purchasing or carrying any such margin stock or margin securities. Solectron represents and warrants that Solectron is not engaged principally, or as one of Solectron's important activities, in the business of extending credit to others for the purpose of purchasing or carrying such margin stock or margin securities. (j) Investment Company Act. Solectron is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (k) Omissions. None of Solectron's representations or warranties contained in this Lease or in any other document, certificate or written statement furnished to BNPLC by or on behalf of Solectron in connection with this Lease 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) Not a Foreign Person. Solectron is not a "foreign person" within the meaning of Sections 1445 and 7701 of the Code (i.e. Solectron 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). (m) Further Assurances. Solectron shall, upon request of BNPLC, (i) promptly correct any 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 any renewals, additions, substitutions, replacements or appurtenances to the Property; (iii) execute, acknowledge, deliver, procure and record or file any document or instrument deemed advisable by BNPLC to protect its rights in and to the 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 BNPLC to enable BNPLC, BNPLC's Parent 39 46 and any other Participants to comply with the requirements or requests of any agency or authority having jurisdiction over them. 17. EVENTS OF DEFAULT. (a) Definition of Events of Default. Each of the following events shall be deemed to be an "EVENT OF DEFAULT" by Solectron under this Lease: (i) Solectron shall fail to pay when first due any Base Rent, any Commitment Fees or any Administrative Agency Fees and such failure shall continue for three Business Days after Solectron is notified thereof by BNPLC pursuant to a notice that specifically references this Paragraph 17.(a). (ii) Solectron shall fail to pay when first due any Rent other than Base Rent, Commitment Fees or Administrative Agency Fees, or Solectron shall fail to pay when first due any amount required by the Closing Certificate, and in either case such failure shall continue for thirty days after Solectron is notified thereof by BNPLC pursuant to a notice that specifically references this Paragraph 17.(a). (iii) Solectron shall fail to comply with any term, provision or covenant of this Lease or the Closing Certificate, other than as described in the other clauses of this subparagraph 17.(a), and shall not cure such failure prior to the earlier of (A) thirty days after notice thereof is sent to Solectron, or (B) the date any writ or order is issued for the levy or sale of any property owned by BNPLC (including the Property) because of such failure or any criminal action is overtly threatened or instituted against BNPLC 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 overtly threatened or instituted, the period within which such failure may be cured by Solectron shall be extended for a further period (not to exceed an additional one hundred twenty days) as shall be necessary for the curing thereof with diligence, if (but only if) (x) such failure is susceptible of cure but cannot with reasonable diligence be cured within such thirty day period, (y) Solectron shall promptly have commenced to cure such failure and shall thereafter continuously prosecute the curing thereof with reasonable diligence and (z) the extension of the period for cure will not, in the case of such a failure that occurs or commences more than thirty-five days prior to the expiration of this Lease, cause the period for cure to extend beyond five days prior to the expiration of this Lease. (iv) Solectron shall fail to comply with any term, provision or condition of the Purchase Agreement and, if the Purchase Agreement expressly provide a time within which Solectron may cure such failure, Solectron shall not cure the failure within such time. (v) Solectron shall abandon the Property. (vi) Guarantor, Solectron or any of Guarantor's other Subsidiaries shall: (1) be in default with respect to any payment (whether of principal or interest and regardless of amount) in respect of any "Material Indebtedness" (which as used in this provision shall mean any Debt of Guarantor or its applicable Subsidiary [as the case may be] that is owed to BNPLC or BNPLC's Affiliates or that is outstanding in a principal amount of at least $10,000,000 in the aggregate), and such default shall continue beyond the applicable grace period, if any, specified in the agreements or instruments relating to such Material Indebtedness; or (2) be in default under any agreement or instrument relating to any Material Indebtedness 40 47 and as a result of such default, the Material Indebtedness shall be declared to be due and payable prior to the stated maturity thereof. (vii) Guarantor, Solectron or any of Guarantor's other 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 Guarantor, Solectron or any of Guarantor's other 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 seeking the entry of an order for 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 sixty consecutive days, or any of the actions sought in such proceeding (including 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 Guarantor, Solectron or any of Guarantor's other Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this clause 17.(a)(vii). (viii) Any order, judgment or decree is entered in any proceedings against Guarantor, Solectron or any of Guarantor's other Subsidiaries decreeing its dissolution and such order, judgment or decree remains unstayed and in effect for more than sixty days. (ix) Any order, judgment or decree is entered in any proceedings against Guarantor decreeing a divestiture of any of its assets that represent a substantial part, or the divestiture of the stock of Solectron or any of Guarantor's other Subsidiaries whose assets represent a substantial part, of the total assets of Guarantor and its Subsidiaries (determined on a consolidated basis in accordance with GAAP) or which requires the divestiture of assets, or stock of any of Guarantor's Subsidiaries, which shall have contributed a substantial part of the net income of Guarantor and its Subsidiaries (determined on a consolidated basis 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 days. (x) A final judgment or order for the payment of money in an amount (not covered by insurance) which exceeds $10,000,000 shall be rendered against Guarantor, Solectron or any of Guarantor's other Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment, or (ii) within sixty days after the entry thereof, such judgment or order is not discharged or execution thereof stayed pending appeal, or within thirty days after the expiration of any such stay, such judgment is not discharged. (xi) Any ERISA Termination Event that BNPLC determines in good faith would constitute grounds for a termination of any Plan of Solectron or for the appointment by the appropriate United States district court of a trustee to administer any Plan of Solectron shall have occurred and be continuing thirty days after notice to such effect shall have been given to Solectron by BNPLC, or any Plan of Solectron shall be terminated, or a trustee shall be appointed by an appropriate United States district court to administer any Plan of Solectron, or the Pension Benefit Guaranty Corporation shall institute proceedings to terminate any Plan of Solectron or to appoint a trustee to administer any Plan of Solectron. 41 48 (xii) Solectron or any of its Affiliates shall enter into any transaction which would cause this Lease, the Purchase Agreement or any other document executed in connection herewith (or any exercise of BNPLC's rights hereunder or thereunder) to constitute a non-exempt prohibited transaction under ERISA. (xiii) Guarantor shall breach or repudiate its guarantee of the obligations of Solectron under this Lease, the Purchase Agreement or the Closing Certificate or Guarantor shall fail to comply with any other covenants of Guarantor in the Guaranty including the obligations of Guarantor set forth Section 10 of the Guaranty. (xiv) Any breach by Solectron of subparagraph 16.(b)(iii) resulting from Solectron's failure to notify BNPLC of a material Default known to a Responsible Financial Officer. (xv) Any representation of Solectron contained herein, in the Closing Certificate or in the Purchase Agreement is false or misleading in any material respect, or any certificate delivered to BNPLC by or on behalf of Solectron as required by this Lease is false or misleading in any material respect. (xvi) Any representation of Guarantor contained in the Guaranty is false or misleading in any material respect, or any certificate, if any, delivered to BNPLC by or on behalf of Guarantor as may be required by the Guaranty is false or misleading in any material respect. 18. REMEDIES. (a) Basic Remedies. At any time when an Event of Default has occurred and is continuing, BNPLC may notify Solectron that BNPLC intends after the expiration of sixty days to exercise remedies provided in this subparagraph 18.(a). At any time more than sixty days after BNPLC has given such a notice to Solectron, and regardless of whether any Event of Default continues throughout or after such sixty days, BNPLC shall be entitled at BNPLC's option and without limiting BNPLC in the exercise of any other right or remedy BNPLC may have, and without any further demand or notice except as expressly described in this subparagraph 18.(a), to exercise the following remedies: (i) By notice to Solectron, BNPLC may terminate Solectron's right to possession of the Property. A notice given in connection with unlawful detainer proceedings specifying a time within which to cure a default shall terminate Solectron's right to possession if Solectron fails to cure the default within the time specified in the notice. (ii) Upon termination of Solectron's right to possession and without further demand or notice, BNPLC may re-enter the Property in any manner not prohibited by Applicable Law and take possession of all improvements, additions, alterations, equipment and fixtures thereon and remove any persons in possession thereof. Any property on the Land or in the Improvements may be removed and stored in a warehouse or elsewhere at the expense and risk of and for the account of Solectron. (iii) Upon termination of Solectron's right to possession, this Lease shall terminate and BNPLC may recover from Solectron: a) The worth at the time of award of the unpaid Rent which had been earned at the time of termination; 42 49 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 Solectron 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 Solectron proves could be reasonably avoided; and d) Any other amount necessary to compensate BNPLC for all the detriment proximately caused by Solectron's failure to perform Solectron'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 Property, removing persons or property therefrom, placing the Property in good order, condition, and repair, preparing and altering the Property for reletting, all other costs and expenses of reletting, and any loss incurred by BNPLC as a result of Solectron's failure to perform Solectron's obligations under the Purchase Agreement. The "WORTH AT THE TIME OF AWARD" of the amounts referred to in subparagraph 18.(a)(iii)a) and subparagraph 18.(a)(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 Washington law at the time of computation. The "WORTH AT THE TIME OF AWARD" of the amount referred to in subparagraph 18.(a)(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 Washington law. (iv) Even if Solectron breaches this Lease and abandons the Property, this Lease shall continue in effect for so long as BNPLC does not terminate Solectron's right to possession, and BNPLC may enforce all of BNPLC's rights and remedies under this Lease, including the right to recover the Rent as it becomes due under this Lease. Solectron's right to possession shall not be deemed to have been terminated by BNPLC except pursuant to subparagraph 18.(a)(i) hereof. The following shall not constitute a termination of Solectron's right to possession: a) Acts of maintenance or preservation or efforts to relet the Property; b) The appointment of a receiver upon the initiative of BNPLC to protect BNPLC's interest under this Lease; or c) Reasonable withholding of consent to an assignment or subletting, or terminating a subletting or assignment by Solectron. (b) Enforceability. This Paragraph 18 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. 43 50 (c) Remedies Cumulative. No right or remedy herein conferred upon or reserved to BNPLC 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; however, before exercising any right or remedy available under Applicable Law or in equity to evict Solectron from the Property or to terminate Solectron's right of occupancy hereunder, BNPLC shall give Solectron at least sixty days notice as contemplated in the first sentence of subparagraph 18.(a). In addition to other remedies provided in this Lease, BNPLC shall be entitled, to the extent permitted by Applicable Law or in equity, 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, or to a decree compelling performance of any of the other covenants, agreements, conditions or provisions of this Lease to be performed by Solectron, or to any other remedy allowed to BNPLC at law or in equity. Nothing contained in this Lease shall limit or prejudice the right of BNPLC to prove for and obtain in proceedings for bankruptcy or insolvency of Solectron 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 BNPLC under the Purchase Agreement, and BNPLC shall not be required to give the sixty day notice described in subparagraph 18.(a) as a condition to any acceleration of the Designated Sale Date or to taking any action to enforce the Purchase Agreement or the Closing Certificate. 19. DEFAULT BY BNPLC. If BNPLC should default in the performance of any of its obligations under this Lease, BNPLC shall have the time reasonably required, but in no event less than thirty days, to cure such default after receipt of notice from Solectron specifying such default and specifying what action Solectron believes is necessary to cure the default. If Solectron prevails in any litigation brought against BNPLC because of BNPLC's failure to cure a default within the time required by the preceding sentence, then Solectron shall be entitled to an award against BNPLC for the monetary damages proximately caused to Solectron by such default. Notwithstanding the foregoing, BNPLC's right to cure as provided in this Paragraph 19 will not in any event extend the time within which BNPLC must remove Liens Removable by BNPLC as required by Paragraph 20 beyond the Designated Sale Date. 20. QUIET ENJOYMENT. Provided Solectron pays the Base Rent and all Additional Rent payable hereunder as and when due and payable and keeps and fulfills all of the terms, covenants, agreements and conditions to be performed by Solectron hereunder, BNPLC shall not during the Term disturb Solectron's peaceable and quiet enjoyment of the Property; however, such enjoyment shall be subject to the terms, provisions, covenants, agreements and conditions of this Lease, to Permitted Encumbrances, to Development Documents and to any other claims not constituting Liens Removable by BNPLC. If any Lien Removable by BNPLC is claimed against the Property, including any judgment lien securing a Deductible Judgment against BNPLC, BNPLC will remove the Lien Removable by BNPLC promptly. However, BNPLC shall not be responsible for any Lien that is expressly excluded from the definition of Liens Removable by BNPLC in the attached List of Defined Terms. Any breach by BNPLC of this Paragraph shall render BNPLC liable to Solectron for any monetary damages proximately caused thereby, but as more specifically provided in Paragraph 2 above, no such breach shall entitle Solectron to terminate this Lease or excuse Solectron from its obligation to pay Base Rent and other amounts hereunder. 21. SURRENDER UPON TERMINATION. Unless Solectron or an Applicable Purchaser purchases BNPLC's entire interest in the Property pursuant to the terms of the Purchase Agreement, Solectron shall, upon 44 51 the termination of Solectron's right to occupancy, surrender to BNPLC the Property, including any buildings, alterations, improvements, replacements or additions constructed by Solectron, with all fixtures and furnishings included in the 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 BNPLC, with all Improvements in substantially the same condition as of the date the same were initially completed, excepting only (i) ordinary wear and tear that occurs between the maintenance, repairs and replacements required by other provisions of this Lease, and (ii) alterations and additions which are expressly permitted by the terms of this Lease and which have been completed by Solectron in a good and workmanlike manner in accordance with all Applicable Laws. Any movable furniture or movable personal property belonging to Solectron or any party claiming under Solectron, if not removed at the time of such termination and if BNPLC shall so elect, shall be deemed abandoned and become the property of BNPLC without any payment or offset therefor. If BNPLC shall not so elect, BNPLC may remove such property from the Property and store it at Solectron's risk and expense. Solectron shall bear the expense of repairing any damage to the Property caused by such removal by BNPLC or Solectron. 22. HOLDING OVER BY SOLECTRON. Should Solectron not purchase BNPLC's right, title and interest in the Property as provided in the Purchase Agreement, but nonetheless continue to hold the Property after the termination of this Lease without BNPLC's 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) Stipulated Loss Value on the day in question, times (ii) (A) the Prime Rate in effect for such day so long as the holdover period does not extend beyond ninety days and (B) for each such day beginning with the ninety-first day after the holdover commences, two percent (2%) above the Prime Rate; divided by (iii) three hundred and sixty; subject, however, to all of the terms, provisions, covenants and agreements on the part of Solectron hereunder. No payments of money by Solectron to BNPLC 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 BNPLC and Solectron. 23. INDEPENDENT OBLIGATIONS EVIDENCED BY THE PURCHASE AGREEMENT AND CLOSING CERTIFICATE. Solectron acknowledges and agrees that nothing contained in this Lease shall limit, modify or otherwise affect any of Solectron's obligations under the Purchase Agreement or the Closing Certificate, which obligations are intended to be separate, independent and in addition to, and not in lieu of, the obligations set forth herein. In the event of any inconsistency between the terms and provisions of the Purchase Agreement and the terms and provisions of this Lease, the terms and provisions of the Purchase Agreement shall control. In the event of any inconsistency between the terms and provisions of the Closing Certificate and the terms and provisions of this Lease, the terms and provisions of this Lease shall control; provided, nothing in this Lease shall be construed to limit or impair the indemnities provided by Solectron in the Closing Certificate, including the indemnity therein provided against Environmental Losses. 24. WAIVER OF JURY TRIAL. BNPLC AND SOLECTRON 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 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 contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Solectron 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 Lease and the other documents referred to herein, and that each will continue to rely on the waiver in their related future dealings. Solectron and BNPLC 45 52 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 PROPERTY. In the event of litigation, this Lease may be filed as a written consent to a trial by the court. 25. 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 demand hereunder or with reference to the making of any payment required hereunder, shall be deemed to be complied with when and if the following steps are taken: (i) All Rent required to be paid by Solectron to BNPLC hereunder shall be paid to BNPLC in immediately available funds by wire transfer to: Federal Reserve Bank of New York ABA 026007689 Banque Nationale de Paris /BNP/ BNP San Francisco /AC/ 14334000176 /Ref/ Solectron (Solectron Washington Synthetic Lease) or at such other place and in such other manner as BNPLC may designate in a notice to Solectron. (ii) All advances paid to Solectron by BNPLC hereunder or in connection herewith shall be paid to Solectron in immediately available funds by wire transfer to: Seafirst Bank 800 Fifth Ave. Seattle, WA 98124 Account Name: Solectron Washington General Account Account No.: 67539213 ABA: 125000024 Reference: Washington Synthetic Lease or at such other place and in such other manner as Solectron may designate in a notice signed by Solectron's Treasurer or Chief Financial Officer to BNPLC. (iii) All notices, demands, approvals, consents and other communications to be made hereunder to or by the parties hereto must, to be effective for purpose of this Lease, be in writing. Notices, demands and other communications required or permitted hereunder are to be sent to the addresses set forth below (or in the case of communications to Participants, at the addresses set forth in Schedule 1 to 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 46 53 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 G. Cox Telecopy: (214) 969-0060 With a copy to: Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Rafael Lumanlan or Stuart Darby 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 Solectron: Solectron Washington, Inc. 777 Gibraltar Drive, Building #5 Milpitas, CA 95035 Attn: Chief Financial Officer Telecopy: (408) 956-6059 47 54 With a copy to: Wilson, Sonsini, Goodrich & Rosati 650 Page Mill Palo Alto, California 94304-1050 Attention: Real Estate Department/DSS Telecopy: (415) 493-6811 (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 created hereby created with any other interest in the Property by reason of the fact that the same person may acquire or hold, directly or indirectly, this Lease or the leasehold estate created hereby and any other interest in the Property, unless all Persons with an interest in the Property that would be adversely affected by any such merger specifically agree in writing that such a merger shall occur. (d) No Implied Waiver. The failure of BNPLC or Solectron 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 breach of 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 BNPLC 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 of any provision of this Lease shall be deemed to have been made unless expressed in writing and signed by the waiving party. (e) NO IMPLIED REPRESENTATIONS BY BNPLC. BNPLC AND BNPLC'S AGENTS HAVE MADE NO REPRESENTATIONS OR PROMISES WITH RESPECT TO THE PROPERTY EXCEPT AS EXPRESSLY SET FORTH HEREIN AND IN THE PURCHASE AGREEMENT, AND NO RIGHTS, EASEMENTS OR LICENSES ARE ACQUIRED BY SOLECTRON BY IMPLICATION OR OTHERWISE EXCEPT AS EXPRESSLY SET FORTH IN THIS LEASE AND THE PURCHASE AGREEMENT. (f) Entire Agreement. This Lease, the Purchase Agreement, the Closing Certificate, and the other documents dated as of the Effective Date which are being executed by Solectron and executed or accepted by BNPLC contemporaneously with the execution of this Lease supersede any prior negotiations and agreements between BNPLC and Solectron concerning the Property, and no amendment or modification of this Lease shall be binding or valid unless expressed in a writing executed by both parties hereto. (g) 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. 48 55 (h) Time is of the Essence. Time is of the essence as to all obligations of Solectron and BNPLC and all notices required of Solectron and BNPLC under this Lease. (i) Governing Law. This Lease shall be governed by and construed in accordance with the laws of the State of Washington without regard to conflict or choice of laws. (j) Paragraph Headings. The paragraph headings contained in this Lease are for convenience only and shall in no way enlarge or limit the scope or meaning of the various and several paragraphs hereof. (k) 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 BNPLC is a party or of which BNPLC is an intended beneficiary, without the consent of BNPLC. All accounting terms used but not specifically defined herein shall be construed in accordance with GAAP. The words "this Lease", "herein", "hereof", "hereby", "hereunder" and words of similar import when used in this Lease 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 used herein refer only to the Paragraphs or subparagraphs in which the phrase occurs. As used herein the word "or" is not exclusive. As used herein the words "include", "including" and similar terms shall be construed as if followed by "without limitation to". (l) Not a Partnership, Etc. NOTHING IN THIS LEASE IS INTENDED TO BE OR TO CREATE ANY PARTNERSHIP, JOINT VENTURE, OR OTHER JOINT ENTERPRISE BETWEEN BNPLC AND SOLECTRON. NEITHER THE EXECUTION OF THIS LEASE NOR THE ADMINISTRATION OF THIS LEASE OR OTHER DOCUMENTS REFERENCED HEREIN BY BNPLC, NOR ANY OTHER RIGHT, DUTY OR OBLIGATION OF BNPLC UNDER OR PURSUANT TO THIS LEASE OR SUCH DOCUMENTS IS INTENDED TO BE OR TO CREATE ANY FIDUCIARY OBLIGATIONS OF BNPLC TO SOLECTRON. 26. INCOME TAX REPORTING. BNPLC and Solectron intend this Lease and the Purchase Agreement to have a form for income taxes which is different than the form of this Lease and the Purchase Agreement for other purposes, and thus the parties acknowledge and agree as follows: a) FOR PURPOSES OF DETERMINING THEIR RESPECTIVE FEDERAL, STATE AND LOCAL INCOME TAX OBLIGATIONS, BNPLC and Solectron believe and intend that this Lease and the Purchase Agreement constitute a financing arrangement or conditional sale. Both BNPLC and Solectron agree to report this Lease and the Purchase Agreement as a financing arrangement or conditional sale on their respective income tax returns (the "REQUIRED REPORTING"), unless such Required Reporting is challenged in writing by the Internal Revenue Service or another governmental authority with jurisdiction (a "TAX CHALLENGE"). Consistent with the foregoing, BNPLC and Solectron expect that Solectron (and not BNPLC) shall be treated as the true owner of the Property for income tax purposes, thereby entitling Solectron (and not BNPLC) to take depreciation deductions and other 49 56 tax benefits available to the owner. Solectron shall also report all interest earned on Escrowed Proceeds as Solectron's income for federal, state and local income tax purposes. REFERENCES IN THIS LEASE OR IN THE PURCHASE AGREEMENT TO A "LEASE" OR TO "LEASED PROPERTY" ARE NOT INTENDED FOR INCOME TAX PURPOSES TO REFLECT THE INTENT OF BNPLC OR SOLECTRON AS TO THE FORM OF THE TRANSACTIONS COVERED BY, OR THE PROPER CHARACTERIZATION OF, THIS LEASE AND THE PURCHASE AGREEMENT. b) FOR ALL OTHER PURPOSES, INCLUDING THE DETERMINATION OF THE APPROPRIATE FINANCIAL ACCOUNTING FOR THIS LEASE AND THE DETERMINATION OF THEIR RESPECTIVE RIGHTS AND REMEDIES UNDER STATE LAW, BNPLC and Solectron believe and intend that (i) this Lease constitutes a true Lease, not a mere financing arrangement, enforceable in accordance with its express terms (and neither this subparagraph 26 nor the provisions referencing this subparagraph on the title page of this Lease nor the corresponding provisions in the Purchase Agreement are intended to affect the enforcement of any other provisions of this Lease or the Purchase Agreement) and (ii) the Purchase Agreement shall constitute a separate and independent contract, enforceable in accordance with the express terms and conditions set forth therein. In this regard, Solectron acknowledges that Solectron asked BNPLC to participate in the transactions evidenced by this Lease and the Purchase Agreement as a landlord and owner of the Property, not as a lender. Although other transactions might have been used to accomplish similar results, Solectron expects to receive certain material accounting and other advantages through the use of a lease transaction. Accordingly, and notwithstanding the Required Reporting for income tax purposes, Solectron cannot equitably deny that this Lease and the Purchase Agreement should be construed and enforced in accordance with their respective terms, rather than as a mortgage or other security device, in any action brought by BNPLC to enforce this Lease or the Purchase Agreement. In the event of a Tax Challenge, BNPLC and Solectron shall each provide to the other copies of all notices from the Internal Revenue Service or any other governmental authority presenting the Tax Challenge. Further, before changing from the Required Reporting because of a Tax Challenge, BNPLC and Solectron shall each consider in good faith any reasonable suggestions received from the other party to this Lease about an appropriate response to the Tax Challenge; provided, however, that the suggestions are set forth in a written notice delivered no later than thirty Business Days after the suggesting party is first notified of the Tax Challenge; and, provided further, that when presented with a Tax Challenge, BNPLC and Solectron shall each have the right to change from the Required Reporting rather than participate in any litigation or other legal proceeding against the Internal Revenue Service or another governmental authority. In any event, Solectron must indemnify and hold harmless BNPLC from and against all liabilities, costs, additional taxes and other expenses that may arise or become due because of any challenge to the Required Reporting or because of any resulting recharacterization of this Lease or the Purchase Agreement required by the Internal Revenue Service or another governmental authority, including any additional taxes that may become due upon any sale under the Purchase Agreement, to the extent (if any) that such liabilities, costs, additional taxes and other expenses are not offset by tax savings resulting from additional depreciation deductions or other tax benefits to BNPLC of the recharacterization. 27. PROPRIETARY INFORMATION AND CONFIDENTIALITY. Solectron shall have no obligation to provide proprietary information (as defined in the next sentence) to BNPLC, except and to the extent that (1) BNPLC reasonably determines that BNPLC cannot accomplish the purposes of BNPLC's inspection of the Property pursuant to the various provisions hereof without evaluating such information, and (2) before conducting any inspections of the Property permitted hereunder BNPLC shall, if requested by Solectron, confirm and ratify the 50 57 confidentiality agreements covering such proprietary information set forth in subparagraph 7.(f). For purposes of this Lease "PROPRIETARY INFORMATION" means Solectron's intellectual property, trade secrets and other confidential information of value to Solectron about, among other things, Solectron's products, marketing and corporate strategies, but in no event will "proprietary information" include any disclosure of substances and materials (and their chemical composition) which are or previously have been present in, on or under the Property at the time of any inspections by BNPLC, nor will "proprietary information" include any additional disclosures reasonably required to permit BNPLC to determine whether the presence of such substances and materials has constituted a violation of Environmental Laws or this Lease. In addition, under no circumstances shall Solectron have any obligation to disclose to BNPLC or any other party any proprietary information of Solectron (including, without limitation, any pending applications for patents or trademarks, any research and design and any trade secrets) except if and to the limited extent reasonably necessary to comply with the express provisions of this Lease. [The signature pages follow.] 51 58 IN WITNESS WHEREOF, Solectron and BNPLC have caused this Amended and Restated Lease Agreement to be executed as of July 1, 1998. "SOLECTRON" SOLECTRON WASHINGTON, INC. By: /s/ LOUIS F. BIECK ----------------------------------- Name (print): Louis F. Bieck Title: Vice President 59 [Continuation of signature pages to Amended and Restated Lease Agreement dated to be effective July 1, 1998] "BNPLC" BNP LEASING CORPORATION By: /s/ LLOYD G. COX ------------------------------------ Lloyd G. Cox, Vice President 60 Exhibit A LEGAL DESCRIPTION All that certain real property situate in the City of Everett, County of Snohomish, State of Washington, being a portion of the Southwest quarter of Section 2, and a portion of the Southeast quarter of Section 3, all in Township 28 North, Range 4 East, W.M., and also being a portion of Lot 2 Binding Site Plan/Record of Survey recorded under Snohomish County Recording Number 8910255010, and being more particularly described as follows: BEGINNING at the quarter corner common to said Sections 2 and 3; thence from said point of beginning along the East-West centerline of said Section 2, South 88(Degree) 10'56" East 1192.73 feet; thence leaving said East-West centerline South 01(Degree) 49'04" West 347.51 feet; thence South 26(Degree) 07'32" East 208.83 feet; thence South 12(Degree) 56'43" East 395.73 feet to the Northerly right of way line of Merrill Creek Parkway as deeded to the City of Everett under Snohomish County Recording Number 8801270201, Snohomish County records; thence along said right of way line of Merrill Creek Parkway from a tangent that bears South 77(Degree) 03'17" West, along the arc of a curve to the left having a radius of 630.00 feet and a central angle of 37(Degree) 00'43", an arc length of 406.97 feet; thence leaving said right of way line North 79(Degree) 36'24" West 1190.79 feet to the Easterly boundary of the Binding Site Plan/Record of Survey entitled Seaway Center Two/Intermec recorded under Snohomish County Recording Number 8910255009; thence along said Easterly boundary North 00(Degree) 50'18" East 955.72 feet to the East-West centerline of said Section 3; thence along said East-West centerline South 88(Degree) 33'31" East 136.77 feet to the point of beginning; (ALSO KNOWN AS Lot 2F of Binding Site Plan/Record of Survey Seaway Center Five as recorded under Snohomish County Recording Number 9204015001); TOGETHER WITH a non-exclusive driveway and access easement as set forth in document entitled Driveway and Assess Easement Agreement recorded under Snohomish County Recording Number 9711050088. Situated in the County of Snohomish, State of Washington 61 Exhibit B PERMITTED ENCUMBRANCES This conveyance is subject to the following matters, but only to the extent the same are still valid and in full force and effect: - - Liens securing TAXES AND ASSESSMENTS, not yet due and payable. - - EASEMENT AND THE TERMS AND CONDITIONS THEREOF: GRANTEE: Public Utility District No. 1 of Snohomish County PURPOSE: Underground/overhead electric distribution system AREA AFFECTED: Ten foot wide strips adjacent to right of way known as Merrill Creek Parkway as conveyed to the City of Everett by deed recorded under Snohomish County Recording Number 8801270201; and the North boundary of Seaway Blvd., TOGETHER WITH the right to extend and establish switch cabinets, transformers, pedestals and other appurtenances beyond said easement area onto adjacent property of the grantor RECORDED: July 26, 1988 RECORDING NO.: 8807260343 Contains covenant prohibiting structures over said easement or other activity which might endanger the underground system. - - EASEMENT AND THE TERMS AND CONDITIONS THEREOF: GRANTEE: City of Everett PURPOSE: Utilities, drainageand detention pond facilities and appurtenances AREA AFFECTED: Portions of subject property RECORDED: December 13, 1988 RECORDING NO.: 8812130477 - - Right to make necessary slopes for cuts or fills upon property herein described as granted to City of Everett by deed recorded under Recording No. 8801270201. - - ALL COVENANTS, CONDITIONS, RESTRICTIONS, RESERVATIONS, EASEMENTS OR OTHER SERVITUDES, if any, disclosed by Binding Site Plan/Survey as recorded under Snohomish County Recording Number 9204015001. - - The following as and to extent shown on as-built Survey prepared by W & H Pacific on March 20, 1997, under Job No. 3-2944-0133: A) Fence from Southerly adjoiner extends 2.2 feet Northerly of our South property line. B) Bird feeder post 0.79 feet South of North property line (belongs to property adjoiner to North). C) Property adjoiner to the North wood fence extends 0.11 feet South of subject property's North line. D) Along Easterly property line - 1/2 light pole onto subject property. 62 - - DRIVEWAY AND ACCESS EASEMENT AGREEMENT AND THE TERMS AND CONDITIONS THEREOF: GRANTEE: Cintas Sales Corporation, an Ohio Corporation PURPOSE: Ingress, egress and utilities and related rights as in said instrument AREA AFFECTED: Southeasterly portion of subject property RECORDED: November 5, 1997 RECORDING NO.: 9711050088 Said easement contains a covenant to bear equal share of cost of construction, maintenance or repair of same. - - EASEMENT AND THE TERMS AND CONDITIONS THEREOF: GRANTEE: City of Everett, a municipal corporation PURPOSE: Sewer system and related rights as in said instrument AREA AFFECTED: 20 foot wide strip of land within Lot 2F RECORDED: November 10, 1997 RECORDING NO.: 9711100557 - - EASEMENT AND THE TERMS AND CONDITIONS THEREOF: GRANTEE: City of Everett, a municipal corporation PURPOSE: Water system and related rights as in said instrument AREA AFFECTED: 15 foot wide strips of land within Lot 2F RECORDED: November 12, 1997 RECORDING NO.: 9711120701 Exhibit B - Page 2 63 Exhibit C DESCRIPTION OF THE INITIAL CONSTRUCTION PROJECT Subject to future Scope Changes, the initial Construction Project will be substantially consistent with the following description: Two office/manufacturing buildings connected by a common office/corporate entrance/cafeteria area totaling approximately 176,000 square feet, together with parking areas for approximately 700 vehicles and other appurtenant improvements. 64 Exhibit D ESTOPPEL FROM CONTRACTORS _________, 199__ BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd G. Cox Re: Assignment of Construction Contract Ladies and Gentlemen: The undersigned hereby represents to BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"), and covenants with BNPLC as follows: 1. The undersigned has entered into that certain [Construction Contract] (the "CONSTRUCTION CONTRACT") by and between the undersigned and Solectron Washington, Inc. ("SOLECTRON") dated _______________, 199__ for the construction of the improvements to be constructed as part of Solectron's Everett campus leased by Solectron (the "IMPROVEMENTS") on the land described in the Lease described below (the "LAND" and, together with the Improvements and any other improvements now on or constructed in the future on the Land, the "PROJECT"). 2. The undersigned has also received a copy of the Amended and Restated Lease Agreement dated as of July 1, 1998 (the "LEASE"), pursuant to which BNPLC is leasing the Project to Solectron, and BNPLC has agreed, subject to the terms and conditions of the Lease, to provide a construction allowance for the construction of the Improvements. The Lease also requires, subject to certain limitations therein provided, that Solectron fulfill its obligations under the Construction Contract and related documents and indemnify BNPLC against any liability arising thereunder, all as more particularly provided in the Lease, reference to which is hereby made for all purposes. 3. 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, except as provided in any written modifications or amendments which are also attached to this letter. 4. The undersigned has not sent or received any notice of default or any other notice for the purpose of terminating the Construction Contract, nor does the undesigned have knowledge of any existing circumstance or event which, but for the elapse of time or otherwise, would constitute a default by the undersigned or by Solectron under the Construction Contract. The undersigned acknowledges and agrees that: a) Title to all Improvements shall, when constructed on the Land, pass directly to BNPLC, not to Solectron. BNPLC shall not, however, be held liable for, and the undersigned shall not assert, any claims, demands or liabilities against BNPLC arising under or in any way relating to the Construction Contract; provided, this paragraph will not (1) be construed as a waiver of any statutory mechanic's or materialmen's liens against the Land or the improvements thereon that may otherwise exist or arise in favor of the undersigned, or (2) prohibit the 65 BNP Leasing Corporation _______________, 199___ Page 2 undersigned from asserting any claims or making demands against BNPLC under the Construction Contract if BNPLC elects in writing, pursuant to Paragraph b) below, to assume the Construction Contract in the event Solectron's right to possession of the Land is terminated, in which event BNPLC shall be liable for the unpaid balance of the contract sum due for the work of the undersigned, payable pursuant to (and subject to the terms and conditions set forth for the benefit of the owner in) the Construction Contract, but in no event shall BNPLC otherwise be personally liable for any acts or omissions on the part of Solectron. b) Upon any termination of Solectron's right to possession of the Project under the Lease, including any eviction of Solectron resulting from an Event of Default (as defined in the Lease), BNPLC may, by notice to the undersigned and without the necessity of the execution of any other document, assume Solectron's rights and obligations under the Construction Contract, cure any defaults by Solectron thereunder and enforce the Construction Contract and all rights of Solectron thereunder. Within ten days of receiving notice from BNPLC that Solectron's right to possession has been terminated, the undersigned shall send to BNPLC 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 Project; (vi) the total amount received by the undersigned for construction through the date of the letter; (vii) the estimated total cost of completing the undersigned's work as of the date of the letter, together with a current draw schedule; and (viii) any other information BNPLC may request to allow it to decide whether to assume the Construction Contract. BNPLC shall have seven days from receipt of such written certificate containing all such requested information to decide whether to assume the Construction Contract. If BNPLC fails to assume the Construction Contract within such time, the undersigned agrees that BNPLC shall not be liable for (and the undersigned shall not assert or bring any action against BNPLC or, except for any statutory lien rights, 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 Solectron (and any statutory lien rights) for the recovery of any such damages or other amounts. c) If BNPLC notifies the undersigned that BNPLC shall not assume the Construction Contract pursuant to the preceding paragraph following the termination of Solectron'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 BNPLC shall be entitled to take exclusive possession of the Project. The undersigned shall also, upon request by BNPLC, deliver and assign to BNPLC 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 Solectron), all other material relating to the work which belongs to BNPLC or Solectron, 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 BNPLC that BNPLC declines to assume the Construction Contract, the undersigned shall for a period not to exceed fifteen days after receipt of such notice take Exhibit D - Page 2 66 BNP Leasing Corporation _______________, 199___ Page 3 such steps, at BNPLC'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 BNPLC or the undersigned with respect to the Construction Contract shall prejudice any other rights or remedies of BNPLC or the undersigned provided by law, by the Lease, by the Construction Contract or otherwise against Solectron. e) The undersigned agrees promptly to notify BNPLC of any material default or claimed material default by Solectron under the Construction Contract of which the undersigned is aware, 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 BNPLC prominently marked "URGENT - NOTICE OF SOLECTRON'S DEFAULT UNDER CONSTRUCTION AGREEMENT WITH SOLECTRON WASHINGTON, INC. - EVERETT, WASHINGTON" at the address specified for notice below (or at such other addresses as BNPLC 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 BNPLC or its designee to cure any such default within the time period reasonably required for such cure, but in no event less than thirty days. If it is necessary or helpful to take possession of all or any portion of the Project to cure a default by Solectron under the Construction Contract, the time permitted by the undersigned for cure by BNPLC will include the time necessary to terminate Solectron's right to possession of the Project and evict Solectron, provided that BNPLC commences the steps required to exercise such right within sixty 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: _________________________ _________________________ _________________________ Telecopy: (___) ___-_____ To BNPLC: BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd G. Cox Telecopy: (214) 969-0060 Exhibit D - Page 3 67 BNP Leasing Corporation _______________, 199___ Page 4 A copy of any such notice or communication will also be sent to Solectron 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: Solectron Washington, Inc. ________________________________ ________________________________ ________________________________ Attention: _____________________ Telecopy: (___) ________________ g) The undersigned acknowledges that it has all requisite authority to execute this letter. The undersigned further acknowledges that BNPLC has requested this letter, and is relying on the truth and accuracy of the representations made herein, in connection with BNPLC's decision to advance funds for construction under the Lease with Solectron. Very truly yours, ____________________________________ By: ________________________________ Name: __________________________ Title: _________________________ Solectron 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, BNPLC to assume the Construction Contract in the event Solectron is evicted from the Project. SOLECTRON WASHINGTON, INC. By: ________________________________ Name: __________________________ Title: _________________________ Exhibit D - Page 4 68 Exhibit E ESTOPPEL FROM ARCHITECTS/ENGINEERS _________, 199__ BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd G. Cox Re: Assignment of [Architect's/Engineer's] Agreement Ladies and Gentlemen: The undersigned hereby represents to BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"), and covenants with BNPLC as follows: 1. The undersigned has entered into that certain [Architects/Engineers Agreement] (the "AGREEMENT") by and between the undersigned and Solectron Washington, Inc. ("SOLECTRON") dated _______, 199__ for the [design] of the improvements to be constructed as part of Solectron's Everett campus by Solectron (the "IMPROVEMENTS") on the land described in the Lease described below (the "LAND" and, together with the Improvements and any other improvements now on or constructed in the future on the Land, the "PROJECT"). 2. The undersigned has been advised that BNPLC owns the Land. 3. The undersigned has also received a copy of the Amended and Restated Lease Agreement dated as of July 1, 1998 (the "LEASE"), pursuant to which BNPLC is leasing the Project to Solectron, and BNPLC has agreed, subject to the terms and conditions of the Lease, to provide a construction allowance for Solectron's construction of the Improvements. The Lease also requires Solectron to fulfill all obligations of Solectron under the Agreement and related documents and to indemnify BNPLC 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. The Agreement is in full force and effect and has not been modified or amended, except as provided in any written modifications or amendments which are also attached to this letter. 5. The undersigned has not sent or received any notice of default or any other notice for the purpose of terminating the Agreement, nor does the undersigned have knowledge of any existing circumstance or event which, but for the elapse of time or otherwise, would constitute a default by the undersigned or by Solectron under the Agreement. The undersigned acknowledges and agrees that: a) BNPLC shall not be held liable for, and the undersigned shall not assert, any claims, demands or liabilities against BNPLC or 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 69 BNP Leasing Corporation ______________, 199____ Page 2 if BNPLC elects in writing, pursuant to Paragraph b) below, to assume the Agreement in the event Solectron's right to possession of the Land is terminated, in which event BNPLC shall be liable thereunder for (but only for) any acts or omissions on the part of BNPLC occurring after the date on which BNPLC notifies the undersigned of BNPLC's election to assume the Agreement. b) Upon any termination of Solectron's right to possession of the Project under the Lease, including any eviction of Solectron resulting from an Event of Default (as defined in the Lease), BNPLC may, by notice to the undersigned and without the necessity of the execution of any other document, assume Solectron's rights and obligations under the Agreement, cure any defaults by Solectron thereunder and enforce the Agreement and all rights of Solectron thereunder. Within ten days of receiving notice from BNPLC that Solectron's right to possession has been terminated, the undersigned shall send to BNPLC 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 services contemplated by the Agreement are proceeding in a satisfactory manner in all material respects (or if not, a detailed description of all significant problems with the progress of services); (v) a reasonably detailed report of the then critical dates estimated by the undersigned for services required to complete the construction project; (vi) the total amount received by the undersigned for services through the date of the letter; (vii) the estimated total cost of completing such services as of the date of the letter, together with a current payment schedule; and (viii) any other information BNPLC may request to allow it to decide whether to assume the Agreement. BNPLC shall have thirty days from receipt of such written certificate containing all such requested information to decide whether to assume the Agreement. If BNPLC fails to assume the Agreement within such time, the undersigned agrees that BNPLC shall not be liable for (and the undersigned shall not assert or bring any action against BNPLC or 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 Solectron for the recovery of any such damages or other amounts. c) If BNPLC notifies the undersigned that BNPLC shall not assume the Agreement pursuant to the preceding paragraph following the termination of Solectron's right to possession of the Project under the Lease, the undersigned shall immediately discontinue the services under the Agreement and remove its personnel from the Project, and BNPLC shall be entitled to take exclusive possession of the Project. The undersigned shall also, upon request by BNPLC, deliver and assign to the following, to the extent that Solectron or BNPLC then owns or is entitled by the Agreement to the following: (1) 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 Solectron); (2) all other materials or documents relating to the services, and (3) 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 BNPLC that BNPLC declines to assume the Agreement, the undersigned shall for a period not to exceed fifteen days after receipt of such notice take such steps as are reasonably necessary to preserve and protect services completed and in progress. Exhibit E - Page 2 70 BNP Leasing Corporation ______________, 199____ Page 3 d) No action taken by BNPLC or the undersigned with respect to the Agreement shall prejudice any other rights or remedies of BNPLC or the undersigned provided by law, by the Lease, by the Agreement or otherwise against Solectron. e) The undersigned agrees promptly to notify BNPLC of any material default or claimed material default by Solectron under the Agreement of which the undersigned is aware, 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 BNPLC prominently marked "URGENT - NOTICE OF SOLECTRON'S DEFAULT UNDER AGREEMENT WITH SOLECTRON WASHINGTON, INC. - EVERETT, WASHINGTON" at the address specified for notice below (or at such other addresses as BNPLC 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 BNPLC or its designee to cure any such default within the same time period that Solectron itself would have to cure (if any) pursuant to the Agreement, but in no event less than thirty days. 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: ------------------------- ------------------------- ------------------------- Telecopy: (___) ___-_____ To BNPLC: BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd G. Cox Telecopy: (214) 969-0060 A copy of any such notice or communication will also be sent to Solectron 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: Solectron Washington, Inc. -------------------------------- -------------------------------- -------------------------------- -------------------------------- Attention: ---------------------- Telecopy: (___) ________________ Exhibit E - Page 3 71 BNP Leasing Corporation _______________, 199___ Page 4 g) The undersigned acknowledges that it has all requisite authority to execute this letter. The undersigned further acknowledges that BNPLC has requested this letter, and is relying on the truth and accuracy of the representations made herein, in connection with BNPLC's decision to advance funds for construction under the Lease with Solectron. Very truly yours, ------------------------------------ ------------------------------------ By: --------------------------------- Name: --------------------------- Title: -------------------------- Solectron 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, BNPLC to assume the Agreement in the event Solectron is evicted from the Project. SOLECTRON WASHINGTON, INC. By: --------------------------------- Name: --------------------------- Title: -------------------------- Exhibit E - Page 4 72 Exhibit F DRAW REQUEST FORMS ________, 199__ BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd G. Cox Re: Construction Advance Request No. __________ by Solectron Washington, Inc. Ladies and Gentlemen: Reference is made to the Amended and Restated Lease Agreement between BNP Leasing Corporation (herein "BNPLC") and Solectron Washington, Inc. (herein "SOLECTRON") dated as of July 1, 1998 (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. Solectron 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 Solectron's general contractor or construction manager, attached to which is a schedule of values listing all subcontractors, suppliers and other parties to whom the general contractor or construction manager 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) Solectron for construction of Improvements and for which Solectron is entitled to reimbursement from the Current Advance. 2. A list of any costs paid by Solectron, other than to the general contractor or construction manager, for which Solectron is entitled to reimbursement from the proceeds of the Current Advance (herein the "OTHER COSTS LIST"). [NOTE: DRAW REQUESTS NEED INCLUDE THE PARAGRAPHS MARKED BELOW WITH AN ASTERISK, AND THE INVOICES OR OTHER ITEMS DESCRIBED IN SUCH PARAGRAPHS, ONLY IF AND TO THE EXTENT THAT BNPLC MAY REQUEST IT AFTER THE LEASE IS EXECUTED] *3. Invoices and requests for payments from the subcontractors and others entitled to payment from the general contractor or construction manager 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 $200,000 from the 73 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 Solectron's general contractor or construction manager 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 $100,000. 6. An up-to-date list of the names and addresses of any contractors or subcontractors that have actually filed a claim of lien against the 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 Solectron as required by subparagraph 6.(e)(viii) of the Lease. We hereby confirm that BNPLC will not be responsible for the application of any funds advanced to Solectron or to any other party at our request. Sincerely, SOLECTRON WASHINGTON, INC. By: ________________________________ Name: __________________________ Title: _________________________ Exhibit F - Page 2 74 CONSTRUCTION ADVANCE CERTIFICATE Pursuant to subparagraph 6.(e)(viii) of the Amended and Restated Lease Agreement dated as of July 1, 1998 (the "LEASE") between Solectron Washington, Inc. ("SOLECTRON") and BNP Leasing Corporation ("BNPLC"), Solectron does hereby represent, warrant and certify to BNPLC in connection with Solectron's request for Construction Advance No. __________ that: a) no Event of Default or material Default has occurred and is continuing, b) the representations and warranties of Solectron in the following provisions of the Closing Certificate, the Lease and the Purchase Agreement are true and correct in all material respects as of the date hereof as though made on and as of the date hereof: Subparagraphs 16.(c) through 16.(l) of the Lease. Subparagraphs 3(A), 3(E) and 4(A) through 4(G) of the Closing Certificate Subparagraphs 4(a) through 4(e) of the Purchase Agreement c) the representations and warranties of Guarantor in Section 9 of the Guaranty are true and correct in all material respects as of the date hereof as though made on and as of the date hereof, d) each Construction Project which has commenced but not yet been completed 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 Solectron has corrected or is diligently pursuing the correction of any significant defect in such construction, e) all costs and expenses for which Solectron is requesting reimbursement by the Construction Advance referenced above constitute actual costs and expenses incurred by Solectron for a Construction Project, and f) liens (if any) now being asserted against the Property by Potential Lien Claimants do not in the aggregate secure or allegedly secure more than $3,000,000 of claims. (As used in this certificate a lien will be considered as "being asserted" if a claim of lien relating thereto shall have been recorded and not discharged by payment or settlement.) 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 Solectron Washington, Inc. as of ______________, 19___. SOLECTRON WASHINGTON, INC. By: ________________________________ Name: __________________________ Title: _________________________ Exhibit F - Page 3 75 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 [state "NONE" if there are none]: 1. 2. 3. Exhibit F - Page 4 76 OTHER COSTS LIST (Construction Advance Request No. ________) Costs paid - other than to Solectron's general contractor or construction manager - by Solectron and for which Solectron is entitled to reimbursement from the Current Advance being requested are as follows [state "NONE" if there are none]: 1. 2. 3. Exhibit F - Page 5 77 Exhibit G NOTICE OF REQUEST FOR ACTION BY BNPLC BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd G. Cox Re: Amended and Restated Lease Agreement dated as of July 1, 1998, between Solectron Washington, Inc., 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. Pursuant to subparagraph 7.(a) of the Lease, requests the following of BNPLC: [INSERT HERE A SPECIFIC DESCRIPTION OF THE ACTION REQUESTED - E.G., "PLEASE EXECUTE THE ENCLOSED APPLICATION FOR BUILDING PERMIT REQUIRED BY THE CITY OF EVERETT IN CONNECTION WITH CONSTRUCTION OF CERTAIN IMPROVEMENTS WHICH ARE PART OF THE INITIAL CONSTRUCTION PROJECT."] PLEASE NOTE: SUBPARAGRAPH 7.(A) OF THE LEASE OBLIGATES BNPLC NOT TO UNREASONABLY REFUSE TO COMPLY WITH THE FOREGOING REQUEST, SUBJECT TO TERMS AND CONDITIONS SET FORTH IN THAT SUBPARAGRAPH. SOLECTRON HEREBY CERTIFIES TO BNPLC THAT AFTER CAREFUL CONSIDERATION SOLECTRON BELIEVES THAT ALL SUCH TERMS AND CONDITIONS ARE SATISFIED IN THE CASE OF THE FOREGOING REQUEST, AND SOLECTRON HEREBY RATIFIES AND CONFIRMS ITS OBLIGATION TO INDEMNIFY BNPLC AGAINST ANY LOSSES BNPLC MAY INCUR OR SUFFER BECAUSE OF ITS COMPLIANCE WITH SUCH REQUEST AS PROVIDED IN SUBPARAGRAPH 5.(D) OF THE LEASE. Solectron respectfully requests that BNPLC respond to this notice as soon as reasonably possible. Executed this _____ day of ______________, 19___. SOLECTRON WASHINGTON, INC. By: ________________________________ Name: __________________________ Title: _________________________ 78 Exhibit H NOTICE OF REQUEST REQUIRING AN EXPEDITED RESPONSE BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd G. Cox Re: Amended and Restated Lease Agreement dated as of July 1, 1998, between Solectron Washington, Inc., 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. Solectron asks for an EXPEDITED RESPONSE to the following request, which is a request made by Solectron pursuant to subparagraph 7.(a) of the Lease: [INSERT HERE A SPECIFIC DESCRIPTION OF THE ACTION REQUESTED - E.G., "PLEASE EXECUTE THE ENCLOSED APPLICATION FOR BUILDING PERMIT REQUIRED BY THE CITY OF EVERETT IN CONNECTION WITH CONSTRUCTION OF CERTAIN IMPROVEMENTS WHICH ARE PART OF THE INITIAL CONSTRUCTION PROJECT."] PLEASE NOTE: SUBPARAGRAPH 7.(A) OF THE LEASE OBLIGATES BNPLC NOT TO UNREASONABLY REFUSE TO COMPLY WITH THE FOREGOING REQUEST, SUBJECT TO TERMS AND CONDITIONS SET FORTH IN THAT SUBPARAGRAPH. SOLECTRON HEREBY CERTIFIES TO BNPLC THAT AFTER CAREFUL CONSIDERATION SOLECTRON BELIEVES THAT ALL SUCH TERMS AND CONDITIONS ARE SATISFIED IN THE CASE OF THE FOREGOING REQUEST, AND SOLECTRON HEREBY RATIFIES AND CONFIRMS ITS OBLIGATION TO INDEMNIFY BNPLC AGAINST ANY LOSSES BNPLC MAY INCUR OR SUFFER BECAUSE OF ITS COMPLIANCE WITH SUCH REQUEST AS PROVIDED IN SUBPARAGRAPH 5.(D) OF THE LEASE. As you consider the foregoing request, please understand that Solectron must ask for an expedited request for the following reasons: [INSERT HERE A BRIEF DESCRIPTION OF THE NEED FOR AN EXPEDITED RESPONSE - E.G., "TO AVOID CRITICAL PATH DELAYS IN THE CONSTRUCTION CONTEMPLATED BY THE LEASE, SOLECTRON MUST SUBMIT THE ENCLOSED APPLICATION FOR BUILDING PERMIT TO THE CITY OF EVERETT WITHIN 15 DAYS, AND UNFORTUNATELY THE CITY HAS ONLY RECENTLY INDICATED THAT SOLECTRON WILL NEED THE SIGNATURE OF BNPLC ON THE APPLICATION."] For the reasons stated above, Solectron respectfully requests that BNPLC respond to this notice as soon as possible. Although Solectron would appreciate a sooner response, Solectron believes that it would be unreasonable for BNPLC not to respond to this notice on or before: [INSERT HERE A REASONABLE DEADLINE FOR THE RESPONSE - BUT IN NO EVENT PRIOR TO 10 BUSINESS DAYS AFTER THE DATE OF THIS NOTICE - TAKING INTO ACCOUNT THE MATERIALS THAT BNPLC WILL HAVE TO REVIEW TO EVALUATE 79 SOLECTRON'S REQUEST AND THE PARTICULAR REASONS FOR SOLECTRON'S NEED FOR AN EXPEDITED RESPONSE] Executed this _____ day of ______________, 19___. SOLECTRON WASHINGTON, INC. Name: __________________________ Title: _________________________ Exhibit H - Page 2 80 Exhibit I INTENTIONALLY DELETED 81 Exhibit J COMPLIANCE CERTIFICATE BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd G. Cox Gentlemen: The undersigned, as _____________________________ of SOLECTRON CORPORATION ("Guarantor"), does hereby certify on behalf of Guarantor and Solectron Washington, Inc. ("Solectron") that the following are true: 1. This Certificate is furnished pursuant to subparagraph 16.(b)(ii) of that certain Amended and Restated Lease Agreement dated as of July 1, 1998 (the "LEASE"; the terms defined therein being used herein as therein defined) between Solectron and you. 2. No Event of Default or material Default by Solectron under the Lease has occurred and is continuing. 3. The representations and warranties of Solectron in the following provisions of the Closing Certificate, the Lease and the Purchase Agreement are true and correct in all material respects as of the date hereof as though made on and as of the date hereof: Subparagraphs 16.(c) through 16.(l) of the Lease. Subparagraphs 3(A), 3(E) and 4(A) through 4(G) of the Closing Certificate Subparagraphs 4(a) through 4(e) of the Purchase Agreement 4. The representations and warranties of Guarantor in Section 9 of the Guaranty are true and correct in all material respects as of the date hereof as though made on and as of the date hereof. 5. Annex 1 attached hereto sets forth financial data and computations evidencing Guarantor's compliance with certain covenants established in Schedule A attached to the Guaranty, all of which data and computations are complete, true and correct. Executed this _____ day of ______________, 19___. SOLECTRON CORPORATION Name: ____________________________ Title: ___________________________ 82 Annex 1 To Compliance Certificate For the _________________ Ended ________________, 19___ NOTE: References to Sections below are intended to refer to the Sections in Part 3 of Schedule A to the Guaranty.
Actual Required/Permitted ------ ------------------ 1. Section 3.09 - Adjusted Leverage Ratio As of the last day of each fiscal quarter, the amount which is not greater than (a) 1.75 to 1.00 from the Effective Date through and including February 28, 1998, (b) 1.50 to 1.00 from May 31, 1998 through and including February 28, 1999, (c) 1.25 to 1.00 from May 31, 1999 through and including February 28, 2000, and (d) 1.00 to 1.00 thereafter. Adjusted Leverage Ratio calculation (A) Consolidated Funded Debt $_______ plus Guarantee obligations ________ plus Indebtedness with respect to ________ synthetic leases and securitized assets plus Indebtedness with respect to ________ letters of credit (including the Letters of Credit) minus Permitted Subordinated ________ Indebtedness TOTAL $_______
Exhibit J - Page 2 83 (B) operating income $_______ plus depreciation and ________ amortization charges TOTAL $_______ RATIO OF (A) TO (B) ________ 2. Section 3.10 - Minimum Consolidated Tangible Net Worth As of the last day of each fiscal quarter following April 30, 1997, the amount that is not less than the sum of (without duplication) 80% of Consolidated Tangible Net Worth measured as of the end of the fiscal quarter ended February 28, 1997, plus 50% of consolidated net income (without subtracting losses or acquisition-related charges) for each fiscal quarter the fiscal quarter ended February 28, 1997, minus 100% of all acquisition-related charges if such charges are recorded in the same fiscal quarter in which the applicable acquisition is consummated. (A) Consolidated Tangible Net Worth calculation: total shareholders' equity $_______ minus intangible assets ________
Exhibit J - Page 3 84 Consolidated Tangible Net Worth $_______ (B) Minimum Consolidated Tangible Net Worth calculation: Beginning minimum amount $_______ plus 50% of quarterly net income _______ for each fiscal quarter subsequent to the quarter ended February 28, 1997, with no reduction for losses or acquisition-related charges minus 100% of all acquisition- related charges if such charges are recorded in the same fiscal quarter in which the applicable acquisition is consummated Minimum Consolidated Tangible Net $_______ Worth (A) MINUS (B) $_______ 3. Section 3.11 - Modified Quick Ratio At the end of any fiscal quarter of Guarantor when (1) the rating the rating established by Moody's for the Index Debt of Guarantor is below Ba2 or (2) the rating established by S&P for the Index Debt of Guarantor is below BB, or (3) neither Moody's nor S&P maintains a rating for the Index Debt of Guarantor, the Modified Quick Ratio is to be not less than 1.0 to 1.0. (A) Quick Assets calculation: unencumbered cash $_______ plus unencumbered short term cash ________ investments
Exhibit J - Page 4 85 plus unencumbered marketable ________ securities which are classified as short term investments according to GAAP plus unencumbered net accounts ________ receivable plus fair market value of the following to the extent not otherwise already included in Quick Assets and to the extent having maturities of not longer than two years: securities issued or fully ________ guaranteed by the United States government or any agency thereof and backed by the full faith and credit of the United States certificates of deposit, time ________ deposits, Eurodollar time deposits, repurchase agreements, or banker's acceptances that are (A) 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 (B) rated not less than A- by Standard & Poor's Corporation or less than A by Moody's Investors Service, Inc. corporate or municipal ________ bonds rated not less than A- by Standard & Poor's Corporation or less than A by Moody's Investors Service, Inc. TOTAL $_______
Exhibit J - Page 5 86 (B) Current Liabilities according to $_______ GAAP (C) Payments not included in Current $_______ Liabilities maturing within 12 months on Indebtedness or which are the subject of any Guarantee RATIO OF (A) TO [(B) +(C)] ________
Exhibit J - Page 6 87 Exhibit K NOTICE OF LIBOR PERIOD ELECTION BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd G. Cox Re: Amended and Restated Lease Agreement dated as of July 1, 1998, between Solectron Washington, Inc., 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___. SOLECTRON WASHINGTON, INC. Name:___________________________ Title:__________________________ [cc all Participants] 88 Schedule 1 LIST OF DEVELOPMENT DOCUMENTS - NONE - 89 Schedule 2 LIST OF CLAIMS PENDING OR THREATENED AGAINST THE PROPERTY - NONE - 90 LIST OF DEFINED TERMS FOR AGREEMENTS BETWEEN BNP LEASING CORPORATION AND SOLECTRON WASHINGTON, INC. DATED AS OF JULY 1, 1998 91 TABLE OF CONTENTS
PAGE DEFINED TERM NUMBER - ------------ ------ ACTIVE NEGLIGENCE...................................................................................1 ADDITIONAL RENT.....................................................................................1 ADMINISTRATIVE AGENCY FEES..........................................................................1 ADVANCE DATE........................................................................................1 AFFILIATE...........................................................................................1 APPLICABLE LAWS.....................................................................................1 APPLICABLE PURCHASER................................................................................1 ATTORNEYS' FEES.....................................................................................1 BANKING RULES CHANGE................................................................................1 BASE RENT...........................................................................................2 BASE RENT COMMENCEMENT DATE.........................................................................2 BASE RENT DATE......................................................................................2 BASE RENT PERIOD....................................................................................3 BNPLC...............................................................................................3 BNPLC'S PARENT......................................................................................3 BREAKAGE COSTS......................................................................................3 BREAK EVEN PRICE....................................................................................4 BUSINESS DAY........................................................................................4 CAPITAL ADEQUACY CHARGES............................................................................4 CARRYING COSTS......................................................................................4 CLOSING CERTIFICATE.................................................................................4 CODE................................................................................................4 COMMITMENT FEE......................................................................................4 COMPLETION NOTICE...................................................................................4 CONSTRUCTION ADVANCES...............................................................................4 CONSTRUCTION ALLOWANCE..............................................................................5 CONSTRUCTION PERIOD.................................................................................5 CONSTRUCTION PROJECTS...............................................................................5 CONSTRUCTION WARRANTY...............................................................................5 CONSTRUCTION WARRANTY PAYMENTS......................................................................5 DEBT................................................................................................5 DEDUCTIBLE JUDGMENT.................................................................................6 DEFAULT.............................................................................................6 DEFAULT RATE........................................................................................6 DESIGNATED SALE DATE................................................................................6 DEVELOPMENT DOCUMENTS...............................................................................6 EFFECTIVE DATE......................................................................................6 EFFECTIVE RATE......................................................................................6 ENVIRONMENTAL CONSULTANT............................................................................7 ENVIRONMENTAL LAWS..................................................................................7 ENVIRONMENTAL LOSSES................................................................................7 ENVIRONMENTAL REPORTS...............................................................................8 ERISA...............................................................................................8 ERISA AFFILIATE.....................................................................................8 ERISA TERMINATION EVENT.............................................................................8 ESCROWED PROCEEDS...................................................................................8 ESTABLISHED MISCONDUCT..............................................................................8
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PAGE DEFINED TERM NUMBER - ------------ ------ EUROCURRENCY LIABILITIES............................................................................9 EURODOLLAR RATE RESERVE PERCENTAGE..................................................................9 EVENT OF DEFAULT....................................................................................9 EXCLUDED TAXES......................................................................................9 EXISTING CONTRACT..................................................................................10 FAIR MARKET VALUE..................................................................................10 FED FUNDS RATE.....................................................................................10 FUNDED CONSTRUCTION ALLOWANCE......................................................................10 FUNDING ADVANCES...................................................................................10 GAAP...............................................................................................11 GUARANTOR..........................................................................................11 GUARANTY...........................................................................................11 HAZARDOUS SUBSTANCE................................................................................11 HAZARDOUS SUBSTANCE ACTIVITY.......................................................................11 IMPOSITIONS........................................................................................11 IMPROVEMENTS.......................................................................................12 INDEX DEBT.........................................................................................12 INDUSTRIAL HYGIENIST...............................................................................12 INITIAL FUNDING ADVANCE............................................................................12 INTERESTED PARTY...................................................................................12 LAND...............................................................................................12 LANDLORD'S ELECTION TO CONTINUE CONSTRUCTION.......................................................12 LEASE..............................................................................................12 LIBOR..............................................................................................13 LIBOR PERIOD ELECTION..............................................................................13 LIEN...............................................................................................13 LIENS REMOVABLE BY BNPLC...........................................................................14 LIST OF DEFINED TERMS..............................................................................14 LOSS CUTOFF DATE...................................................................................14 LOSSES.............................................................................................14 MATERIAL ENVIRONMENTAL COMMUNICATION...............................................................14 MAXIMUM CONSTRUCTION ALLOWANCE.....................................................................14 MOODY'S............................................................................................15 OUTSTANDING CONSTRUCTION ALLOWANCE.................................................................15 PARTICIPANT........................................................................................15 PARTICIPATION AGREEMENT............................................................................15 PERMITTED ENCUMBRANCES.............................................................................15 PERMITTED HAZARDOUS SUBSTANCE USE..................................................................15 PERMITTED HAZARDOUS SUBSTANCES.....................................................................16 PERMITTED TRANSFER.................................................................................16 PERSON.............................................................................................16 PERSONAL PROPERTY..................................................................................16 PLAN...............................................................................................16 POTENTIAL LIEN CLAIMANTS...........................................................................16 PRIME RATE.........................................................................................16 PRIOR CLOSING CERTIFICATE..........................................................................17 PRIOR GUARANTY.....................................................................................17
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PAGE DEFINED TERM NUMBER - ------------ ------ PRIOR LEASE........................................................................................17 PRIOR PARTICIPATION AGREEMENT......................................................................17 PRIOR PURCHASE AGREEMENT...........................................................................17 PROPERTY...........................................................................................17 PURCHASE AGREEMENT.................................................................................17 QUALIFIED PAYMENTS.................................................................................17 REAL PROPERTY......................................................................................17 REMEDIAL WORK......................................................................................17 RENT...............................................................................................18 RESIDUAL RISK PERCENTAGE...........................................................................18 RESPONSIBLE FINANCIAL OFFICER......................................................................18 S&P................................................................................................18 SCOPE CHANGE.......................................................................................18 SELLER.............................................................................................18 SOLECTRON..........................................................................................18 SOLECTRON'S MAXIMUM REMARKETING OBLIGATION.........................................................18 SPREAD.............................................................................................19 STIPULATED LOSS VALUE..............................................................................19 SUBSIDIARY.........................................................................................20 SUPPLEMENTAL PAYMENT...............................................................................20 TERM...............................................................................................20 TRANSACTION EXPENSES...............................................................................20 UNFUNDED BENEFIT LIABILITIES.......................................................................20 VOLUNTARY RETENTION OF THE PROPERTY................................................................20
-iii- 94 LIST OF DEFINED TERMS As used in the documents to which this List of Defined Terms is attached: "ACTIVE NEGLIGENCE" of any Person (including BNPLC) means, and is limited to, the negligent conduct on the Property (and not mere omissions) by such Person or by others acting and authorized to act on such Person's behalf in a manner that proximately causes actual bodily injury or property damage for which Solectron does not carry (and is not obligated by the Lease to carry) insurance. "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 Property or as a party to the transactions described in the Lease, (2) any negligent failure of any other Interested 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 transactions described in the Lease, or (3) the exercise in a lawful manner by BNPLC (or any party lawfully claiming through or under BNPLC) of any right or remedy provided in or under the Lease, the Purchase Agreement or the Closing Certificate. "ADDITIONAL RENT" shall have the meaning assigned to it in subparagraph 4.(c) of the Lease. "ADMINISTRATIVE AGENCY FEES" shall have the meaning assigned to it in subparagraph 4.(e) of the Lease. "ADVANCE DATE" means, regardless of whether any Construction Advance shall actually be made thereon, the first Business Day of every calendar month, beginning with July 1, 1998 and continuing regularly thereafter to and including the Base Rent Commencement Date. "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. Notwithstanding the foregoing, for purposes of the Lease and the Purchase Agreement, Solectron's "Affiliates" will not include any Person domiciled outside the United States. "APPLICABLE LAWS" means any or all of the following, to the extent applicable to Solectron or the Property or the Lease, the Purchase Agreement or the Closing Certificate: restrictive covenants; zoning ordinances and building codes; flood disaster laws; health, safety and environmental laws and regulations; the Americans with Disabilities Act and other laws pertaining to disabled persons; and other laws, statutes, ordinances, rules, permits, regulations, orders, determinations and court decisions. "APPLICABLE PURCHASER" means any third party designated by Solectron to purchase BNPLC's interest in the Property and in any Escrowed Proceeds as provided in the Purchase Agreement. "ATTORNEYS' FEES" means the reasonable fees and expenses of counsel to the parties incurring the same, excluding costs or expenses of in-house counsel (whether or not accounted for as general overhead or administrative expenses), but otherwise including 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 all such reasonable fees and expenses incurred with respect to appeals, arbitrations and bankruptcy proceedings, and whether or not any manner of proceeding is brought with respect to the matter for which such fees and expenses were incurred. "BANKING RULES CHANGE" means either: (1) the introduction of or any change after the Effective Date (other than any change by way of imposition or increase of reserve requirements included in the Eurodollar Rate 95 Reserve Percentage) in any law or regulation applicable to BNPLC, BNPLC's Parent or any other Participant, or in the generally accepted interpretation by the institutional lending community of any such law or regulation, or in the interpretation of any such law or regulation asserted by any regulator, court or other governmental authority or (2) the compliance by BNPLC, BNPLC's Parent or any other Participant with any new guideline or new request after the Effective Date from any central bank or other governmental authority (whether or not having the force of law). "BASE RENT" means the rent payable by Solectron pursuant to subparagraph 4.(a) of the Lease. "BASE RENT COMMENCEMENT DATE" means the earlier of (1) the last day that constitutes first business day of a calendar month and that is no more than 364 days after the Effective Date, (2) the first Business Day of the first calendar month to follow by ten days or more BNPLC's receipt of the Completion Notice, (3) the first Business Day of the first calendar month to follow by ten days or more BNPLC's receipt of a notice from Solectron, setting forth Solectron's express, unconditional and unequivocal election to accelerate the Base Rent Commencement Date by delivery such notice, notwithstanding that after the Base Rent Commencement Date, Solectron shall have no further right to Construction Advances under the Lease, or (4) the first Business Day of the first calendar month upon which the Funded Construction Allowance shall equal or exceed the Maximum Construction Allowance available under the Lease. For example, if on the first Business Day of October, 1998 construction of the initial Construction Project is continuing, the Funded Construction Allowance is $15,995,000 (before adding any Carrying Costs for the preceding month) and the Maximum Construction Allowance is $16,000,000 (assuming only for purposes of this example that the was Initial Funding Advance was $9,000,000), and if Carrying Costs of $80,000 would be added to the Funded Construction Allowance on such day if the Construction Allowance were not limited to the Maximum Construction Allowance, then such day will be the Base Rent Commencement Date and on such day $5,000 will be added to the Funded Construction Allowance as Carrying Cost and $75,000 will be payable as Base Rent pursuant to subparagraph 4.(b)(i) of the Lease. "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 Base Rent Commencement Date, then the first Business Day of the first calendar month following the Base Rent Commencement Date shall be the first Base Rent Date. (b) If the LIBOR Period Election in effect on the Base Rent Commencement Date is three months or six months, then the first Business Day of the third calendar month following the Base Rent Commencement 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 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 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. List of Defined Terms - Page 2 96 Thus, for example, if the Base Rent Commencement Date falls on the first Business Day of June, 1999 and a LIBOR Period Election of six months commences on the Base Rent Commencement 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 Base Rent Commencement 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 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 Solectron 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, Solectron 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. "BNPLC" means BNP Leasing Corporation, a Delaware corporation. "BNPLC'S PARENT" means BNPLC's Affiliate, Banque Nationale de Paris, a bank organized and existing under the laws of France and any successors of such bank. "BREAKAGE COSTS" means any and all costs, losses or expenses incurred or sustained by BNPLC's Parent (as a Participant or otherwise) or any other Participant, for which BNPLC's Parent or the Participant shall request reimbursement from BNPLC, because of the resulting liquidation or redeployment of deposits or other funds: (1) used to make or maintain Funding Advances upon application of a Qualified Payment or upon any sale of the Property pursuant to the Purchase Agreement, if such application or sale occurs on any day other than the last day of a Construction Period or Base Rent Period; or (2) reserved to provide a Construction Advance that Solectron requests (by a request not rescinded in accordance with subparagraph 6.(f) of the Lease), but thereafter declines to take for any reason, or that List of Defined Terms - Page 3 97 Solectron requests but is not permitted to take because of its failure to satisfy any of the conditions specified in subparagraph 6.(e) of the Lease. Breakage Costs will include, for example, losses attributable to any decline in LIBOR as of the effective date of any application described in the clause (1) preceding, as compared to LIBOR used to determine the Effective Rate then in effect. Each determination by BNPLC's Parent or the applicable Participant of Breakage Costs shall, in the absence of clear and demonstrable error, be conclusive and binding upon Solectron. "BREAK EVEN PRICE" means an amount equal, on the Designated Sale Date, to Stipulated Loss Value, plus all costs and expenses (including appraisal costs, withholding taxes (if any) other than Excluded Taxes, and reasonable Attorneys' Fees, as defined in the Lease) incurred in connection with any sale of the Property under the Purchase Agreement or in connection with collecting sales proceeds due thereunder, and plus any costs not considered as Construction Advances that may have been incurred by or on behalf of BNPLC to continue or complete construction of the initial Construction Project after a Landlord's Election to Continue Construction made pursuant to subparagraph 6.(h) of the Lease, less the aggregate amounts (if any) of Deductible Judgments. "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). "CAPITAL ADEQUACY CHARGES" means any additional amounts BNPLC's Parent or any other Participant requests BNPLC to pay as compensation for an increase in required capital as provided in subparagraph 5.(c)(ii) of the Lease. "CARRYING COSTS" means the charges added to and made a part of the Outstanding Construction Allowance (and thus also added to and made a part of the Funded Construction Allowance) from time to time on and before the Base Rent Commencement Date pursuant to and as more particularly described in subparagraph 6.(a) of the Lease. "CLOSING CERTIFICATE" means the Amended and Restated Closing Certificate and Agreement dated as of July 1, 1998 executed by Solectron in favor of BNPLC, as such Closing Certificate may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. "CODE" means the Internal Revenue Code of 1986, as amended. "COMMITMENT FEE" shall have the meaning assigned to it in subparagraph 4.(d) of the Lease. "COMPLETION NOTICE" means the notice required by subparagraph 6.(g) of the Lease from Solectron to BNPLC, advising BNPLC when construction of the initial Construction Project is substantially complete. "CONSTRUCTION ADVANCES" means (1) actual advances of funds made by or on behalf of BNPLC to or on behalf of Solectron pursuant to subparagraph 6.(a) of the Lease for the reimbursement to Solectron or payment of Commitment Fees and of costs, fees and expenses incurred to construct the initial Construction Project, and (2) amounts otherwise considered as Construction Advances pursuant to subparagraph 6.(h) of the Lease. List of Defined Terms - Page 4 98 "CONSTRUCTION ALLOWANCE" means the allowance, consisting of Construction Advances and Carrying Costs, which is to be provided for the initial Construction Project as more particularly described in Paragraph 6 of the Lease. "CONSTRUCTION PERIOD" means each successive period of approximately one month, with the first Construction Period beginning on and including the Effective Date and ending on but not including the first Advance Date. Each successive Construction Period after the first Construction Period 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, until the last Construction Period, which shall end on but not include the earlier of the Base Rent Commencement Date or the Designated Sale Date. "CONSTRUCTION PROJECTS" include (1) the "initial Construction Project" which means the construction of the improvements described in Exhibit C to the Lease and contemplated by any plans, renderings and budgets referenced in such Exhibit, consistent with the uses permitted by the Lease, and (2) "subsequent Construction Projects" which means any other project to be undertaken by Solectron during the Term and in accordance with the Lease for the construction of new buildings or other substantial Improvements or for the alteration of then existing Improvements. Subject to the requirements of subparagraph 6.(d) of the Lease, a Construction Project may involve demolition of then existing Improvements which are no longer needed or which must be removed to accommodate new Improvements. All construction work planned or done contemporaneously shall constitute a single Construction Project for purposes of the Lease, notwithstanding that such work may be done in stages or performed by more than one general contractor. However, it is understood that any number of distinct Construction Projects may be undertaken by Solectron during the Term of (and in accordance with the provisions of) the Lease, and that Construction Projects (including the initial Construction Project) may include offsite and other public improvements required as conditions of governmental approvals for the Construction Projects, environmental remediation and other work, dedications, fees or contributions required by any governmental authority in connection with the Construction Projects. Notwithstanding the foregoing, although refinishing, reconfiguring and refitting space or other interior nonstructural alterations within any completed building will be subject to subparagraph 12.(d) of the Lease, it will not for purposes of the Lease constitute a Construction Project if done in a manner that is not likely to have any material adverse affect on the value of the Property taken as a whole, unless Solectron expects to receive Construction Advances for the cost thereof. "CONSTRUCTION WARRANTY" shall have the meaning assigned to it in subparagraph 6.(d)(v) of the Lease. "CONSTRUCTION WARRANTY PAYMENTS" shall have the meaning assigned to it in subparagraph 6.(d)(v) of the Lease. "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 another Person against loss in respect of, indebtedness or obligations of others List of Defined Terms - Page 5 99 of the kinds referred to in the preceding clauses (i) through (v); (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. "DEDUCTIBLE JUDGMENT" means a final, liquidated judgment against BNPLC, the execution of which has not been and will not be stayed pending appeal by BNPLC, secured by a judgment lien filed against the Property which constitutes a Lien Removable by BNPLC. "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. "DEFAULT RATE" means a floating per annum rate equal to two percent (2%) above the Prime Rate. However, in no event will the "Default Rate" exceed the maximum interest rate permitted by law. "DESIGNATED SALE DATE" means the earlier of: (1) the first Business Day of July, 2003; or (2) any Business Day designated as such in an irrevocable, unconditional notice given by Solectron to BNPLC; provided, the Business Day so designated by Solectron must be no earlier than sixty days after the date of such notice; and provided, further, in such notice Solectron must acknowledge that because of Solectron's election to accelerate the Designated Sale Date, "Solectron's Maximum Remarketing Obligation" (as defined below) will equal the Break Even Price, and thus BNPLC shall be entitled to receive no less than the Break Even Price under the Purchase Agreement on the Designated Sale Date; or (3) any Business Day designated as such in a notice given by BNPLC to Solectron when any Event of Default has occurred and is continuing or after any breach by Solectron of the Purchase Agreement (and the expiration without cure of any applicable cure periods which may be expressly provided in the Purchase Agreement), including any such breach consisting of a failure to make a payment pursuant to the Purchase Agreement. "DEVELOPMENT DOCUMENTS" means the contracts, ordinances and other documents described in Schedule 1 attached to the Lease, if any, as the same may be modified from time to time in accordance with the Lease and the Closing Certificate (including modifications authorized pursuant to subparagraphs 7.(a) and 7.(b) of the Lease), and any applications, permits or certificates concerning or affecting the use or development of the Property that may be submitted, issued or executed from time to time as contemplated in such contracts, ordinances and other documents or that BNPLC may hereafter execute, approve or consent to at the request of Solectron. "EFFECTIVE DATE" means July 1, 1998. "EFFECTIVE RATE" means for each Construction Period and for each Base Rent Period, the per annum rate determined by dividing (A) LIBOR for such Construction Period or Base Rent Period, as the case may be, by (B) one hundred percent (100%) minus the Eurodollar Rate Reserve Percentage for such Construction Period or Base Rent Period. If LIBOR or the Eurodollar Rate Reserve Percentage changes from Construction Period to Construction Period or from Base Rent Period to Base Rent Period, then the Effective Rate shall be automatically List of Defined Terms - Page 6 100 increased or decreased as of the date of such change, as the case may be, without prior notice to Solectron. If for any reason BNPLC determines that it is impossible or unreasonably difficult to determine the Effective Rate with respect to a given Construction Period or Base Rent Period in accordance with the foregoing, then the "EFFECTIVE RATE" for that Construction Period or Base Rent Period shall equal any published index or per annum interest rate determined in good faith by BNPLC's Parent to be comparable to LIBOR 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 BNPLC's Parent's comparison of past eurodollar market rates to past yields on such Treasury obligations. Any determination by BNPLC of the Effective Rate under this definition shall, in the absence of clear and demonstrable error, be conclusive and binding upon Solectron. "ENVIRONMENTAL CONSULTANT" means a qualified individual employed by a qualified firm. Individuals shall be deemed qualified if they (i) possess at least five years of experience in performing environmental, engineering and consulting services; (ii) have performed or supervised at least five projects involving remediation of soil contaminated with hazardous substances, including at least one project similar to the Remedial Work; (iii) have all licenses required under applicable law for the Remedial Work; and (iv) have at least a bachelor's degree in the physical sciences or a related field from an accredited college or university. A firm shall be deemed qualified if it is: (i) a nationally recognized, reputable environmental and/or engineering firm in the business of providing professional environmental engineering and consulting services; (ii) has experience and expertise in projects involving the Remedial Work; (iii) maintains policies of insurance which are approved by BNPLC in its reasonable discretion. "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 the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 (as amended, "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, "RCRA"). "ENVIRONMENTAL LOSSES" means Losses suffered or incurred by any Interested Party relating to or arising out of, based on or as a result of: (i) any Hazardous Substance Activity that occurs or is alleged to have occurred on or prior to the Loss Cutoff Date; (ii) any violation on or prior to the Loss Cutoff Date of Environmental Laws relating to the 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 that occurs or is alleged to have occurred in whole or in part on or prior to the Loss Cutoff Date; 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 Interested Party which relates to, arises from, is based on, or results from any of the matters described in clauses (i), (ii) or (iii) of this definition, or any allegation of any such matters. For purposes of determining whether Losses constitute "Environmental Losses," any actual or alleged Hazardous Substance Activity or violation of Environmental Laws relating to the Property will be presumed to have occurred prior to the Loss Cutoff Date unless Solectron establishes by clear and convincing evidence to the contrary that the relevant Hazardous Substance Activity or violation of Environmental Laws did not occur or commence prior to the Loss Cutoff Date. Even if after the Loss Cutoff Date Losses are incurred by or asserted against a particular Interested Party that would not have been incurred or asserted, but for any matter described in clauses (i), (ii) or (iii) of this definition, or an allegation of any such matter, then such Losses will constitute Environmental Losses. List of Defined Terms - Page 7 101 "ENVIRONMENTAL REPORTS" means the following report, which was provided by Solectron to BNPLC prior to the execution of the Lease: Phase I Environmental Site Assessment, Lot 2F, Seaway Center, Merrill Creek Parkway, Everett, Washington, performed by Geotech Consultants, Inc. "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. "ERISA AFFILIATE" means any Person who for purposes of Title IV of ERISA is a member of Solectron's controlled group, or under common control with Solectron, within the meaning of Section 414 of the Internal Revenue Code, and the regulations promulgated and rulings issued thereunder. "ERISA TERMINATION EVENT" means (i) the occurrence with respect to any Plan of a reportable event described in Section 4043(c) of ERISA for which any penalty or notice thereof has not been waived pursuant to regulations, rulings, or notices issued by the Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation under Section 4043(a) of ERISA, or (ii) 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 (other than in connection with a standard termination of a fully funded Plan pursuant to Section 4041 of ERISA), or (iii) the institution of proceedings to terminate any Plan by the Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or (iv) any other event or condition which would constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. "ESCROWED PROCEEDS" means, subject to the exclusions specified in the next sentence, any money that is received by BNPLC from time to time during the Term (and any interest earned thereon) from any party (1) under any property insurance policy as a result of damage to the Property, (2) as compensation for any restriction imposed by any governmental authority upon the use or development of the Property or for the condemnation of the Property or any portion thereof, (3) because of any judgment, decree or award for injury or damage to the 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 Property; provided, however, in determining the amount of "Escrowed Proceeds" there shall be deducted all expenses and costs of every type, kind and nature (including Attorneys' Fees) incurred by BNPLC to collect such proceeds. Notwithstanding the foregoing, "Escrowed Proceeds" will not include (A) any payment to BNPLC by a Participant or an Affiliate of BNPLC that is made to compensate BNPLC for the Participant's or Affiliate's share of any Losses BNPLC may incur as a result of any of the events described in the preceding clauses (1) through (4), (B) any money or proceeds that have been applied as a Qualified Payment or to pay any Breakage Costs or other costs incurred in connection with a Qualified Payment, (C) any money or proceeds that, after no less than ten days notice to Solectron, BNPLC returns or pays to a third party because of BNPLC's good faith belief that such return or payment is required by law, (D) any money or proceeds paid by BNPLC to Solectron or offset against any amount owed by Solectron, or (E) any money or proceeds used by BNPLC in accordance with the Lease for repairs or the restoration of the Property or to obtain development rights or the release of restrictions that will inure to the benefit of future owners or occupants of the Property. Until Escrowed Proceeds are paid to Solectron pursuant to Paragraph 11 of the Lease, transferred to a purchaser under the Purchase Agreement as therein provided or applied as a Qualified Payment or as otherwise described in the preceding sentence, BNPLC 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. "ESTABLISHED MISCONDUCT" of a Person means, and is limited to: (1) if the Person is bound by the Lease or the Purchase Agreement, a breach by such Person of the express provisions of the Lease or the Purchase Agreement that continues beyond any period for cure provided therein, and (2) conduct of such Person or its List of Defined Terms - Page 8 102 Affiliates that has been determined to constitute wilful misconduct or Active Negligence in or as a necessary element of a final judgment rendered against such Person by a court with jurisdiction to make such determination. Established Misconduct of one Interested Party shall not be attributed to a second Interested Party unless the second Interested Party is an Affiliate of the first. Negligence which does not constitute Active Negligence shall not in any event constitute Established Misconduct. For purposes of this definition, "conduct of a Person" will include (1) the conduct of an employee of that Person, but only to the extent that the employee is acting within the scope of his employment by that Person, as determined in or as a necessary element of a final judgment rendered against such Person by a court with jurisdiction to make such determination, and (2) the conduct of an agent of that Person (such as an independent environmental consultant engaged by that Person), but only to the extent that the agent is, as determined in or as a necessary element of a final judgment rendered against such Person by a court with jurisdiction to make such determination, (x) acting within the scope of the authority granted to him by such Person, (y) not acting with the consent or approval of or under the direction of Solectron or Solectron's Affiliates, employees or agents, and (z) not acting in good faith to mitigate Losses that such Person may suffer because of a breach or repudiation by Solectron of the Closing Certificate or Lease or the Purchase Agreement. "EUROCURRENCY LIABILITIES" shall have the meaning assigned to it in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "EURODOLLAR RATE RESERVE PERCENTAGE" means, for purposes of determining the Effective Rate for any Construction Period or Base Rent 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 any emergency, supplemental or other marginal reserve requirement) for BNPLC's Parent 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. "EVENT OF DEFAULT" shall have the meaning assigned to it in subparagraph 17.(a) of the Lease. "EXCLUDED TAXES" means (1) all federal, state and local income taxes upon Base Rent, Commitment Fees, Administrative Agency Fees, any interest paid to BNPLC or any Participant pursuant to subparagraph 4.(g) of the Lease and any additional compensation claimed by BNPLC pursuant to subparagraph 5.(c)(ii) of the Lease; (2) all federal, state and local income taxes upon any amounts paid as reimbursement for or to satisfy Losses incurred by BNPLC or any Participant to the extent such taxes are offset by a corresponding reduction of BNPLC's or the applicable Participant's income taxes because of BNPLC's or such Participant's deduction of the reimbursed Losses from its taxable income or because of any tax credits attributable thereto; (3) taxes imposed by any governmental authority outside the United States of America; and (4) any transfer or change of ownership taxes assessed because of BNPLC's transfer or conveyance to any third party of BNPLC's rights or interests in the Lease or the Purchase Agreement or the Property, but excluding any such taxes assessed because of any transfer described in clauses (4) or (6) of the definition of Permitted Transfer below. For purposes of this definition, income taxes shall include any state or local taxes on the net income of BNPLC or a Participant, as the case may be, whether or not designated as an "income tax" or "franchise tax" and regardless of any future increase in tax rates used to compute such taxes. If, however, a change in Applicable Laws after the Effective Date results in an increase in such taxes for any reason other than an increase in the applicable tax rates (e.g., a disallowance of deductions that would otherwise be available against payments described in clause (1) of this definition), then for purposes of computing the taxes that constitute "Excluded Taxes," the change in law will not be considered. List of Defined Terms - Page 9 103 "EXISTING CONTRACT" means the Real Estate Purchase and Sale Agreement dated as of September 30, 1997 between Solectron Corporation and Seller covering the Land described in Exhibit A of the Lease. "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 Solectron has fulfilled and can be expected to continue to fulfill its obligations under the Lease [other than its obligation to complete the initial Construction Project before the Designated Sale Date]; that Solectron has maintained the Property in compliance with all Applicable Laws [including Environmental Laws]; that any Construction Projects [other than the initial Construction Project] commenced by Solectron but not completed prior to the Designated Sale Date shall not reduce the value of the Property; that all Improvements are self-sufficient in the sense that any easements or offsite facilities needed under the Development Documents or otherwise for the use of the Improvements will be available at no additional cost to the owner of the Improvements; that Solectron has repaired and restored the Property after any damage following fire or other casualty; that Solectron has restored the remainder of the Property after any partial taking by eminent domain; that Solectron 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, including any assessment liens, but not including Liens Removable by BNPLC; that no conditions or circumstances on or about the Property [such as the presence of an endangered species] is discovered that will impede development of the Property; that development of the Property will not be hindered or delayed because of the limited availability of utilities or water; that any purchaser paying fair market value for the Property will receive copies of all of Solectron's books and records which are necessary or useful to a future owner's or occupant's use of the Property in the manner permitted by the Lease, including books and records evidencing the testing and validation of the Property for the uses permitted by the Lease; that without undue cost or delay any such purchaser can obtain any necessary permits or licenses needed to use the Property for the purposes permitted by the Lease; and that Solectron has cured any title defects affecting the Property other than Liens Removable by BNPLC, all in accordance with the standards and requirements of the Lease [as though the Lease were continuing in force], and the Closing Certificate) as determined by an independent MAI Certified General Real Estate Appraiser reasonably satisfactory to BNPLC who has five years or more experience appraising similar properties in and around Everett, Washington. "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 BNPLC's Parent from three Federal funds brokers of recognized standing selected by BNPLC's Parent. All determinations of the Fed Funds Rate by BNPLC's Parent shall, in the absence of clear and demonstrable error, be binding and conclusive upon Solectron. "FUNDED CONSTRUCTION ALLOWANCE" means on any day the Outstanding Construction Allowance on that day, including all Construction Advances and Carrying Costs added to the Outstanding Construction Allowance on or prior to that day, plus the amount of any Qualified Payments deducted on or prior to that day in the calculation of such Outstanding Construction Allowance. "FUNDING ADVANCES" means (1) the Initial Funding Advance and (2) all future advances made by BNPLC's Parent or any other Participant to or on behalf of BNPLC to allow BNPLC to provide the Construction Allowance under the Lease. List of Defined Terms - Page 10 104 "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 16.(b) of the Lease (except for changes concurred in by Solectron's independent public accountants). "GUARANTOR" means Solectron Corporation, a Delaware corporation. "GUARANTY" means the Amended and Restated Guaranty dated as of July 1, 1998 given by Guarantor to BNPLC, guaranteeing the obligations of Solectron under the Lease, Purchase Agreement and Closing Certificate, as such Guaranty may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. "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 or substance," "infectious waste," "toxic substance," "toxic pollutant," or any other formulation intended to define, list or classify substances by reason of deleterious properties, including 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. "HAZARDOUS SUBSTANCE ACTIVITY" means any actual, proposed or threatened use, storage, holding, release (including 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 Property, including 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 Property and any resulting residual Hazardous Substance contamination in, on or under the Property. "HAZARDOUS SUBSTANCE ACTIVITY" also means any existence of Hazardous Substances on the Property that would cause the Property or the owner or operator thereof to be in violation of, or that would subject the Property to any remedial obligations under, any Environmental Laws, including CERCLA and RCRA, assuming disclosure to the applicable governmental authorities of all relevant facts, conditions and circumstances pertaining to the Property. "HAZARDOUS SUBSTANCE ACTIVITY" does not, however, include events or circumstances that do not affect the Property on or about other properties owned or operated by Solectron. "IMPOSITIONS" means 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 the Lease or which are imposed upon BNPLC or the Property because of the ownership, leasing, occupancy, sale or operation of the Property, or any part thereof or interest therein, or relating to or required to be paid by any of the Permitted Encumbrances or the Development Documents, excluding only Excluded Taxes. "IMPOSITIONS" shall include real estate taxes imposed because of a change of use or ownership of the Property on or prior to the date of any sale by BNPLC pursuant to the Purchase Agreement. List of Defined Terms - Page 11 105 "IMPROVEMENTS" means any and all (1) buildings and other real property improvements now or hereafter erected on the Land, and (2) equipment (e.g., HVAC systems, elevators and plumbing fixtures) attached to the buildings or other real property improvements, the removal of which would cause structural or other material damage to the buildings or other real property improvements or would materially and adversely affect the value or use of the buildings or other real property improvements. "INDEX DEBT" means senior, unsecured, long-term indebtedness for borrowed money of Guarantor that is not guaranteed by any other Person or subject to any other credit enhancement. "INDUSTRIAL HYGIENIST" means an industrial hygienist certified by the American Board of Industrial Hygiene who is experienced with required and appropriate health and safety standards and good industrial hygiene practice related to operations at hazardous waste sites. "INITIAL FUNDING ADVANCE" means, collectively, the advances of made by BNPLC's Parent (directly or through one or more of its Affiliates) to or on behalf of BNPLC (1) on or prior to the effective date of the Prior Lease to cover the cost of BNPLC's acquisition of the Property and certain Transaction Expenses and other amounts described in this definition, and (2) to cover Construction Advances and Carrying Costs under (and as defined in) the Prior Lease. The amount of the Initial Funding Advance may be confirmed by a separate closing certificate executed by Solectron as of the Effective Date. To the extent that BNPLC did not itself use the entire Initial Funding Advance to pay Transaction Expenses incurred by BNPLC or for other purposes described in the preceding sentence, the remainder thereof was advanced to Solectron, with the understanding that Solectron would use any such amount advanced for one or more of the following purposes: (1) the payment or reimbursement of Transaction Expenses incurred by Solectron; (2) the payment or reimbursement of expenses incurred by Solectron in connection with the initial Construction Project, including the planning, design, engineering, construction and permitting of thereof; (3) the maintenance of the Property; or (4) the payment of Rents next due. "INTERESTED PARTY" means each of (1) BNPLC, its Affiliates and its successors and assigns as to the Property or any part thereof or any interest therein, (2) BNPLC's Parent, and (3) any other Participants and their permitted successors and assigns under the Participation Agreement; provided, however, none of the following shall constitute an Interested Party: (a) any Person to whom BNPLC may transfer an interest in the Property by a conveyance that is not a Permitted Transfer and others that cannot lawfully claim an interest in the Property except through or under such a transfer by BNPLC, (b) Solectron or any Person that cannot lawfully claim an interest in the Property except through or under a conveyance from Solectron, or (c) any Applicable Purchaser under the Purchase Agreement and any Person that cannot lawfully claim an interest in the Property except through or under a conveyance from such Applicable Purchaser. "LAND" means the land as described in Exhibit A attached to the Lease, Closing Certificate and Purchase Agreement. However, upon any amendment to the Lease which modifies the land covered thereby, the land covered by the Closing Certificate and Purchase Agreement shall automatically be so modified. "LANDLORD'S ELECTION TO CONTINUE CONSTRUCTION" shall have the meaning assigned to it in subparagraph 6.(h) of the Lease. "LEASE" means the Amended and Restated Lease Agreement dated as of July 1, 1998 between BNPLC, as landlord, and Solectron, as tenant, pursuant to which Solectron has agreed to lease BNPLC's interest in the Property, as such Lease Agreement may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. List of Defined Terms - Page 12 106 "LIBOR" means, for purposes of determining the Effective Rate for each Construction Period or Base Rent Period, the rate determined by BNPLC'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 BNPLC'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. BNPLC shall instruct BNPLC'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 Construction Period or Base Rent Period, as the case may be, (ii) in an amount equal or comparable to the total (projected on the applicable date of determination by BNPLC's Parent) Stipulated Loss Value on the first day of such period, and (iii) for a time equal or comparable to the length of such period. If BNPLC'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. If for any reason BNPLC's Parent determines that it is impossible or unreasonably difficult to determine LIBOR with respect to a given Construction Period or Base Rent Period in accordance with the foregoing, or if BNPLC's Parent shall determine that it is unlawful (or any central bank or governmental authority shall assert that it is unlawful) for BNPLC, BNPLC's Parent or any Participant to provide or maintain Funding Advances during any Construction Period or Base Rent Period for which Carrying Costs or 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 BNPLC's Parent shall, in the absence of clear and demonstrable error, be binding and conclusive upon Solectron. "LIBOR PERIOD ELECTION" for the first Base Rent Period means one month and for any subsequent Base Rent Period means a period of one month, three months or six months as designated by Solectron at least ten Business Days prior to the commencement of such Base Rent Period by a notice given to BNPLC in the form of Exhibit K attached to the Lease. (For purposes of the Lease a LIBOR Period Election for any Base Rent Period shall also be considered the LIBOR Period Election in effect on (1) the Base Rent Commencement Date or 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 so designated by Solectron shall remain in effect for the entire Base Rent Period specified in Solectron's notice to BNPLC (provided such Base Rent Period commences at least ten Business Days after BNPLC's receipt of the notice) and for all subsequent Base Rent Periods until a new designation becomes effective in accordance with the provisions set forth in this definition. Notwithstanding the foregoing, however: (1) Solectron shall not be entitled to designate a LIBOR Period Election that would cause a Base Rent Period to extend beyond the end of the scheduled Term; (2) changes in the LIBOR Period Election shall become effective only upon the commencement of a new Base Rent Period; and (3) if Solectron fails to make a LIBOR Period Election consistent with the foregoing requirements for any Base Rent Period, or 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 deemed to be one month. "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 lease in the nature thereof, any agreement to sell receivables with recourse, 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 the Lease. List of Defined Terms - Page 13 107 "LIENS REMOVABLE BY BNPLC" means, and is limited to, Liens encumbering the Property that are asserted (1) other than as contemplated by the Lease or the Purchase Agreement, by BNPLC itself, (2) by third parties lawfully claiming through or under BNPLC (which for purposes of the Lease shall include any judgment liens established against the Property because of a judgment rendered against BNPLC and shall also include any liens established against the Property to secure past due Excluded Taxes), or (3) by third parties lawfully claiming under a deed or other instrument duly executed by BNPLC; provided, however, Liens Removable by BNPLC shall not include (A) any Permitted Encumbrances or Development Documents (regardless of whether claimed through or under BNPLC), (B) the Closing Certificate, the Lease, the Purchase Agreement or any other document executed by BNPLC with the knowledge of (and without objection by) Solectron's counsel contemporaneously with the execution and delivery of the Closing Certificate, the Lease and the Purchase Agreement, (C) Liens which are neither lawfully claimed through or under BNPLC (as described above) nor claimed under a deed or other instrument duly executed by BNPLC, (D) Liens claimed by Solectron or claimed through or under a conveyance made by Solectron, (E) Liens arising because of BNPLC's compliance with Applicable Law, the Lease, Permitted Encumbrances, the Development Documents or any written request made by Solectron, (F) Liens securing the payment of property taxes or other amounts assessed against the Property by any governmental authority, other than to secure the payment of past due Excluded Taxes or to secure damages caused by (and attributed by any applicable principles of comparative fault to) BNPLC's own Established Misconduct or the Established Misconduct of BNPLC's Parent or BNPLC's other Affiliates, or (G) Liens resulting from or arising in connection with any breach by Solectron of the Closing Certificate, the Lease or the Purchase Agreement. "LIST OF DEFINED TERMS" means this List of Defined Terms, which is attached to and made a part of the Closing Certificate, the Lease, and the Purchase Agreement. "LOSS CUTOFF DATE" means the later of the dates upon which (i) the Lease terminates, (ii) Solectron surrenders possession of the Property or (iii) Solectron ceases to have any leasehold or other interest in the Property under the Lease or otherwise. "LOSSES" means the following, to the extent (but only to the extent) resulting from, arising out of or in connection with events or circumstances (including the condition of the Property) that actually or allegedly occurred or existed or may hereafter occur or exist on or before the Loss Cutoff Date: any and all losses, liabilities, damages (whether actual, consequential, punitive or otherwise denominated), demands, claims, administrative or legal proceedings, actions, judgments, causes of action, assessments, fines, penalties, costs and expenses (including 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. For purposes of determining whether any loss, liability, damage, demand, claim, administrative or legal proceeding, action, judgment, cause of action, assessment, fine, penalty, cost or expense constitutes a "Loss," the events or circumstances relating thereto will be presumed to have occurred prior to the Loss Cutoff Date unless Solectron establishes by clear and convincing evidence to the contrary that the relevant events or circumstances did not occur or exist prior to the Loss Cutoff Date. "MATERIAL ENVIRONMENTAL COMMUNICATION" means a communication between Solectron or its agents and a regulatory agency or third party, which causes, or potentially could cause (whether by implementation of or response to said communication), a material change in the scope, duration, or nature of any Remedial Work. "MAXIMUM CONSTRUCTION ALLOWANCE" means an amount equal to $25,000,000, less the Initial Funding Advance. List of Defined Terms - Page 14 108 "MOODY'S" means Moody's Investor Service, Inc. "OUTSTANDING CONSTRUCTION ALLOWANCE" shall have the meaning assigned to it in subparagraph 6.(a) of the Lease. "PARTICIPANT" means BNPLC's Parent and any other Person that, upon becoming a party to the Participation Agreement by executing a supplement as contemplated therein, agrees from time to time to participate in all or some of the risks and rewards to BNPLC of the Lease, the Purchase Agreement and the Closing Certificate. As of the Effective Date, the only Participant is BNPLC's Parent, but BNPLC may agree after the Effective Date to share in risks and rewards of the Lease, the Purchase Agreement and the Closing Certificate with other Participants. However, no Person other than BNPLC's Parent and its Affiliates shall qualify as a Participant for purposes of the Lease, the Purchase Agreement, the Closing Certificate or other agreements concerning the Property to which Solectron is a party unless such Person, with Solectron's prior written approval (which approval will not be unreasonably withheld), became a party to the Participation Agreement by executing a supplement to that agreement as contemplated therein. "PARTICIPATION AGREEMENT" means the Amended and Restated Participation Agreement dated as of the Effective Date, between BNPLC and BNPLC's Parent and any other Participants that may become parties thereto as contemplated therein, pursuant to which BNPLC's Parent has agreed to participate in the risks and rewards to BNPLC of the 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. "PERMITTED ENCUMBRANCES" means (i) the encumbrances and other matters affecting the Property that are set forth in Exhibit B attached to the Lease, (ii) any easement agreement or other document affecting title to the Property executed by BNPLC at the request of or with the consent of Solectron, and (iii) any liens from time to time imposed to secure only ad valorem taxes on the Property which, at the time in question, are not delinquent. "PERMITTED HAZARDOUS SUBSTANCE USE" means the use, generation, 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, generation, storage and disposal shall not: (1) exceed that reasonably required for the construction of Construction Projects permitted by the Lease or for the operation of the Property for the purposes expressly permitted under subparagraph 3.(a) of the Lease; or (2) include any disposal, discharge or other release of Hazardous Substances from the 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 Solectron 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 Property in a manner that requires a RCRA treatment, storage or disposal permit, including a landfill, incinerator or other waste disposal facility. List of Defined Terms - Page 15 109 "PERMITTED HAZARDOUS SUBSTANCES" means Hazardous Substances used and reasonably required for Construction Projects expressly permitted by the Lease or for the use of the Property by Solectron and its permitted subtenants and assigns for the purposes expressly permitted by subparagraph 3.(a) of the Lease, in either case 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 usual and customary office, laboratory and janitorial products. "PERMITTED TRANSFER" means any one or more of the following: (1) the creation or conveyance of rights and interests in favor of the BNPLC's Parent or other Participants pursuant to the terms and conditions of the Participation Agreement, provided that in any case where rights or interests in the Property are so created or conveyed, the rights or interests are made expressly subject to the rights of Solectron under the Lease and the Purchase Agreement; (2) any assignment or conveyance by BNPLC to any present or future Participant of any lien or security interest against the Property (in contrast to a conveyance of BNPLC's fee estate) or of any interest in Rent, payments required by or under the Purchase Agreement or payments to be generated from the Property after the Term, provided that such assignment or conveyance is made expressly subject to the rights of Solectron under the Lease and the Purchase Agreement; (3) any agreement to exercise or refrain from exercising rights or remedies under the Lease or the Purchase Agreement made by BNPLC with any present or future Participant; (4) any assignment or conveyance by BNPLC requested by Solectron or required by any Permitted Encumbrance, by Development Documents, by the Purchase Agreement or by Applicable Laws; (5) conveyances or transfers by BNPLC or its Affiliates to BNPLC or its Affiliates, provided that in the case of any such conveyance or transfer that covers any interest in the Property, the conveyance or transfer is made expressly subject to the rights of Solectron under the Lease and the Purchase Agreement; or (6) any other assignment or conveyance by BNPLC when an Event of Default shall have occurred and be continuing or after a Landlord's Election to Continue Construction or after the Designated Sale Date. "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. "PERSONAL PROPERTY" shall have the meaning assigned to it on page 2 of the Lease. "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 Internal Revenue Code and is either (i) maintained by Solectron, Guarantor or any Subsidiary of Solectron or Guarantor for employees of Solectron, Guarantor or any Subsidiary of Solectron or Guarantor or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which Solectron, Guarantor or any Subsidiary of Solectron or Guarantor is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions. "POTENTIAL LIEN CLAIMANTS" means (1) general contractors, or (2) other parties who have filed any required statutory notices, or who have actually notified BNPLC or Solectron of claims, in order to preserve or establish their right to a mechanic's or materialman's lien against the Property in connection with any Construction Project. "PRIME RATE" means the prime interest rate or equivalent charged by BNPLC's Parent in the United States of America as announced or published by BNPLC's Parent from time to time, which need not be the lowest interest rate charged by BNPLC's Parent. If for any reason BNPLC's Parent does not announce or publish a prime rate or equivalent, the prime rate or equivalent announced or published by either Citibank, N.A. or any New York List of Defined Terms - Page 16 110 branch or office of Credit Commercial de France as selected by BNPLC shall be used to compute the rate describe in the preceding sentence. 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 Effective Date without notice to Solectron as of the effective time of each change in rates described in this definition. "PRIOR CLOSING CERTIFICATE" shall have the meaning assigned to it on the first page of the Closing Certificate. "PRIOR GUARANTY" shall have the meaning assigned to it on the first page of the Guaranty. "PRIOR LEASE" shall have the meaning assigned to it on the first page of the Lease. "PRIOR PARTICIPATION AGREEMENT" shall have the meaning assigned to it on the first page of the Participation Agreement. "PRIOR PURCHASE AGREEMENT" shall have the meaning assigned to it on the first page of the Purchase Agreement. "PROPERTY" means the Personal Property and the Real Property, collectively. "PURCHASE AGREEMENT" means the Amended and Restated Purchase Agreement dated as of July 1, 1998 between BNPLC and Solectron pursuant to which Solectron has agreed to purchase or to arrange for the purchase by a third party of BNPLC's interest in the Property, as such Purchase Agreement may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. "QUALIFIED PAYMENTS" means all payments received by BNPLC from time to time during the Term from any party (1) under any property insurance policy as a result of damage to the Property, (2) as compensation for any restriction placed upon the use or development of the Property or for the condemnation of the Property or any portion thereof, (3) because of any judgment, decree or award for injury or damage to the 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 Property; provided, however, that (x) in determining the amount of "Qualified Payments", there shall be deducted all expenses and costs of every kind, type and nature (including taxes, Breakage Costs and Attorneys' Fees) incurred by BNPLC with respect to the collection or application of such payments, (y) "Qualified Payments" shall not include any payment to BNPLC by a Participant or an Affiliate of BNPLC that is made to compensate BNPLC for the Participant's or Affiliate's share of any Losses BNPLC 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 BNPLC that BNPLC has paid to Solectron for the restoration or repair of the Property or that BNPLC 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 BNPLC 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 BNPLC as provided in subparagraph 11.(c) of the Lease. "REAL PROPERTY" shall have the meaning assigned to it on page 1 of the Lease. "REMEDIAL WORK" means any investigation, monitoring, clean-up, containment, remediation, removal, payment of response costs, or restoration work and the preparation and implementation of any closure or other List of Defined Terms - Page 17 111 required remedial plans that any governmental agency or political subdivision requires or approves (or could reasonably be expected to require if it was aware of all relevant circumstances concerning the Property), whether by judicial order or otherwise, because of the presence of or suspected presence of Hazardous Substances in, on, under or about the Property or because of any prior Hazardous Substance Activity. Without limiting the generality of the foregoing, Remedial Work also means any obligations imposed upon or undertaken by Solectron pursuant to Development Documents or any recommendations or proposals made therein. "RENT" means the Base Rent and all Additional Rent. "RESIDUAL RISK PERCENTAGE" means fifteen percent (15%). "RESPONSIBLE FINANCIAL OFFICER" means the chief financial officer, the controller, the treasurer or the assistant treasurer of either Solectron or Guarantor, as the case may be. "S&P" means Standard and Poor's Corporation. "SCOPE CHANGE" means a change to a Construction Project that, if implemented, will make the quality, function or capacity of the Improvements affected by such Construction Project "materially different" (as defined below in this paragraph) than as described or inferred by plans and other items submitted to BNPLC by Solectron as described in subparagraph 6.(d)(i) of the Lease. "Scope Change" is not intended to include the mere refinement, correction or detailing of plans or other items submitted to BNPLC by Solectron. As used in this definition, a "material difference" means a difference that (a) could (after completion of the applicable Construction Project and the funding of any Construction Advances required in connection therewith) significantly reduce any excess of the market value of the Property over Stipulated Loss Value or significantly increase any excess of Stipulated Loss Value over the market value of the Property, or (b) will change the general character of the Improvements from that needed to accommodate the uses permitted by subparagraph 3.(a) of the Lease. "SELLER" means The Quadrant Corporation. "SOLECTRON" means Solectron Washington, Inc., a California corporation. "SOLECTRON'S MAXIMUM REMARKETING OBLIGATION" shall have the meaning indicated in the following provisions: (1) In the event of a Voluntary Retention of the Property, or if the Designated Sale Date occurs on the first Business Day of July, 2003 as provided above in clause (1) of the definition of Designated Sale Date, "SOLECTRON'S MAXIMUM REMARKETING OBLIGATION" will equal (A) (x) Stipulated Loss Value on the Designated Sale Date, times (y) 100% minus the Residual Risk Percentage, less (B) the sum of any Escrowed Proceeds held and to be retained by BNPLC after the Designated Sale Date. (2) Absent a Voluntary Retention of the Property, if the Designated Sale Date should occur prior to the first Business Day of July, 2003 because of Solectron's election to accelerate the Designated Sale Date as provided above in clause (2) of the definition of Designated Sale Date, "SOLECTRON'S MAXIMUM REMARKETING OBLIGATION" will equal the Break Even Price. (3) Absent a Voluntary Retention of the Property, if the Designated Sale Date should occur prior to the first Business Day of July, 2003 for any reason other than as described in the preceding List of Defined Terms - Page 18 112 clause (2) (including because of BNPLC's election to accelerate the Designated Sale Date as provided above in clause (3) of the definition of Designated Sale Date), "SOLECTRON'S MAXIMUM REMARKETING OBLIGATION" will equal the Break Even Price. "SPREAD" means, for each Construction Period or period beginning on and including a Base Rent Date and ending on but not including the next Base Rent Date, the amount established as described below in this definition on the date that is two Business Days prior to such period by reference to the stated (or published, implied) rating by S&P or by Moody's applicable to the Index Debt on that date. The Spread shall be established at the Level in the pricing grid below which corresponds to the rating of S&P and Moody's, respectively, applicable to the Index Debt; provided that (a) if one, but not both, of Moody's or S&P shall not have in effect a rating (stated or published, implied) for the Index Debt, then the Spread shall be determined solely with reference to the available rating by the rating agency that still rates the Index Debt; (b) if the ratings established by Moody's and S&P for the Index Debt shall indicate two different but consecutive Levels, the Spread shall be based on the more favorable to Guarantor of the two Levels; (c) if the ratings established by Moody's and S&P for the Index Debt shall indicate two different but nonconsecutive Levels, the Spread shall be the average of the Spreads corresponding to such Levels; (d) if the rating 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 on the date on which it is first announced by the applicable rating agency; (e) notwithstanding anything to the contrary in (a) through (d) above, but subject to (f) and (g) below, if either the rating established by Moody's for the Index Debt of Guarantor is below Ba2 or the rating established by S&P for the Index Debt of Guarantor is below BB, the Spread shall be 80.0 basis points; (f) notwithstanding anything to the contrary in (a) through (e) above, but subject to (g) below, if Moody's does not establish a rating for the Index Debt of Ba2 or higher (including if Moody's has ceased to establish any rating for the Index Debt) and S&P does not establish a rating for the Index Debt of BB or higher (including if S&P has ceased to establish any rating of the Index Debt), the Spread shall be the difference computed by subtracting the Effective Rate from the rate that is 50.0 basis points above the Prime Rate; and (g) notwithstanding anything to the contrary in (a) through (f) above, on any date where an Event of Default has occurred and is continuing, the Spread shall equal the Default Rate less the Effective Rate.
====================================================================================================== LEVELS S&P RATING MOODY'S RATING MARGIN - ------------------------------------------------------------------------------------------------------ Level I BBB+ (or better) Baa1 (or better) 32.5 basis points - ------------------------------------------------------------------------------------------------------ Level II BBB Baa2 40.0 basis points - ------------------------------------------------------------------------------------------------------ Level III BBB- Baa3 48.75 basis points - ------------------------------------------------------------------------------------------------------ Level IV BB+ Ba1 67.5 basis points - ------------------------------------------------------------------------------------------------------ Level V BB Ba2 80.0 basis points ======================================================================================================
All determinations of the Spread by BNPLC shall, in the absence of clear and demonstrable error, be binding and conclusive for purposes of the Lease. Further BNPLC may, but shall not be required, to rely on the determination of the Spread set forth in any certificate delivered by Guarantor pursuant to subparagraph 16.(b)(ii) of the Lease, and no reduction in the Spread will be effective because of an improvement in the S&P Rating or the Moody's Rating before the date that Guarantor has notified BNPLC thereof by delivery of such a certificate. "STIPULATED LOSS VALUE" as of any date means the amount equal to the sum of the Initial Funding Advance, plus the sum of all Construction Advances and Carrying Costs added to the Outstanding List of Defined Terms - Page 19 113 Construction Allowance on or prior to such date, minus all funds received by BNPLC and applied as Qualified Payments on or prior to such date. Under no circumstances will any payment of Base Rent, Commitment Fees or Administrative Agency Fees reduce Stipulated Loss Value. "SUBSIDIARY" means any corporation of which another corporation owns, directly or indirectly, such number of outstanding shares as have more than fifty percent (50%) of the ordinary voting power for the election of directors. "SUPPLEMENTAL PAYMENT" shall have the meaning assigned to it in subparagraph 1(a)(ii) of the Purchase Agreement. "TERM" shall have the meaning assigned to it in Paragraph 1 of the Lease. "TRANSACTION EXPENSES" means costs incurred in connection with the preparation and negotiation of the Lease, the Closing Certificate, the Purchase Agreement and related documents and the consummation of the transactions contemplated therein. "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 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 Solectron or Guarantor or any ERISA Affiliate of Solectron or Guarantor under Title IV of ERISA. "VOLUNTARY RETENTION OF THE PROPERTY" means an affirmative election made by BNPLC to keep the Property pursuant to, and under the circumstances described in, the second sentence of subparagraph 1(a)(ii) of the Purchase Agreement. List of Defined Terms - Page 20 EX-10.2 5 AMENDED AND RESTATED PURCHASE AGREEMENT 1 EXHIBIT 10.2 ================================================================================ $25,000,000 AMENDED AND RESTATED PURCHASE AGREEMENT BETWEEN BNP LEASING CORPORATION ("BNPLC") AND SOLECTRON WASHINGTON, INC. ("SOLECTRON") JULY 1, 1998 (EVERETT, WASHINGTON) ================================================================================ PURSUANT TO AND AS MORE PARTICULARLY PROVIDED IN PARAGRAPH 13 OF THIS AGREEMENT, THE LEASE REFERENCED HEREIN AND THIS PURCHASE AGREEMENT ARE TO CONSTITUTE, FOR INCOME TAX PURPOSES ONLY, A FINANCING ARRANGEMENT OR CONDITIONAL SALE. AS PROVIDED IN PARAGRAPH 13 OF THIS AGREEMENT, BNPLC AND SOLECTRON EXPECT THAT SOLECTRON (AND NOT BNPLC) SHALL BE TREATED AS THE TRUE OWNER OF THE PROPERTY FOR INCOME TAX PURPOSES, THEREBY ENTITLING SOLECTRON (AND NOT BNPLC) TO TAKE DEPRECIATION DEDUCTIONS AND OTHER TAX BENEFITS AVAILABLE TO THE OWNER. 2 TABLE OF CONTENTS
Page ---- 1. SOLECTRON'S OPTIONS AND OBLIGATIONS ON THE DESIGNATED SALE DATE......................1 (a) Choices.......................................................................1 (b) Election by Solectron.........................................................2 (c) Termination of Solectron's Option To Purchase.................................3 (d) Payment to BNPLC..............................................................3 (e) Effect of Options on Subsequent Title Encumbrances............................3 2. TERMS OF CONVEYANCE UPON PURCHASE....................................................4 3. SURVIVAL OF SOLECTRON'S OBLIGATIONS..................................................4 (a) Status of this Agreement......................................................4 (b) Remedies Under the Lease and Closing Certificate..............................5 4. OTHER REPRESENTATIONS, WARRANTIES AND COVENANTS OF SOLECTRON.........................5 (a) No Default or Violation.......................................................5 (b) No Suits......................................................................5 (c) Enforceability................................................................5 (d) Organization..................................................................6 (e) Omissions.....................................................................6 5. CERTAIN REMEDIES CUMULATIVE..........................................................6 6. ATTORNEYS' FEES AND LEGAL EXPENSES...................................................6 7. ESTOPPEL CERTIFICATE.................................................................6 8. SUCCESSORS AND ASSIGNS...............................................................6 9. MISCELLANEOUS........................................................................7 (a) Notices.......................................................................7 (b) Severability..................................................................8 (c) No Implied Waiver.............................................................8 (d) NO IMPLIED REPRESENTATIONS BY BNPLC...........................................9 (e) Entire Agreement..............................................................9 (f) Time is of the Essence........................................................9 (g) Governing Law.................................................................9 (h) Paragraph Headings............................................................9 (i) Other Terms and References....................................................9 (j) Not a Partnership, Etc........................................................9 10. WAIVER OF JURY TRIAL................................................................10
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11. ADDITIONAL RIGHTS OF BNPLC RELATING TO ESCROWED PROCEEDS............................10 12. SECURITY FOR BNPLC'S OBLIGATIONS....................................................10 13. INCOME TAX REPORTING................................................................10 Exhibits and Schedules Exhibit A....................................................................Legal Description Exhibit B.................................................................................Deed Exhibit C.............................................State of Washington Excise Tax Affidavit Exhibit D..........................................................Bill of Sale and Assignment Exhibit E........................................................Acknowledgment and Disclaimer Exhibit F................................................................Intentionally Deleted Exhibit G..............................................................Secretary's Certificate Exhibit H..................................................Instruction Letter to Title Insurer Exhibit I...............................................Certificate Concerning Tax Withholding Exhibit J...............................................Indemnity for Liens Removable by BNPLC List of Defined Terms.......................................................Shared Definitions
(ii) 4 AMENDED AND RESTATED PURCHASE AGREEMENT This AMENDED AND RESTATED PURCHASE AGREEMENT (this "AGREEMENT"), by and between BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"), and SOLECTRON WASHINGTON, INC., a California corporation ("SOLECTRON"), is dated as of July 1, 1998, the Effective Date. ("EFFECTIVE DATE" and other capitalized terms used and not otherwise defined in this Agreement are intended to have the meanings assigned to them in the List of Defined Terms attached to and made a part of this Agreement.) RECITALS Pursuant to the Existing Contract, covering the Land described in Exhibit A, BNPLC acquired the Land and any appurtenances thereto from Seller contemporaneously with the execution of a Purchase Agreement between BNPLC and Solectron dated as of December 1, 1997 (the "PRIOR PURCHASE AGREEMENT") and with the execution of the Prior Lease by BNPLC and Solectron. This Agreement amends, restates and replaces the Prior Purchase Agreement in its entirety, as of the Effective Date. Pursuant to the Prior Lease, BNPLC leased the Land to Solectron and agreed to provide funding for the construction of Improvements to be owned by BNPLC. Contemporaneously with the execution of this Agreement, BNPLC and Solectron are executing the Lease to amend, restate and replace the Prior Lease in its entirety as of the Effective Date. (BNPLC's interests in the Land, the Improvements and in all other real and personal property from time to time covered by the Lease and included within the "Property" as defined therein are hereinafter collectively referred to as the "PROPERTY".) By this Agreement, Solectron and BNPLC intend to evidence the terms and conditions upon which Solectron will purchase or arrange for the purchase of the Property. AGREEMENTS 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. SOLECTRON'S OPTIONS AND OBLIGATIONS ON THE DESIGNATED SALE DATE. (a) Choices. On the Designated Sale Date, even if an Event of Default shall have occurred and be continuing or the Lease shall have been terminated, Solectron shall have the right and the obligation to either: (i) purchase or cause an Affiliate of Solectron to purchase BNPLC's interest in the Property and in Escrowed Proceeds, if any, for a cash price equal to the Break Even Price; or (ii) cause an Applicable Purchaser who is not an Affiliate of Solectron to purchase the Property and Escrowed Proceeds, if any, from BNPLC for a net cash price set by Solectron at an amount not below the lesser of (a) Fair Market Value, (b) the Residual Risk Percentage of Stipulated Loss Value outstanding immediately prior to the purchase, or (c) the Break Even Price. If, however, pursuant to the 5 preceding sentence Solectron sets a net cash price below the Residual Risk Percentage of Stipulated Loss Value and below the Break Even Price (because Fair Market Value is lower), BNPLC may affirmatively elect to keep the Property and any Escrowed Proceeds rather than sell to the Applicable Purchaser, in which case Solectron must pay to BNPLC a supplemental payment equal to Solectron's Maximum Remarketing Obligation. Unless BNPLC elects to keep the Property pursuant to the preceding sentence, Solectron must make a supplemental payment to BNPLC on the Designated Sale Date equal to the excess (if any) of the Break Even Price over the total of the cash price actually paid to BNPLC on the Designated Sale Date by the Applicable Purchaser for the Property and any Escrowed Proceeds; provided, however, such supplemental payment shall not exceed Solectron's Maximum Remarketing Obligation. (Any supplemental payment payable to BNPLC by Solectron, rather than by the Applicable Purchaser, pursuant to this clause (ii) is herein referred to as the "SUPPLEMENTAL PAYMENT.") If the cash price actually paid by the Applicable Purchaser to BNPLC exceeds the Break Even Price and all other sums that are then due from Solectron to BNPLC under the Lease and Closing Certificate, Solectron shall be entitled to such excess. If any amount payable to BNPLC pursuant to this subparagraph 1.(a) is not actually paid to BNPLC on the Designated Sale Date, Solectron shall pay interest on the past due amount computed at the Default Rate from the Designated Sale Date. However, Solectron shall be entitled to a credit against the interest required by the preceding sentence equal to the Base Rent, if any, actually paid by Solectron pursuant to the Lease for any period after the Designated Sale Date. (b) Election by Solectron. Solectron shall have the right to elect between satisfying the obligations set out in clause (i) of the preceding subparagraph 1.(a) or satisfying the obligations set out in clause (ii) of the preceding subparagraph 1.(a); provided, however: (i) To give BNPLC the opportunity to have Fair Market Value determined by an appraiser (as provided in the definition of Fair Market Value) before the Designated Sale Date, Solectron must, unless Solectron concedes that Fair Market Value will be no less than the Residual Risk Percentage of Stipulated Loss Value on the Designated Sale Date, provide BNPLC with a Remarketing Notice. As used in this Agreement, "REMARKETING NOTICE" means a notice given by Solectron to BNPLC (and to each of the Participants) no earlier than two hundred seventy days before the Designated Sale Date and no later than one hundred and eighty days before the Designated Sale Date, specifying that Solectron does not concede that Fair Market Value will be greater than the Residual Risk Percentage of Stipulated Loss Value. (No Remarketing Notice will be required if Solectron does concede that Fair Market Value will equal or exceed the Residual Risk Percentage of Stipulated Loss Value on the Designated Sale Date.) But if for any reason (including any acceleration of the Designated Sale Date as provided in the definition of Designated Sale Date in the List of Defined Terms) Solectron 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 determining any Supplemental Payment required by this Agreement, be deemed to be no less than the Residual Risk Percentage of Stipulated Loss Value on the Designated Sale Date. (ii) To give BNPLC the opportunity to prepare the deed and other documents that BNPLC must tender pursuant to Paragraph 2 (collectively, the "SALE CLOSING DOCUMENTS") before the Designated Sale Date, Solectron must, if it is to satisfy the obligations set forth in subparagraph 1.(a) by causing an Affiliate of Solectron or another Applicable Purchaser to purchase the Property, irrevocably specify the Affiliate or other Applicable Purchaser in notice to BNPLC given at least seven days prior to the Designated Sale Date. If for any reason Solectron fails to so specify an Affiliate or another Applicable Purchaser, Solectron shall be deemed to have irrevocably elected to satisfy the obligations set forth in subparagraph 1.(a)(i) by itself purchasing the Property. 2 6 (c) Termination of Solectron's Option To Purchase. Without limiting BNPLC's right to require Solectron to satisfy the obligations imposed by subparagraph 1.(a), Solectron shall have no further option hereunder to purchase the Property if either: (i) Solectron shall have elected to satisfy its obligations under subparagraph 1.(a)(ii) on a Designated Sale Date and BNPLC shall have elected to keep the Property on such Designated Sale Date in accordance with subparagraph 1.(a)(ii); or (ii) Solectron 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 day period for tender specified in the next sentence. If BNPLC does not receive all payments due under the Lease or hereunder on a Designated Sale Date, Solectron may nonetheless tender to BNPLC the full Break Even Price and all amounts then due under the Lease, together with interest on the total Break Even 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 days after the applicable Designated Sale Date, BNPLC must accept it and promptly thereafter deliver any Escrowed Proceeds and the Sale Closing Documents listed in Paragraph 2. (d) Payment to BNPLC. All amounts payable under the preceding subparagraphs 1.(a) or 1.(c) by Solectron 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 subparagraph 1.(a), on the Designated Sale Date Solectron must pay all amounts then due to BNPLC under the Lease. BNPLC will remit any excess amounts due Solectron pursuant to the last sentence of subparagraph 1.(a)(ii) promptly after BNPLC's receipt of the same. To the extent, if any, that Solectron claims and is entitled to claim a reduction in the Break Even Price because of any Deductible Judgments, as provided in the definition of Break Even Price in the List of Defined Terms attached to this Agreement, Solectron must pay such Deductible Judgments for the account of BNPLC contemporaneously with the payment of the other amounts required by subparagraph 1.(a). (e) Effect of Options on Subsequent Title Encumbrances. Any conveyance of the Property to Solectron or any Applicable Purchaser pursuant to this Agreement shall cut off and terminate any interest in the Land, Improvements or other Property claimed by, through or under BNPLC, including any interest claimed by the Participants and including any Liens Removable by BNPLC (such as, but not limited to, any judgment liens established against the Property because of a judgment rendered against BNPLC and any leasehold or other interests conveyed by BNPLC in the ordinary course of BNPLC's business), but not obligations of Solectron to BNPLC under the indemnities in the Closing Certificate or under the Lease or this Agreement then due 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. 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 Solectron hereby. Further, Solectron 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 Solectron nor any Applicable Purchaser shall be responsible for the proper distribution or application of any such payments by BNPLC; and any such payment to BNPLC shall discharge the obligation of Solectron to cause such payment to all Persons claiming an interest in such payment. The parties shall record a memorandum of this Agreement for purposes of effecting constructive notice to all Persons of Solectron's rights under this Agreement, including its rights under this subparagraph. 3 7 2. TERMS OF CONVEYANCE UPON PURCHASE. Immediately after Solectron tenders all payments to BNPLC as required by and pursuant to the preceding Paragraph 1, BNPLC must, unless it is to keep the Property as permitted by subparagraph 1.(a)(ii), deliver Escrowed Proceeds, if any, and convey all of its right, title and interest in the Land, Improvements and other Property by BNPLC's execution, acknowledgment (where appropriate) and delivery of the Sale Closing Documents to Solectron or the Applicable Purchaser, as the case may be, subject only to the Permitted Encumbrances and any other encumbrances that do not constitute Liens Removable by BNPLC. However, such conveyance shall not include the right to receive any payment under the indemnities in the Closing Certificate or 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. The Sale Closing Documents used to accomplish such conveyance shall consist of the following: (1) a Deed in the form attached as Exhibit B, (2) a State of Washington Excise Tax Affidavit in the form attached as Exhibit C, (3) a Bill of Sale and Assignment of Lease and Intangible Assets in the form attached as Exhibit D, (4) an Acknowledgment of Disclaimer of Representations and Warranties in the form attached as Exhibit E, which Solectron or the Applicable Purchaser must execute and return to BNPLC, (5) a Secretary's Certificate in the form attached as Exhibit G, (6) a letter to the title insurance company insuring title to the Property in the form attached as Exhibit H, (7) a certificate concerning tax withholding in the form attached as Exhibit I, and (8) if applicable, an Indemnity for Liens Removable by BNPLC in the form attached hereto as Exhibit J. The Indemnity for Liens Removable by BNPLC described in the preceding sentence shall be required if, but only if, before the other Sale Closing Documents are tendered by BNPLC in accordance with this Agreement, Solectron shall have identified, provided a written list to BNPLC of, and been unable to obtain a commitment for title insurance against, any title encumbrances that Solectron believes in good faith may constitute Liens Removable by BNPLC and that, if valid, would constitute Liens Removable by BNPLC. Any such Indemnity will be completed by attaching a list of such identified encumbrances as Annex B thereto. If for any reason BNPLC fails to tender the Sale Closing Documents as required by this Paragraph 2, BNPLC may cure such refusal at any time before thirty days after receipt of a demand for such cure from Solectron. 3. SURVIVAL OF SOLECTRON'S OBLIGATIONS. (a) Status of this Agreement. Except as expressly provided herein, this Agreement shall not terminate, nor shall Solectron have any right to terminate this Agreement, nor shall Solectron be entitled to any reduction of the Break Even Price or Supplemental Payment hereunder, nor shall the obligations of Solectron to BNPLC under Paragraph 1 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 Solectron'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 Solectron or any party claiming under Solectron by paramount title or otherwise, (v) Solectron'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 Solectron to make payment to and, if applicable, to cause the Applicable Purchaser to make payment to BNPLC under Paragraph 1 shall be separate and independent covenants and agreements from BNPLC's obligations under this Agreement or any other agreement between BNPLC and Solectron; provided, however, that nothing in this subparagraph shall excuse BNPLC from its obligation to tender the Sale Closing Documents in substantially the form attached hereto as exhibits as required by Paragraph 2 and any Escrowed Proceeds (if such tender is not excused because of an election by BNPLC to keep the Property under subparagraph 1.(a)(ii)) immediately after the tender by Solectron and/or the Applicable Purchaser of such payments and of the other documents to be executed in favor of BNPLC at the closing of the sale. 4 8 However, nothing in this subparagraph, nor the performance without objection by Solectron of its obligations hereunder, shall be construed as a waiver by Solectron of any right Solectron may have at law or in equity, following (A) any failure by BNPLC to tender any Escrowed Proceeds or the Sale Closing Documents as required by Paragraph 2 (if such tender is not excused because of an election by BNPLC to keep the Property under subparagraph 1.(a)(ii)) upon the tender by Solectron or the Applicable Purchaser of the payments required by Paragraph 1 and of the other documents to be executed in favor of BNPLC at the closing of the sale hereunder, or (B) any failure by BNPLC to remove all Liens Removable by BNPLC before conveying the Property pursuant to this Agreement, (i) to recover monetary damages proximately caused by such failure of BNPLC if BNPLC does not cure the failure within thirty days after Solectron demands a cure by written notice to BNPLC, or (ii) to obtain a decree compelling specific performance of BNPLC's obligation hereunder. (b) Remedies Under the Lease and Closing Certificate. No repossession of or re-entering upon the Property or exercise of any other remedies available to BNPLC under the Lease and Closing Certificate shall relieve Solectron of its liabilities and obligations hereunder, all of which shall survive BNPLC's exercise of remedies under the Lease and Closing Certificate. Solectron acknowledges that the consideration for this Agreement is separate and independent of the consideration for the Lease and Closing Certificate, and Solectron's obligations hereunder shall not be affected or impaired by any event or circumstance that would excuse Solectron from performance of its obligations under the Lease and Closing Certificate. 4. OTHER REPRESENTATIONS, WARRANTIES AND COVENANTS OF SOLECTRON. Solectron represents, warrants and covenants as follows: (a) No Default or Violation. The execution, delivery and performance by Solectron of this Agreement does not and will not constitute a breach or default under any other material agreement or contract to which Solectron is a party or by which Solectron is bound or which affects the Property, and does not violate or contravene any law, order, decree, rule or regulation to which Solectron is subject, and such execution, delivery and performance by Solectron 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, Solectron's property pursuant to the provisions of any of the foregoing. (b) No Suits. Other than matters, if any, disclosed in Schedule 2 attached to the Lease, there are no judicial or administrative actions, suits, proceedings or investigations pending or, to Solectron's knowledge, threatened that will adversely affect the Property or the validity, enforceability or priority of this Agreement, and Solectron 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 use, occupancy or operation of the Property. (c) Enforceability. The execution, delivery and performance by Solectron of this Agreement is duly authorized and does not require the consent or approval of any governmental body or other regulatory authority that has not heretofore been obtained and is not in contravention of or conflict with any applicable laws or any term or provision of Solectron's articles of incorporation or bylaws. This Agreement is a valid, binding and legally enforceable obligation of Solectron, in accordance with its 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. (d) Organization. Solectron is duly incorporated and legally existing under the laws of the State of California and is duly qualified to do business in the State of Washington. Solectron 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 fulfill its obligations under this Agreement. 5 9 (e) Omissions. None of Solectron's representations or warranties contained in this Agreement or in any other document, certificate or written statement furnished to BNPLC by or on behalf of Solectron in connection with this Agreement 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. 5. CERTAIN 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. 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. 7. ESTOPPEL CERTIFICATE. Either party to this Agreement will, upon not less than twenty days' prior request by the other party hereto, 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 responding party has knowledge. Any such statement may be relied upon by any Participant or prospective purchaser or permitted assignee of BNPLC or Solectron with respect to the Property. 8. SUCCESSORS AND ASSIGNS. The terms, provisions, covenants and conditions hereof shall be binding upon Solectron and BNPLC and their respective permitted successors and assigns and shall inure to the benefit of Solectron and BNPLC and all permitted transferees, mortgagees, successors and assignees of Solectron and BNPLC with respect to the Property; provided, that the rights of BNPLC hereunder shall not pass to Solectron or any Applicable Purchaser or any subsequent owner claiming through Solectron or an Applicable Purchaser. 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, and if BNPLC's successor in interest assumes in writing for the benefit of Solectron 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, then BNPLC shall thereby be released from any further obligations arising under this Agreement or the Lease after the date of such assumption, and Solectron agrees to look solely to each successor in interest of BNPLC for performance of such obligations. 9. MISCELLANEOUS. (a) Notices. Each provision of this Agreement, or of any Applicable Laws with reference to the sending, mailing or delivery of any notice or demand hereunder, or with reference to the making of any payment required hereunder, shall be deemed to be complied with when and if the following steps are taken: 6 10 (i) All payments required to be paid by Solectron or any Applicable Purchaser to BNPLC hereunder shall be paid to BNPLC in immediately available funds by wire transfer to: Federal Reserve Bank of New York ABA 026007689 Banque Nationale de Paris /BNP/ BNP San Francisco /AC/ 14334000176 /Ref/ Solectron (Solectron Washington Purchase Agreement) or at such other place and in such other manner as BNPLC may designate in a notice to Solectron. Time is of the essence as to all payments of Solectron under this Agreement. (ii) All payments required to be made by BNPLC to Solectron pursuant to the last sentence of subparagraph 1.(a)(ii) shall be paid to Solectron in immediately available funds at the address of Solectron set forth below or as Solectron may otherwise direct by notice sent in accordance herewith. (iii) All notices, demands, approvals, consents and other communications to be made hereunder to or by the parties hereto must, to be effective for purpose of this Agreement, be in writing. Notices, demands and other communications required or permitted hereunder are to be sent to the addresses set forth below (or in the case of communications to Participants, at the addresses set forth in Schedule 1 attached to 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 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 G. Cox Telecopy: (214) 969-0060 With a copy to: Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Rafael Lumanlan or Stuart Darby Telecopy: (415) 296-8954 7 11 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 Solectron: Solectron Washington, Inc. 777 Gibraltar Drive, Building #5 Milpitas, CA 95035 Attn: Chief Financial Officer Telecopy: (408) 956-6059 With a copy to: Wilson, Sonsini, Goodrich & Rosati 650 Page Mill Palo Alto, California 94304-1050 Attention: Real Estate Department/DSS Telecopy: (415) 493-6811 (b) Severability. If any term or provision of this Agreement 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 Agreement, 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. Further, the obligations of Solectron hereunder, to the maximum extent possible, shall be deemed to be separate, independent and in addition to, not in lieu of, the obligations of Solectron under the Lease and Closing Certificate. In the event of any inconsistency between the terms of this Agreement and the terms and provisions of the Lease and Closing Certificate, the terms and provisions of this Agreement shall control. (c) No Implied Waiver. The failure of BNPLC or Solectron 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 Agreement shall not be construed as a waiver or a relinquishment thereof for the future. The waiver of or redress for any breach of this Agreement 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 BNPLC of any payment hereunder with knowledge of the breach of any covenant or agreement contained in this Agreement shall not be deemed a waiver of such breach, and no waiver of any provision of this Agreement shall be deemed to have been made unless expressed in writing and signed by the waiving party. (d) NO IMPLIED REPRESENTATIONS BY BNPLC. BNPLC AND BNPLC'S AGENTS HAVE MADE NO REPRESENTATIONS OR PROMISES WITH RESPECT TO THE PROPERTY EXCEPT AS EXPRESSLY SET FORTH HEREIN AND IN THE LEASE, AND NO RIGHTS, EASEMENTS OR LICENSES 8 12 ARE ACQUIRED BY SOLECTRON BY IMPLICATION OR OTHERWISE EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE LEASE. (e) Entire Agreement. This Agreement, the Closing Certificate, the Lease and the other documents dated as of July 1, 1998, which are being executed by Solectron and executed or accepted by BNPLC contemporaneously with the execution of this Agreement supersede any prior negotiations and agreements between BNPLC and Solectron concerning the Property, and no amendment or modification of this Agreement shall be binding or valid unless expressed in a writing executed by both parties hereto. (f) Time is of the Essence. Time is of the essence as to all obligations of Solectron and BNPLC and all notices required of Solectron and BNPLC under this Agreement. (g) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Washington without regard to conflict or choice of laws. (h) 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. (i) Other Terms and References. Words of any gender used in this Agreement 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 Agreement, 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 Agreement 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 BNPLC is a party or of which BNPLC is an intended beneficiary, without the consent of BNPLC. All accounting terms used but not specifically defined herein shall be construed in accordance with GAAP. The words "this Agreement", "herein", "hereof", "hereby", "hereunder" and words of similar import when used in this Agreement refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The phrases "this Paragraph" and "this subparagraph" and similar phrases used herein refer only to the Paragraphs or subparagraphs in which the phrase occurs. As used herein the word "or" is not exclusive. As used herein the words "include", "including" and similar terms shall be construed as if followed by "without limitation to". (j) Not a Partnership, Etc. NOTHING IN THIS AGREEMENT IS INTENDED TO BE OR TO CREATE ANY PARTNERSHIP, JOINT VENTURE, OR OTHER JOINT ENTERPRISE BETWEEN BNPLC AND SOLECTRON. NEITHER THE EXECUTION OF THIS AGREEMENT NOR THE ADMINISTRATION OF THIS AGREEMENT OR OTHER DOCUMENTS REFERENCED HEREIN BY BNPLC, NOR ANY OTHER RIGHT, DUTY OR OBLIGATION OF BNPLC UNDER OR PURSUANT TO THIS AGREEMENT OR SUCH DOCUMENTS IS INTENDED TO BE OR TO CREATE ANY FIDUCIARY OBLIGATIONS OF BNPLC TO SOLECTRON. 9 13 10. WAIVER OF JURY TRIAL. BNPLC AND SOLECTRON EACH HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER DOCUMENT OR DEALINGS BETWEEN THEM RELATING TO THIS AGREEMENT OR THE 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 contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Solectron 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. Solectron and BNPLC 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 AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS AGREEMENT OR THE PROPERTY. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. 11. ADDITIONAL RIGHTS OF BNPLC RELATING TO ESCROWED PROCEEDS. BNPLC shall be entitled to deliver any Escrowed Proceeds it holds on the Designated Sale Date directly to Solectron or to any Applicable Purchaser purchasing BNPLC's interest in the Property and the Escrowed Proceeds pursuant to this Agreement notwithstanding any prior actual or attempted conveyance or assignment by Solectron, voluntary or otherwise, of any right to receive the same; BNPLC shall not be responsible for the proper distribution or application by Solectron or any Applicable Purchaser of any such Escrowed Proceeds paid over to Solectron or the Applicable Purchaser; and any such payment of Escrowed Proceeds to Solectron or an Applicable Purchaser shall discharge any obligation of BNPLC to deliver the same to all Persons claiming an interest therein. 12. SECURITY FOR BNPLC'S OBLIGATIONS. To secure Solectron's right to purchase the Property pursuant to this Agreement and to recover any damages caused by a breach of Paragraph 2 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 Solectron a lien and security interest against all rights, title and interests of BNPLC from time to time in and to the Land, Improvements and other Property. Solectron may enforce such lien and security interest judicially after any such breach by BNPLC, but not otherwise. Solectron 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, subject to the condition that BNPLC unequivocally and effectively waive, following any such judicial foreclosure of the lien and security interest granted in this paragraph, BNPLC's right of redemption. Contemporaneously with the execution of this Agreement, Solectron 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 Solectron shall be entitled to record such memorandum at any time prior to the Designated Sale Date. 13. INCOME TAX REPORTING. BNPLC and Solectron intend this Agreement and the Lease to have a form for income taxes which is different than the form of this Agreement and the Lease for other purposes, and thus the parties acknowledge and agree as follows: (i) FOR PURPOSES OF DETERMINING THEIR RESPECTIVE FEDERAL, STATE AND LOCAL INCOME TAX OBLIGATIONS, BNPLC and Solectron believe and intend that this Agreement and the Lease constitute a financing arrangement or conditional sale. Both BNPLC and Solectron agree to report this Agreement and the Lease as a financing arrangement or conditional sale on their respective income tax returns (the "REQUIRED REPORTING"), unless such Required Reporting is challenged in writing by the Internal Revenue 10 14 Service or another governmental authority with jurisdiction (a "TAX CHALLENGE"). Consistent with the foregoing, BNPLC and Solectron expect that Solectron (and not BNPLC) shall be treated as the true owner of the Property for income tax purposes, thereby entitling Solectron (and not BNPLC) to take depreciation deductions and other tax benefits available to the owner. Solectron shall also report all interest earned on Escrowed Proceeds as Solectron's income for federal, state and local income tax purposes. REFERENCES IN THIS AGREEMENT OR IN THE LEASE TO A "LEASE" OR THE "LEASED PROPERTY" ARE NOT INTENDED FOR INCOME TAX PURPOSES TO REFLECT THE INTENT OF BNPLC OR SOLECTRON AS TO THE FORM OF THE TRANSACTIONS COVERED BY, OR THE PROPER CHARACTERIZATION OF, THIS AGREEMENT AND THE LEASE. (ii) FOR ALL OTHER PURPOSES, INCLUDING THE DETERMINATION OF THE APPROPRIATE FINANCIAL ACCOUNTING FOR THIS AGREEMENT AND THE DETERMINATION OF THEIR RESPECTIVE RIGHTS AND REMEDIES UNDER STATE LAW, BNPLC and Solectron believe and intend that (i) the Lease constitutes a true Lease, not a mere financing arrangement, enforceable in accordance with its express terms (and neither this Paragraph 13 nor the provisions referencing this Paragraph on the title page of this Agreement nor the corresponding provisions in the Lease are intended to affect the enforcement of any other provisions of this Agreement or the Lease) and (ii) this Agreement shall constitute a separate and independent contract, enforceable in accordance with the express terms and conditions set forth herein. In this regard, Solectron acknowledges that Solectron asked BNPLC to participate in the transactions evidenced by this Agreement and the Lease as a landlord and owner of the Property, not as a lender. Although other transactions might have been used to accomplish similar results, Solectron expects to receive certain material accounting and other advantages through the use of a lease transaction. Accordingly, and notwithstanding the Required Reporting for income tax purposes, Solectron cannot equitably deny that this Agreement and the Lease should be construed and enforced in accordance with their respective terms, rather than as a mortgage or other security device, in any action brought by BNPLC to enforce this Agreement or the Lease. In the event of a Tax Challenge, BNPLC and Solectron shall each provide to the other copies of all notices from the Internal Revenue Service or any other governmental authority presenting the Tax Challenge. Further, before changing from the Required Reporting because of a Tax Challenge, BNPLC and Solectron shall each consider in good faith any reasonable suggestions received from the other party to this Agreement about an appropriate response to the Tax Challenge; provided, however, that the suggestions are set forth in a notice delivered no later than thirty Business Days after the suggesting party is first notified of the Tax Challenge; and, provided further, that when presented with a Tax Challenge, BNPLC shall have the right to change from the Required Reporting rather than participate in any litigation or other legal proceeding against the Internal Revenue Service or another governmental authority. In any event, Solectron shall indemnify BNPLC and defend and hold BNPLC harmless from and against all Losses imposed on or asserted against or incurred by BNPLC by reason of, in connection with or arising out of any such challenge or any resulting recharacterization of this Agreement or the Lease required by the Internal Revenue Service or another governmental authority, including any additional taxes that may become due upon any sale under this Agreement, to the extent (if any) that such Losses are not offset by tax savings to BNPLC resulting from additional depreciation deductions or other tax benefits of the recharacterization. [The signature pages follow.] 11 15 IN WITNESS WHEREOF, Solectron and BNPLC have caused this Agreement to be executed as of July 1, 1998. "SOLECTRON" SOLECTRON WASHINGTON, INC. By: /s/ LOUIS F. BIECK ------------------------ Name (print): LOUIS F. BIECK Title: VICE PRESIDENT 16 [Continuation of signature pages to Amended and Restated Purchase Agreement dated to be effective July 1, 1998] "BNPLC" BNP LEASING CORPORATION By: /s/ LLOYD G. COX ------------------------------- Lloyd G. Cox, Vice President 17 EXHIBIT A LEGAL DESCRIPTION All that certain real property situate in the City of Everett, County of Snohomish, State of Washington, being a portion of the Southwest quarter of Section 2, and a portion of the Southeast quarter of Section 3, all in Township 28 North, Range 4 East, W.M., and also being a portion of Lot 2 Binding Site Plan/Record of Survey recorded under Snohomish County Recording Number 8910255010, and being more particularly described as follows: BEGINNING at the quarter corner common to said Sections 2 and 3; thence from said point of beginning along the East-West centerline of said Section 2, South 88(Degree) 10'56" East 1192.73 feet; thence leaving said East-West centerline South 01(Degree) 49'04" West 347.51 feet; thence South 26(Degree) 07'32" East 208.83 feet; thence South 12(Degree) 56'43" East 395.73 feet to the Northerly right of way line of Merrill Creek Parkway as deeded to the City of Everett under Snohomish County Recording Number 8801270201, Snohomish County records; thence along said right of way line of Merrill Creek Parkway from a tangent that bears South 77 (Degree) 03'17" West, along the arc of a curve to the left having a radius of 630.00 feet and a central angle of 37(Degree) 00'43", an arc length of 406.97 feet; thence leaving said right of way line North 79(Degree) 36'24" West 1190.79 feet to the Easterly boundary of the Binding Site Plan/Record of Survey entitled Seaway Center Two/Intermec recorded under Snohomish County Recording Number 8910255009; thence along said Easterly boundary North 00(Degree) 50'18" East 955.72 feet to the East-West centerline of said Section 3; thence along said East-West centerline South 88(Degree) 33'31" East 136.77 feet to the point of beginning; (ALSO KNOWN AS Lot 2F of Binding Site Plan/Record of Survey Seaway Center Five as recorded under Snohomish County Recording Number 9204015001); TOGETHER WITH a non-exclusive driveway and access easement as set forth in document entitled Driveway and Assess Easement Agreement recorded under Snohomish County Recording Number 9711050088. Situate in the County of Snohomish, State of Washington 18 EXHIBIT B DEED RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: NAME: [Solectron or the Applicable Purchaser] ADDRESS: ___________________ ATTN: ___________________ CITY: ___________________ STATE: ___________________ Zip: ___________________ BNP LEASING CORPORATION, a Delaware corporation (hereinafter called "Grantor"), for and in consideration of the sum of Ten Dollars ($10.00) and other valuable consideration paid to Grantor by [Solectron or the Applicable Purchaser] (hereinafter called "Grantee"), the receipt and sufficiency of which are hereby acknowledged, does hereby GRANT, SELL, CONVEY, ASSIGN and DELIVER to Grantee the real property described in Annex A attached hereto and hereby made a part hereof, 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 (collectively, the "Property"); provided, however, this conveyance is made by Grantor and accepted by Grantee subject to all zoning and other ordinances affecting the Property, all general or special assessments due and payable after the date hereof, all encroachments, variations in area or in measurements, boundary line disputes, roadways and other matters not of record which would be disclosed by a current survey and inspection of the Property, and the encumbrances listed in Annex B attached hereto and made a part hereof (collectively, the "Permitted Encumbrances"). TO HAVE AND TO HOLD the Property, together with all and singular the rights and appurtenances thereto in any wise belonging unto Grantee, its successors and assigns, forever, and Grantor does hereby bind Grantor and Grantor's successors 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. 19 IN WITNESS WHEREOF, this Deed is executed by Grantor on this _____ day of _________________________________, _______. The address of Grantee is: ___________________________ ___________________________ BNP LEASING CORPORATION Date: As of ____________ By: ____________________ Its: Exhibit B - Page 2 20 STATE OF ____________ ) ) SS COUNTY OF ___________ ) 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 _______________________ Exhibit B - Page 3 21 ANNEX A LEGAL DESCRIPTION [DRAFTING NOTE: TO THE EXTENT THAT THE "LAND" COVERED BY THE LEASE CHANGES FROM TIME TO TIME BECAUSE OF ADJUSTMENTS FOR WHICH SOLECTRON REQUESTS BNPLC'S CONSENT OR APPROVAL AS PROVIDED IN THE LEASE, SO TOO WILL THE DESCRIPTION OF THE LAND BELOW CHANGE. ANY SUCH CHANGES WILL BE INCORPORATED INTO THE DESCRIPTION BELOW AND THIS "DRAFTING NOTE" WILL BE DELETED BEFORE THE DEED TO WHICH THIS DESCRIPTION IS ATTACHED IS ACTUALLY EXECUTED AND DELIVERED.] All that certain real property situate in the City of Everett, County of Snohomish, State of Washington, being a portion of the Southwest quarter of Section 2, and a portion of the Southeast quarter of Section 3, all in Township 28 North, Range 4 East, W.M., and also being a portion of Lot 2 Binding Site Plan/Record of Survey recorded under Snohomish County Recording Number 8910255010, and being more particularly described as follows: BEGINNING at the quarter corner common to said Sections 2 and 3; thence from said point of beginning along the East-West centerline of said Section 2, South 88(Degree) 10'56" East 1192.73 feet; thence leaving said East-West centerline South 01(Degree) 49'04" West 347.51 feet; thence South 26(Degree) 07'32" East 208.83 feet; thence South 12(Degree) 56'43" East 395.73 feet to the Northerly right of way line of Merrill Creek Parkway as deeded to the City of Everett under Snohomish County Recording Number 8801270201, Snohomish County records; thence along said right of way line of Merrill Creek Parkway from a tangent that bears South 77(Degree) 03'17" West, along the arc of a curve to the left having a radius of 630.00 feet and a central angle of 37(Degree) 00'43", an arc length of 406.97 feet; thence leaving said right of way line North 79(Degree) 36'24" West 1190.79 feet to the Easterly boundary of the Binding Site Plan/Record of Survey entitled Seaway Center Two/Intermec recorded under Snohomish County Recording Number 8910255009; thence along said Easterly boundary North 00(Degree) 50'18" East 955.72 feet to the East-West centerline of said Section 3; thence along said East-West centerline South 88(Degree) 33'31" East 136.77 feet to the point of beginning; (ALSO KNOWN AS Lot 2F of Binding Site Plan/Record of Survey Seaway Center Five as recorded under Snohomish County Recording Number 9204015001); TOGETHER WITH a non-exclusive driveway and access easement as set forth in document entitled Driveway and Assess Easement Agreement recorded under Snohomish County Recording Number 9711050088. Situate in the County of Snohomish, State of Washington Exhibit B - Page 4 22 ANNEX B PERMITTED ENCUMBRANCES [DRAFTING NOTE: TO THE EXTENT THAT ENCUMBRANCES (OTHER THAN "LIENS REMOVABLE BY BNPLC") ARE IDENTIFIED IN ADDITION TO THOSE DESCRIBED BELOW, SUCH ADDITIONAL ENCUMBRANCES WILL BE ADDED TO THE LIST BELOW AND THIS "DRAFTING 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" UNDER THE LEASE FROM TIME TO TIME OR BECAUSE OF SOLECTRON'S REQUEST FOR BNPLC'S CONSENT OR APPROVAL TO AN ADJUSTMENT AS PROVIDED IN THE LEASE.] This conveyance is subject to all encumbrances not constituting a "Lien Removable by BNPLC" (as defined in the List of Defined Terms attached to the Lease Agreement referenced in item #1 of the list below), including the following matters to the extent the same are still valid and in force: - - Amended and Restated Lease Agreement dated as of July 1, 1998, by and between BNP Leasing Corporation, as lessor, and Solectron Washington, Inc., as lessee. - - Liens securing TAXES AND ASSESSMENTS, not yet due and payable. - - EASEMENT AND THE TERMS AND CONDITIONS THEREOF: GRANTEE: Public Utility District No. 1 of Snohomish County PURPOSE: Underground/overhead electric distribution system AREA AFFECTED: Ten foot wide strips adjacent to right of way known as Merrill Creek Parkway as conveyed to the City of Everett by deed recorded under Snohomish County Recording Number 8801270201; and the North boundary of Seaway Blvd., TOGETHER WITH the right to extend and establish switch cabinets, transformers, pedestals and other appurtenances beyond said easement area onto adjacent property of the grantor RECORDED: July 26, 1988 RECORDING NO.: 8807260343 Contains covenant prohibiting structures over said easement or other activity which might endanger the underground system. - - EASEMENT AND THE TERMS AND CONDITIONS THEREOF: GRANTEE: City of Everett PURPOSE: Utilities, drainage and detention pond facilities and appurtenances AREA AFFECTED: Portions of subject property RECORDED: December 13, 1988 RECORDING NO.: 8812130477 - - Right to make necessary slopes for cuts or fills upon property herein described as granted to City of Everett by deed recorded under Recording No. 8801270201. Exhibit B - Page 5 23 - - ALL COVENANTS, CONDITIONS, RESTRICTIONS, RESERVATIONS, EASEMENTS OR OTHER SERVITUDES, if any, disclosed by Binding Site Plan/Survey as recorded under Snohomish County Recording Number 9204015001. - - The following as and to extent shown on as-built Survey prepared by W&H Pacific on March 20, 1997, under Job No. 3-2944-0133: A) Fence from Southerly adjoiner extends 2.2 feet Northerly of our South property line. B) Bird feeder post 0.79 feet South of North property line (belongs to property adjoiner to North). C) Property adjoiner to the North wood fence extends 0.11 feet South of subject property's North line. D) Along Easterly property line - 1/2 light pole onto subject property. - - DRIVEWAY AND ACCESS EASEMENT AGREEMENT AND THE TERMS AND CONDITIONS THEREOF: GRANTEE: Cintas Sales Corporation, an Ohio Corporation PURPOSE: Ingress, egress and utilities and related rights as in said instrument AREA AFFECTED: Southeasterly portion of subject property RECORDED: November 5, 1997 RECORDING NO.: 9711050088 Said easement contains a covenant to bear equal share of cost of construction, maintenance or repair of same. - - EASEMENT AND THE TERMS AND CONDITIONS THEREOF: GRANTEE: City of Everett, a municipal corporation PURPOSE: Sewer system and related rights as in said instrument AREA AFFECTED: 20 foot wide strip of land within Lot 2F RECORDED: November 10, 1997 RECORDING NO.: 9711100557 - - EASEMENT AND THE TERMS AND CONDITIONS THEREOF: GRANTEE: City of Everett, a municipal corporation PURPOSE: Water system and related rights as in said instrument AREA AFFECTED: 15 foot wide strips of land within Lot 2F RECORDED: November 12, 1997 RECORDING NO.: 9711120701 Exhibit B - Page 6 24 EXHIBIT C See the form of Washington Excise Tax Affidavit attached to and made a part of this Exhibit C. 25 EXHIBIT D BILL OF SALE AND ASSIGNMENT OF LEASE AND INTANGIBLE ASSETS Reference is made to: (1) that certain Amended and Restated Purchase Agreement between BNP Leasing Corporation ("ASSIGNOR") and Solectron Washington, Inc., dated as of July 1, 1998 (the "PURCHASE AGREEMENT"); (2) that certain Amended and Restated Lease Agreement between Assignor, as landlord, and Solectron Washington, Inc., as tenant, dated as of July 1, 1998 (the "LEASE"); and (3) that certain Amended and Restated Closing Certificate and Agreement by Solectron Washington, Inc. in favor of Assignor, dated as of July 1, 1998 (the "CLOSING CERTIFICATE"). (Capitalized terms used and not otherwise defined in this document are intended to have the meanings assigned to them in the List of Defined Terms attached to and made a part of the Lease.) As contemplated by the Purchase Agreement, Assignor hereby sells, transfers and assigns unto [SOLECTRON 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) the Lease; (b) 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; and (c) all other property included within the definition of "Property" as set forth in the Purchase Agreement, including but not limited to any of the following transferred to Assignor by the tenant pursuant to Paragraph 8 of the Lease or otherwise acquired by Assignor, at the time of the execution and delivery of the Lease and Purchase Agreement or thereafter, by reason of Assignor's status as the owner of any interest in the Property: (1) any goods, equipment, furnishings, furniture, chattels and tangible personal property of whatever nature that are located on the Property and all renewals or replacements of or substitutions for any of the foregoing; (ii) the rights of Assignor, existing at the time of the execution of the Lease and Purchase Agreement or thereafter arising, under Permitted Encumbrances or Development Contracts (both as defined in the Lease); and (iii) any other permits, licenses, franchises, certificates, and other rights and privileges related to the Property that Assignee would have acquired if Assignee had itself purchased the land included in the Property. Provided, however, excluded from this conveyance and reserved to Assignor are any rights or privileges of Assignor under the following ("EXCLUDED RIGHTS"): (1) the indemnities set forth in the Lease and the Closing Certificate, whether such rights are presently known or unknown, including rights of the Assignor to be indemnified against environmental claims of third parties as provided in the Closing Certificate which may not presently be known, (2) provisions in the Lease that establish the right of Assignor to recover any accrued unpaid rent under the Lease which may be outstanding as of the date hereof, (3) agreements between Assignor and "BNPLC's Parent" or any "Participant," both as defined in the Lease, or any modification or extension thereof, or (4) any other instrument being delivered to Assignor contemporaneously herewith pursuant to the Purchase Agreement. To the extent that this conveyance does include any rights to receive future payments under the Lease, such rights ("INCLUDED RIGHTS") shall be subordinate to Assignor's Excluded Rights, and Assignee hereby waives any rights to enforce Included Rights until such time as Assignor has received all payments to which it remains entitled by reason of Excluded Rights. If any amount shall be paid to Assignee on account of any Included Rights at any time before Assignor has received all payments to which it is entitled 26 because of Excluded Rights, such amount shall be held in trust by Assignee for the benefit of Assignor, shall be segregated from the other funds of Assignee and shall forthwith be paid over to Assignor to be held by Assignor as collateral for, or then or at any time thereafter applied in whole or in part by Assignor against, the payments due to Assignor because of Excluded Rights, whether matured or unmatured, in such order as Assignor shall elect. Assignor does for itself and its successors 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 a Lien Removable by BNPLC, but not otherwise. 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. IN WITNESS WHEREOF, the parties have executed this instrument as of _______________, ________. ASSIGNOR: BNP LEASING CORPORATION a Delaware corporation By: _________________________ Its: ________________________ ASSIGNEE: [SOLECTRON OR THE APPLICABLE PURCHASER], a _______________ corporation By: _________________________ Its: ________________________ Exhibit D - Page 2 27 STATE OF ____________ ) ) SS COUNTY OF ___________ ) 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 ________________________ STATE OF ____________ ) ) SS COUNTY OF ___________ ) 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 _________________________ Exhibit D - Page 3 28 ANNEX A LEGAL DESCRIPTION [DRAFTING NOTE: TO THE EXTENT THAT THE "LAND" COVERED BY THE LEASE CHANGES FROM TIME TO TIME BECAUSE OF ADJUSTMENTS FOR WHICH SOLECTRON REQUESTS BNPLC'S CONSENT OR APPROVAL AS PROVIDED IN THE LEASE, SO TOO WILL THE DESCRIPTION OF THE LAND BELOW CHANGE. ANY SUCH CHANGES WILL BE INCORPORATED INTO THE DESCRIPTION BELOW AND THIS "DRAFTING NOTE" WILL BE DELETED BEFORE THE DOCUMENT TO WHICH THIS DESCRIPTION IS ATTACHED IS ACTUALLY EXECUTED AND DELIVERED.] All that certain real property situate in the City of Everett, County of Snohomish, State of Washington, being a portion of the Southwest quarter of Section 2, and a portion of the Southeast quarter of Section 3, all in Township 28 North, Range 4 East, W.M., and also being a portion of Lot 2 Binding Site Plan/Record of Survey recorded under Snohomish County Recording Number 8910255010, and being more particularly described as follows: BEGINNING at the quarter corner common to said Sections 2 and 3; thence from said point of beginning along the East-West centerline of said Section 2, South 88(Degree) 10'56" East 1192.73 feet; thence leaving said East-West centerline South 01(Degree) 49'04" West 347.51 feet; thence South 26(Degree) 07'32" East 208.83 feet; thence South 12(Degree) 56'43" East 395.73 feet to the Northerly right of way line of Merrill Creek Parkway as deeded to the City of Everett under Snohomish County Recording Number 8801270201, Snohomish County records; thence along said right of way line of Merrill Creek Parkway from a tangent that bears South 77(Degree) 03'17" West, along the arc of a curve to the left having a radius of 630.00 feet and a central angle of 37(Degree) 00'43", an arc length of 406.97 feet; 7 thence leaving said right of way line North 79(Degree) 36'24" West 1190.79 feet to the Easterly boundary of the Binding Site Plan/Record of Survey entitled Seaway Center Two/Intermec recorded under Snohomish County Recording Number 8910255009; thence along said Easterly boundary North 00(Degree) 50'18" East 955.72 feet to the East-West centerline of said Section 3; thence along said East-West centerline South 88(Degree) 33'31" East 136.77 feet to the point of beginning; (ALSO KNOWN AS Lot 2F of Binding Site Plan/Record of Survey Seaway Center Five as recorded under Snohomish County Recording Number 9204015001); TOGETHER WITH a non-exclusive driveway and access easement as set forth in document entitled Driveway and Assess Easement Agreement recorded under Snohomish County Recording Number 9711050088. Situate in the County of Snohomish, State of Washington Exhibit D - Page 4 29 EXHIBIT E ACKNOWLEDGMENT OF DISCLAIMER OF REPRESENTATIONS AND WARRANTIES THIS ACKNOWLEDGMENT OF DISCLAIMER OF REPRESENTATIONS AND WARRANTIES (this "Certificate") is made as of ___________________, ____, by [Solectron 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 deed and (2) a Bill of Sale and Assignment of Lease 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 Established Misconduct of BNPLC. As used in the preceding sentence, "ESTABLISHED MISCONDUCT" is intended to have, and be limited to, the meaning given to it in the List of Defined Terms attached to the Amended and Restated Purchase Agreement between BNPLC and Solectron Washington, Inc. dated as of July 1, 1998, pursuant to which BNPLC is delivering the Conveyancing Documents. 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 ________________, ____. [SOLECTRON OR THE APPLICABLE PURCHASER] By: ___________________________ Name: ______________________ Title:______________________ 30 EXHIBIT F [Intentionally deleted.] 31 EXHIBIT G SECRETARY'S CERTIFICATE The undersigned, [Secretary or Assistant 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 SALE CLOSING 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 and title] 32 CORPORATE RESOLUTIONS OF BNP LEASING CORPORATION WHEREAS, pursuant to that certain Purchase Agreement (herein called the "Purchase Agreement") dated as of July 1, 1998, by and between BNP Leasing Corporation (the "Corporation") and Solectron Washington, Inc. ("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 Everett, Washington 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 G - Page 2 33 EXHIBIT H BNP LEASING CORPORATION 717 N. HARWOOD SUITE 2630 DALLAS, TEXAS 75201 ______________, ____________ [Title Insurance Company] ___________________________ ___________________________ ___________________________ Re: Recording of (1) Deed and (2) Bill of Sale and Assignment of Lease and Intangible Assets to [SOLECTRON OR THE APPLICABLE PURCHASER] ("Purchaser") Ladies and Gentlemen: BNP Leasing Corporation has executed and delivered to Purchaser (1) a Deed and (2) Bill of Sale and Assignment of Lease and Intangible Assets, each in the form attached to this letter. You are hereby authorized and directed to record such documents at the request of Purchaser. Sincerely, 34 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 [SOLECTRON 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 75-2252918; 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: ___________, ____. BNP LEASING CORPORATION, a Delaware corporation By: _______________________________________ Name: _________________________________ Title: ________________________________ 35 EXHIBIT J INDEMNITY FOR LIENS REMOVABLE BY BNPLC THIS INDEMNITY AGREEMENT (this "AGREEMENT") is made as of _________________, _____, by SOLECTRON WASHINGTON, INC., a California corporation ("PURCHASER") [OR THE APPLICABLE PURCHASER] and BNP LEASING CORPORATION, a Delaware corporation ("SELLER") and ___________________________ ("TITLE COMPANY"). R E C I T A L S A. Purchaser is acquiring the land described in Annex A attached hereto and any improvements located thereon (the "PROPERTY") pursuant to the terms and conditions of that certain Amended and Restated Purchase Agreement dated as of July 1, 1998 by between Seller and Purchaser [or Solectron] (the "PURCHASE AGREEMENT"). B. In connection with its acquisition of the Property, Seller has been notified as contemplated by the Purchase Agreement that the matters described in Annex B attached hereto (the "RELEVANT ENCUMBRANCES") have been identified as encumbrances upon title to the Property and that such matters, to the extent valid, constitute Liens Removable by BNPLC (as defined below). C. Because of such notice to Seller, Seller is required by the Purchase Agreement to tender this Indemnity Agreement to Purchaser. 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: Seller must promptly remove any of the Relevant Encumbrances that constitute "LIENS REMOVABLE BY BNPLC" (which for purposes of this Indemnity Agreement shall have the meaning assigned to it in the List of Defined Terms attached to the Purchase Agreement). Seller must also pay, indemnify and hold harmless Purchaser, the Title Company, the Purchaser's successors and assigns as to the Property and the Title Company's successors and assigns as to any title insurance policy issued to Purchaser by the Title Company covering the Property from and against any and all liabilities, damages, claims, actions, judgments, costs and expenses (including, without limitation, reasonable attorneys' fees) caused by Seller's failure to promptly remove any of the Relevant Encumbrances that constitute Liens Removable by BNPLC. Nothing herein shall be construed as an admission by Seller that any of the Relevant Encumbrances do constitute Liens Removable by BNPLC or as imposing a duty upon Seller to remove or defend against claims arising out of any Relevant Encumbrances that do not constitute Liens Removable by BNPLC. Nothing herein contained shall limit Purchaser's rights or remedies under the Purchase Agreement because of any failure by BNPLC to remove all Liens Removable by BNPLC before conveying the Property. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF WASHINGTON WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. SELLER, PURCHASER AND THE TITLE COMPANY EACH HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER DOCUMENT, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to be all- 36 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. Purchaser, Seller and the Title Company 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. Purchaser, Seller and the Title Company 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 OR THIS AGREEMENT. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] Exhibit J - Page 2 37 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. "Seller" BNP LEASING CORPORATION, a Delaware corporation By: _______________________________ Name: _________________________ Title: ________________________ "Purchaser" SOLECTRON WASHINGTON, INC., a California corporation By: _______________________________ Name: _________________________ Title: ________________________ "Title Company" _______________________, a ___________________________ By: _______________________________ Name: _________________________ Title: ________________________ Exhibit J - Page 3 38 ANNEX A LEGAL DESCRIPTION [DRAFTING NOTE: TO THE EXTENT THAT THE "LAND" COVERED BY THE LEASE CHANGES FROM TIME TO TIME BECAUSE OF ADJUSTMENTS FOR WHICH SOLECTRON REQUESTS BNPLC'S CONSENT OR APPROVAL AS PROVIDED IN THE LEASE, SO TOO WILL THE DESCRIPTION OF THE LAND BELOW CHANGE. ANY SUCH CHANGES WILL BE INCORPORATED INTO THE DESCRIPTION BELOW AND THIS "DRAFTING NOTE" WILL BE DELETED BEFORE THE DOCUMENT TO WHICH THIS DESCRIPTION IS ATTACHED IS ACTUALLY EXECUTED AND DELIVERED.] All that certain real property situate in the City of Everett, County of Snohomish, State of Washington, being a portion of the Southwest quarter of Section 2, and a portion of the Southeast quarter of Section 3, all in Township 28 North, Range 4 East, W.M., and also being a portion of Lot 2 Binding Site Plan/Record of Survey recorded under Snohomish County Recording Number 8910255010, and being more particularly described as follows: BEGINNING at the quarter corner common to said Sections 2 and 3; thence from said point of beginning along the East-West centerline of said Section 2, South 88(Degree) 10'56" East 1192.73 feet; thence leaving said East-West centerline South 01(Degree) 49'04" West 347.51 feet; thence South 26(Degree) 07'32" East 208.83 feet; thence South 12(Degree) 56'43" East 395.73 feet to the Northerly right of way line of Merrill Creek Parkway as deeded to the City of Everett under Snohomish County Recording Number 8801270201, Snohomish County records; thence along said right of way line of Merrill Creek Parkway from a tangent that bears South 77(Degree) 03'17" West, along the arc of a curve to the left having a radius of 630.00 feet and a central angle of 37(Degree) 00'43", an arc length of 406.97 feet; thence leaving said right of way line North 79(Degree) 36'24" West 1190.79 feet to the Easterly boundary of the Binding Site Plan/Record of Survey entitled Seaway Center Two/Intermec recorded under Snohomish County Recording Number 8910255009; thence along said Easterly boundary North 00(Degree) 50'18" East 955.72 feet to the East-West centerline of said Section 3; thence along said East-West centerline South 88(Degree) 33'31" East 136.77 feet to the point of beginning; (ALSO KNOWN AS Lot 2F of Binding Site Plan/Record of Survey Seaway Center Five as recorded under Snohomish County Recording Number 9204015001); TOGETHER WITH a non-exclusive driveway and access easement as set forth in document entitled Driveway and Assess Easement Agreement recorded under Snohomish County Recording Number 9711050088. Situate in the County of Snohomish, State of Washington Exhibit J - Page 4 39 ANNEX B Relevant Encumbrances [THIS ANNEX IS TO BE COMPLETED BY A LIST OF POSSIBLE LIENS REMOVABLE BY BNPLC IDENTIFIED BY SOLECTRON AND AGAINST WHICH SOLECTRON HAS NOT BEEN ABLE TO OBTAIN TITLE INSURANCE.] Exhibit J - Page 1 EX-10.3 6 AMENDED AND RESTATED GUARANTEE 1 EXHIBIT 10.3 AMENDED AND RESTATED GUARANTY FROM SOLECTRON CORPORATION, ("GUARANTOR") IN FAVOR OF BNP LEASING CORPORATION, ("BNPLC") EFFECTIVE AS OF JULY 1, 1998 2 AMENDED AND RESTATED GUARANTY THIS AMENDED AND RESTATED GUARANTY is made as of July 1, 1998, by SOLECTRON CORPORATION, a Delaware corporation ("GUARANTOR"), in favor of BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"). RECITALS 1. Guarantor owns directly one hundred percent (100%) of the outstanding shares of capital stock of Solectron Washington, Inc., a California corporation ("SWI"). 2. Contemporaneously herewith SWI and BNPLC are executing an Amended and Restated Lease Agreement dated the date hereof (as from time to time supplemented, amended or restated, the "LEASE"), pursuant to which BNPLC has agreed to lease to SWI certain land and improvements thereon which are described in the Lease. As of the Effective Date, the Lease amends, restates and replaces a prior Lease Agreement between SWI and BNPLC dated as of December 1, 1997. 3. Contemporaneously herewith SWI and BNPLC are executing an Amended and Restated Purchase Agreement dated the date hereof (as from time to time supplemented, amended or restated, the "PURCHASE AGREEMENT"), pursuant to which SWI has agreed to purchase or arrange for the purchase of the Property as more particularly provided therein. As of the Effective Date, the Purchase Agreement amends, restates and replaces a prior Purchase Agreement between SWI and BNPLC dated as of December 1, 1997. 4. Contemporaneously herewith SWI is executing an Amended and Restated Closing Certificate and Agreement dated the date hereof (as from time to time supplemented, amended or restated, the "CLOSING CERTIFICATE"), pursuant to which SWI has made certain representations to BNPLC concerning the Property and has agreed to indemnify BNPLC for certain matters relating to the Property. As of the Effective Date, the Closing Certificate amends, restates and replaces the prior Closing Certificate and Agreement executed by SWI in favor of BNPLC dated as of December 1, 1997. 5. As a condition precedent to BNPLC's execution of the Lease and Purchase Agreement, BNPLC requires that Guarantor execute and deliver to BNPLC this Guaranty of SWI's obligations under the Lease, Purchase Agreement and Closing Certificate. As of the Effective Date, this Guaranty amends, restates and replaces a prior Guaranty executed by Guarantor in favor of BNPLC dated as of December 1, 1997 (the "PRIOR GUARANTY"). 6. The board of directors of Guarantor has determined that Guarantor's execution, delivery and performance of this Guaranty may reasonably be expected to benefit Guarantor, directly or indirectly, and are in the best interests of Guarantor. NOW, THEREFORE, in consideration of the premises, of the benefits which will inure to Guarantor from the transactions contemplated by the Lease, Purchase Agreement and Closing Certificate and of Ten Dollars and other good and valuable consideration, the receipt and sufficiency of all of which are hereby acknowledged, and in order to induce BNPLC to enter into the Lease and Purchase Agreement, Guarantor hereby agrees with BNPLC as follows: 3 AGREEMENTS Section 1. Definitions. Reference is hereby made to the Lease, Purchase Agreement and Closing Certificate for all purposes. All capitalized terms used in this Guaranty which are defined in the Lease and the List of Defined Terms attached to the Lease and not otherwise defined herein shall have the same meanings when used herein. All references herein to any Obligation Document or other document or instrument refer to the same as from time to time amended, supplemented or restated. As used herein the following terms shall have the following meanings: "Designated Covenants" means, collectively, all of the covenants and agreements of SWI contained in the Lease, Purchase Agreement and Closing Certificate. "Designated Representations" means, collectively, all of the representations and warranties of SWI contained in the Lease, Purchase Agreement and Closing Certificate. "Obligations" means collectively all of the indebtedness, obligations, and undertakings which are guaranteed by Guarantor, as described in subsections (a) and (b) of Section 2. "Obligation Documents" means the Lease, the Purchase Agreement, the Closing Certificate and all other documents and instruments (other than this Guaranty) under, by reason of which, or pursuant to which any or all of the Obligations are evidenced, governed, secured, or otherwise dealt with, and all other documents, instruments and agreements hereafter delivered in connection herewith or therewith. "Obligors" means SWI and any other guarantors or obligors, primary or secondary, of any or all of the Obligations, excluding Guarantor. "Security" means any rights, properties, or interests of BNPLC, under the Obligation Documents or otherwise, which provide recourse or other benefits to BNPLC in connection with the Obligations or the non-payment or non-performance thereof. Section 2. Guaranty. Subject only to Section 3 below: (a) Guarantor hereby irrevocably, absolutely, and unconditionally guarantees to BNPLC the prompt, complete, and full payment when due, and no matter how the same shall become due, of all sums payable under the Lease, Purchase Agreement and Closing Certificate. Without limiting the generality of the foregoing, Guarantor's liability hereunder shall extend to and include all post-petition interest, expenses, and other duties and liabilities of SWI described above in this subsection (a), or below in the following subsections (b) and (c), which would be owed by SWI but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization, or similar proceeding involving SWI. (b) The Guarantor hereby irrevocably, absolutely, and unconditionally guarantees to BNPLC (i) that each Designated Representation is true and correct and (ii) that each Designated Covenant will be performed promptly and completely when due, no matter how the same shall become due. (c) Without limiting the foregoing, BNPLC shall be entitled to recover from Guarantor any expenses, losses and damages which BNPLC may incur or suffer (including but not limited to any loss, 2 4 reduction or delay in amounts paid to BNPLC) as a result of the failure of any Designated Representation to be true and correct or as a result of the failure of Guarantor to cause any Designated Covenant to be performed (without regard to any event or circumstance which may be asserted by Guarantor as having excused, prevented or limited such performance by Guarantor). All rights, powers and remedies of BNPLC for such failure to cause any such covenant or undertaking to be performed are cumulative. (d) If either SWI or the Guarantor fails to pay or perform any Obligation as described in the immediately preceding subsections (a), (b) or (c), the Guarantor will incur the additional obligation to pay to BNPLC, and the Guarantor will forthwith upon demand by BNPLC, the amount of any and all reasonable expenses, including fees and disbursements of BNPLC's counsel, and of any experts or agents retained by BNPLC, which BNPLC may incur as a result of such failure. (e) As between Guarantor and BNPLC, this Guaranty shall be considered a primary liability of Guarantor. Section 3. Express Grace and Cure Periods. This Guaranty is not intended to nullify any grace or cure period expressly provided for the benefit of SWI in the Lease, Purchase Agreement or Closing Certificate. Accordingly, any payment required of SWI by the Lease, Purchase Agreement or Closing Certificate, for which a grace or cure period is expressly provided therein, will not be considered due for purposes of this Guaranty until such grace or cure period expires. Similarly, any performance obligation imposed upon SWI by the Lease, Purchase Agreement or Closing Certificate, for which a grace or cure period is expressly provided therein, will not be considered to have been breached unless SWI's failure to perform such obligation continues upon the expiration of such grace or cure period. Section 4. Unconditional Guaranty. (a) No action which BNPLC may take or omit to take in connection with any of the Obligation Documents, any of the Obligations (or any other indebtedness owing by SWI to BNPLC), or any Security, and no course of dealing of BNPLC with any Obligor or any other Person, shall release or diminish Guarantor's obligations, liabilities, agreements or duties hereunder, affect this Guaranty in any way, or afford Guarantor any recourse against BNPLC, regardless of whether any such action or inaction may increase any risks to or liabilities of BNPLC or any Obligor or increase any risk to or diminish any safeguard of any Security. Without limiting the foregoing, Guarantor hereby expressly agrees that BNPLC may, from time to time, without notice to or the consent of Guarantor, do any or all of the following: (i) Amend, change or modify, in whole or in part, any one or more of the Obligation Documents and give or refuse to give any waivers or other indulgences with respect thereto. (ii) Neglect, delay, fail, or refuse to take or prosecute any action for the collection or enforcement of any of the Obligations, to foreclose or take or prosecute any action in connection with any Security or Obligation Document, to bring suit against any Obligor or any other Person, or to take any other action concerning the Obligations or the Obligation Documents. (iii) Change, rearrange, extend, or renew the time, rate, terms, or manner for payment or performance of any one or more of the Obligations (whether for principal, interest, fees, expenses, indemnifications, affirmative or negative covenants, or otherwise). 3 5 (iv) Compromise or settle any unpaid or unperformed Obligation or any other obligation or amount due or owing, or claimed to be due or owing, under any Obligation Document. (v) Take, exchange, amend, eliminate, surrender, release, or subordinate any or all Security for any or all of the Obligations, accept additional or substituted Security therefor, and perfect or fail to perfect BNPLC's rights in any or all Security. (vi) Discharge, release, substitute or add Obligors. (vii) Apply all monies received from Obligors or others, or from any Security for any of the Obligations, as BNPLC may determine to be in its best interest, without in any way being required to marshall Security or assets or to apply all or any part of such monies upon any particular Obligations. (b) No action or inaction of any Obligor or any other Person, and no change of law or circumstances, shall release or diminish Guarantor's obligations, liabilities, agreements, or duties hereunder, affect this Guaranty in any way, or afford Guarantor any recourse against BNPLC. Without limiting the foregoing, the obligations, liabilities, agreements, and duties of Guarantor under this Guaranty shall not be released, diminished, impaired, reduced, or affected by the occurrence of any or all of the following from time to time, even if occurring without notice to or without the consent of Guarantor: (i) Any voluntary or involuntary liquidation, dissolution, sale of all or substantially all assets, marshalling of assets or liabilities, receivership, conservatorship, assignment for the benefit of creditors, insolvency, bankruptcy, reorganization, arrangement, or composition of any Obligor or any other proceedings involving any Obligor or any of the assets of any Obligor under laws for the protection of debtors, or any discharge, impairment, modification, release, or limitation of the liability of, or stay of actions or lien enforcement proceedings against, any Obligor, any properties of any Obligor, or the estate in bankruptcy of any Obligor in the course of or resulting from any such proceedings. (ii) The failure by BNPLC to file or enforce a claim in any proceeding described in the immediately preceding subsection (i) or to take any other action in any proceeding to which any Obligor is a party. (iii) The release by operation of law of any Obligor from any of the Obligations or any other obligations to BNPLC. (iv) The invalidity, deficiency, illegality, or unenforceability of any of the Obligations or the Obligation Documents, in whole or in part, any bar by any statute of limitations or other law of recovery on any of the Obligations, or any defense or excuse for failure to perform on account of force majeure, act of God, casualty, impossibility, impracticability, or other defense or excuse whatsoever. (v) The failure of any Obligor or any other Person to sign any guaranty or other instrument or agreement within the contemplation of any Obligor or BNPLC. (vi) The fact that Guarantor may have incurred directly part of the Obligations or is otherwise primarily liable therefor. 4 6 (vii) Without limiting any of the foregoing, any fact or event (whether or not similar to any of the foregoing) which in the absence of this provision would or might constitute or afford a legal or equitable discharge or release of or defense to a guarantor or surety other than the actual payment and performance by Guarantor under this Guaranty. (c) BNPLC may invoke the benefits of this Guaranty before pursuing any remedies against any Obligor or any other Person and before proceeding against any Security now or hereafter existing for the payment or performance of any of the Obligations. BNPLC may maintain an action against Guarantor on this Guaranty without joining any Obligor therein and without bringing a separate action against any Obligor. (d) If any payment to BNPLC by any Obligor is held to constitute a preference or a voidable transfer under applicable state or federal laws, or if for any other reason BNPLC is required to refund such payment to the payor thereof or to pay the amount thereof to any other Person, such payment to BNPLC shall not constitute a release of Guarantor from any liability hereunder, and Guarantor agrees to pay such amount to BNPLC on demand and agrees and acknowledges that this Guaranty shall continue to be effective or shall be reinstated, as the case may be, to the extent of any such payment or payments. (e) This is a continuing guaranty and shall apply to and cover all Obligations and renewals and extensions thereof and substitutions therefor from time to time. Section 5 Waiver. Guarantor waives all notices of the creation, renewal, extension or accrual of any of the Obligations and notice or proof of reliance by BNPLC on this Guaranty or acceptance of this Guaranty. The Obligations shall conclusively be considered to have been created, contracted or incurred in reliance on this Guaranty, and all dealings between BNPLC and SWI shall likewise be conclusively presumed to have been had or consummated in reliance on this Guaranty. Guarantor also waives (to the extent permitted by applicable law) all requirements of notice, presentment, protest or demand on it, SWI or any other Person, all other notices and demands whatsoever relating to the Obligations and any requirement that BNPLC file a claim with a court in any bankruptcy or similar proceedings of SWI or first proceed against SWI or any other Person or first realize on any collateral security held by it or otherwise exhaust any right, power or remedy under any document or against BNPLC or any other Person before proceeding against Guarantor under this Guaranty. BNPLC shall have no responsibility to notify Guarantor of SWI's financial condition or SWI's incurrence or performance of the Obligations. WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER PROVISION SET FORTH IN THIS GUARANTY, GUARANTOR HEREBY WAIVES, TO THE MAXIMUM EXTENT SUCH WAIVER IS PERMITTED BY LAW, ANY AND ALL DEFENSES ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF (A) CALIFORNIA CIVIL CODE SECTIONS 2808, 2809, 2810, 2815, 2819, 2820, 2821, 2838, 2839, 2845, 2848, 2849, AND 2850, (B) TO THE EXTENT APPLICABLE, CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 580a, 580b, 580c, 580d AND 726, AND (C) TO THE EXTENT APPLICABLE, CHAPTER 2 OF TITLE 14 OF THE CALIFORNIA CIVIL CODE. Guarantor warrants and agrees that each of the waivers set for in this Guaranty is made with full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any of such waivers are determined to be contrary to any applicable law or public policy, such waivers shall be effective only to the maximum extent permitted by law. Section 6 Exercise of Remedies. BNPLC shall have the right to enforce, from time to time, in any order and at BNPLC's sole discretion, any rights, powers and remedies which BNPLC may have 5 7 under the Obligation Documents, this Guaranty or otherwise. No failure on the part of BNPLC to exercise, and no delay in exercising, any right hereunder or under any Obligation Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right preclude any other or further exercise thereof or the exercise of any other right. The rights, powers and remedies of BNPLC provided herein and in the Obligation Documents are cumulative and are in addition to, and not exclusive of, any other rights, powers or remedies provided by law or in equity. The rights of BNPLC hereunder are not conditional or contingent on any attempt by BNPLC to exercise any of its rights under any Obligation Document against any Obligor or any other Person. Section 7 Limited Subrogation. Until all of the Obligations have been paid and performed in full Guarantor shall have no right, by reason of or in connection with this Guaranty, to exercise any right of subrogation, reimbursement, indemnity, exoneration, contribution or any other claim which it may now or hereafter have against or to any Obligor or any Security, and Guarantor hereby waives any rights to enforce any such remedy which Guarantor may have against SWI and any right to participate in any Security until such time. If any amount shall be paid to Guarantor on account of any such subrogation or other rights, any such other remedy, or any Security at any time when all of the Obligations and all other expenses guaranteed pursuant hereto shall not have been paid in full, such amount shall be held in trust for the benefit of BNPLC, shall be segregated from the other funds of Guarantor and shall forthwith be paid over to BNPLC to be held by BNPLC as collateral for, or then or at any time thereafter applied in whole or in part by BNPLC against, all or any portion of the Obligations, whether matured or unmatured, in such order as BNPLC shall elect. Section 8 Successors and Assigns. Guarantor's rights or obligations hereunder may not be assigned or delegated, but this Guaranty and such obligations shall pass to and be fully binding upon the successors of Guarantor, as well as Guarantor. This Guaranty shall apply to and inure to the benefit of BNPLC and its successors or assigns. Without limiting the generality of the immediately preceding sentence, BNPLC may assign, grant a participation in, or otherwise transfer any Obligation held by it or any portion thereof, and BNPLC may assign or otherwise transfer its rights or any portion thereof under any Obligation Document, to any other Person, and such other Person shall thereupon become vested with all of the benefits in respect thereof granted to BNPLC hereunder unless otherwise expressly provided by BNPLC in connection with such assignment or transfer. Section 9 Representations, Warranties and Covenants of Guarantor. Guarantor hereby represents, warrants and covenants to BNPLC as follows: (a) The Recitals at the beginning of this Guaranty are true and correct in all material respects. (b) The direct or indirect value of the consideration received and to be received by Guarantor in connection herewith is reasonably worth at least as much as the liability and obligations of Guarantor hereunder, and the incurrence of such liability and obligations in return for such consideration may reasonably be expected to benefit Guarantor, directly or indirectly. (c) The execution, delivery and performance by Guarantor of this Guaranty do not and will not constitute a breach or default under any other material agreement or contract to which Guarantor is a party or by which Guarantor is bound or which affects the Property, and do not violate or contravene any law, order, decree, rule or regulation to which Guarantor is subject, and such execution, delivery and performance by Guarantor 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, Guarantor's property pursuant to the provisions of any of the foregoing. 6 8 (d) There are no judicial or administrative actions, suits, proceedings or investigations pending or, to Guarantor's knowledge, threatened that will adversely affect the Property or the validity, enforceability or priority of this Guaranty, and Guarantor 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 use, occupancy or operation of the Property. No condemnation or other like proceedings are pending or, to Guarantor's knowledge, threatened against the Property. (e) The execution, delivery and performance by Guarantor of this Guaranty are duly authorized and does 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 Guarantor's articles of incorporation or bylaws. This Guaranty is a valid, binding and legally enforceable obligation of Guarantor, in accordance with its 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. (f) Guarantor is not "insolvent" on the date hereof (that is, the sum of Guarantor's absolute and contingent liabilities, including the Obligations, does not exceed the fair market value of Guarantor's assets) and has no outstanding liens, suits, garnishments or court actions which could render Guarantor insolvent or bankrupt. Guarantor's capital is adequate for the businesses in which Guarantor is engaged and intends to be engaged. Guarantor has not incurred (whether hereby or otherwise), nor does Guarantor intend to incur or believe that it will incur, debts which will be beyond its ability to pay as such debts mature. There has not been filed by or, to Guarantor's knowledge, against Guarantor 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 Guarantor or any significant portion of Guarantor'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 BNPLC relating to Guarantor are true, correct and complete in all material respects. No material adverse change has occurred in the financial position of Guarantor and its Subsidiaries as reflected in Guarantor's financial statements covering the fiscal period ended December 31, 1997. (g) Guarantor is duly incorporated and legally existing under the laws of the State of Delaware. Guarantor 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 fulfill its obligations under this Guaranty. Guarantor has the corporate power and adequate authority, rights and franchises to own Guarantor's property and to carry on Guarantor's business as now conducted and is duly qualified and in good standing in each state in which the character of Guarantor's business makes such qualification necessary (including 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 Guarantor and its Subsidiaries, taken as a whole. (h) Guarantor is not and will not become an "employee benefit plan" (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA. The assets of Guarantor do not and will not in the future constitute "plan assets" of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101. Guarantor is not and will not become a "governmental plan" within the meaning of Section 3(32) of ERISA. Transactions by or with Guarantor are not subject to state statutes regulating investments of and fiduciary obligations with respect to governmental plans. No ERISA Termination Event has occurred with respect to any Plan of Guarantor and Guarantor and all its Subsidiaries are in compliance with ERISA. Neither Guarantor nor any of its Subsidiaries is required 7 9 to contribute to, or has any other absolute or contingent liability in respect of, any "multi employer plan" as defined in Section 4001 of ERISA. As of the Effective Date no "accumulated funding deficiency" (as defined in Section 412(a) of the Code) exists with respect to any Plan of Guarantor, whether or not waived by the Secretary of the Treasury or his delegate, and the current value of the benefits of each Plan of Guarantor, if any, equals or is less than the current value of such Plan's assets available for the payment of such benefits. (i) None of the representations or warranties of Guarantor or SWI contained in this Guaranty or the Obligation Documents or any other document, certificate or written statement furnished to BNPLC by or on behalf of Guarantor or SWI 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. (j) Guarantor shall, upon request of BNPLC, (i) promptly correct any error or omission which may be discovered in the contents of this Guaranty 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 Guaranty and to subject to this Guaranty any property intended by the terms hereof to be covered hereby, including any renewals, additions, substitutions, replacements or appurtenances to the Property; (iii) execute, acknowledge, deliver, procure and record or file any document or instrument deemed advisable by BNPLC to protect its rights in and to the 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 BNPLC to enable BNPLC, BNPLC's Parent and any other Participants to comply with the requirements or requests of any agency or authority having jurisdiction over them. Section 10 Covenants Incorporated by Reference to Schedule A. So long as Guarantor shall continue to have any obligations under this Guaranty, Guarantor shall comply with each and every requirement set forth in Schedule A attached hereto and made a part hereof; provided, however, to the extent that any of the Obligations or requirements set forth in other provisions of this Guaranty are more stringent than the requirements set forth in Schedule A, the more stringent Obligations or requirements set forth herein shall control. Section 11 Ownership of SWI. So long as Guarantor shall continue to have any obligations under this Guaranty, Guarantor shall continue to own directly one hundred percent (100%) of the outstanding shares of capital stock of SWI. Section 12 No Oral Change. No amendment of any provision of this Guaranty shall be effective unless it is in writing and signed by Guarantor and BNPLC, and no waiver of any provision of this Guaranty, and no consent to any departure by Guarantor therefrom, shall be effective unless it is in writing and signed by BNPLC, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Section 13 Invalidity of Particular Provisions. If any term or provision of this Guaranty shall be determined to be illegal or unenforceable all other terms and provisions hereof shall nevertheless remain effective and shall be enforced to the fullest extent permitted by applicable law. Section 14 Headings and References. The headings used herein are for purposes of convenience only and shall not be used in construing the provisions hereof. The words "this 8 10 Guaranty," "this instrument," "herein," "hereof," "hereby" and words of similar import refer to this Guaranty as a whole and not to any particular subdivision unless expressly so limited. The phrases "this section" and "this subsection" and similar phrases refer only to the subdivisions hereof in which such phrases occur. The word "or" is not exclusive, and the word "including" (in its various forms) means "including without limitation". Pronouns in masculine, feminine and neuter genders shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. Section 15 Term. This Guaranty shall be irrevocable until all of the Obligations have been completely and finally paid and performed, Guarantor shall have paid all amounts that may be required hereunder, the Obligation Documents have been terminated, and all obligations and undertakings of SWI under, by reason of, or pursuant to the Obligation Documents have been completely performed, and this Guaranty is thereafter subject to reinstatement as provided in Section 3(d). All extensions of credit and financial accommodations heretofore or hereafter made by BNPLC to SWI shall be conclusively presumed to have been made in acceptance hereof and in reliance hereon. Section 16 Notices. Any notice or communication required or permitted hereunder shall be given as provided in the Lease and if to Guarantor at its address set forth below: TO GUARANTOR: Solectron Corporation 777 Gibraltar Drive, Building #5 Milpitas, California 95035 Attn: Chief Financial Officer Telecopy: (408) 956-6059 or to such other address or to the attention of such other individual as hereafter shall be designated in writing by Guarantor to BNPLC sent in accordance herewith. Section 17 Counterparts. This Guaranty may be executed in any number of counterparts, each of which when so executed shall be deemed to constitute one and the same Guaranty. SECTION 18 GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. Section 19 Waiver of a Jury Trial. GUARANTOR AND BNPLC EACH HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY. 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. Guarantor and BNPLC each acknowledge that this waiver is a material inducement to enter into a business relationship, that BNPLC has already relied on the waiver in entering into the Lease, Purchase Agreement and Closing Certificate and the other documents referred to herein, and that each will continue to rely on the waiver in their related future dealings. BNPLC and Guarantor 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 9 11 TO THIS GUARANTY OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS GUARANTY. In the event of litigation, this Guaranty may be filed as a written consent to a trial by the court. IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty as of the date first written above. SOLECTRON CORPORATION By: /s/ SUSAN WANG -------------------------------------- Name (print): Susan Wang -------------------------------------- Title: Sr. Vice President & CFO -------------------------------------- 10 12 Schedule A FINANCIAL AND OTHER COVENANTS OF GUARANTOR PART 1 ADDITIONAL DEFINITIONS 1.01 Definitions Applicable in this Schedule. For purposes of this Schedule A, the following capitalized terms will have the following respective meanings: "Adjusted Leverage Ratio" means with respect to Guarantor and its Subsidiaries on a consolidated basis at the end of any fiscal quarter, the ratio of (a) (without duplication) (i) Consolidated Funded Debt plus (ii) Guarantee obligations plus (iii) Indebtedness with respect to synthetic leases and securitized assets plus (iv) Indebtedness in respect to letters of credit minus (v) Permitted Subordinated Indebtedness, to (b) (i) operating income plus (ii) depreciation and amortization charges, in each case, for the period of the four fiscal quarters ended on the applicable date of determination. "Capital Lease Obligations" means the obligations of any Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Consolidated Funded Debt" means, as of the last day of any fiscal quarter, the sum for Guarantor and its Subsidiaries as of such day, of, without duplication, (a) the aggregate outstanding principal amount of Indebtedness for borrowed money and (b) the aggregate outstanding capitalized amount of Capital Lease Obligations, all as determined on a consolidated basis in accordance with GAAP. "Consolidated Tangible Assets" means, as of the last day of any fiscal quarter of Guarantor, all tangible assets on the consolidated balance sheet of Guarantor and its Subsidiaries, as determined on a consolidated basis in accordance with GAAP. "Consolidated Tangible Net Worth" means as of the last day of any fiscal quarter of Guarantor, (a) total shareholders' equity of Guarantor and its Subsidiaries minus (b) the aggregate amount of all intangible assets on the consolidated balance sheet of Guarantor and its Subsidiaries, all as determined on a consolidated basis in accordance with GAAP. "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. "Existing Credit Agreement" means the Credit Agreement dated as of April 29, 1997, among Guarantor as Borrower, Bank of America National Trust and Savings Association, as Agent and Issuing Bank, and other financial institutions named therein. 13 "Guarantee" of or by any Person (the "guarantor") means, for the purposes of this Schedule only and not for the purposes of the Obligation Documents, any obligation, contingent or otherwise of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor") in any matter, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. "Indebtedness" of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid (excluding deferred compensation obligations owed to current and former directors, officers and employees), (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable, measured in accordance with GAAP, incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty supporting Indebtedness, (j) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances, and (k) all obligations, contingent or otherwise, with respect to synthetic leases or securitized assets. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. "Lien" means, for the purpose of this Schedule only and not for the purposes of the Obligation Documents, with respect to any asset (a) a mortgage, deed of trust, lien, pledge, hypothecation, encumbrance or security interest in, on or of such asset, and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement relating to such asset. "Material Adverse Effect" means a material adverse effect on (a) the business, assets, operations, prospects or condition, financial or otherwise, of Guarantor and its Subsidiaries taken as a whole, (b) the ability of Guarantor to perform its obligations under this Guaranty if called upon to do so, or (c) the ability of SWI to perform its Obligations under the Obligation Documents; or (d) the rights of or benefits available to BNPLC or the Participants under the Obligation Documents. "Modified Quick Ratio" means, as computed with respect to Guarantor and its Subsidiaries on a consolidated basis, the ratio of (1) their Quick Assets to (2) the sum (without duplication of any item) of their Current Liabilities and any payments maturing within 12 months on any Indebtedness of Schedule A - Page 2 14 Guarantor or its Subsidiaries or on Indebtedness of any other Person which is the subject of any Guarantee made by Guarantor or its Subsidiaries. "Permitted Contest" means a contest of the validity or amount of any payment claimed to be due from Guarantor or a Subsidiary where (a) the contest is undertaken by Guarantor or such Subsidiary in good faith by appropriate proceedings, (b) Guarantor or such Subsidiary shall have set aside on its books adequate reserves with respect thereto in accordance with GAAP, and (c) the failure to make such payment pending such contest could not reasonably be expected to result in a Material Adverse Effect. "Permitted Encumbrances" means, for the purposes of this Guaranty only and not for the purposes of the Obligation Documents: (a) Liens imposed by law by any governmental authority for taxes that are not yet due or are the subject of a Permitted Contest. (b) Carriers' warehousemen's, mechanics', material men's, repairmen's and other like Liens imposed by law, and any other involuntary, statutory or common law Lien arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are the subject of a Permitted Contest. (c) Pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations. (d) Deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business. (e) Easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of Guarantor or any Subsidiary. (f) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under the Lease. (g) Liens which constitute rights of set-off of a customary nature or banker's Liens with respect to amounts on deposit arising by operation of law in connection with arrangements entered into with banks in the ordinary course of business. (h) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods. (i) Leases or subleases and licenses and sublicenses granted to others in the ordinary course of business not interfering in any material respect with the business of Guarantor or its Subsidiaries taken as a whole, and any interest or title of any lessor or licensor under any lease or license. Schedule A - Page 3 15 The term "Permitted Encumbrances" shall not include any Lien securing Indebtedness. "Permitted Subordinated Indebtedness" means Indebtedness of Guarantor, the payment of which is expressly subordinated (on terms satisfactory to BNPLC) to the Obligations. "Quick Assets" means the sum (without duplication of any item) of unencumbered cash, plus unencumbered short term cash investments, plus other unencumbered marketable securities which are classified as short term investments according to GAAP, plus unencumbered current net accounts receivable, plus the fair market value of certain long-term investments hereinafter described. 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 determination of Quick Assets, the owner of the assets (be it Guarantor or one of its Subsidiaries) 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 the owner's control. The following assets (and only the following assets) will qualify as "long-term investments" to be included in Quick Assets to the extent (and only to the extent) that, at the time of the determination of Quick Assets, they shall not be classified as short term investments in accordance with GAAP and shall have maturities of not longer than two years: (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 (A) 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 (B) rated not less than A- by Standard & Poor's Corporation or less than A by Moody's Investors Service, Inc.; and (3) corporate or municipal bonds rated not less than A- by Standard & Poor's Corporation or less than A by Moody's Investors Service, Inc. "Special Purpose Subsidiary" means any bankruptcy remote special purpose subsidiary of Guarantor formed for the purpose of selling undivided interests in accounts receivable and/or other assets transferred by Guarantor and/or any of its Subsidiaries to such subsidiary for financing purposes, including Solectron Funding Corporation, a corporation organized or to be organized under the laws of the state of Delaware. "Subsidiary" means, for purposes of this Schedule only and not for the purposes of the Obligation Documents, with respect to Guarantor or any Special Purpose Subsidiary (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date. Schedule A - Page 4 16 PART 2 DELIVERY OF INFORMATION 2.01. Financial Statements and Other Information. Guarantor will furnish to BNPLC and to each Participant of which Guarantor has been notified: (a) within 90 day's after the end of each fiscal year of Guarantor, its audited consolidated balance sheet and related statements of operations, changes in shareholders' equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by KPMG Peat Marwick or other independent public accountants of recognized national standing (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of Guarantor and consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; (b) within 60 days after the end of each of the first three fiscal quarters of each fiscal year of Guarantor, its consolidated balance sheet and related statements of operations and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its senior or executive financial officers as presenting fairly in all material respects the financial condition and results of operations of Guarantor and consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; (c) concurrently with any delivery of financial statements under clauses (a) or (b) above, a completed compliance certificate of a senior or executive financial officer of Guarantor in form and content reasonably acceptable to BNPLC; (d) concurrently with any delivery of consolidated financial statements under clause (a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their audit of such consolidated financial statements of any Event of Default or a Default under the Obligation Documents insofar as it relates to accounting matters (which certificate may be limited to the extent required by accounting rules or guidelines); (e) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by Guarantor or any Subsidiary with the Securities and Exchange Commission, or any governmental authority succeeding to any or all of the functions of said commission, or with any national securities exchange, or distributed by Guarantor to its shareholders generally, as the case may be; (f) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of Guarantor or any Subsidiary, or compliance with the terms of the Obligation Documents, as the BNPLC or any Participant may reasonably request; and (g) promptly upon becoming aware thereof, notice of the effectiveness of any Schedule A - Page 5 17 rating of any Index Debt by S&P or Moody's and notice of the effectiveness of any change in any rating of any Index Debt by S&P or Moody's. 2.02. Notices of Material Events. Guarantor will furnish to BNPLC and each Participant prompt written notice of the following: (a) The filing or commencement of any action, suit or proceeding by or before any arbitrator or governmental authority against or affecting Guarantor or any Subsidiary thereof that could reasonably be expected to result in a Material Adverse Effect. (b) The occurrence of any ERISA Termination Event that, alone or together with any other ERISA Termination Events that have occurred, could reasonably be expected to result in liability of Guarantor and its Subsidiaries in an aggregate amount exceeding $5,000,000. (c) Any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Paragraph 2.02 shall be accompanied by a statement of a senior or executive financial officer or other executive officer of Guarantor setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. PART 3 NEGATIVE COVENANTS 3.01. Subsidiary Indebtedness. No Subsidiary will create, incur, assume or permit to exist any Indebtedness, except: (a) Indebtedness existing on the Effective Date and set forth in schedule 6.01 attached to the Existing Credit Agreement (a copy of which schedule is also attached hereto for convenience) and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof. (b) Indebtedness of any Subsidiary to Guarantor or any other Subsidiary. (c) Guarantees by any Subsidiary of Indebtedness of Guarantor or of any other Subsidiary to the extent such Indebtedness is permitted under the Obligation Documents and other material agreements governing the Indebtedness of Guarantor. (d) Indebtedness of any Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; provided that (i) such Indebtedness is incurred prior to or within 120 days after such acquisition or the completion of such construction or improvement, and (ii) the aggregate principal amount of Indebtedness permitted by this clause (d) when aggregated (without duplication) with all Indebtedness incurred under clause (g) below, with the aggregate amount of all claims and obligations secured by Liens permitted pursuant to clauses (d) and (f) of Schedule A - Page 6 18 Paragraph 3.02 and with the aggregate book value or sale price of the assets sold in sale and leaseback transactions permitted pursuant to Paragraph 3.03 does not exceed 30% of Consolidated Tangible Assets as of the last day of the most recent fiscal period in respect of which financial statements shall have been delivered pursuant to Paragraph 2.01 of this Schedule. (e) Indebtedness of any Person that becomes a Subsidiary after April 30, 1997; provided that such Indebtedness exists at the time such Person becomes a Subsidiary and is not created in contemplation of or in connection with such Person becoming a Subsidiary. (f) Indebtedness of any Subsidiary as an account party in respect of trade letters of credit. (g) Other unsecured Indebtedness of the Subsidiaries in an aggregate principal amount outstanding at any time that, when aggregated (without duplication) with all Indebtedness incurred under clause (d) above, with the aggregate amount of all claims and obligations secured by Liens permitted pursuant to clauses (d) and (f) of Paragraph 3.02 and with the aggregate book value or sale price of the assets sold in sale and leaseback transactions permitted pursuant to Paragraph 3.03 does not exceed 30% of Consolidated Tangible Assets as of the last day of the most recent fiscal period in respect of which financial statements shall have been delivered pursuant to Paragraph 2.01 of this Schedule. (h) (i) Indebtedness of any Special Purpose Subsidiary; or (ii) Indebtedness of any other Subsidiary incurred by such Subsidiary in connection with the incurrence of Indebtedness by any Special Purpose Subsidiary. 3.02. Liens. Guarantor will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except: (a) Permitted Encumbrances and Liens securing Capital Lease Obligations permitted under subparagraph 3.01(d), and any renewal or extension of any such Permitted Encumbrance or Lien so long as the principal amount of the obligations secured thereby is not increased; (b) any Lien on any property or asset of Guarantor or any Subsidiary existing on April 30, 1997 and set forth in schedule 6.02 attached to the Existing Credit Agreement (a copy of which schedule is also attached hereto for convenience); provided that (i) such Lien shall not apply to any other property or asset of Guarantor or any Subsidiary and (ii) such Lien shall secure only those obligations which it secures on the date hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (c) any Lien existing on any property or asset prior to the acquisition thereof by Guarantor or any Subsidiary or existing on any property or asset (including attachments, accessions, replacements or proceeds thereof) of any Person that becomes a Subsidiary after April 30, 1997 prior to the time such Person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition of such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property Schedule A - Page 7 19 or assets of Guarantor or any Subsidiary, and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be, and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (d) Liens on fixed or capital assets acquired, constructed or improved by Guarantor or any Subsidiary (including replacements or proceeds of such assets and including any Capital Lease Obligations); provided that (i) in the case of any Subsidiary, such security interest secure Indebtedness permitted by clause (d) of Paragraph 3.01, (ii) such security interests and the Indebtedness secured thereby are incurred prior to or within 120 days after such acquisition or the completion of such construction or improvement, (iii) the Indebtedness secured thereby does not exceed 100% of the cost of acquiring, constructing or improving such fixed or capital assets, (iv) such security interest shall not apply to any other property or assets of Guarantor or any Subsidiary, and (v) the aggregate amount of such Indebtedness when aggregated (without duplication) with all Indebtedness incurred under clauses (d) and (g) of Paragraph 3.01, with the aggregate amount of all claims secured by Liens permitted pursuant to clause (f) below and with the aggregate book value or sale price of the assets sold in sale and leaseback transactions permitted pursuant to Paragraph 3.03 does not exceed 30% of Consolidated Tangible Assets as of the last day of the most recent fiscal period in respect of which financial statements shall have been delivered pursuant to Paragraph 2.01; (e) Liens securing claims of any Special Purpose Subsidiary against any other Subsidiary and sales or assignments of accounts receivable (or interests therein) by any Subsidiary to a Special Purpose Subsidiary and by any Special Purpose Subsidiary; and (f) other Liens securing claims in an aggregate amount at any time outstanding that when aggregated (without duplication) with (i) all obligations of any Special Purpose Subsidiary secured by liens, (ii) all Indebtedness incurred under clauses (d) and (g) of Paragraph 3.01, (iii) the aggregate amount of all obligations secured by Liens permitted pursuant to clause (d) above and (iv) the aggregate book value or sale price of the assets sold in sale and leaseback transactions permitted pursuant to Paragraph 6.03, does not exceed 30% of Consolidated Tangible Assets as of the last day of the most recent fiscal period of Guarantor in respect of which financial statements shall have been delivered pursuant to Paragraph 2.01, provided that the dollar amount of claims and other obligations (other than claims or other obligations of any Subsidiary in favor of any Special Purpose Subsidiary which is directly or indirectly wholly owned by Guarantor and inchoate indemnity obligations) secured by accounts receivable does not exceed the greater of $130,000,000 or 35% of Guarantor's aggregate accounts receivable (including such accounts receivable sold to any Special Purpose Subsidiary) calculated on a consolidated basis. 3.03. Sale and Leaseback Transactions. Guarantor will not, and will not permit any Subsidiary to, enter into any arrangement, directly or indirectly, with any Person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred; provided, however, that notwithstanding the above, Guarantor or any Subsidiary may engage in any sale and leaseback transaction if, immediately after the consummation of such transaction, the aggregate book value or sale price of the assets sold in sale and leaseback transactions referred to in this Paragraph 3.03, when aggregated (without duplication) with all Indebtedness incurred under clauses (d) and (g) of Schedule A - Page 8 20 Paragraph 3.01 and with the aggregate amount of all claims and obligations secured by Liens permitted pursuant to clauses (d) and (f) of Paragraph 3.02, does not exceed 30% of Consolidated Tangible Assets as of the last day of the most recent fiscal period in respect of which financial statements shall have been delivered pursuant to Paragraph 2.01. 3.04. Fundamental Changes. (a) Guarantor will not, and will not permit any Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or any substantial portion of its assets, or all or substantially all of the capital stock of any of the Subsidiaries (in each case, whether now owned or hereafter acquired), or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Event of Default or default under the Obligation Documents shall have occurred and be continuing (i) any Person may merge into or consolidate with Guarantor in a transaction in which Guarantor is the surviving corporation, (ii) any Person may merge into any Subsidiary in a transaction in which the surviving entity is a Subsidiary, (iii) any Subsidiary may sell, transfer, lease or otherwise dispose of its assets to Guarantor or to another Subsidiary, (iv) any Subsidiary may liquidate or dissolve if Guarantor determines in good faith that such liquidation or dissolution is in the best interests of Guarantor and is not materially disadvantageous to BNPLC or the Participants and any distribution or other transfer of assets in connection with such liquidation or dissolution is made to Guarantor or another Subsidiary in an amount consistent with such person's ownership percentage of the Subsidiary being dissolved or liquidated, (v) Guarantor and the Subsidiaries may sell, lease or otherwise dispose of property in any individual transaction not related to any other such transaction if the aggregate fair market value of the assets sold, leased or otherwise disposed of in such transaction is less than $2,000,000, (vi) Guarantor and/or any of the Subsidiaries may sell or otherwise transfer their accounts receivable and other assets to any Special Purpose Subsidiary and/or any Special Purpose Subsidiary may sell or otherwise transfer such accounts receivable or other property (or interests therein) if otherwise permitted under Paragraph 3.02(f), and (vii) Guarantor and the Subsidiaries may sell, lease or otherwise dispose of property in any other transaction in the ordinary course of business, provided that, with respect to transactions outside of the ordinary course of business, the aggregate fair market value of all assets sold, leased or otherwise disposed of in transactions under this clause (vii) shall not when taken together at the time of each such sale, lease or other disposition exceed 25% of Consolidated Tangible Assets as of the last day of the most recent fiscal period in respect of which financial statements shall have been delivered pursuant to Paragraph 2.01 at such time. (b) Guarantor will not, and will not permit any of its Subsidiaries to, engage to any material extent in any line of business material to Guarantor and the Subsidiaries, taken as a whole, other than businesses currently conducted by Guarantor and the Subsidiaries and businesses reasonably related thereto. 3.05 Intentionally Omitted. 3.06. Fiscal Year. Guarantor will not change its fiscal year end from August 31. 3.07. Restrictive Agreements. Guarantor will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that Schedule A - Page 9 21 prohibits, restricts or imposes any condition upon (a) the ability of Guarantor or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to Guarantor or any other Subsidiary or to Guarantee Indebtedness of Guarantor or any other Subsidiary if any such prohibition, restriction or condition is more burdensome than any similar prohibition, restriction or condition contained in this Schedule; provided that (i) the foregoing shall not apply to restrictions and conditions imposed by law or by any the Existing Credit Agreement, (ii) the foregoing shall not apply to restrictions and conditions existing prior to and identified in the schedule 6.07 attached to the Existing Credit Agreement (a copy of which schedule is also attached hereto for convenience), but shall apply to any amendment or modification expanding the scope of any such restriction or condition unless otherwise permitted under this Paragraph 3.07, (iii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Schedule if such restrictions or conditions apply only to the property or assets securing such Indebtedness, (v) clause (a) of the foregoing shall not apply to customary provisions in leases and other contracts restricting the assignment thereof, (vi) the foregoing shall not apply to such restrictions and conditions applicable to any Subsidiary acquired after April 30, 1997 if such restrictions and conditions existed at the time such Subsidiary was acquired and were not created in anticipation of such acquisition, (vii) the foregoing shall not apply to one or more Subsidiaries having any such restriction or condition so long as any such Subsidiary individually shall not account for more than 5% of the gross revenues for the most recently ended fiscal year of Guarantor and the Subsidiaries, taken as a whole, and each such Subsidiary together with all other such Subsidiaries in the aggregate shall not account for more than 10% of the gross revenues for the most recently ended fiscal year of Guarantor and the Subsidiaries, taken as a whole, (viii) the foregoing shall not apply to any working capital facility entered into by a Subsidiary organized under the laws of any foreign country, and (ix) the foregoing shall not apply to any Special Purpose Subsidiary or to any agreement or other arrangement entered into by Guarantor or any of the Subsidiaries incidental to a transaction involving a Special Purpose Subsidiary, which transaction is otherwise permitted under the terms of this Schedule and the Obligations Documents. 3.08. Distributions. Guarantor shall not declare or make, and shall not suffer or permit any of its Subsidiaries to declare or make, any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any shares of any class of its capital stock, or purchase, redeem or otherwise acquire for value any shares of its capital stock or any warrants, rights or options to acquire such shares, now or hereafter outstanding, if any Event of Default or default under the Existing Credit Agreement then exists or would result therefrom. 3.09. Adjusted Leverage Ratio. Guarantor will not permit its Adjusted Leverage Ratio, as calculated as of the last day of each fiscal quarter of Guarantor, to be greater than (a) 1.50 to 1.00 from the Effective Date through and including February 28, 1999, (b) 1.25 to 1.00 from May 31, 1999 through and including February 28, 2000, and (c) 1.00 to 1.00 thereafter. 3.10. Consolidated Tangible Net Worth. Guarantor will not permit its Consolidated Tangible Net Worth as of the last day of each fiscal quarter of Guarantor following April 30, 1997 to be less than the sum of (without duplication) 80% of Consolidated Tangible Net Worth measured as of the end of the fiscal quarter ended February 28, 1997, plus 50% of consolidated net income (without subtracting losses or acquisition related charges) for each fiscal quarter ended after the fiscal quarter Schedule A - Page 10 22 ended February 28, 1997, minus 100% of all acquisition-related charges if such charges are recorded in the same fiscal quarter in which the applicable acquisition is consummated. 3.11. Modified Quick Ratio. At the end of any fiscal quarter of Guarantor when (1) the rating established by Moody's for the Index Debt of Guarantor is below Ba2 or (2) the rating established by S&P for the Index Debt of Guarantor is below BB, or (3) neither Moody's nor S&P maintains a rating for the Index Debt of Guarantor, Guarantor shall not permit the Modified Quick Ratio to be less than 1.0 to 1.0. Schedule A - Page 11 23 Schedule 3.13: Copyrights, Patents, Trademarks and Licenses Infringement Claims None. Schedule 6.01: Subsidiary Indebtedness
Name of Subsidiary Agreement ------------------ ---------------------------------------------- Solectron Scotland Limited $4.918 million Credit Facility with Royal Bank of Scotland Solectron Technology, Inc. $30.488 million Credit Agreement with Standard SDN BHD Chartered Bank and DCB Bank Solectron GmbH $5,000 Credit Agreement with Commerzebank $7 million L-T note from Landersgirekasse Oeffentliche Bank $2 million Credit Agreement with Hewlett Packard Company for purchase of inventory at acquisition Solectron Japan, Inc. $22.425 million Credit Agreement with Bank of Tokyo Mitsubishi Ltd. Fine Pitch Technology, Inc. $89,000 Equipment Loan from San Jose National Bank Force Computers, Inc. $1.038 million Credit Facility with Dresdner Bank Tokyo $8.876 million Credit Facility with Stadtoparkasse Munich $5.917 million Credit Facility with Hypobanck Munich $5.917 million Credit Facility with Reuschelbank $655,000 Credit Facility with Barclays Bank $500,000 Credit Facility with Bank Leumi $7.5 million Credit Facility with Comerica Bank
Schedule 6.02: Liens 1. Solectron Corporation
Secretary of State - California ------------------------------- Secured Party Description of Collateral Filing Date File Number - ---------------------------------- ------------------------------- ----------- ----------- Equitable Life Leasing Corporation Specific Equipment and Proceeds 1-26-93 88020525 Xerox Corporation Office Equipment and Proceeds 6-22-92 92137563
-2- 24
Secured Party Description of Collateral Filing Date File Number - ---------------------------------- -------------------------------- ----------- ----------- Taylor Made Office Systems, Inc. Specific Equipment and Proceeds 4-15-94 94074579 Hewlett Packard Company Specific Equipment and Proceeds 5-11-94 94093984 Hewlett Packard Company Specific Equipment and Proceeds 3-2-95 9506661264 Hewlett Packard Company Specific Equipment and Proceeds 8-28-95 9524460015 Taylor Made Office Systems, Inc. Specific Equipment and Proceeds 12-19-95 9535560504 Taylor Made Office Systems, Inc. Specific Equipment and Proceeds 3-1-96 9606760948 Taylor Made Office Systems, Inc. Specific Equipment and Proceeds 7-24-96 9620860481 Associates Leasing, Inc. Computer Equipment and Proceeds 1-10-97 9701360025 Security Pacific Equipment Leasing, Inc. Specific Equipment and Proceeds 5-1-95 85169376 Security Pacific Equipment Leasing, Inc. Computer Equipment and Proceeds 8-21-95 85270060 MNLC/BALTC Leasing Partners Specific Equipment and Proceeds 4-2-92 87117094 Security Pacific Equipment Leasing, Inc. Computer Equipment and Proceeds 5-6-92 87217647 Equitable Life Leasing Corporation Computer Equipment and Proceeds 10-20-92 87314510 G.E. Capital Corporation Specific Equipment and Proceeds 2-18-93 88046793 NEMLC Leasing Associates No. 3 Specific Equipment and Proceeds 1-11-93 88063091 Security Pacific Equipment Leasing Specific Equipment and Proceeds 12-27-94 90067753 Deutsch Credit Corporation Specific Equipment and Proceeds 4-3-95 90101368 Security Pacific Equipment Leasing, Inc. Specific Equipment and Proceeds 5-1-95 90172604 Hewlett Packard Company Computer Equipment and Proceeds 5-4-92 92099518 Lease Plan USA, Inc. Specific Equipment and Proceeds 5-12-92 92107399 Hewlett Packard Company Specific Equipment and Proceeds 7-13-92 92153799 Hewlett Packard Company Specific Equipment and Proceeds 10-6-92 92216939 Hewlett Packard Company Specific Equipment and Proceeds 10-16-92 92223550 Hewlett Packard Company Specific Equipment and Proceeds 10-27-92 92231425 Hewlett Packard Company Specific Equipment and Proceeds 4-1-93 92241883 Equitable Life Leasing Corporation Specific Equipment and Proceeds 1-28-94 93018954 Hewlett Packard Company Specific Equipment and Proceeds 4-22-93 9308147 Hewlett Packard Company Specific Equipment and Proceeds 5-12-93 93096482 MetLife Capital, L.P. Computer Equipment and Proceeds 1-28-94 93113136 Hewlett Packard Company Specific Equipment and Proceeds 6-4-93 93114108 Hewlett Packard Company Specific Equipment and Proceeds 6-16-93 93122297 United States Leasing International, Inc. Computer Equipment and Proceeds 11-5-93 93223327 Capital Preferred Yield Fund - II, L.P. Specific Equipment and Proceeds 4-7-94 93234553 Avnet Computer Technologies, Inc. Specific Equipment and Proceeds 2-4-94 94021647 Hewlett Packard Company Specific Equipment and Proceeds 4-25-94 94081377 Hewlett Packard Company Specific Equipment and Proceeds 5-4-94 94088238 Hewlett Packard Company Specific Equipment and Proceeds 5-20-94 94101661 Hewlett Packard Company Specific Equipment and Proceeds 7-18-94 94145012
-3- 25
Secured Party Description of Collateral Filing Date File Number - -------------------------------- ------------------------------- ----------- ----------- Hewlett Packard Company Specific Equipment and Proceeds 8-30-94 94178790 BNP Leasing Corporation Specific Equipment and Proceeds 9-8-94 94185412 Hewlett Packard Company Specific Equipment and Proceeds 9-21-94 9428560112 BNP Leasing Corporation Specific Equipment and Proceeds 9-27-94 9429360076 Hewlett Packard Company Specific Equipment and Proceeds 11-28-94 9434761275 Comdisco, Inc. Specific Equipment and Proceeds 12-8-94 9434960578 Hewlett Packard Company Specific Equipment and Proceeds 12-14-94 9500361142 Hewlett Packard Company Specific Equipment and Proceeds 1-26-95 9503360328 Hewlett Packard Company Specific Equipment and Proceeds 2-10-95 9504860699 Hewlett Packard Company Specific Equipment and Proceeds 2-10-95 9504860715 Hewlett Packard Company Specific Equipment and Proceeds 2-21-95 9505960514 Hewlett Packard Company Specific Equipment and Proceeds 3-6-95 9506860234 Hewlett Packard Company Specific Equipment and Proceeds 4-28-95 9512160498 Hewlett Packard Company Specific Equipment and Proceeds 4-28-95 9512160513 Hewlett Packard Company Specific Equipment and Proceeds 6-5-95 9515960516 Hewlett Packard Company Specific Equipment and Proceeds 6-5-95 9515960526 Hewlett Packard Company Specific Equipment and Proceeds 9-5-95 9525560208 Hewlett Packard Company Specific Equipment and Proceeds 9-5-95 9525560219 Hewlett Packard Company Specific Equipment and Proceeds 9-26-95 9527260307 Pitney Bowes Credit Corporation Specific Equipment and Proceeds 1-22-96 9602360211 Hewlett Packard Company Specific Equipment and Proceeds 1-29-96 9603060985 Copelco Capital, Inc. Specific Equipment and Proceeds 4-25-96 9608261042 Copelco Capital, Inc. Specific Equipment and Proceeds 6-19-96 9617660616 Copelco Capital, Inc. Specific Equipment and Proceeds 7-30-96 9621460705 Hewlett Packard Company Specific Equipment and Proceeds 8-9-96 9622661204 Copelco Capital, Inc. Specific Equipment and Proceeds 11-26-96 9633161377 Comdisco, Inc. Specific Equipment and Proceeds 2-10-97 9704260387 Comdisco, Inc. Specific Equipment and Proceeds 2-24-97 9705660119 Hewlett Packard Company Specific Equipment and Proceeds 7-7-93 93138136 Taylor Made Office Systems, Inc. Specific Equipment and Proceeds 8-21-95 9523560031
Liens of the Company pursuant to that Lease Agreement, dated as of September 6, 1994 (as amended from time to time) between BNP Leasing Company and Solectron Corporation. 2. Solectron Washington, Inc. Department of Licensing-Washington -4- 26
Secured Party Description of Collateral Filing Date File Number - ------------------------------------ ------------------------- ----------- ----------- GTE Northwest Specific Equipment 9-20-93 93-263-0729 AT&T Capital Services, Inc. Specific Equipment 11-3-95 95-307-0414 3. Solectron Texas, Inc.
Secretary of State - Texas Secured Party Description of Collateral Filing Date File Number - ------------------------------------ ------------------------- ----------- ----------- General Electric Capital Corporation Electronic Equipment 8-26-96 96704367 4. Fine Pitch Technology
Secretary of State - California Secured Party Description of Collateral Filing Date File Number - ------------------------------------ ------------------------- ----------- ----------- San Jose National Bank Specific Equipment 2-29-95 9504660745 San Jose National Bank Specific Equipment 4-3-95 9509560531 San Jose National Bank Specific Equipment 12-13-95 9534860123 5. Force Computers, Inc.
Secretary of State - California Secured Party Description of Collateral Filing Date File Number - ------------------------------------ ------------------------- ----------- ----------- Taylor Made Office Systems, Inc. Specific Equipment 10-11-94 9430660823 Taylor Made Office Systems, Inc. Specific Equipment 8-21-95 9523460666 Taylor Made Office Systems, Inc. Specific Equipment 6-13-94 94119361 6. Solectron Technology, Inc. (Charlotte)
Secretary of State - North Carolina Secured Party Description of Collateral Filing Date File Number - ------------------------------------ ------------------------- ----------- ----------- Hewlett Packard Company Specific Equipment 2-22-93 0000970502
Schedule 6.07; Restrictive Agreements Indenture dated as of February 15, 1996 governing the terms of issuance of 7 3/8% Senior Notes due 2006. Contains a covenant restricting the Company's ability to encumber certain items of its property. -5- 27 Lease Agreement dated as of September 6, 1994 (as amended from time to time) between BNP Leasing Company and Solectron Corporation. Includes all covenants by cross reference in Article VI of this Credit Agreement. The Force Computers, Inc. credit facilities contains (1) restrictions on its ability to pay dividends to Solectron and (2) its ability to encumber any of its assets except for ordinary course involuntary liens and equipment finance and purchase money security interests. -6- EX-10.4 7 AMENDED AND RESTATED LEASE AGREEMENT 1 EXHIBIT 10.4 ================================================================================ $16,000,000 AMENDED AND RESTATED LEASE AGREEMENT BETWEEN BNP LEASING CORPORATION ("BNPLC") AND FORCE COMPUTERS, INC. ("FCI") JULY 16, 1998 (SAN JOSE, CALIFORNIA) ================================================================================ PURSUANT TO AND AS MORE PARTICULARLY PROVIDED IN SUBPARAGRAPH 26 OF THIS LEASE, THIS LEASE AND THE PURCHASE AGREEMENT REFERENCED HEREIN ARE TO CONSTITUTE, FOR INCOME TAX PURPOSES ONLY, A FINANCING ARRANGEMENT OR CONDITIONAL SALE. AS PROVIDED IN SUBPARAGRAPH 26 OF THIS LEASE, BNPLC AND FCI EXPECT THAT FCI (AND NOT BNPLC) SHALL BE TREATED AS THE TRUE OWNER OF THE PROPERTY FOR INCOME TAX PURPOSES, THEREBY ENTITLING FCI (AND NOT BNPLC) TO TAKE DEPRECIATION DEDUCTIONS AND OTHER TAX BENEFITS AVAILABLE TO THE OWNER. 2 TABLE OF CONTENTS
Page ---- 1. TERM.................................................................................2 (a) Scheduled Term................................................................2 (b) Automatic Termination as of the Base Rent Commencement Date Resulting From an Election by FCI to Terminate the Purchase Option and FCI's Initial Remarketing Rights and Obligations........................................................2 (c) Election by BNPLC to Terminate After an Issue 97-10 Election..................2 (d) Election by FCI to Terminate After Accelerating the Designated Sale Date......3 (e) Extension of the Term.........................................................3 2. NO LEASE TERMINATION.................................................................3 (a) Status of Lease...............................................................3 (b) Waiver by FCI.................................................................4 3. USE AND CONDITION OF THE PROPERTY....................................................4 (a) Use...........................................................................4 (b) Condition of the Property.....................................................5 (c) Consideration for and Scope of Waiver.........................................5 4. RENT.................................................................................5 (a) Base Rent Generally...........................................................5 (b) Calculation of and Due Dates for Base Rent....................................6 (i) Amount Payable On the Base Rent Commencement Date......................6 (ii) Determination of Subsequent Payment Due Dates..........................6 (iii) Base Rent Formula......................................................6 (c) Additional Rent...............................................................6 (d) Commitment Fees...............................................................7 (e) Administrative Agency Fees....................................................7 (f) Issue 97-10 Prepayments.......................................................7 (g) No Demand or Setoff...........................................................7 (h) Default Interest and Order of Application.....................................7 5. PAYMENT OF EXECUTORY COSTS AND LOSSES RELATED TO THE PROPERTY........................7 (a) "Net" Lease Generally.........................................................8 (b) Impositions...................................................................8 (c) Increased Costs; Capital Adequacy Charges.....................................8 (d) FCI's Payment of Other Losses; General Indemnification........................9 (e) Exceptions and Qualifications to Indemnities.................................10 (f) Withholding Taxes............................................................12 6. CONSTRUCTION OF NEW IMPROVEMENTS....................................................13 (a) Advances; Outstanding Construction Allowance.................................13
3 (b) Calculation of Carrying Costs................................................13 (i) Carrying Costs Formula................................................13 (ii) Limits on the Amount of Carrying Costs................................13 (c) FCI's Right to Control the Construction Project..............................14 (d) Landlord's Election to Continue Construction.................................14 (i) Take Control of the Property..........................................14 (ii) Continuation of Construction..........................................14 (iii) Arrange for Turnkey Construction......................................15 (iv) Suspension or Termination of Construction.............................15 (e) Powers Coupled With an Interest..............................................16 (f) Completion Notice............................................................16 7. OTHER OBLIGATIONS OF AND LIMITED REPRESENTATIONS BY BNPLC...........................16 (a) Cooperation of BNPLC to Facilitate Construction and Development..............16 (b) Actions Permitted by FCI Without BNPLC's Consent.............................17 (c) Waiver of Landlord's Liens...................................................18 (d) Limited Representations by BNPLC Concerning Accounting Matters...............18 (e) Other Limited Representations by BNPLC.......................................19 (i) No Default or Violation...............................................19 (ii) No Suits..............................................................19 (iii) Enforceability........................................................19 (iv) Organization..........................................................20 (v) Not a Foreign Person..................................................20 (f) Keeping Proprietary Information Confidential.................................20 8. STATUS OF PROPERTY ACQUIRED WITH FUNDS PROVIDED BY BNPLC............................20 9. ENVIRONMENTAL.......................................................................21 (a) Environmental Covenants by FCI...............................................21 (b) Right of BNPLC to do Remedial Work Not Performed by FCI......................21 (c) Environmental Inspections and Reviews........................................22 (d) Communications Regarding Environmental Matters...............................22 10. INSURANCE REQUIRED AND CONDEMNATION.................................................23 (a) Liability Insurance..........................................................23 (b) Property Insurance...........................................................23 (c) Failure to Obtain Insurance..................................................24 (d) Condemnation.................................................................24 11. APPLICATION OF INSURANCE AND CONDEMNATION PROCEEDS..................................24 (a) Collection of Insurance and Condemnation Proceeds Generally..................24 (b) Administration of Remaining Proceeds; FCI's Obligation to Restore............25 (c) Special Provisions Concerning CMA Termination Events, Events of Default and Qualified Payments...........................................................25 (d) Takings of All or Substantially All of the Property..........................26 (e) Waiver of Subrogation........................................................26 12. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF FCI CONCERNING THE PROPERTY.............................................................26
(ii) 4 (a) Compliance with Covenants and Laws...........................................26 (b) Operation of Property........................................................27 (c) Debts for Construction, Maintenance, Operation or Development................27 (d) Repair, Maintenance, Alterations and Additions...............................28 (e) Compliance With Permitted Encumbrances and Development Contracts.............28 (f) Modification of Permitted Encumbrances and Development Contracts.............29 (g) Books and Records Concerning the Property....................................29 13. ASSIGNMENT AND SUBLETTING BY FCI....................................................29 (a) BNPLC's Consent Required.....................................................29 (b) Standard for BNPLC's Consent to Assignments and Certain Other Matters........29 (c) Consent Not a Waiver.........................................................30 14. ASSIGNMENT BY BNPLC.................................................................30 (a) Restrictions on Transfers....................................................30 (b) Effect of Permitted Transfer or other Assignment by BNPLC....................30 15. BNPLC'S RIGHT OF ACCESS.............................................................30 16. OTHER REPRESENTATIONS, WARRANTIES AND COVENANTS OF FCI..............................31 (a) Negative Covenants...........................................................31 (i) Multi employer ERISA Plans............................................31 (ii) Prohibited ERISA Transaction..........................................31 (b) Financial Statements; Required Notices; Certificates as to Default...........31 (c) No Default or Violation......................................................32 (d) No Suits.....................................................................32 (e) Enforceability...............................................................32 (f) Financial Matters............................................................33 (g) Organization.................................................................33 (h) ERISA........................................................................33 (i) Use of Proceeds..............................................................33 (j) Investment Company Act.......................................................34 (k) Omissions....................................................................34 (l) Not a Foreign Person.........................................................34 (m) Further Assurances...........................................................34 17. EVENTS OF DEFAULT...................................................................34 (a) Definition of Events of Default..............................................34 18. REMEDIES............................................................................36 (a) Basic Remedies...............................................................36 (b) Notice Required So Long As FCI 's Purchase Option and Initial Remarketing Rights and Obligations Continue Under the Purchase Agreement.................38 (c) Enforceability...............................................................38 (d) Remedies Cumulative..........................................................38 19. DEFAULT BY BNPLC....................................................................39 20. QUIET ENJOYMENT.....................................................................39
(iii) 5 21. SURRENDER UPON TERMINATION..........................................................39 22. HOLDING OVER BY FCI.................................................................40 23. INDEPENDENT OBLIGATIONS EVIDENCED BY THE OTHER OPERATIVE DOCUMENTS..................40 24. WAIVER OF JURY TRIAL................................................................40 25. MISCELLANEOUS.......................................................................41 (a) Notices......................................................................41 (b) Severability.................................................................42 (c) No Merger....................................................................42 (d) No Implied Waiver............................................................42 (e) NO IMPLIED REPRESENTATIONS BY BNPLC..........................................43 (f) Entire Agreement.............................................................43 (g) Binding Effect...............................................................43 (h) Time is of the Essence.......................................................43 (i) Governing Law................................................................43 (j) Paragraph Headings...........................................................43 (k) Other Terms and References...................................................43 (l) Not a Partnership, Etc.......................................................43 26. INCOME TAX REPORTING................................................................44 27. PROPRIETARY INFORMATION AND CONFIDENTIALITY.........................................45 28. USURY SAVINGS CLAUSE................................................................45
(iv) 6 EXHIBITS AND SCHEDULES Exhibit A....................................................................Legal Description Exhibit B...........................................................Permitted Encumbrance List Exhibit C..........Notice by FCI of Election Not to Make Construction-Period Indemnity Payment Exhibit D.......................................Standard Notice of Request for Action by BNPLC Exhibit E....................................Notice of Request Requiring an Expedited Response Exhibit F...............................................................Insurance Requirements Exhibit G...............................................................Compliance Certificate Exhibit H...........................................................Libor Period Election Form Schedule 1.......................................................List of Development Documents Schedule 2...........................List of Claims Pending or Threatened Against the Property List of Defined Terms.......................................................Shared Definitions
(v) 7 AMENDED AND RESTATED LEASE AGREEMENT This AMENDED AND RESTATED LEASE AGREEMENT (this "LEASE"), by and between BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"), and FORCE COMPUTERS, INC., a Delaware corporation ("FCI"), is dated as of July 16, 1998, the Effective Date. ("EFFECTIVE DATE" and other capitalized terms used and not otherwise defined in this Lease are intended to have the meanings assigned to them in the List of Defined Terms attached to and made a part of this Lease.) RECITALS Pursuant to the Existing Contract, which covers the Land described in Exhibit A, BNPLC acquired the Land and any appurtenances thereto from Seller on or about July 16, 1998. Contemporaneously with the purchase of the Land, BNPLC leased it to FCI pursuant to a Lease Agreement dated as of July 16, 1998. The parties wish to amend and restate the Lease Agreement to incorporate certain changes mutually acceptable to the parties. This Amended and Restated Lease Agreement incorporates such changes and amends, restates and replaces the prior Lease Agreement in its entirety as of the Effective Date. GRANTING CLAUSES In consideration of the rent to be paid and the covenants and agreements to be performed by FCI, as hereinafter set forth, BNPLC does hereby LEASE, DEMISE and LET unto FCI for the term hereinafter set forth all right, title and interest of BNPLC, now owned or hereafter acquired, in and to: (1) the Land; (2) any and all Improvements acquired from Seller pursuant to the Existing Contract and all Improvements hereafter constructed as described in the Operative Documents; (3) all easements and other rights appurtenant to the Land or to the Improvements, whether now owned or hereafter acquired by BNPLC; and (4) (A) any land lying within the right-of-way of any street, open or proposed, adjoining the Land, (B) any sidewalks and alleys adjacent to the Land and (C) any strips and gores between the Land and abutting land. BNPLC's interest in all property described in clauses (1) through (4) above are hereinafter referred to collectively as the "REAL PROPERTY". To the extent, but only to the extent, that assignable rights or interests in, to or under the following have been or will be acquired by BNPLC under the Existing Contract or acquired by BNPLC pursuant to Paragraph 8 below, BNPLC also hereby grants and assigns to FCI for the term of this Lease the right to use and enjoy (and, in the case of contract rights, to enforce) such rights or interests of BNPLC: (a) any goods, equipment, furnishings, furniture and other tangible 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; 8 (b) the benefits, if any, conferred upon the owner of the Real Property by the Permitted Encumbrances and Development Documents; and (c) any permits, licenses, franchises, certificates, and other rights and privileges against third parties related to the Real Property. Such rights and interests of BNPLC, whether now existing or hereafter arising, are hereinafter collectively called the "PERSONAL PROPERTY". The Real Property and the Personal Property are hereinafter sometimes collectively called the "PROPERTY." However, the leasehold estate conveyed hereby and FCI's rights hereunder are expressly made subject and subordinate to the terms and conditions of this Lease, to the matters listed in Exhibit B and all other Permitted Encumbrances), and to any other claims or encumbrances not constituting Liens Removable by BNPLC. GENERAL TERMS AND CONDITIONS The Property is leased by BNPLC to FCI and is accepted and is to be used and possessed by FCI upon and subject to the following terms and conditions: 1. TERM. (a) Scheduled Term. This Lease is intended to be an effective and binding obligation upon BNPLC and FCI throughout the period (the "TERM") commencing on and including the Effective Date and ending on the first Business Day of August, 2003, unless extended or sooner terminated as expressly herein provided; however, the rights of FCI as the tenant hereunder to the use, occupancy and possession of the Land and the Improvements will not commence until the Base Rent Commencement Date. Prior to the Base Rent Commencement Date, FCI's will have the right under and pursuant to the rights and authority granted to it by the Construction Management Agreement to the use, occupancy and possession of the Land and the Improvements in its capacity as construction manager. Such right of FCI as construction manager will be to the exclusion of BNPLC, but subject to the terms and conditions set forth therein, herein and in the other Operative Documents, so long as the Construction Management Agreement remains in force. (b) Automatic Termination as of the Base Rent Commencement Date Resulting From an Election by FCI to Terminate the Purchase Option and FCI's Initial Remarketing Rights and Obligations. If FCI terminates the Purchase Option and FCI's Initial Remarketing Rights and Obligations prior to the Base Rent Commencement Date pursuant to subparagraph 4(B) of the Purchase Agreement, then this Lease shall terminate automatically on the Base Rent Commencement Date. Just as any such termination of the Purchase Option and FCI's Initial Remarketing Rights and Obligations shall be subject to the condition (set forth in subparagraph 4(B) of the Purchase Agreement) that FCI pay an Issue 97-10 Prepayment to BNPLC, so too will the termination of this Lease pursuant to this subparagraph be subject the condition that FCI make the Issue 97-10 Prepayment to BNPLC. (c) Election by BNPLC to Terminate After an Issue 97-10 Election. BNPLC shall be entitled to terminate this Lease, as BNPLC deems appropriate in its sole and absolute discretion, at any time after receiving a notice given by FCI to make or attempt to make any Issue 97-10 Election. Upon any termination of this Lease by BNPLC pursuant to this subparagraph, FCI must pay to BNPLC an Issue 97-10 Prepayment. 2 9 (d) Election by FCI to Terminate After Accelerating the Designated Sale Date. Provided FCI has not made any Issue 97-10 Election, FCI shall be entitled to accelerate the Designated Sale Date (and thus accelerate the purchase of BNPLC's interest in the Property by FCI or by an Applicable Purchaser pursuant to the Purchase Agreement) by sending a notice to BNPLC as provided in clause (2) of the definition of "Designated Sale Date" in the List of Defined Terms. In the event, because of FCI's election to so accelerate the Designated Sale Date or for any other reason, the Designated Sale Date occurs before the end of the scheduled Term, FCI may terminate this Lease on or after the Designated Sale Date; provided, however, as a condition to any such termination by FCI, FCI must have done the following prior to the termination: (i) purchased or caused an Applicable Purchaser to purchase the Property pursuant to the Purchase Agreement and satisfied all of FCI's other obligations under the Purchase Agreement; (ii) paid to BNPLC all Base Rent, all Commitment Fees, all Administrative Agency Fees and all other Rent due on or before or accrued through the Designated Sale Date; and (iii) paid any Breakage Costs caused by BNPLC's sale of the Property pursuant to the Purchase Agreement. (e) Extension of the Term. The Term may be extended at the option of FCI 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, BNPLC and FCI must have agreed in writing upon, and received the written consent and approval of BNPLC's Parent and all other Participants to (1) a corresponding extension not only to the date for the expiration of the Term specified above in this Section, but also to the date specified in clause (1) of the definition of Designated Sale Date in the List of Defined Terms attached hereto, and (2) an adjustment to the Rent that FCI 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 BNPLC and FCI, each in its sole and absolute discretion; (B) there must be no Event of Default continuing hereunder at the time of FCI's exercise of its option to extend; (C) prior to any such extension, FCI must have completed the Construction Project in accordance with the Construction Management Agreement and must not have made any Issue 97-10 Election; and (D) immediately prior to any such extension, this Lease must remain in effect. With respect to the condition that BNPLC and FCI must have agreed upon the Rent required for any extension of the Term, neither FCI nor BNPLC is willing to submit itself to a risk of liability or loss of rights hereunder for being judged unreasonable. Accordingly, both FCI and BNPLC 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 FCI 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 FCI shall continue without interruption and without any loss of priority over other interests in or claims against the Property that may be created or arise after the date hereof and before the extension. 2. NO LEASE TERMINATION. (a) Status of Lease. Except as expressly provided herein, this Lease shall not terminate, nor shall FCI have any right to terminate this Lease, nor shall FCI be entitled to any abatement of the Rent, nor shall the obligations of FCI under this Lease be excused, for any reason whatsoever, including any of the following: (i) any damage to or the destruction of all or any part of the Property from whatever cause, (ii) the taking of the Property or any portion thereof by eminent domain or otherwise for any reason, (iii) the 3 10 prohibition, limitation or restriction of FCI'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 FCI or of anyone claiming through or under FCI (provided, that if FCI is wrongfully evicted by BNPLC or by any third party lawfully exercising its rights under a Lien Removable by BNPLC, then FCI will have the remedies described in Paragraph 19 below), (v) any default on the part of BNPLC under this Lease or under any other agreement to which BNPLC and FCI are parties, (vi) the inadequacy in any way whatsoever of the design, construction, assembly or installation of any improvements, fixtures or tangible personal property included in the Property, it being understood that BNPLC has not made, does not make and will not make any representation express or implied as to the adequacy thereof, (vii) any latent or other defect in the Property or any change in the condition thereof or the existence with respect to the Property of any violations of Applicable Laws, (viii) any breach by Seller of the surviving provisions of the Existing Contract, or (ix) any other cause whether similar or dissimilar to the foregoing. It is the intention of the parties hereto that the obligations of FCI hereunder shall be separate and independent of the covenants and agreements of BNPLC, that the Base Rent and all other sums payable by FCI hereunder shall continue to be payable in all events and that the obligations of FCI 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. (b) Waiver by FCI. Without limiting the foregoing, FCI waives to the extent permitted by Applicable Laws, except as otherwise expressly provided herein, all rights to which FCI 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 Property or any part thereof or (ii) to any abatement, suspension, deferment or reduction of the Rent. However, nothing in this Paragraph 2 shall be construed as a waiver by FCI of any right FCI may have at law or in equity to the following remedies, whether because of BNPLC's failure to remove a Lien Removable by BNPLC or because of any other default by BNPLC under this Lease that continues beyond the period for cure provided in Paragraph 19: (i) the recovery of monetary damages, (ii) injunctive relief in case of the violation, or attempted or threatened violation, by BNPLC of any of the express covenants, agreements, conditions or provisions of this Lease which are binding upon BNPLC (including the confidentiality provisions set forth in subparagraph 7.(f) below), or (iii) a decree compelling performance by BNPLC of any of the express covenants, agreements, conditions or provisions of this Lease which are binding upon BNPLC. 3. USE AND CONDITION OF THE PROPERTY. (a) Use. Subject to the Permitted Encumbrances, the Development Documents and the terms hereof, FCI may use and occupy the Property during the Term, but only for the following purposes and other lawful purposes incidental thereto: (i) manufacturing, engineering, assembly, warehousing and laboratory-based research and development of circuit boards, computer-related and other electronic products; (ii) administrative and office space; (iii) cafeteria, library, and other support function uses that FCI may provide to its employees; and (iv) other lawful uses approved in advance and in writing by BNPLC, which approval will not be unreasonably withheld after completion of the Construction Project (but FCI acknowledges that 4 11 BNPLC's withholding of such approval shall be reasonable if BNPLC determines in good faith that (i) giving the approval may materially increase BNPLC's risk of liability for any existing or future environmental problem, or (ii) giving the approval is likely to substantially increase BNPLC's administrative burden of complying with or monitoring FCI's compliance with the requirements of this Lease or other Operative Documents). Although the term "products" in this subparagraph may include products designed to detect, monitor, neutralize, handle or process Hazardous Substances, the use of the Property by FCI shall not include bringing Hazardous Substances onto the Property for the purpose of testing or demonstrating any such products. (b) Condition of the Property. FCI ACKNOWLEDGES THAT IT HAS CAREFULLY AND FULLY INSPECTED THE PROPERTY AND ACCEPTS THE PROPERTY 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. FCI ALSO ACCEPTS THE PROPERTY WITHOUT ANY COVENANT, REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, BY BNPLC OR ITS AFFILIATES REGARDING THE TITLE THERETO OR THE RIGHTS OF ANY PARTIES IN POSSESSION OF ANY PART THEREOF, EXCEPT AS EXPRESSLY SET FORTH IN PARAGRAPH 20. BNPLC 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 PROPERTY OR FOR ANY VIOLATIONS WITH RESPECT THERETO OF APPLICABLE LAWS. NOR SHALL BNPLC BE REQUIRED TO FURNISH TO FCI ANY FACILITIES OR SERVICES OF ANY KIND, INCLUDING WATER, STEAM, HEAT, GAS, AIR CONDITIONING, ELECTRICITY, LIGHT OR POWER. (c) Consideration for and Scope of Waiver. The provisions of subparagraph 3.(b) above have been negotiated by BNPLC and FCI after due consideration for the Rent payable hereunder and are intended to be a complete exclusion and negation of any representations or warranties of BNPLC or its Affiliates, express or implied, with respect to the Property that may arise pursuant to any law now or hereafter in effect or otherwise, except as expressly set forth herein. However, such exclusion of representations and warranties by BNPLC and its Affiliates is not intended to impair any representations or warranties made by other parties, including any architects, engineers or contractors engaged to work on the Construction Project, the benefit of which is to pass to FCI during the Term because of the definition of Personal Property and Property above. 4. RENT. (a) Base Rent Generally. On the Base Rent Commencement Date and on each Base Rent Date through the end of the Term, FCI shall pay BNPLC rent ("BASE RENT"). Each payment of Base Rent must be received by BNPLC no later that 10:00 a.m. (Central time) on the date it becomes due; if received after 10:00 a.m. (Central time) it will be considered for purposes of this Lease as received on the next following Business Day. BNPLC shall notify FCI of the amount of each payment of Base Rent (calculated as provided in subparagraph 4.(b)) at least three days before the date upon which it first becomes due. However, any failure by BNPLC to so notify FCI shall not constitute a waiver of BNPLC's right to payment, but absent such notice FCI shall not be in default for any underpayment resulting therefrom if FCI, in good faith, reasonably estimates the payment required, makes a timely payment of the amount so estimated and corrects any underpayment within three Business Days after being notified by BNPLC of the underpayment. 5 12 (b) Calculation of and Due Dates for Base Rent. Payments of Base Rent shall be calculated and become due as follows: (i) Amount Payable On the Base Rent Commencement Date. The Base Rent payable on the Base Rent Commencement Date shall equal the difference (if any) between (a) the total amount that would have been added to the Outstanding Construction Allowance as Carrying Costs on such date if not for the limit set forth in subparagraph 6.(b)(ii), and (b) the Carrying Costs actually added on such date to the Outstanding Construction Allowance. (ii) Determination of Subsequent Payment Due Dates. For all Base Rent Periods subject to a LIBOR Period Election of one month 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 FCI or any Applicable Purchaser purchases BNPLC'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 BNPLC under the Purchase Agreement. (iii) Base Rent Formula. Each installment of Base Rent payable for any Base Rent Period shall equal: o Stipulated Loss Value on the first day of such Base Rent Period, times o the sum of (a) the Effective Rate with respect to such Base Rent Period, plus (b) the Spread for the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, times o the number of days in the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, divided by o three hundred sixty. Assume, only for the purpose of illustration: that prior to the first day of a Base Rent Period subject to a LIBOR Period Election of one month the Construction Allowance has been fully funded, but a total of $35,000,000 of Qualified Payments have been received by BNPLC, leaving a Stipulated Loss Value of $15,000,000; that the Effective Rate for such Base Rent Period is 6%; that the Spread for such period is thirty-two and one-half basis points (32.5/100 of 1%); and that such Base Rent Period contains exactly thirty days. Under such assumptions, the Base Rent for the hypothetical Base Rent Period will equal: $15,000,000 x (6% + .325%) x 30/360 = $79,062.50 (c) Additional Rent. All amounts which FCI is required to pay to or on behalf of BNPLC 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, 6 13 are herein called "ADDITIONAL RENT", and together Base Rent and Additional Rent are herein sometimes called "RENT"). (d) Commitment Fees. For each Construction Period FCI shall pay BNPLC a fee (a "COMMITMENT FEE") equal to: o twelve and one-half basis points (12.5/100 of 1%), times an amount equal to: (i) the Maximum Construction Allowance, less (ii) the Funded Construction Allowance on the first day of such Construction Period; times o the number of days in such Construction Period; divided by o three hundred sixty. FCI shall pay Commitment Fees in arrears on the first Business Day of February, May, August and November of each calendar year, beginning with August 1, 1998 and continuing regularly throughout the Term so long as Commitment Fees have accrued and remain unpaid. However, if any Commitment Fees shall have accrued and remain unpaid on the date BNPLC's interest in the Property is sold pursuant to the Purchase Agreement, such accrued unpaid Commitment Fees shall be due on the date of the sale. (e) Administrative Agency Fees. Upon execution and delivery of this Lease by BNPLC, and again on each anniversary of the date hereof, FCI shall pay to BNPLC an administrative fee (an "ADMINISTRATIVE AGENCY FEE") in the amount set forth in the letter agreement dated as of April 22, 1998 between BNPLC, FCI and Guarantor and other affiliates of FCI. Each Administrative Agency Fee shall represent Additional Rent for the Construction Period or Base Rent Period during which it is paid. (f) Issue 97-10 Prepayments. Following any Issue 97-10 Election or any CMA Termination Event under (and as defined in) the Construction Management Agreement, FCI shall make an Issue 97-10 Prepayment to BNPLC within three Business Days after receipt of any demand for such a payment. BNPLC may demand an Issue 97-10 Payment pursuant to this subparagraph at any time and from time to time (as Project Costs increase) after any Issue 97-10 Election or CMA Termination Event. (g) No Demand or Setoff. Except as expressly provided herein, FCI shall pay all Rent without notice or demand and without counterclaim, deduction, setoff or defense. (h) Default 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. BNPLC shall be entitled to apply any amounts paid by or on behalf of FCI against any Rent then past due in the order the same became due or in such other order as BNPLC may elect. 5. PAYMENT OF EXECUTORY COSTS AND LOSSES RELATED TO THE PROPERTY. 7 14 (a) "Net" Lease Generally. Subject only to the exceptions listed in subparagraph 5.(e) below, it is the intention of BNPLC and FCI that the Base Rent, Commitment Fees, Administrative Agency Fees and other payments herein specified shall be absolutely net to BNPLC and that FCI shall pay all costs, expenses and obligations of every kind relating to the Property or this Lease which may arise or become due, including: (i) any taxes payable by virtue of BNPLC's receipt of amounts paid to or on behalf of BNPLC in accordance with this Paragraph 5; (ii) any amount for which BNPLC is or becomes liable with respect to the Permitted Encumbrances or the Development Documents; and (iii) any costs incurred by BNPLC (including Attorneys' Fees) because of BNPLC's acquisition or ownership of any interest in the Property or because of this Lease or the transactions contemplated herein. (b) Impositions. FCI shall pay or cause to be paid prior to delinquency all ad valorem taxes assessed against the Property and other Impositions. If requested by BNPLC from time to time, FCI shall furnish BNPLC with receipts showing payment of all Impositions at least ten days prior to the applicable default date therefor. Notwithstanding the foregoing, FCI may in good faith, by appropriate proceedings, contest the validity, applicability or amount of any asserted Imposition, and pending such contest FCI shall not be deemed in default hereunder because of the Imposition if (1) FCI diligently prosecutes such contest to completion in a manner reasonably satisfactory to BNPLC, and (2) FCI 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, in any event each such contest shall be concluded and the contested Impositions must be paid by FCI prior to the earlier of (i) the date that any criminal action is overtly threatened or instituted against BNPLC or its directors, officers or employees because of the nonpayment thereof or (ii) the date any writ or order is issued under which any property owned or leased by BNPLC (including the Property) may be seized or sold or any other action is taken or overtly threatened against BNPLC or against any property owned or leased by BNPLC because of the nonpayment thereof, (iii) any Designated Sale Date upon which, for any reason, FCI or an Affiliate of FCI or any Applicable Purchaser shall not purchase BNPLC's interest in the Property pursuant to the Purchase Agreement for a net price to BNPLC (when taken together with any additional payments made by FCI pursuant to Paragraph 1(A)(2) of the Purchase Agreement, in the case of a purchase by an Applicable Purchaser) equal to Stipulated Loss Value, or (iv) any date upon which the Construction Management Agreement or this Lease or FCI's Initial Remarketing Rights and Obligations may be terminated because of or following any Issue 97-10 Election. (c) Increased Costs; Capital Adequacy Charges. (i) If, after the Effective Date, there shall be any increase in the cost to BNPLC's Parent or any other Participant agreeing to make or making, funding or maintaining advances to BNPLC in connection with the Property because of any Banking Rules Change, then FCI shall from time to time, pay to BNPLC for the account of BNPLC's Parent or such other Participant, as the case may be, additional amounts sufficient to compensate BNPLC's Parent or the Participant for such increased cost. A certificate as to the amount of such increased cost, submitted to BNPLC and FCI by BNPLC's Parent or the other Participant, shall be conclusive and binding upon FCI, absent clear and demonstrable error. (ii) BNPLC's Parent or any other Participant may demand additional payments ("CAPITAL ADEQUACY CHARGES") if BNPLC's Parent or the other Participant determines that any Banking Rules Change 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 advances made or to be made to BNPLC to permit BNPLC 8 15 to maintain BNPLC's investment in the Property or to make Construction Advances. To the extent that BNPLC's Parent or another Participant demands Capital Adequacy Charges as compensation for the additional capital requirements reasonably allocable to such investment or advances, FCI shall pay to BNPLC for the account of BNPLC's Parent or the other Participant, as the case may be, the amount so demanded. (iii) Any amount to be paid by FCI under this subparagraph 5.(c) shall be due within ten days after a demand for such payment is made upon FCI. (d) FCI's Payment of Other Losses; General Indemnification. (i) Subject only to subparagraph 5.(e), all Losses (including Environmental Losses) asserted against or incurred or suffered by BNPLC or other Interested Parties at any time and from time to time by reason of, in connection with or arising out of (A) their ownership or alleged ownership of any interest in the Property or the Rents, (B) the use and operation of the Property, (C) the negotiation or administration of this Lease or other Operative Documents, (D) the making of Funding Advances, (E) any Construction Project, (F) the breach by FCI of this Lease or any other document executed by FCI in connection herewith, (G) any failure of the Property or FCI itself to comply with Applicable Laws, (H) Hazardous Substance Activities, including those occurring prior to the Effective Date, (I) any bodily or personal injury or death or property damage occurring in or upon or in the vicinity of the Property through any cause whatsoever, or (J) the Permitted Encumbrances (including the surviving provisions of the Existing Contract), shall be paid by FCI, and FCI shall indemnify and defend BNPLC and other Interested Parties from and against all such Losses. (However, the indemnity in the preceding sentence shall not be construed to make FCI liable to both BNPLC and any Participant or other party claiming through BNPLC for the same costs, expenses or damages. Nor will such indemnity be construed to make FCI liable for any allocation of general overhead or internal administrative expenses of BNPLC, BNPLC's Parent or any other Interested Party except to the extent allowed by subparagraph 5.(c)(i) because of a Banking Rules Change after the date of this Lease. Nor will such indemnity be construed to limit FCI's right to reimbursement for Reimbursable Construction-Period Costs under the Construction Management Agreement.) (ii) SUBJECT ONLY TO SUBPARAGRAPH 5.(E), THE INDEMNITIES AND RELEASES PROVIDED HEREIN FOR THE BENEFIT OF BNPLC AND OTHER INTERESTED PARTIES, INCLUDING THE INDEMNITY SET FORTH IN THE PRECEDING SUBPARAGRAPH 5.(D)(I), SHALL APPLY EVEN IF AND WHEN THE SUBJECT MATTERS OF THE INDEMNITIES AND RELEASES ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OR STRICT LIABILITY OF BNPLC OR ANOTHER INTERESTED PARTY. FURTHER, SUCH INDEMNITIES AND RELEASES WILL APPLY EVEN IF INSURANCE OBTAINED BY FCI OR REQUIRED OF FCI BY THIS LEASE OR OTHER OPERATIVE DOCUMENTS IS NOT ADEQUATE TO COVER LOSSES AGAINST OR FOR WHICH THE INDEMNITIES AND RELEASES ARE PROVIDED. FCI'S LIABILITY, HOWEVER, FOR ANY FAILURE TO OBTAIN INSURANCE REQUIRED BY THIS LEASE OR OTHER OPERATIVE DOCUMENTS WILL NOT BE LIMITED TO LOSSES AGAINST WHICH INDEMNITIES ARE PROVIDED HEREIN, IT BEING UNDERSTOOD THAT SUCH INSURANCE IS INTENDED TO DO MORE THAN PROVIDE A SOURCE OF PAYMENT FOR LOSSES AGAINST WHICH BNPLC AND OTHER INTERESTED PARTIES ARE ENTITLED TO INDEMNIFICATION BY THIS LEASE. 9 16 (iii) Costs and expenses for which FCI shall be responsible pursuant to this subparagraph 5.(d) will include appraisal fees, filing and recording fees, inspection fees, survey fees, taxes, brokerage fees and commissions, abstract fees, title policy fees, Uniform Commercial Code search fees, escrow fees and Attorneys' Fees incurred by BNPLC with respect to the Property, whether such costs and expenses are incurred at the time of execution of this Lease or at any time during the Term. Such costs and expenses will also include Attorneys' Fees or other costs incurred to evaluate lien releases and other information submitted by FCI with requests for Construction Advances. (iv) Subject to the limitations set forth in subparagraph 5.(e), FCI's obligations under this subparagraph 5.(d) shall survive the termination or expiration of this Lease. Any amount to be paid by FCI under this subparagraph 5.(d) shall be due within ten days after a demand for such payment is made upon FCI. (v) If an Interested Party notifies FCI of any claim or proceeding included in, or any investigation or allegation concerning, Losses for which FCI is responsible pursuant to this subparagraph 5.(d), FCI shall assume on behalf of the Interested Party and conduct with due diligence and in good faith the investigation and defense thereof and the response thereto with counsel selected by FCI, but reasonably satisfactory to the Interested Party; provided, that the Interested 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, proceeding, investigation or allegation involves both FCI and the Interested Party and the Interested 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 FCI, then the Interested Party shall have the right to select separate counsel to participate in the investigation and defense of and response to such claim, proceeding, investigation or allegation on its own behalf, and FCI shall pay or reimburse the Interested Party for all Attorney's Fees incurred by the Interested Party because of the selection of such separate counsel. If FCI fails to assume promptly (and in any event within fifteen days after being notified of the applicable claim, proceeding, investigation or allegation) the defense of the Interested Party, then the Interested Party may contest (or settle, with the prior written consent of FCI, which consent will not be unreasonably withheld) the claim, proceeding, investigation or allegation at FCI's expense using counsel selected by the Interested Party. Moreover, if any such failure by FCI continues for thirty days or more after FCI is notified of any such claim, proceeding, investigation or allegation, the Interested Party may elect not to contest or continue contesting the same and instead settle (or pay in full) all claims related thereto without FCI's consent and without releasing FCI from any obligations to the Interested Party under this subparagraph 5.(d) so long as, in the written opinion of reputable counsel to the Interested Party, the settlement (or payment in full) is clearly advisable. (e) Exceptions and Qualifications to Indemnities. (i) BNPLC acknowledges and agrees that nothing in the preceding subparagraphs of this Paragraph 5 shall be construed to require FCI to pay or reimburse an Interested Party for: (1) Excluded Taxes; (2) Losses incurred or suffered by such Interested Party that are proximately caused by (and attributed by any applicable principles of comparative fault to) the Established Misconduct of that Interested Party; (3) withholding of taxes permitted by subparagraph 5.(f); (4) general overhead or internal administrative expenses of BNPLC or any other Interested Party, except to the extent allowed by subparagraph 5.(c)(i) because of changes described in that subparagraph after the Effective Date; (5) Losses incurred or suffered by Participants in connection with their negotiation or execution of the Participation Agreement (or supplements making them parties thereto) or in connection with any due 10 17 diligence they may undertake before entering into the Participation Agreement; (6) Losses incurred or suffered by any Interested Party after, and not proximately caused by events or circumstances that actually or allegedly occurred or existed on or before, the later of the dates upon which (A) this Lease terminates or expires, or (B) FCI surrenders possession of the Property. Further, without limiting BNPLC's rights (as provided in other provisions of this Lease and other Operative Documents) to include the following in the calculation of the Outstanding Construction Allowance, Stipulated Loss Value, the Break Even Price and the Maximum Permitted Prepayment (as applicable) or to collect Base Rent, Issue 97-10 Prepayments, a Supplemental Payment and other amounts, the calculation of which depends upon the Outstanding Construction Allowance, Stipulated Loss Value, the Break Even Price and the Maximum Permitted Prepayment, BNPLC acknowledges and agrees that nothing in subparagraph 5.(a) or the preceding subparagraphs of this Paragraph 5 shall be construed to require FCI to pay or reimburse an Interested Party for: a) costs paid by BNPLC with the proceeds of the Initial Funding Advance as part of the Transaction Expenses; or b) Construction Advances, including costs and expenditures incurred or paid by or on behalf of BNPLC after any Landlord's Election to Continue Construction, to the extent that such costs and expenditures are considered to be Construction Advances pursuant to subparagraph 6.(d). (ii) Notwithstanding anything to the contrary in the preceding subparagraphs of this Paragraph 5, FCI's liability for payments required by the preceding subparagraphs of this Paragraph 5, and not excused by the preceding subparagraph 5.(e)(i), prior to substantial completion of the Construction Project ("CONSTRUCTION-PERIOD INDEMNITY PAYMENTS") shall be subject to the following provisions: a) FCI may decline to pay any Construction-Period Indemnity Payments other than the following (it being understood that FCI's payment of the following Construction-Period Indemnity Payments shall not be subject to any abatement or deferral by anything contained in this subparagraph 5.(e)(ii)): (1) Construction-Period Indemnity Payments eligible for reimbursement to FCI under the terms and conditions of the Construction Management Agreement; and (2) Construction-Period Indemnity Payments that constitute Absolute FCI Construction Obligations. b) Any Construction-Period Indemnity Payment FCI is excused from paying by this subparagraph 5.(e)(ii), together with interest thereon at the Default Rate, will be included in the calculation of the Break Even Price under (and as defined in) the Purchase Agreement. (iii) Further, if an Interested Party receives a written notice of Losses that such Interested Party believes are covered by the indemnity in subparagraph 5.(d)(i), then such Interested Party will be expected to promptly furnish a copy of such notice to FCI. The failure to so provide a copy of the notice to FCI shall not excuse FCI from its obligations under subparagraph 5.(d)(i); provided, that if FCI is unaware of the matters described in the notice and such failure renders unavailable defenses that FCI might otherwise assert, or precludes actions that FCI might otherwise take, to minimize its 11 18 obligations, then FCI shall be excused from its obligation to indemnify such Interested Party (and any Affiliate of such Interested Party) against the Losses, if any, which would not have been incurred or suffered but for such failure. For example, if BNPLC fails to provide FCI with a copy of a notice of an obligation covered by the indemnity set out in subparagraph 5.(d)(i) and FCI is not otherwise already aware of such obligation, and if as a result of such failure BNPLC becomes liable for penalties and interest covered by the indemnity in excess of the penalties and interest that would have accrued if FCI had been promptly provided with a copy of the notice, then FCI will be excused from any obligation to BNPLC (or any Affiliate of BNPLC) to pay the excess. (f) Withholding Taxes. Notwithstanding anything else to the contrary in this Paragraph 5, but subject to the provisions of this subparagraph 5.(f), to the extent required by law FCI may deduct United States and California withholding taxes imposed as a way of collecting or in lieu of Excluded Taxes on payments of Base Rent, Commitment Fees, Administrative Agency Fees, any interest payable pursuant to subparagraph 4.(h) or any additional compensation claimed by BNPLC pursuant to subparagraph 5.(c)(ii) (collectively, "INCOME PAYMENTS") from Income Payments, without obligation to gross up, indemnify or otherwise increase payments in consequence thereof. Such withholding, without obligation to gross up, indemnify or otherwise increase payments in consequence thereof, will be permitted if, but only if: (i) in the case of withholding for Excluded Taxes imposed by the United States of America, the Person entitled to receive Income Payments (whether BNPLC, as the original landlord named herein, or an assignee of the original landlord's rights hereunder, a "PAYEE") is not exempt from withholding by reason of having been organized under the laws of the United States of America or any State thereof, and such Person shall not have provided FCI with three counterparts of each of the forms prescribed by the Internal Revenue Service (Form 1001 or 4224, or successor forms, as the case may be) claiming for Payee an exemption from federal withholding on all Income Payments; (ii) in the case of withholding for Excluded Taxes imposed by the State of California, the Payee is not exempt from withholding by reason of having been qualified to do business in California or otherwise, and such Person shall not have provided FCI with three (3) counterparts of the forms (if any) prescribed by the California taxing authorities claiming for Payee an exemption from California withholding on all Income Payments; (iii) at least thirty days prior to any withholding from or reduction of Income Payments, FCI shall have notified the Payee that FCI believes the withholding is required and permitted by this subparagraph; and (iv) the withholding taxes on the Income Payments would have been assessed even if the applicable taxing authorities had characterized the transactions evidenced by this Lease and the Purchase Agreement as a financing arrangement. Any Payee exempt from withholding for Excluded Taxes imposed by the United States of America by reason of having been organized under the laws of the United States of America or any State thereof shall provide to FCI statements conforming to the requirements of Treasury Regulation 1.1441-5(b) or any successor thereto (which statements may be made on a Form W-9). If FCI shall ever be required to pay Excluded Taxes that BNPLC has failed to pay when due because of FCI's failure to withhold from payments made under this Lease, BNPLC shall reimburse FCI for such Excluded Taxes and for any penalties or interest thereon charged to FCI. Nothing in this subparagraph 5.(f) shall excuse FCI from its obligation under subparagraph 5.(c)(i) to compensate BNPLC for increased costs attributable to any change in law relating to withholding taxes after the 12 19 Effective Date. 6. CONSTRUCTION OF NEW IMPROVEMENTS. (a) Advances; Outstanding Construction Allowance. The Construction Management Agreement entitles FCI to receive from BNPLC - subject to the terms and conditions set forth in the Construction Management Agreement - Construction Advances on Advance Dates from time to time to pay or reimburse FCI for the costs of acquiring any existing Improvements after the Effective Date pursuant to the Existing Contract, for the costs of the Construction Project and for certain other costs described in the Construction Management Agreement. In addition, BNPLC may from time to time make expenditures or incur costs constituting Construction Advances after a Landlord's Election to Continue Construction as described in subparagraph 6.(d). As used herein, references to the "OUTSTANDING CONSTRUCTION ALLOWANCE" mean the difference on the date in question (but not less than zero) of (A) the total Construction Advances made by or on behalf of BNPLC on or prior to the date in question, plus (B) all Carrying Costs added on or prior to the date in question, less (C) any funds received and applied as Qualified Prepayments on or prior to the date in question. Charges ("CARRYING COSTS") shall accrue as described below for each Construction Period 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). However, if for any reason Stipulated Loss Value (and thus the Outstanding Construction Allowance included as a component thereof) must be determined as of any date between Advance Dates, the Outstanding Construction Allowance determined on such date shall include not only Carrying Costs added on or before the immediately preceding Advance Date computed as described below, but also Carrying Costs accruing on and after such preceding Advance Date to but not including the date in question. (b) Calculation of Carrying Costs. Carrying Costs shall be calculated as follows: (i) Carrying Costs Formula. Carrying Costs accruing for any Construction Period shall equal: o Stipulated Loss Value on the first day of such Construction Period, times o the sum of: (A) the Spread, plus (B) the Effective Rate with respect to such Construction Period, times o the number of days in the period from and including the preceding Advance Date to but not including the Advance Date upon which the period ends, divided by o three hundred sixty. (ii) Limits on the Amount of Carrying Costs. Notwithstanding the foregoing, however, because the Construction Allowance available to FCI under the Construction Management Agreement is limited in amount to the Maximum Construction Allowance, and because Carrying Costs are to be charged against the Construction Allowance, Carrying Costs added to the Outstanding Construction Allowance on the Base Rent Commencement Date shall not exceed the amount that can be added 13 20 without causing the Funded Construction Allowance to exceed the Maximum Construction Allowance. If, because of an extension of the Base Rent Commencement Date by BNPLC (as described in the definition thereof in the List of Defined Terms) or because of any Landlord's Election to Continue Construction, the Funded Construction Allowance already exceeds the Maximum Construction Allowance, then no Carrying Costs will be added to the Outstanding Construction Allowance on the Base Rent Commencement Date. (c) FCI's Right to Control the Construction Project. Subject to BNPLC's rights under subparagraph 6.(d) of this Lease, the Construction Management Agreement grants to FCI the sole right and responsibility for designing and constructing the Construction Project, it being understood that although title to all Improvements will pass directly to BNPLC (as more particularly provided in Paragraph 8), BNPLC's obligation with respect to the Construction Project shall be limited to the making of advances under and subject to the conditions set forth in the Construction Management Agreement. No contractor or other third party shall be entitled to require BNPLC to make advances as a third party beneficiary of this Lease or of the Construction Management Agreement or otherwise. (d) Landlord's Election to Continue Construction. Without limiting BNPLC's other rights and remedies under this Lease, and without terminating this Lease or FCI's obligations hereunder or under any of the other documents referenced herein, in the event of any termination of the Construction Management Agreement as provided in subparagraph 5(D) or subparagraph 5(E) thereof, BNPLC shall be entitled (but not obligated) to take whatever action it deems necessary or appropriate by the use of legal proceedings or otherwise to continue or complete the Construction Project in a manner substantially consistent (to the extent practicable under Applicable Laws) with the general description of the Construction Project set forth in Exhibit B to the Construction Management Agreement and with the permitted use of the Property set forth in subparagraph 3.(a). (As used herein, "LANDLORD'S ELECTION TO CONTINUE CONSTRUCTION" means any election by BNPLC to continue or complete the Construction Project pursuant to the preceding sentence.) After any Landlord's Election to Continue Construction, BNPLC may do any one or more of the following pursuant to this subparagraph without further notice and regardless of whether any Event of Default is then continuing: (i) Take Control of the Property. BNPLC may cause FCI and any contractors or other parties on the Property to vacate the Property until the Construction Project is complete or BNPLC elects not to continue work on the Construction Project. (ii) Continuation of Construction. BNPLC may perform or cause to be performed any work to complete or continue the construction of the Construction Project. In this regard, so long as work ordered or undertaken by BNPLC is substantially consistent (to the extent practicable under Applicable Laws) with the general description of the Construction Project set forth in Exhibit B to the Construction Management Agreement and the permitted use of the Property set forth in subparagraph 3.(a), BNPLC shall have complete discretion to: a) proceed with construction according to such plans and specifications as BNPLC may from time to time approve; b) establish and extend construction deadlines as BNPLC from time to time deems appropriate, without obligation to adhere to the deadlines for Construction Milestones set forth in the Construction Management Agreement; c) hire, fire and replace architects, engineers, contractors, construction managers 14 21 and other consultants as BNPLC from time to time deems appropriate, without obligation to use, consider or compensate architects, engineers, contractors, construction managers or other consultants previously selected or engaged by FCI; d) determine the compensation that any architect, engineer, contractor, construction manager or other consultant engaged by BNPLC will be paid, and the terms and conditions that will govern the payment of such compensation (including whether payment will be due in advance, over the course of construction or on some other basis and including whether contracts will be let on a fixed price basis, a cost plus a fee basis or some other basis), as BNPLC from time to time deems appropriate; e) pay, settle or compromise existing or future bills and claims which are or may be liens against the Property or as BNPLC considers necessary or desirable for the completion of the Construction Project or the removal of any clouds on title to the Property; f) prosecute and defend all actions or proceedings in connection with the construction of the Construction Project; g) select and change interior and exterior finishes for the Improvements and landscaping as BNPLC from time to time deems appropriate; and h) generally do anything that FCI itself might have done if FCI had satisfied or obtained BNPLC's waiver of the conditions specified therein. (iii) Arrange for Turnkey Construction. Without limiting the generality of the foregoing, BNPLC may engage any contractor or real estate developer BNPLC believes to be reputable to take over and complete construction of the Construction Project on a "turnkey" basis. (iv) Suspension or Termination of Construction. Notwithstanding any Landlord's Election to Continue Construction, BNPLC may subsequently elect at any time to suspend or terminate further construction without obligation to FCI. For purposes of this Lease and other Operative Documents (including the determination of the Outstanding Construction Allowance, Stipulated Loss Value, the Break Even Price and the Maximum Permitted Prepayment), after any Landlord's Election to Continue Construction, all costs and expenditures incurred or paid by or on behalf of BNPLC to complete or continue construction as provided in this subparagraph shall be considered Construction Advances and Project Costs, regardless of whether they cause the Funded Construction Allowance to exceed the Maximum Construction Allowance. Further, as used in the preceding sentence, "costs incurred" by BNPLC will include costs that BNPLC has become obligated to pay to any third party that is not an Affiliate of BNPLC (including any contractor), even if the payments for which BNPLC has become so obligated will constitute prepayments for work or services to be rendered after payment and notwithstanding that BNPLC's obligations for the payments may be conditioned upon matters beyond BNPLC's control. For example, even if a construction contract between BNPLC and a contractor excused BNPLC from making further progress payments to the contractor upon FCI's failure to make any required Issue 97-10 Prepayment hereunder, the obligation to make a progress payment would nonetheless be "incurred" by BNPLC, for purposes of determining whether BNPLC has incurred costs considered to be Project Costs and Construction Advances, when BNPLC's obligation to pay it became subject only to FCI's payment of the Issue 97-10 or other conditions beyond BNPLC's control. If and to the extent, however, BNPLC does incur costs 15 22 considered as Construction Advances under this subparagraph, but (1) BNPLC does not actually pay the costs and after incurring them BNPLC is fully and finally excused from the obligation to pay them for any reason other than a breach by FCI of this Lease or other Operative Documents, or (2) BNPLC receives a refund of such costs, then the costs BNPLC is excused from paying or refunded to BNPLC shall be considered Qualified Prepayments. (e) Powers Coupled With an Interest. BNPLC's rights under subparagraph 6.(d) are intended to constitute powers coupled with an interest which cannot be revoked. (f) Completion Notice. After any Landlord's Election to Continue Construction, BNPLC may provide a notice (a "COMPLETION NOTICE") to FCI, advising FCI that construction of the Construction Project is substantially complete or that BNPLC no longer intends to continue such construction at that time. 7. OTHER OBLIGATIONS OF AND LIMITED REPRESENTATIONS BY BNPLC. (a) Cooperation of BNPLC to Facilitate Construction and Development. During the Term BNPLC shall take any action reasonably requested by FCI to facilitate the construction and use of the Property permitted by this Lease; provided, however, that: (i) This subparagraph 7.(a) shall not impose upon BNPLC the obligation to take any action that can be taken by FCI, FCI's Affiliates or anyone else other than BNPLC as the owner of the Land, the Improvements or any other interests in the Property. (ii) BNPLC shall not be required by this subparagraph 7.(a) to make any payment to another Person unless BNPLC shall first have received funds from FCI, in excess of any other amounts due from FCI hereunder, sufficient to make the payment. (This clause (ii) will not be construed as limiting the right of FCI to obtain additional Construction Advances, on and subject to the terms and conditions set forth in the Construction Management Agreement, for payments FCI itself may pay or incur an obligation to pay to another Person.) (iii) BNPLC shall have no obligations whatsoever under this subparagraph at any time after an Issue 97-10 Election by FCI, after a Landlord's Election to Continue Construction or when an Event of Default shall have occurred and be continuing. (iv) FCI must request any action to be taken by BNPLC pursuant to this subparagraph, and such request must be specific and in writing, if required by BNPLC at the time the request is made. A suggested form for such a request is attached as Exhibit D. (v) No action may be required of BNPLC pursuant to this subparagraph 7.(a) that could constitute a violation of any Applicable Laws or compromise or constitute a waiver of BNPLC's rights under other provisions of this Lease or the other Operative Documents or that for any other reason is reasonably objectionable to BNPLC. The actions BNPLC shall take pursuant to this subparagraph 7.(a) if reasonably requested by FCI will include, subject to the conditions listed in the proviso above, joining in or consenting to any (I) grant of easements, licenses, rights of way, and other rights in the nature of easements encumbering the Real Property, (II) release or termination of easements, licenses, rights of way or other rights in the nature of easements which 16 23 are for the benefit of the Real Property or any portion thereof, (III) dedication or transfer of portions of the Land not improved with a building, for road, highway or other public purposes, (IV) agreements (other than with FCI or its Affiliates) for the use and maintenance of common areas, for reciprocal rights of parking, for ingress and egress and for amendments to any Permitted Encumbrances or Development Documents (including amendments to the Development Documents that FCI may reasonably request to facilitate construction or development on land owned by it or its Affiliates other than the Land), (V) instruments necessary or desirable for the exercise or enforcement of rights under the Permitted Encumbrances, the Development Documents or any contract, permit, license, franchise or other right included within the term "Property", (VI) permit applications or other documents reasonably required to accommodate the construction or alteration of Improvements otherwise permitted by this Lease, (VII) confirmations of FCI's rights under any particular provisions of this Lease which FCI may wish to provide to a third party, (IX) execution or filing of a tract or parcel map subdividing the Real Property into lots or parcels or reconfiguring existing parcels, (X) agreements providing development incentives or tax abatements with respect to the Property. However, the determination of whether any such action is reasonably requested or reasonably objectionable to BNPLC may depend in whole or in part upon the extent to which the requested action shall result in a lien to secure payment or performance obligations against BNPLC's interest in the Property, shall cause a decrease in the value of the Property to less than sixty percent (60%) of Stipulated Loss Value after any Qualified Payments that may result from such action are taken into account, or shall impose upon BNPLC any present or future obligations greater than the obligations BNPLC is willing to accept in reliance on the indemnifications provided by FCI hereunder. Upon request by FCI, BNPLC shall also provide 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), certifying the dates to which the Base Rent and other amounts payable by FCI hereunder have been paid, stating whether BNPLC is aware of any default by FCI that may exist hereunder and confirming BNPLC's agreements concerning landlord's liens and other matters set forth in subparagraph 7.(c); it being intended that any such statement by BNPLC may be relied upon by anyone with whom FCI may intend to enter into an agreement for construction of the Improvements or other significant agreements concerning the Property. Any Losses incurred by BNPLC because of any action taken pursuant to this subparagraph 7.(a) shall be covered by the indemnification set forth in subparagraph 5.(d). Further, for purposes of such indemnification, any action taken by BNPLC will be deemed to have been made at the request of FCI if made pursuant to any request of counsel to or any officer of FCI (or with their knowledge, and without their objection) in connection with the execution or administration of this Lease or the other Operative Documents. To avoid construction delays or for other reasonable cause, FCI may ask BNPLC for an expedited response to any request for action made by FCI pursuant to this subparagraph 7.(a) by delivering such request with a notice substantially in the form attached hereto as Exhibit E. BNPLC shall endeavor in good faith to respond promptly to any such notice after the receipt of any such notice by an officer of BNPLC. (b) Actions Permitted by FCI Without BNPLC's Consent. No refusal by BNPLC to execute or join in the execution of any agreement, application or other document requested by FCI pursuant to the preceding subparagraph 7.(a) shall preclude FCI from itself executing such agreement, application or other document; provided, that in doing so FCI is not purporting to act for BNPLC and does not thereby create or expand any obligations or restrictions that encumber the Property. Further, subject to the other terms and conditions of this Lease, FCI shall be entitled to do any of the following in FCI's own name and to the exclusion of BNPLC during the Term without any notice to or consent of BNPLC so long as no Landlord's Election to Continue Construction has occurred, so long as no Event of Default has occurred and is continuing 17 24 and so long as FCI is not purporting to act for BNPLC and does not thereby create or expand any obligations or restrictions that encumber the Property: (i) perform obligations arising under and exercise and enforce the rights of FCI or the owner of the Real Property under the Development Documents and Permitted Encumbrances; (ii) perform obligations arising under and exercise and enforce the rights of FCI or the owner of the Real Property with respect to any other contracts or documents (such as building permits) included within the Personal Property; and (iii) recover and retain any monetary damages or other benefit inuring to FCI or the owner of the Real Property through the enforcement of any rights, contracts or other documents included within the Personal Property (including the Development Documents and Permitted Encumbrances); provided, that to the extent any such monetary damages may become payable as compensation for an adverse impact on value of the Property, the rights of BNPLC and FCI hereunder with respect to the collection and application of such monetary damages shall be the same as for condemnation proceeds payable because of a taking of all or any part of the Property. (c) Waiver of Landlord's Liens. BNPLC waives any security interest, statutory landlord's lien or other interest BNPLC may have in or against computer equipment and other tangible personal property placed on the Land from time to time that FCI or its Affiliates own or lease from other lessors; provided, however, that BNPLC does not waive its interest in or rights with respect to equipment or other property included within the "Property" as described in Paragraph 8. Although computer equipment or other tangible personal property may be "bolted down" or otherwise firmly affixed to Improvements, it shall not by reason thereof become part of the Improvements if it can be removed without causing structural or other material damage to the Improvements and without rendering HVAC or other major building systems inoperative and if it does not otherwise constitute "Property" as provided in Paragraph 8. (d) Limited Representations by BNPLC Concerning Accounting Matters. BNPLC is not expected or required to represent or warrant that this Lease or the Purchase Agreement will qualify for any particular accounting treatment under GAAP. However, to permit FCI to determine for itself the appropriate accounting for this Lease and the Purchase Agreement, BNPLC does represent to FCI as of the Effective Date: (i) Equity capital invested in BNPLC is greater than three percent (3%) of the aggregate of all lease funding amounts (including participations) of BNPLC. Such equity capital investments constitute equity in legal form and are reflected as shareholders' equity in the financial statements and accounting records of BNPLC. (ii) BNPLC is one hundred percent (100%) owned by French American Bank Corporation, which is one hundred percent (100%) owned by BNPLC's Parent. (iii) BNPLC leases properties of substantial value to more than fifteen tenants. (iv) All parties to whom BNPLC has any material obligations known to BNPLC are (and are expected to be) Affiliates of BNPLC's Parent, Participants, or participants with BNPLC in other leasing deals or loans made by BNPLC, or other tenants or borrowers in such other leasing deals or loans. (v) BNPLC has substantial assets in addition to the Property, assets which BNPLC believes to 18 25 have a value far in excess of the value of the Property. (vi) Other than any Funding Advances provided from time to time by Participants under the Participation Agreement, BNPLC expects to obtain all Funding Advances from Banque Nationale de Paris or other Affiliates of BNPLC (including Funding Advances to cover Carrying Costs and other amounts to be capitalized as part of the Outstanding Construction Allowance, and assuming that FCI uses the Maximum Construction Allowance under this Lease), and to the extent that Banque Nationale de Paris or such other Affiliates themselves borrow or accept bank deposits to obtain the funds needed to provide such Funding Advances, the obligation to repay such funds shall not be limited, by agreement or corporate structure, to payments collected from FCI or otherwise recovered from the Property. (vii) BNPLC has not obtained residual value insurance or a residual value guarantee from any third party to ensure the recovery of its investment in the Property. (viii) BNPLC does not intend to take any action during the term of this Lease that would change, or anticipate any change in, any of the facts listed above in this subparagraph. FCI shall have the right to ask BNPLC questions from time to time concerning BNPLC's financial condition, concerning matters relevant to the proper accounting treatment of this Lease on FCI's financial statements and accounting records (including the amount of BNPLC's equity capital as a percentage of the aggregate of all lease funding amounts [including participations] by BNPLC) or concerning BNPLC's ability to perform under this Lease or other Operative Documents, to which questions BNPLC shall promptly respond. Such response, however, may be limited to a statement that BNPLC will not provide requested information; provided, however, BNPLC must notify FCI in writing if at any time during the Term BNPLC ceases to be 100% owned, directly or indirectly, by Banque Nationale de Paris, or if at any time during the Term BNPLC believes it could not represent that the statements in clauses (i), (v) and (vii) above continue to be accurate, whether because of a change in the capital structure of BNPLC, a purchase of residual value insurance with respect to the Property or otherwise. (e) Other Limited Representations by BNPLC. BNPLC represents that: (i) No Default or Violation. The execution, delivery and performance by BNPLC of this Lease and the other Operative Documents do not and will not constitute a breach or default under any material contract or agreement to which BNPLC is a party or by which BNPLC is bound and do not, to the knowledge of BNPLC, violate or contravene any law, order, decree, rule or regulation to which BNPLC is subject. (As used in this subparagraph 7.(e), "BNPLC'S KNOWLEDGE" means the present actual knowledge of Lloyd Cox, the current officer of BNPLC having primary responsibility for the negotiation of this Lease.) (ii) No Suits. There are no judicial or administrative actions, suits, proceedings or investigations pending or, to BNPLC's knowledge, threatened against BNPLC that are reasonably likely to affect BNPLC's interest in the Property or the validity, enforceability or priority of this Lease or the other Operative Documents, and BNPLC 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 BNPLC or its interest in the Property. (iii) Enforceability. The execution, delivery and performance of this Lease and the other 19 26 Operative Documents by BNPLC are duly authorized, are not in contravention of or conflict with any term or provision of BNPLC's articles of incorporation or bylaws and do not, to BNPLC'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 other Operative Documents are valid, binding and legally enforceable obligations of BNPLC 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, BNPLC makes no representation or warranty that conditions imposed by zoning ordinances or other state or local Applicable Laws to the purchase, ownership, lease or operation of the Property have been satisfied. (iv) Organization. BNPLC is duly incorporated and legally existing under the laws of Delaware and is (or will become, if necessary to lawfully perform hereunder) duly qualified to do business in the State of California. BNPLC has or will obtain on a timely basis, at FCI's expense to the extent so provided in the other provisions of this Lease, all requisite power and all governmental certificates of authority, licenses, permits, qualifications and other documentation necessary to own and lease the Property and to perform its obligations under this Lease. (v) Not a Foreign Person. BNPLC is not a "foreign person" within the meaning of Sections 1445 and 7701 of the Code (i.e., BNPLC 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). (f) Keeping Proprietary Information Confidential. BNPLC agrees to use reasonable precautions to keep confidential any "proprietary information" (as defined in Paragraph 27) that BNPLC may receive from FCI or otherwise discover with respect to FCI or FCI's business pursuant to this Lease or any investigation by BNPLC hereunder, except for disclosures: (i) specifically and previously authorized in writing by FCI; (ii) to any permitted assignee of BNPLC as to any interest in the Property so long as the assignee has agreed in writing to use its reasonable efforts to keep such information confidential in accordance with the terms of this subparagraph; (iii) to legal counsel, accountants, auditors, environmental consultants and other professional advisors to BNPLC so long as BNPLC shall inform such persons in writing (if practicable) of the confidential nature of such information and shall direct them to treat such information confidentially; (iv) to regulatory officials having jurisdiction over BNPLC or BNPLC's Parent (provided that the disclosing party shall request confidential treatment of the disclosed information, if practicable); (v) as required by legal process (provided that the disclosing party shall request confidential treatment of the disclosed information, if practicable); (vi) of information which has previously become publicly available through the actions or inactions of a Person other than BNPLC not, to BNPLC's knowledge, in breach of an obligation of confidentiality to FCI; and (vii) to any Participant so long as the Participant has not repudiated the confidentiality provision concerning FCI's proprietary information set forth in the Participation Agreement. 8. STATUS OF PROPERTY ACQUIRED WITH FUNDS PROVIDED BY BNPLC. Subject in each case to FCI's rights under the other provisions of this Lease, any Improvements sold by Seller pursuant to the Existing Contract and all Improvements constructed during the term of this Lease shall be owned by BNPLC and shall constitute "Property" covered by this Lease. Further, subject in each case to FCI's rights under the other provisions of this Lease, all furnishings, furniture, chattels, permits, licenses, franchises, certificates and other personal property of whatever nature shall have been acquired on behalf of BNPLC by FCI, shall be owned by BNPLC and shall constitute "Property" covered by this Lease, to the extent heretofore or hereafter acquired, in whole or in part, with any portion of the Initial Funding Advance provided to FCI or with any Construction Advances or other funds for which FCI has received or hereafter receives reimbursement from 20 27 the Initial Funding Advance or Construction Advances, as shall all renewals or replacements of or substitutions for any such Property. FCI shall not authorize or permit the transfer of title to the Improvements or to any other such Property to pass through FCI or FCI's Affiliates before it is transferred to BNPLC from contractors, suppliers, vendors or other third Persons. Nothing herein shall constitute authorization of FCI by BNPLC to bind BNPLC to any construction contract or other agreement with a third Person, but any construction contract or other agreement executed by FCI for the acquisition or construction of Improvements or other components of the Property may provide for the transfer of title as required by the preceding sentence. Upon request of BNPLC made when any Event of Default has occurred and is continuing, FCI shall deliver to BNPLC an inventory describing all significant items of Personal Property (and, in the case of tangible personal property, showing the make, model, serial number and location thereof) other than Improvements, with a certification by FCI that such inventory is true and complete and that all items specified in the inventory are covered by this Lease free and clear of any Lien other than the Permitted Encumbrances or Liens Removable by BNPLC. 9. ENVIRONMENTAL. (a) Environmental Covenants by FCI. FCI covenants that: (i) FCI shall not conduct or permit others to conduct Hazardous Substance Activities, except Permitted Hazardous Substance Use and Remedial Work. (ii) FCI shall not discharge or permit the discharge of anything on or from the Property that would require any permit under applicable Environmental Laws, other than (1) storm water runoff, (2) waste water discharges through a publicly owned treatment works, (3) discharges that are a necessary part of any Remedial Work, and (4) other similar discharges consistent with the definition herein of Permitted Hazardous Substance Use, in each case in strict compliance with Environmental Laws. (iii) Following any discovery that Remedial Work is required by Environmental Laws or otherwise reasonably required, and to the extent not inconsistent with the other provisions of this Lease, FCI shall promptly perform and diligently and continuously pursue such Remedial Work, in each case in strict compliance with Environmental Laws. (iv) If requested by BNPLC in connection with any significant Remedial Work required by this subparagraph, FCI shall retain an independent Environmental Consultant or Industrial Hygienist, as appropriate, to evaluate any significant new information generated during FCI's implementation of the Remedial Work and to discuss with FCI whether such new information indicates the need for any additional measures that FCI should take to protect the health and safety of persons (including, without limitation, employees, contractors and subcontractors and their employees) or to protect the environment. FCI shall implement any such additional measures to the extent required with respect to the Property by Environmental Laws or otherwise reasonably required and to the extent not inconsistent with the other provisions of this Lease. (b) Right of BNPLC to do Remedial Work Not Performed by FCI. If FCI's failure to cure any breach of the covenants set forth in subparagraph 9.(a) continues beyond the Environmental Cure Period (as defined below), BNPLC may, in addition to any other remedies available to it, after notifying FCI of the Remedial Work BNPLC believes is needed, conduct all or any part of the Remedial Work. To the extent that Remedial Work done by BNPLC pursuant to the preceding sentence (including any removal of Hazardous Substances) is reasonably required, or is required or believed by BNPLC in good faith to be required by 21 28 Applicable Law or by any demand, regulation or guideline of any governmental authority (whether or not having the force of law), the cost thereof shall be a demand obligation owing by FCI to BNPLC. As used in this subparagraph, "ENVIRONMENTAL CURE PERIOD" means the period ending on the earlier of: (1) one hundred twenty days after FCI is notified of the breach which must be cured within such period, (2) the date that any writ or order is issued for the levy or sale of any property owned by BNPLC (including the Property) because of such breach, (3) the date that any criminal action is overtly threatened or instituted against BNPLC or any of its directors, officers or employees because of such breach, (4) a Designated Sale Date upon which, for any reason, FCI or an Affiliate of FCI or any Applicable Purchaser shall not purchase BNPLC's interest in the Property pursuant to the Purchase Agreement for a net price to BNPLC (when taken together with any additional payments made by FCI pursuant to Paragraph 1(A)(2) of the Purchase Agreement, in the case of a purchase by an Applicable Purchaser) equal to Stipulated Loss Value; or (5) any date upon which the Construction Management Agreement or this Lease or FCI's Initial Remarketing Rights and Obligations may be terminated because of or following any Issue 97-10 Election (c) Environmental Inspections and Reviews. BNPLC reserves the right to retain an Environmental Consultant or Industrial Hygienist to review any report prepared by FCI or to conduct BNPLC's own investigation to confirm whether FCI is complying with the requirements of this Paragraph 9. FCI grants to BNPLC and to BNPLC's agents, employees, consultants and contractors the right during reasonable business hours and after reasonable notice to enter upon the Property to inspect the Property and to perform such tests as BNPLC deems necessary or appropriate to review or investigate Hazardous Substances in, on, under or about the Property or any discharge or suspected discharge of Hazardous Substances into groundwater or surface water from the Property. Without limiting the generality of the foregoing, FCI agrees that BNPLC will have the same right, power and authority to enter and inspect the Property as is granted to a secured lender under Section 2929.5 of the California Civil Code. FCI shall promptly reimburse BNPLC for the reasonable fees of its Environmental Consultants and Industrial Hygienists and the costs of any such inspections and tests; provided, however, BNPLC's right to reimbursement for the reasonable fees of any consultant engaged as provided in this subparagraph or for the costs of any inspections or test undertaken as provided in this subparagraph shall be limited to the following circumstances: (1) an Event of Default or CMA Termination Event shall have occurred; (2) BNPLC shall have retained the consultant to establish the condition of the Property just prior to any conveyance thereof pursuant to the Purchase Agreement or just prior to the expiration of this Lease; (3) BNPLC shall have retained the consultant to satisfy any regulatory requirements applicable to BNPLC or its Affiliates; or (4) BNPLC shall have retained the consultant because BNPLC has been notified of a violation of Environmental Laws concerning the Property or BNPLC otherwise reasonably believes that FCI has not complied with the requirements of this Paragraph 9. (d) Communications Regarding Environmental Matters. (i) FCI shall immediately advise BNPLC and Participants of (1) any discovery of any event or circumstance which would render any of the representations of FCI herein or in the Closing Certificate concerning environmental matters materially inaccurate or misleading if made at the time of such discovery and assuming that FCI was aware of all relevant facts, (2) any Remedial Work (or change in Remedial Work) required or undertaken by FCI or its Affiliates in response to any (A) discovery of any Hazardous Substances on, under or about the Property other than Permitted Hazardous Substances or (B) any claim for damages resulting from Hazardous Substance Activities, (3) FCI's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property which would or could reasonably be expected to cause the Property or any part thereof to be subject to any ownership, occupancy, transferability or use restrictions under Environmental Laws, or (4) any investigation or inquiry of any failure or alleged failure by FCI to comply with Environmental 22 29 Laws affecting the Property by any governmental authority responsible for enforcing Environmental Laws. In such event, FCI shall deliver to BNPLC within thirty days after BNPLC's request (or such longer period as may be reasonably required, but in any event within ninety days after BNPLC's request), a preliminary written environmental plan setting forth a general description of the action that FCI proposes to take with respect thereto, if any, to bring the Property into compliance with Environmental Laws or to correct any breach by FCI of this Paragraph 9, including any proposed Remedial 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 BNPLC may reasonably request. (ii) FCI shall provide BNPLC and Participants with copies of all material written communications with federal, state and local governments, or agencies relating to the matters listed in the preceding clause (i). FCI shall also provide BNPLC and Participants with copies of any correspondence from third Persons which threaten litigation over any significant failure or alleged significant failure of FCI to maintain or operate the Property in accordance with Environmental Laws. (iii) Prior to FCI's submission of a Material Environmental Communication to any governmental or regulatory agency or third party, FCI shall, to extent practicable, deliver to BNPLC and Participants a draft of the proposed submission (together with the proposed date of submission), and in good faith assess and consider any comments of BNPLC regarding the same. Promptly after BNPLC's request, FCI shall meet with BNPLC to discuss the submission, shall provide any additional information reasonably requested by BNPLC and shall provide a written explanation to BNPLC addressing the issues raised by comments (if any) of BNPLC regarding the submission, including a reasoned analysis supporting any decision by FCI not to modify the submission in accordance with comments of BNPLC. 10. INSURANCE REQUIRED AND CONDEMNATION. (a) Liability Insurance. Throughout the Term FCI shall maintain commercial general liability insurance against claims for bodily and personal injury, death and property damage occurring in or upon or resulting from any occurrence in or upon the Property under one or more insurance policies that satisfy the requirements set forth in Exhibit ?. FCI shall deliver and maintain with BNPLC for each liability insurance policy required by this Lease written confirmation of the policy and the scope of the coverage provided thereby issued by the applicable insurer or its authorized agent, which confirmation must also satisfy the requirements set forth in Exhibit ?. (b) Property Insurance. Throughout the Term FCI will keep all Improvements (including all alterations, additions and changes made to the Improvements) insured against fire and other casualty under one or more property insurance policies that satisfy the requirements set forth in Exhibit ?. FCI shall deliver and maintain with BNPLC for each property insurance policy required by this Lease written confirmation of the policy and the scope of the coverage provided thereby issued by the applicable insurer or its authorized agent, which confirmation must also satisfy the requirements set forth in Exhibit ?. If any of the Property is destroyed or damaged by fire, explosion, windstorm, hail or by any other casualty against which insurance shall have been required hereunder, (i) BNPLC may, but shall not be obligated to, make proof of loss if not made promptly by FCI after notice from BNPLC, (ii) each insurance company concerned is hereby authorized and directed to make payment for such loss directly to BNPLC for application as required by Paragraph 11, and (iii) BNPLC may settle, adjust or compromise any and all claims for loss, damage or destruction under any policy or policies of insurance (provided, that so long as no FCI has made no Issue 97-10 Election, no 23 30 Landlord's Election to Continue Construction shall have occurred and no Event of Default shall have occurred and be continuing, BNPLC must obtain FCI's consent to any such settlement). If any casualty shall result in damage to or loss or destruction of the Property, FCI shall give immediate notice thereof to BNPLC and Paragraph 11 shall apply. Notwithstanding the foregoing, FCI shall have the right as FCI deems appropriate to settle, adjust or compromise any insurance claim for damage to the Property that cannot reasonably be asserted for more than $3,000,000 if (and after) FCI completes the Construction Project pursuant to the Construction Management Agreement and so long no Event of Default shall have occurred and be continuing; and FCI may directly receive and hold the proceeds of such claim if (and after) FCI completes the Construction Project pursuant to the Construction Management Agreement and so long as no Landlord's Election to Continue Construction shall have occurred and no Event of Default shall have occurred and be continuing and so long as FCI applies such proceeds as required by subparagraph 11.(b). (c) Failure to Obtain Insurance. If FCI fails to obtain any insurance or to provide confirmation of any such insurance as required by this Lease, BNPLC shall be entitled (but not required) to obtain the insurance that FCI has failed to obtain or for which FCI has not provided the required confirmation and, without limiting BNPLC's other remedies under the circumstances, BNPLC may require FCI to reimburse BNPLC for the cost of such insurance and to pay interest thereon computed at the Default Rate from the date such cost was paid by BNPLC until the date of reimbursement by FCI. (d) Condemnation. Immediately upon obtaining knowledge of the institution of any proceedings for the condemnation of the Property or any portion thereof, or any other similar governmental or quasi-governmental proceedings arising out of injury or damage to the Property or any portion thereof, each party shall notify the other (provided, however, BNPLC shall have no liability for its failure to provide such notice) of the pendency of such proceedings. FCI shall, at its expense, diligently prosecute any such proceedings and shall consult with BNPLC, 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 Property and all judgments, decrees and awards for injury or damage to the Property shall be paid to BNPLC as Escrowed Proceeds for application as provided in Paragraph 11. BNPLC is hereby authorized, in the name of FCI, at any time when an Event of Default shall have occurred and be continuing, or otherwise with FCI's prior consent, to execute and deliver valid acquittances for, and to appeal from, any such judgment, decree or award concerning condemnation of any of the Property. BNPLC 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, FCI shall have the right as FCI deems appropriate to settle, adjust or compromise any claim for any taking of less than all or substantially all of the Property if the claim cannot reasonably be asserted for more than $3,000,000 and if (and after) FCI completes the Construction Project pursuant to the Construction Management Agreement and if no Event of Default shall have occurred and be continuing; and FCI may directly receive and hold the proceeds of any such claim if (and after) FCI completes the Construction Project pursuant to the Construction Management Agreement and so long as no Event of Default shall have occurred and be continuing and so long as FCI applies such proceeds as required by subparagraph 11.(b). 11. APPLICATION OF INSURANCE AND CONDEMNATION PROCEEDS. (a) Collection of Insurance and Condemnation Proceeds Generally. Subject to BNPLC's 24 31 rights under this Paragraph 11, and so long as no CMA Termination Event shall have occurred and no Event of Default shall have occurred and be continuing, FCI shall be entitled to use all property insurance and condemnation proceeds payable with respect to the Property during the Term for the restoration and repair of the Property or any remaining portion thereof. Except as provided in the last sentence of subparagraph 10.(b) and the last sentence of subparagraph 10.(d), all insurance and condemnation proceeds received with respect to the Property (including proceeds payable under any insurance policy covering the Property which is maintained by FCI) shall be paid to BNPLC and then applied as follows: (i) First, such proceeds shall be used to reimburse BNPLC 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 BNPLC as Escrowed Proceeds and used to reimburse FCI for the actual cost of the repair, restoration or replacement of the Property. However, any Remaining Proceeds not needed for such purpose shall be applied by BNPLC as Qualified Payments, as provided in subparagraph 11.(c), after FCI notifies BNPLC that they are not needed for repairs, restoration or replacement. (b) Administration of Remaining Proceeds; FCI's Obligation to Restore. Any Remaining Proceeds held by BNPLC as Escrowed Proceeds shall be deposited by BNPLC in an interest bearing account as provided in the definition of Escrowed Proceeds in the attached List of Defined Terms and shall be paid to FCI or to third parties as FCI may direct as the applicable repair, restoration or replacement progresses and upon compliance by FCI with such terms, conditions and requirements as may be reasonably imposed by BNPLC, but in no event shall BNPLC be required to pay Escrowed Proceeds to FCI in excess of the actual cost to FCI of the applicable repair, restoration or replacement, as evidenced by invoices or other documentation reasonably satisfactory to BNPLC, it being understood that BNPLC may retain and apply any such excess as a Qualified Payment. In any event, FCI 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 in the attached List of Defined Terms. Further, notwithstanding the inadequacy of the Remaining Proceeds held by BNPLC as Escrowed Proceeds, if any, or anything herein to the contrary, FCI must, after any taking of less than all or substantially all of the Property by condemnation and after any damage to the Property by fire or other casualty, either: (i) promptly restore or improve the Property or the remainder thereof to a value no less than sixty percent (60%) of Stipulated Loss Value (computed after the application of any Remaining Proceeds as a Qualified Payment) and to a reasonably safe and sightly condition; or (ii) promptly restore the Property to a reasonably safe and sightly condition and pay to BNPLC for application as a Qualified Payment the amount (if any), as determined by BNPLC, needed to reduce Stipulated Loss Value (computed after the application of such amount and any available Remaining Proceeds as Qualified Payments) to no more than one hundred sixty-seven percent (167%) of the then-current market value of the Property or remainder thereof. (c) Special Provisions Concerning CMA Termination Events, Events of Default and Qualified Payments. If a CMA Termination Event shall have occurred, or an Event of Default shall have occurred and be continuing, then notwithstanding the foregoing, BNPLC shall be entitled to receive and collect all insurance or condemnation proceeds payable with respect to the Property, and BNPLC shall be entitled to either, at the discretion of BNPLC, (A) hold all Remaining Proceeds as Escrowed Proceeds until paid to FCI as 25 32 reimbursement for the actual and reasonable cost of repairing, restoring or replacing the Property when FCI has completed such repair, restoration or replacement, or (B) apply such proceeds as Qualified Payments when and to the extent deemed appropriate by BNPLC. When no CMA Termination Event shall have occurred and no Event of Default shall have occurred and be continuing, BNPLC shall apply any Remaining Proceeds paid to it (or other amounts available for application as a Qualified Payment) as a Qualified Payment on any date that BNPLC is directed to do so by a notice from FCI; provided, that if such a notice from FCI specifies an effective date for a Qualified Payment that is less than five Business Days after BNPLC's actual receipt of the notice, BNPLC may postpone the date of the Qualified Payment to any date not later than five Business Days after BNPLC's receipt of the notice. In any event, except when BNPLC is required by the preceding sentence to apply Remaining Proceeds or other amounts as a Qualified Payment on an Advance Date or Base Rent Date, BNPLC may deduct Breakage Costs incurred in connection with any Qualified Payment from the Remaining Proceeds or other amounts available for application as the Qualified Payment, and FCI will reimburse BNPLC upon request for any such Breakage Costs that BNPLC incurs but does not deduct. (d) Takings of All or Substantially All of the Property. In the event of any taking of all or substantially all of the Property, BNPLC 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 Property by condemnation exceeds the sum of the Remaining Proceeds resulting from such condemnation, then BNPLC shall be entitled to recover the excess from FCI upon demand as an additional Qualified Payment, whereupon this Lease shall terminate. Any taking of so much of the Real Property as, in BNPLC's reasonable good faith judgment, makes it impracticable to restore or improve the remainder thereof as required by part (1) of subparagraph 11.(b) shall be considered a taking of substantially all the Property for purposes of this Paragraph 11. (e) Waiver of Subrogation. Without limiting FCI's obligations to make repairs under other provisions of this Lease, BNPLC and FCI each waive any right of recovery against the other, and the other's agents, officers or employees, for any damage to the Property or to the personal property situated from time to time in or on the Real 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 11.(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 subparagraph. FCI shall cause the insurance policies required of FCI by this Lease to be properly endorsed, if necessary, to prevent any loss of coverage because of the waivers set forth in this subparagraph. If such endorsements are not available at commercially reasonable rates, the waivers set forth in this subparagraph shall be ineffective to the extent that such waivers would cause required insurance with respect to the Property to be impaired. 12. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF FCI CONCERNING THE PROPERTY. FCI represents, warrants and covenants as follows: (a) Compliance with Covenants and Laws. The use of the Property permitted by this Lease complies, or will comply after FCI obtains available permits as the tenant under this Lease, in all material respects with all Applicable Laws. FCI has obtained or will promptly obtain all utility, building, health and operating permits as may be required by any governmental authority or municipality having jurisdiction over the Property for the construction contemplated herein and the use of the Property permitted by this Lease. 26 33 (b) Operation of Property. FCI shall operate the Property in a good and workmanlike manner and in a manner that causes it to comply in all material respects with Applicable Laws. (For purposes of this Lease, "material" noncompliance with Applicable Law will include any noncompliance, the correction of which has been requested by a governmental authority, or because of which a threat of action against the Property or BNPLC has been asserted by a governmental authority.) FCI shall not use or occupy or allow the use or occupancy of the Property in any manner which violates any Applicable Law in any material respect 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 could, individually or in the aggregate, reduce the value of the Property and leave the Property with a value of less than sixty percent (60%) of Stipulated Loss Value, FCI shall not: (i) initiate or permit any zoning reclassification of the Property; (ii) seek any variance under existing zoning ordinances applicable to the Property; (iii) use or permit the use of the 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 Property; or (v) consent to the annexation of the Property to any municipality. If a change in the zoning or other Applicable Laws affecting the permitted use or development of the Property shall occur that BNPLC determines will reduce the then-current market value of the Property, and if after such reduction the then-current market value of the Property shall be less than sixty percent (60%) of Stipulated Loss Value in the reasonable judgment of BNPLC, then FCI shall pay BNPLC an amount equal to such excess for application as a Qualified Payment. FCI shall not cause or consent to any drilling or exploration for, or extraction, removal or production of, minerals from the surface or subsurface of the Property. If FCI receives a notice or claim from any federal, state or other governmental authority that the Property is not in compliance with any Applicable Law in any material respect, or that any action may be taken against BNPLC because the Property does not comply with any Applicable Law, FCI shall promptly furnish a copy of such notice or claim to BNPLC. Notwithstanding the foregoing, FCI may in good faith, by appropriate proceedings, contest the validity and applicability of any Applicable Law with respect to the Property, and pending such contest FCI shall not be deemed in default hereunder because of the violation of such Applicable Law, if FCI diligently prosecutes such contest to completion in a manner reasonably satisfactory to BNPLC, and if FCI promptly causes the 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 Property; provided, however, in any event such contest shall be concluded and the violation of such Applicable Law must be corrected by FCI and any claims asserted against BNPLC or the Property because of such violation must be paid by FCI, all prior to the earlier of (i) the date that any criminal action is overtly threatened or instituted against BNPLC or any of its directors, officers or employees because of such violation, (ii) the date that any action is taken or overtly threatened by any governmental authority against BNPLC or any property owned by BNPLC (including the Property) because of such violation, (iii) a Designated Sale Date upon which, for any reason, FCI or an Affiliate of FCI or any Applicable Purchaser shall not purchase BNPLC's interest in the Property pursuant to the Purchase Agreement for a net price to BNPLC (when taken together with any additional payments made by FCI pursuant to Paragraph 1(A)(2) of the Purchase Agreement, in the case of a purchase by an Applicable Purchaser) equal to Stipulated Loss Value, or (iv) any date upon which the Construction Management Agreement or this Lease or FCI's Initial Remarketing Rights and Obligations may be terminated because of or following any Issue 97-10 Election. (c) Debts for Construction, Maintenance, Operation or Development. FCI shall cause all debts and liabilities incurred in the construction, maintenance, operation or development of the Property, including all debts and liabilities for labor, material and equipment and all debts and charges for utilities servicing the Property, to be promptly paid; provided, nothing in this subparagraph will be construed to make 27 34 FCI liable for Liens Removable by BNPLC or Excluded Taxes. Notwithstanding the foregoing, FCI 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 FCI shall not be deemed in default under this subparagraph because of the contested lien if (1) within thirty days after being asked to do so by BNPLC, FCI bonds over to BNPLC's reasonable satisfaction all such contested liens against the Property alleged to secure an amount in excess of $5,000,000 (individually or in the aggregate), (2) FCI diligently prosecutes such contest to completion in a manner reasonably satisfactory to BNPLC, and (3) FCI 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 must be paid by FCI prior to the earlier of (i) the date that any criminal action is overtly threatened or instituted against BNPLC or its directors, officers or employees because of the nonpayment thereof, (ii) the date that any writ or order is issued under which the Property or any other property in which BNPLC has an interest may be seized or sold or any other action is taken or overtly threatened against BNPLC or any property in which BNPLC has an interest because of the nonpayment thereof, (iii) a Designated Sale Date upon which, for any reason, FCI or an Affiliate of FCI or any Applicable Purchaser shall not purchase BNPLC's interest in the Property pursuant to the Purchase Agreement for a net price to BNPLC (when taken together with any additional payments made by FCI pursuant to Paragraph 1(A)(2) of the Purchase Agreement, in the case of a purchase by an Applicable Purchaser) equal to Stipulated Loss Value, or (iv) any date upon which the Construction Management Agreement or this Lease or FCI's Initial Remarketing Rights and Obligations may be terminated because of or following any Issue 97-10 Election (d) Repair, Maintenance, Alterations and Additions. FCI shall keep the Property in good order, operating condition and appearance, causing all necessary repairs, renewals and replacements to be promptly made, and will not allow any of the Property to be materially misused, abused or wasted. To the extent that any of the following could, individually or in the aggregate, reduce the value of the Property and leave the Property with a value of less than sixty percent (60%) of Stipulated Loss Value, FCI shall not: (i) fail to promptly replace any worn-out fixtures or material items of tangible Personal Property covered by this Lease with fixtures or other tangible Personal Property comparable to the replaced fixtures or Personal Property when new, (ii) remove from the Property any fixtures or tangible Personal Property of significant value covered by this Lease except such as are replaced by FCI by articles of equal suitability and value, free and clear of any Lien other than Permitted Encumbrances or Liens Removable by BNPLC, or (iii) make any significant alterations to any Improvements after they are completed. Without limiting the foregoing, FCI will notify BNPLC before making any alterations to the Improvements which could materially reduce the market value of the Property or which change the general character of the Property or which impair in any significant manner the useful life or utility of any Improvements. Nothing in this subparagraph is intended to limit FCI's rights and obligations under other provisions of this Lease with respect to the construction of the initial or any subsequent Construction Project permitted by other provisions of this Lease. (e) Compliance With Permitted Encumbrances and Development Contracts. FCI shall comply with and will cause to be performed all of the covenants, agreements and obligations imposed upon the owner of any interest in the Property by the Permitted Encumbrances or the Development Contracts. Without limiting the foregoing, FCI shall cause all amounts to be paid when due, the payment of which is secured by any Lien against the Property created by the Permitted Encumbrances. 28 35 (f) Modification of Permitted Encumbrances and Development Contracts. FCI shall not enter into, initiate, approve or consent to any modification of any Permitted Encumbrance or Development Contract that would create or expand or purport to create or expand obligations or restrictions which would encumber the Property without the prior consent of BNPLC. Whether BNPLC must give any such consent requested by FCI during the term of this Lease shall be governed by subparagraph 7.(a). (g) Books and Records Concerning the Property. FCI shall keep books and records that are accurate and complete in all material respects for the Property and will, subject to Paragraph 27, permit all such books and records (including 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 BNPLC. 13. ASSIGNMENT AND SUBLETTING BY FCI. (a) BNPLC's Consent Required. Without the prior consent of BNPLC, FCI shall not assign, transfer, mortgage, pledge or hypothecate this Lease or any interest of FCI hereunder and shall not sublet all or any part of the Property, by operation of law or otherwise; provided, that, if (and after) FCI completes the Construction Project pursuant to the Construction Management Agreement and so long as no Event of Default has occurred and is continuing, FCI shall be entitled without the consent of BNPLC to (1) assign FCI's rights under this Lease and the other Operative Documents to an Affiliate of FCI (including any Affiliate of FCI that is the surviving entity after a merger permitted by subsection 3.04(a) of Schedule A attached to the Guaranty) pursuant to a written assignment unconditionally providing that the Affiliate assumes FCI's obligations hereunder and thereunder and (unless FCI has been merged into the Affiliate pursuant to a merger permitted by subsection 3.04(a) of Schedule A attached to the Guaranty) that FCI ratifies and confirms for the benefit of BNPLC FCI's responsibility and liability to BNPLC under this Lease and the other Operative Documents, and (2) sublet all or any portion of the Property if: (i) any sublease by FCI is made expressly subject and subordinate to the terms hereof; (ii) no sublease purports to grant the subtenant thereunder rights to use or occupy the Property after the expiration or termination of this Lease, other than rights expressly conditioned upon a purchase by FCI of the Property pursuant to the Purchase Agreement; (iii) the uses permitted by such sublease are limited to uses expressly permitted by subparagraph 3.(a) above; and (iv) less than forty-nine percent (49%) of any completed Improvements are at any time subleased by FCI to anyone other than its own Affiliates. (b) Standard for BNPLC's Consent to Assignments and Certain Other Matters. Consents and approvals of BNPLC which are required by this Paragraph 13 will not be unreasonably withheld, but FCI acknowledges that BNPLC's withholding of such consent or approval shall be reasonable if BNPLC determines in good faith that (1) giving the approval may materially increase BNPLC's risk of liability for any existing or future environmental problem, (2) giving the approval is likely to substantially increase BNPLC's administrative burden of complying with or monitoring FCI's compliance with the requirements of this Lease, or (3) any transaction for which FCI has requested the consent or approval would negate FCI's representations in this Lease regarding ERISA or cause this Lease or the other documents referenced herein to constitute a 29 36 violation of any provision of ERISA. (c) Consent Not a Waiver. No consent by BNPLC to a sale, assignment, transfer, mortgage, pledge or hypothecation of this Lease or FCI's interest hereunder, and no assignment or subletting of the Property or any part thereof in accordance with this Lease or otherwise with BNPLC's consent, shall release FCI from liability hereunder; and any such consent shall apply only to the specific transaction thereby authorized and shall not relieve FCI from any requirement of obtaining the prior consent of BNPLC to any further sale, assignment, transfer, mortgage, pledge or hypothecation of this Lease or any interest of FCI hereunder. 14. ASSIGNMENT BY BNPLC. (a) Restrictions on Transfers. Except by a Permitted Transfer, BNPLC shall not assign, transfer, mortgage, pledge, encumber or hypothecate this Lease or the other Operative Documents or any interest of BNPLC in and to the Property during the Term without the prior consent of FCI. (b) Effect of Permitted Transfer or other Assignment by BNPLC. If, without breaching subparagraph 14.(a), BNPLC sells or otherwise transfers the Property and assigns all of its rights under this Lease and the other Operative Documents, and if BNPLC's successor in interest to all such rights assumes in writing for the benefit of FCI BNPLC's obligations under this Lease and the other Operative Documents on and subject to the express terms and conditions set out herein and therein, then BNPLC shall thereby be released from any obligations arising after such assumption under this Lease or the other Operative Documents (other than any liability for a breach of the landlord's obligation to provide Construction Advances), and FCI shall look solely to each successor in interest of BNPLC for performance of such obligations. 15. BNPLC'S RIGHT OF ACCESS. (a) BNPLC and BNPLC's representatives may enter the Property, after three Business Days advance notice to FCI (except in the event of an emergency, when no advance notice will be required), for the purpose of performing any work BNPLC is authorized to undertake by the next subparagraph or for the purpose confirming whether FCI has complied with the requirements of this Lease at any time BNPLC may reasonably question such compliance. So long as FCI remains in possession of the Property, BNPLC or BNPLC's representative will, before making any such inspection or performing any such work on the Property, if then requested to do so by FCI to maintain security: (i) sign in at FCI's security or information desk if FCI has such a desk on the premises, (ii) wear a visitor's badge or other reasonable identification provided by FCI when BNPLC or BNPLC's representative first arrives at the Property, (iii) permit an employee of FCI to observe such inspection or work, and (iv) comply with other similar reasonable nondiscriminatory security, health or safety requirements of FCI, as FCI may establish from time to time in accordance with good industry practices, provided that such other requirements do not, individually or in the aggregate, substantially interfere with or delay inspections or work of BNPLC authorized by this Lease. (b) If FCI fails to perform any act or to take any action which hereunder FCI is required to perform or take, or to pay any money which hereunder FCI is required to pay, and if such failure or action constitutes an Event of Default or causes BNPLC or any director, officer, employee or Affiliate of BNPLC to be overtly threatened with criminal prosecution or renders BNPLC's interest in the 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, BNPLC may, perform or cause to be performed such act or take such action or pay such money. Any expenses so incurred by BNPLC, and any money so paid by BNPLC, shall be a demand 30 37 obligation owing by FCI to BNPLC. Further, BNPLC, 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 BNPLC to do any work which under any provision of this Lease FCI may be required to perform, and the performance thereof by BNPLC shall not constitute a waiver of FCI's default. BNPLC may during the progress of any such work permitted by BNPLC hereunder on or in the Property keep and store upon the Property all necessary materials, tools, and equipment. BNPLC shall not in any event be liable for inconvenience, annoyance, disturbance, loss of business, or other damage to FCI or the subtenants of FCI by reason of making such repairs or the performance of any such work on or in the Property, or on account of bringing materials, supplies and equipment into or through the 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 [and attributed by any applicable principles of comparative fault to] the Established Misconduct of BNPLC), and the obligations of FCI under this Lease shall not thereby be excused in any manner. 16. OTHER REPRESENTATIONS, WARRANTIES AND COVENANTS OF FCI. FCI represents, warrants and covenants as follows: (a) Negative Covenants. Without the prior written consent of BNPLC in each case, neither FCI nor any of its Affiliates shall: (i) Multi employer ERISA Plans. Incur or permit any Affiliate to incur any obligation to contribute to any "Multi employer plan" as defined in Section 4001 of ERISA. (ii) Prohibited ERISA Transaction. Enter into any transaction which would cause this Lease or the other Operative Documents or any other document executed in connection herewith (or any exercise of BNPLC's rights hereunder or thereunder) to constitute a non-exempt prohibited transaction under ERISA. (b) Financial Statements; Required Notices; Certificates as to Default(b) Financial Statements; Required Notices; Certificates as to Default. To the extent not so delivered by Guarantor, FCI shall deliver to BNPLC and to each Participant of which FCI has been notified: (i) copies of all financial statements, certificates, notices and other information that Guarantor is required to provide by Part 2 of Schedule A attached to the Guaranty prior to the deadlines for delivery established thereunder; (ii) together with the annual and quarterly financial statements furnished in accordance with subparagraph 16.(b)(i), a certificate of a Responsible Financial Officer of Guarantor in the form attached hereto as Exhibit G certifying (a) that no Event of Default or material Default by FCI has occurred and is continuing (or, if an Event of Default or material Default by FCI has occurred, stating the nature thereof and the action which FCI proposes to take with respect thereto), (b) that the representations and warranties by Guarantor and FCI contained in the provisions referenced in Exhibit G from this Lease, the other Operative Documents and the Guaranty are true and correct in all material respects on and as of the date of such certificate as though made on and as of such date, or, if not then true and correct, a brief statement as to why such representations are no longer true and correct, and (c) the accuracy of computations attached thereto demonstrating compliance by Guarantor with the financial covenants established in Schedule A attached to the Guaranty; (iii) as soon as possible and in any event within five days after the occurrence of each Event of Default or material Default known to a Responsible Financial Officer of Guarantor, a statement 31 38 setting forth details of such Event of Default or material Default and the action which FCI has taken and proposes to take with respect thereto; (iv) as soon as practicable and in any event within thirty days after a Responsible Financial Officer of FCI knows or has reason to know that any ERISA Termination Event with respect to any Plan has occurred, a statement of a Responsible Financial Officer of FCI describing such ERISA Termination Event and the action, if any, which FCI proposes to take with respect thereto; (v) upon request by BNPLC, a statement by FCI and Guarantor in writing certifying that this Lease and the Guaranty are unmodified and in full effect (or, if there have been modifications, that this Lease and the Guaranty are in full effect as modified, and setting forth such modifications) and the dates to which the Base Rent, Commitment Fees and Administrative Agency Fees have been paid and either stating that no default exists hereunder or specifying each such default; it being intended that any such statement may be relied upon by any prospective purchaser or mortgagee of the Property or any prospective Participant; (vi) promptly after any change in the rating of the Index Debt of Guarantor by S&P or Moody's, which will result in a change in the Spread (as defined in the List of Defined Terms), a certificate of a Responsible Financial Officer of Guarantor advising BNPLC of the ratings after the change; and (vii) such other information respecting the condition or operations, financial or otherwise, of FCI, of its Affiliates or of the Property as BNPLC or any Participant may from time to time reasonably request. BNPLC is hereby authorized to deliver a copy of any information or certificate delivered to it pursuant to this subparagraph 16.(b) to any Participant and to any regulatory body having jurisdiction over BNPLC, BNPLC's Parent or any other Participant that requires or requests it. (c) No Default or Violation. The execution, delivery and performance by FCI of this Lease do not and will not constitute a breach or default under any other material agreement or contract to which FCI is a party or by which FCI is bound or which affects the Property, and do not violate or contravene any law, order, decree, rule or regulation to which FCI is subject, and such execution, delivery and performance by FCI 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, FCI's property pursuant to the provisions of any of the foregoing. (d) No Suits. Except as disclosed in Schedule 2, there are no judicial or administrative actions, suits, proceedings or investigations pending or, to FCI's knowledge, threatened that will adversely affect the Property or the validity, enforceability or priority of this Lease, and FCI 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 use, occupancy or operation of the Property. No condemnation or other like proceedings are pending or, to FCI's knowledge, threatened against the Property. (e) Enforceability. The execution, delivery and performance by FCI of this Lease and the other Operative Documents 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 FCI's articles of incorporation 32 39 or bylaws. This Lease and the Other Operative Documents are valid, binding and legally enforceable obligations of FCI in accordance with its 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. (f) Financial Matters. FCI is not "insolvent" on the date hereof (that is, the sum of FCI's absolute and contingent liabilities, including the obligations of FCI under this Lease, does not exceed the fair market value of FCI's assets) and has no outstanding liens, suits, garnishments or court actions which could render FCI insolvent or bankrupt. FCI's capital is adequate for the businesses in which FCI is engaged and intends to be engaged. FCI has not incurred (whether hereby or otherwise), nor does FCI intend to incur or believe that it will incur, debts which will be beyond its ability to pay as such debts mature. There has not been filed by or, to FCI's knowledge, against FCI 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 FCI or any significant portion of FCI'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 BNPLC relating to FCI are true, correct and complete in all material respects. (g) Organization. FCI is duly incorporated and legally existing under the laws of the State of Delaware and is duly qualified to do business in the State of California. FCI 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 fulfill its obligations under this Lease. FCI has the corporate power and adequate authority, rights and franchises to own FCI's property and to carry on FCI's business as now conducted and is duly qualified and in good standing in each state in which the character of FCI's business makes such qualification necessary 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 FCI and its Subsidiaries, taken as a whole. (h) ERISA. FCI is not and will not become an "employee benefit plan" (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA. The assets of FCI do not and will not in the future constitute "plan assets" of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101. FCI is not and will not become a "governmental plan" within the meaning of Section 3(32) of ERISA. Transactions by or with FCI are not subject to state statutes regulating investments of and fiduciary obligations with respect to governmental plans. No ERISA Termination Event has occurred with respect to any Plan of FCI and FCI and all its Affiliates are in compliance with ERISA. Neither FCI nor any of its Affiliates is required to contribute to, or has any other absolute or contingent liability in respect of, any "Multi employer plan" as defined in Section 4001 of ERISA. As of the Effective Date no "accumulated funding deficiency" (as defined in Section 412(a) of the Code) exists with respect to any Plan of FCI, whether or not waived by the Secretary of the Treasury or his delegate, and the current value of the benefits of each Plan of FCI, if any, equals or is less than the current value of such Plan's assets available for the payment of such benefits. (i) Use of Proceeds. In no event shall the funds from the Initial Funding Advance or any Construction Advance be used (nor have they been used) directly or indirectly for personal, family, household or agricultural purposes or for the purpose, whether immediate, incidental or ultimate, of purchasing, acquiring or carrying any "margin stock" or any "margin securities" (as such terms are defined respectively in Regulation U and Regulation G promulgated by the Board of Governors of the Federal Reserve System) or to extend credit to others directly or indirectly for the purpose of purchasing or carrying any such margin stock or margin securities. FCI represents and warrants that FCI is not engaged principally, or as one of FCI's important 33 40 activities, in the business of extending credit to others for the purpose of purchasing or carrying such margin stock or margin securities. (j) Investment Company Act. FCI is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (k) Omissions. None of FCI's representations or warranties contained in this Lease or in any other document, certificate or written statement furnished to BNPLC by or on behalf of FCI in connection with this Lease 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) Not a Foreign Person. FCI is not a "foreign person" within the meaning of Sections 1445 and 7701 of the Code (i.e. FCI 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). (m) Further Assurances. FCI shall, upon request of BNPLC, (i) promptly correct any 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 any renewals, additions, substitutions, replacements or appurtenances to the Property; (iii) execute, acknowledge, deliver, procure and record or file any document or instrument deemed advisable by BNPLC to protect its rights in and to the 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 BNPLC to enable BNPLC, BNPLC's Parent and any other Participants to comply with the requirements or requests of any agency or authority having jurisdiction over them. 17. EVENTS OF DEFAULT. (a) Definition of Events of Default. Each of the following events shall be deemed to be an "EVENT OF DEFAULT" by FCI under this Lease: (i) FCI shall fail to pay when first due any Base Rent, any Commitment Fees or any Administrative Agency Fees and such failure shall continue for three Business Days after FCI is notified thereof by BNPLC pursuant to a notice that specifically references this Paragraph 17.(a). (ii) FCI shall fail to pay when first due any Rent other than Base Rent, Commitment Fees or Administrative Agency Fees, or FCI shall fail to pay when first due any amount required by the Closing Certificate, and in either case such failure shall continue for thirty days after FCI is notified thereof by BNPLC pursuant to a notice that specifically references this Paragraph 17.(a). (iii) FCI shall fail to comply with any term, provision or covenant of this Lease, the Construction Management Agreement or the Closing Certificate, other than as described in the other clauses of this subparagraph 17.(a), and shall not cure such failure prior to the earlier of (A) thirty days after notice thereof is sent to FCI, or (B) the date any writ or order is issued for the levy or sale of any property owned by BNPLC (including the Property) because of such failure or any criminal action is 34 41 overtly threatened or instituted against BNPLC 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 overtly threatened or instituted, the period within which such failure may be cured by FCI shall be extended for a further period (not to exceed an additional one hundred twenty days) as shall be necessary for the curing thereof with diligence, if (but only if) (x) such failure is susceptible of cure but cannot with reasonable diligence be cured within such thirty day period, (y) FCI shall promptly have commenced to cure such failure and shall thereafter continuously prosecute the curing thereof with reasonable diligence and (z) the extension of the period for cure will not, in the case of such a failure that occurs or commences more than thirty-five days prior to the expiration of this Lease, cause the period for cure to extend beyond five days prior to the expiration of this Lease. (iv) FCI shall fail to pay the full amount of any Supplemental Payment on the Designated Sale Date as required by the Purchase Agreement. (v) FCI shall abandon the Property. (vi) Guarantor, FCI or any of Guarantor's other Subsidiaries shall: (1) be in default with respect to any payment (whether of principal or interest and regardless of amount) in respect of any "Material Indebtedness" (which as used in this provision shall mean any Debt of Guarantor or its applicable Subsidiary [as the case may be] that is owed to BNPLC or BNPLC's Affiliates or that is outstanding in a principal amount of at least $10,000,000 in the aggregate), and such default shall continue beyond the applicable grace period, if any, specified in the agreements or instruments relating to such Material Indebtedness; or (2) be in default under any agreement or instrument relating to any Material Indebtedness and as a result of such default, the Material Indebtedness shall be declared to be due and payable prior to the stated maturity thereof. (vii) Guarantor, FCI or any of Guarantor's other 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 Guarantor, FCI or any of Guarantor's other 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 seeking the entry of an order for 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 sixty consecutive days, or any of the actions sought in such proceeding (including 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 Guarantor, FCI or any of Guarantor's other Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this clause 17.(a)(vii). (viii) Any order, judgment or decree is entered in any proceedings against Guarantor, FCI or any of Guarantor's other Subsidiaries decreeing its dissolution and such order, judgment or decree remains unstayed and in effect for more than sixty days. (ix) Any order, judgment or decree is entered in any proceedings against Guarantor decreeing a divestiture of any of its assets that represent a substantial part, or the divestiture of the stock of FCI or any of Guarantor's other Subsidiaries whose assets represent a substantial part, of the 35 42 total assets of Guarantor and its Subsidiaries (determined on a consolidated basis in accordance with GAAP) or which requires the divestiture of assets, or stock of any of Guarantor's Subsidiaries, which shall have contributed a substantial part of the net income of Guarantor and its Subsidiaries (determined on a consolidated basis 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 days. (x) A final judgment or order for the payment of money in an amount (not covered by insurance) which exceeds $10,000,000 shall be rendered against Guarantor, FCI or any of Guarantor's other Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment, or (ii) within sixty days after the entry thereof, such judgment or order is not discharged or execution thereof stayed pending appeal, or within thirty days after the expiration of any such stay, such judgment is not discharged. (xi) Any ERISA Termination Event that BNPLC determines in good faith would constitute grounds for a termination of any Plan of FCI or for the appointment by the appropriate United States district court of a trustee to administer any Plan of FCI shall have occurred and be continuing thirty days after notice to such effect shall have been given to FCI by BNPLC, or any Plan of FCI shall be terminated, or a trustee shall be appointed by an appropriate United States district court to administer any Plan of FCI, or the Pension Benefit Guaranty Corporation shall institute proceedings to terminate any Plan of FCI or to appoint a trustee to administer any Plan of FCI. (xii) FCI or any of its Affiliates shall enter into any transaction which would cause this Lease or any other Operative Document or any other document executed in connection herewith (or any exercise of BNPLC's rights hereunder or thereunder) to constitute a non-exempt prohibited transaction under ERISA. (xiii) Guarantor shall breach or repudiate its guarantee of the obligations of FCI under this Lease, the Construction Management Agreement, the Purchase Agreement or the Closing Certificate or Guarantor shall fail to comply with any other covenants of Guarantor in the Guaranty including the obligations of Guarantor set forth Section 10 of the Guaranty. (xiv) Any breach by FCI of subparagraph 16.(b)(iii) resulting from FCI's failure to notify BNPLC of a material Default known to a Responsible Financial Officer. (xv) Any representation of FCI contained herein or in the other Operative Documents is false or misleading in any material respect, or any certificate delivered to BNPLC by or on behalf of FCI as required by this Lease is false or misleading in any material respect. (xvi) Any representation of Guarantor contained in the Guaranty is false or misleading in any material respect, or any certificate, if any, delivered to BNPLC by or on behalf of Guarantor as may be required by the Guaranty is false or misleading in any material respect. 18. REMEDIES. (a) Basic Remedies. At any time after an Event of Default and after BNPLC has given any notice required by subparagraph 18.(b), BNPLC shall be entitled at BNPLC's option (and without limiting BNPLC in the exercise of any other right or remedy BNPLC may have, and without any further demand or notice except as expressly described in this subparagraph 18.(a)), to exercise any one or more of the following 36 43 remedies: (i) By notice to FCI, BNPLC may terminate FCI's right to possession of the Property. A notice given in connection with unlawful detainer proceedings specifying a time within which to cure a default shall terminate FCI's right to possession if FCI fails to cure the default within the time specified in the notice. (ii) Upon termination of FCI's right to possession and without further demand or notice, BNPLC may re-enter the Property in any manner not prohibited by Applicable Law and take possession of all improvements, additions, alterations, equipment and fixtures thereon and remove any persons in possession thereof. Any property on the Land or in the Improvements may be removed and stored in a warehouse or elsewhere at the expense and risk of and for the account of FCI. (iii) Upon termination of FCI's right to possession, this Lease shall terminate and BNPLC may recover from FCI: 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 FCI 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 FCI proves could be reasonably avoided; and d) Any other amount necessary to compensate BNPLC for all the detriment proximately caused by FCI's failure to perform FCI'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 Property, removing persons or property therefrom, placing the Property in good order, condition, and repair, preparing and altering the Property for reletting, all other costs and expenses of reletting, and any loss incurred by BNPLC as a result of FCI's failure to perform FCI's obligations under the Other Operative Documents. The "WORTH AT THE TIME OF AWARD" of the amounts referred to in subparagraph 18.(a)(iii)a) and subparagraph 18.(a)(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 18.(a)(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. 37 44 (iv) BNPLC 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 if FCI breaches this Lease and abandons the Property, this Lease shall continue in effect for so long as BNPLC does not terminate FCI's right to possession, and BNPLC may enforce all of BNPLC's rights and remedies under this Lease, including the right to recover the Rent as it becomes due under this Lease. FCI's right to possession shall not be deemed to have been terminated by BNPLC except pursuant to subparagraph 18.(a)(i) hereof. The following shall not constitute a termination of FCI's right to possession: (a) Acts of maintenance or preservation or efforts to relet the Property; (b) The appointment of a receiver upon the initiative of BNPLC to protect BNPLC's interest under this Lease; or (c) Reasonable withholding of consent to an assignment or subletting, or terminating a subletting or assignment by FCI. (b) Notice Required So Long As FCI 's Purchase Option and Initial Remarketing Rights and Obligations Continue Under the Purchase Agreement. So long as FCI remains in possession of the Property and there has been no termination of FCI's Purchase Option and FCI's Initial Remarketing Rights and Obligations as provided Paragraph 4 of the Purchase Agreement, BNPLC's right to exercise remedies provided in subparagraph 18.(a) will be subject to the condition precedent that BNPLC shall have notified FCI of BNPLC's intent to exercise remedies provided in subparagraph 18.(a) at least sixty days prior to exercising the remedies. The condition precedent is intended to provide FCI with an opportunity to exercise FCI's Purchase Option or FCI's Initial Remarketing Rights and Obligations before losing possession of the Property pursuant to subparagraph 18.(a). The condition precedent is not, however, intended to extend any period for curing an Event of Default. Accordingly, if an Event of Default has occurred, and regardless of whether any Event of Default is then continuing, BNPLC may proceed immediately to exercise remedies provided in subparagraph 18.(a) at any time after the earlier of (i) sixty days after BNPLC has given such a notice to FCI, (ii) any date upon which FCI relinquishes possession of the Property, or (iii) any termination of FCI's Purchase Option and FCI's Initial Remarketing Rights and Obligations. (c) Enforceability. This Paragraph 18 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 BNPLC 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; however, before exercising any right or remedy available under Applicable Law or in equity to evict FCI from the Property or to terminate FCI's right of occupancy hereunder, BNPLC shall give FCI any sixty days notice required in subparagraph 18.(b). In addition to other remedies provided in this Lease, BNPLC shall be entitled, to the extent permitted by Applicable Law or in equity, 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, or to a decree compelling performance of any of the other covenants, agreements, conditions or provisions of this Lease to be performed by FCI, or to any other remedy allowed to BNPLC at law or in equity. Nothing contained in this Lease shall limit or prejudice the right of BNPLC to prove for and 38 45 obtain in proceedings for bankruptcy or insolvency of FCI 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 BNPLC under the Purchase Agreement, and BNPLC shall not be required to give the sixty day notice described in subparagraph 18.(a) as a condition to any acceleration of the Designated Sale Date or to taking any action to enforce the Purchase Agreement or the Closing Certificate. 19. DEFAULT BY BNPLC. If BNPLC should default in the performance of any of its obligations under this Lease, BNPLC shall have the time reasonably required, but in no event less than thirty days, to cure such default after receipt of notice from FCI specifying such default and specifying what action FCI believes is necessary to cure the default. If FCI prevails in any litigation brought against BNPLC because of BNPLC's failure to cure a default within the time required by the preceding sentence, then FCI shall be entitled to an award against BNPLC for the monetary damages proximately caused to FCI by such default. Notwithstanding the foregoing, BNPLC's right to cure as provided in this Paragraph 19 will not in any event extend the time within which BNPLC must remove Liens Removable by BNPLC as required to consummate a conveyance of BNPLC's interest in the Property required by the Purchase Agreement. 20. QUIET ENJOYMENT. Provided FCI pays the Base Rent and all Additional Rent payable hereunder as and when due and payable and keeps and fulfills all of the terms, covenants, agreements and conditions to be performed by FCI hereunder, BNPLC shall not during the Term disturb FCI's peaceable and quiet enjoyment of the Property; however, such enjoyment shall be subject to the terms, provisions, covenants, agreements and conditions of this Lease, to Permitted Encumbrances, to Development Documents and to any other claims not constituting Liens Removable by BNPLC. If any Lien Removable by BNPLC is claimed against the Property, including any judgment lien securing a Deductible Judgment against BNPLC, BNPLC will remove the Lien Removable by BNPLC promptly. However, BNPLC shall not be responsible for any Lien that is expressly excluded from the definition of Liens Removable by BNPLC in the attached List of Defined Terms. Any breach by BNPLC of this Paragraph shall render BNPLC liable to FCI for any monetary damages proximately caused thereby, but as more specifically provided in Paragraph 2 above, no such breach shall entitle FCI to terminate this Lease or excuse FCI from its obligation to pay Base Rent and other amounts hereunder. 21. SURRENDER UPON TERMINATION. Unless FCI or an Applicable Purchaser purchases BNPLC's entire interest in the Property pursuant to the terms of the Purchase Agreement, FCI shall, upon the termination of FCI's right to occupancy, surrender to BNPLC the Property, including any buildings, alterations, improvements, replacements or additions constructed by FCI, with all fixtures and furnishings included in the 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 BNPLC, with all Improvements in substantially the same condition as of the date the same were initially completed, excepting only (i) ordinary wear and tear that occurs between the maintenance, repairs and replacements required by other provisions of this Lease, and (ii) alterations and additions which are expressly permitted by the terms of this Lease and which have been completed by FCI in a good and workmanlike manner in accordance with all Applicable Laws. Any movable furniture or movable personal property belonging to FCI or any party claiming under FCI, if not removed at the time of such termination and if BNPLC shall so elect, shall be deemed abandoned and become the property of BNPLC without any payment or offset therefor. If BNPLC shall not so elect, BNPLC may remove such property from the Property and 39 46 store it at FCI's risk and expense. FCI shall bear the expense of repairing any damage to the Property caused by such removal by BNPLC or FCI. 22. HOLDING OVER BY FCI. Should FCI not purchase BNPLC's right, title and interest in the Property as provided in the Purchase Agreement, but nonetheless continue to hold the Property after the termination of this Lease without BNPLC's 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) Stipulated Loss Value on the day in question, times (ii) (A) the Prime Rate in effect for such day so long as the holdover period does not extend beyond ninety days and (B) for each such day beginning with the ninety-first day after the holdover commences, two percent (2%) above the Prime Rate; divided by (iii) three hundred and sixty; subject, however, to all of the terms, provisions, covenants and agreements on the part of FCI hereunder. No payments of money by FCI to BNPLC 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 BNPLC and FCI. 23. INDEPENDENT OBLIGATIONS EVIDENCED BY THE OTHER OPERATIVE DOCUMENTS. FCI acknowledges and agrees that nothing contained in this Lease shall limit, modify or otherwise affect any of FCI's obligations under the other Operative Documents, which obligations are intended to be separate, independent and in addition to, and not in lieu of, the obligations set forth herein. In the event of any inconsistency between the terms and provisions of the Purchase Agreement and the terms and provisions of this Lease, the terms and provisions of the Purchase Agreement shall control. In the event of any inconsistency between the terms and provisions of the Closing Certificate or Construction Management Agreement and the terms and provisions of this Lease, the terms and provisions of this Lease shall control; provided, nothing in this Lease shall be construed to limit or impair the indemnities provided by FCI in the Closing Certificate, including the indemnity therein provided against Environmental Losses, and nothing herein shall limit the obligations of FCI under the Construction Management Agreement. 24. WAIVER OF JURY TRIAL. BNPLC AND FCI 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 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 contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. FCI 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 Lease and the other documents referred to herein, and that each will continue to rely on the waiver in their related future dealings. FCI and BNPLC 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 PROPERTY. In the event of litigation, this Lease may be filed as a written consent to a trial by the court. 40 47 25. 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 demand hereunder or with reference to the making of any payment required hereunder, shall be deemed to be complied with when and if the following steps are taken: (i) All Rent required to be paid by FCI to BNPLC hereunder shall be paid to BNPLC in immediately available funds by wire transfer to: Federal Reserve Bank of New York ABA 026007689 Banque Nationale de Paris /BNP/ BNP San Francisco /AC/ 14334000176 /Ref/ Solectron (Force Computers Synthetic Lease) or at such other place and in such other manner as BNPLC may designate in a notice to FCI. (ii) All advances paid to FCI by BNPLC hereunder or in connection herewith shall be paid to FCI in immediately available funds at such place and in such manner as FCI may reasonably designate in a notice signed by FCI's Treasurer or Chief Financial Officer to BNPLC. (iii) All notices, demands, approvals, consents and other communications to be made hereunder to or by the parties hereto must, to be effective for purpose of this Lease, be in writing. Notices, demands and other communications required or permitted hereunder are to be sent to the addresses set forth below (or in the case of communications to Participants, at the addresses set forth in Schedule 1 to 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 BNPLC: BNP Leasing Corporation 12201 Merit Drive Suite 860 Dallas, Texas 75251 Attention: Lloyd G. Cox Telecopy: (214) 788-9140 With a copy to: Banque Nationale de Paris, San Francisco 180 Montgomery Street 41 48 San Francisco, California 94104 Attention: Rafael Lumanlan or Gavin Holles 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 FCI: Force Computers, Inc. 777 Gibraltar Drive, Building #5 Milpitas, CA 95035 Attn: Chief Financial Officer Telecopy: (408) 956-6059 With a copy to: Wilson, Sonsini, Goodrich & Rosati 650 Page Mill Palo Alto, California 94304-1050 Attention: Real Estate Department/DSS Telecopy: (415) 493-6811 (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 created hereby created with any other interest in the Property by reason of the fact that the same person may acquire or hold, directly or indirectly, this Lease or the leasehold estate created hereby and any other interest in the Property, unless all Persons with an interest in the Property that would be adversely affected by any such merger specifically agree in writing that such a merger shall occur. (d) No Implied Waiver. The failure of BNPLC or FCI 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 breach of 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 BNPLC 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 42 49 no waiver of any provision of this Lease shall be deemed to have been made unless expressed in writing and signed by the waiving party. (e) NO IMPLIED REPRESENTATIONS BY BNPLC. BNPLC AND BNPLC'S AGENTS HAVE MADE NO REPRESENTATIONS OR PROMISES WITH RESPECT TO THE PROPERTY EXCEPT AS EXPRESSLY SET FORTH HEREIN AND IN THE OTHER OPERATIVE DOCUMENTS, AND NO RIGHTS, EASEMENTS OR LICENSES ARE ACQUIRED BY FCI BY IMPLICATION OR OTHERWISE EXCEPT AS EXPRESSLY SET FORTH IN THIS LEASE AND THE OTHER OPERATIVE DOCUMENTS. (f) Entire Agreement. This Lease and the other Operative Documents and the other documents dated as of the Effective Date which are being executed by FCI and executed or accepted by BNPLC contemporaneously with the execution of this Lease supersede any prior negotiations and agreements between BNPLC and FCI concerning the Property, and no amendment or modification of this Lease shall be binding or valid unless expressed in a writing executed by both parties hereto. (g) 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. (h) Time is of the Essence. Time is of the essence as to all obligations of FCI and BNPLC and all notices required of FCI and BNPLC under this Lease. (i) Governing Law. This Lease shall be governed by and construed in accordance with the laws of the State of California without regard to conflict or choice of laws. (j) Paragraph Headings. The paragraph headings contained in this Lease are for convenience only and shall in no way enlarge or limit the scope or meaning of the various and several paragraphs hereof. (k) 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 BNPLC is a party or of which BNPLC is an intended beneficiary, without the consent of BNPLC. All accounting terms used but not specifically defined herein shall be construed in accordance with GAAP. The words "this Lease", "herein", "hereof", "hereby", "hereunder" and words of similar import when used in this Lease 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 used herein refer only to the Paragraphs or subparagraphs in which the phrase occurs. As used herein the word "or" is not exclusive. As used herein the words "include", "including" and similar terms shall be construed as if followed by "without limitation to". (l) Not a Partnership, Etc. NOTHING IN THIS LEASE IS INTENDED TO BE OR TO CREATE ANY PARTNERSHIP, JOINT VENTURE, OR OTHER JOINT ENTERPRISE BETWEEN BNPLC 43 50 AND FCI. NEITHER THE EXECUTION OF THIS LEASE NOR THE ADMINISTRATION OF THIS LEASE OR OTHER DOCUMENTS REFERENCED HEREIN BY BNPLC, NOR ANY OTHER RIGHT, DUTY OR OBLIGATION OF BNPLC UNDER OR PURSUANT TO THIS LEASE OR SUCH DOCUMENTS IS INTENDED TO BE OR TO CREATE ANY FIDUCIARY OBLIGATIONS OF BNPLC TO FCI. 26. INCOME TAX REPORTING. BNPLC and FCI intend this Lease and the Purchase Agreement to have a form for income taxes which is different than the form of this Lease and the Purchase Agreement for other purposes, and thus the parties acknowledge and agree as follows: (a) FOR PURPOSES OF DETERMINING THEIR RESPECTIVE FEDERAL, STATE AND LOCAL INCOME TAX OBLIGATIONS, BNPLC and FCI believe and intend that this Lease and the Purchase Agreement constitute a financing arrangement or conditional sale. Both BNPLC and FCI agree to report this Lease and the Purchase Agreement as a financing arrangement or conditional sale on their respective income tax returns (the "REQUIRED REPORTING"), unless such Required Reporting is challenged in writing by the Internal Revenue Service or another governmental authority with jurisdiction (a "TAX CHALLENGE"). Consistent with the foregoing, BNPLC and FCI expect that FCI (and not BNPLC) shall be treated as the true owner of the Property for income tax purposes, thereby entitling FCI (and not BNPLC) to take depreciation deductions and other tax benefits available to the owner. FCI shall also report all interest earned on Escrowed Proceeds as FCI's income for federal, state and local income tax purposes. REFERENCES IN THIS LEASE OR IN THE PURCHASE AGREEMENT TO A "LEASE" OR TO "LEASED PROPERTY" ARE NOT INTENDED FOR INCOME TAX PURPOSES TO REFLECT THE INTENT OF BNPLC OR FCI AS TO THE FORM OF THE TRANSACTIONS COVERED BY, OR THE PROPER CHARACTERIZATION OF, THIS LEASE AND THE PURCHASE AGREEMENT. (b) FOR ALL OTHER PURPOSES, INCLUDING THE DETERMINATION OF THE APPROPRIATE FINANCIAL ACCOUNTING FOR THIS LEASE AND THE DETERMINATION OF THEIR RESPECTIVE RIGHTS AND REMEDIES UNDER STATE LAW, BNPLC and FCI believe and intend that (i) this Lease constitutes a true Lease, not a mere financing arrangement, enforceable in accordance with its express terms (and neither this subparagraph 26 nor the provisions referencing this subparagraph on the title page of this Lease nor the corresponding provisions in the Purchase Agreement are intended to affect the enforcement of any other provisions of this Lease or the Purchase Agreement) and (ii) the Purchase Agreement shall constitute a separate and independent contract, enforceable in accordance with the express terms and conditions set forth therein. In this regard, FCI acknowledges that FCI asked BNPLC to participate in the transactions evidenced by this Lease and the Purchase Agreement as a landlord and owner of the Property, not as a lender. Although other transactions might have been used to accomplish similar results, FCI expects to receive certain material accounting and other advantages through the use of a lease transaction. Accordingly, and notwithstanding the Required Reporting for income tax purposes, FCI cannot equitably deny that this Lease and the Purchase Agreement should be construed and enforced in accordance with their respective terms, rather than as a mortgage or other security device, in any action brought by BNPLC to enforce this Lease or the Purchase Agreement. In the event of a Tax Challenge, BNPLC and FCI shall each provide to the other copies of all notices from the Internal Revenue Service or any other governmental authority presenting the Tax Challenge. Further, before changing from the Required Reporting because of a Tax Challenge, BNPLC and FCI shall each consider in good faith any reasonable suggestions received from the other party to this Lease about an appropriate response to the 44 51 Tax Challenge; provided, however, that the suggestions are set forth in a written notice delivered no later than thirty Business Days after the suggesting party is first notified of the Tax Challenge; and, provided further, that when presented with a Tax Challenge, BNPLC and FCI shall each have the right to change from the Required Reporting rather than participate in any litigation or other legal proceeding against the Internal Revenue Service or another governmental authority. In any event, FCI must indemnify and hold harmless BNPLC from and against all liabilities, costs, additional taxes and other expenses that may arise or become due because of any challenge to the Required Reporting or because of any resulting recharacterization of this Lease or the Purchase Agreement required by the Internal Revenue Service or another governmental authority, including any additional taxes that may become due upon any sale under the Purchase Agreement, to the extent (if any) that such liabilities, costs, additional taxes and other expenses are not offset by tax savings resulting from additional depreciation deductions or other tax benefits to BNPLC of the recharacterization. 27. PROPRIETARY INFORMATION AND CONFIDENTIALITY. FCI shall have no obligation to provide proprietary information (as defined in the next sentence) to BNPLC, except and to the extent that (1) BNPLC reasonably determines that BNPLC cannot accomplish the purposes of BNPLC's inspection of the Property pursuant to the various provisions hereof without evaluating such information, and (2) before conducting any inspections of the Property permitted hereunder BNPLC shall, if requested by FCI, confirm and ratify the confidentiality agreements covering such proprietary information set forth in subparagraph 7.(f). For purposes of this Lease "PROPRIETARY INFORMATION" means FCI's intellectual property, trade secrets and other confidential information of value to FCI about, among other things, FCI's products, marketing and corporate strategies, but in no event will "proprietary information" include any disclosure of substances and materials (and their chemical composition) which are or previously have been present in, on or under the Property at the time of any inspections by BNPLC, nor will "proprietary information" include any additional disclosures reasonably required to permit BNPLC to determine whether the presence of such substances and materials has constituted a violation of Environmental Laws or this Lease. In addition, under no circumstances shall FCI have any obligation to disclose to BNPLC or any other party any proprietary information of FCI (including, without limitation, any pending applications for patents or trademarks, any research and design and any trade secrets) except if and to the limited extent reasonably necessary to comply with the express provisions of this Lease. 28. USURY SAVINGS CLAUSE. Notwithstanding anything to the contrary contained in this Lease or the other Operative Documents to the contrary, BNPLC does not intend to contract for, charge or collect any amount of money that constitutes interest in excess of the Maximum Rate. As used herein, "MAXIMUM RATE" shall mean, at any time in question, the maximum rate of interest which, under applicable law, may be charged. If, notwithstanding the intention of the parties as explained in Paragraph 26, this Lease and the other Operative Documents should be construed as a financing arrangement under state law, BNPLC and FCI agree that it is their intent in the execution of this Lease and the other Operative Documents to contract in strict compliance with applicable law concerning usury. In furtherance thereof, BNPLC and FCI stipulate and agree that none of the terms and provisions contained in this Lease or in the other Operative Documents shall ever be construed to create a contract to pay for the use, forbearance or detention of money at a rate in excess of the Maximum Rate. Neither FCI nor any other parties now or hereafter becoming liable to BNPLC under the terms of this Lease or the other Operative Documents shall ever be required to pay interest at a rate in excess of the Maximum Rate, and the provisions of this paragraph shall control over all other provisions of this Lease and of the other Operative Documents which may be in apparent conflict herewith. If the Designated Sale Date is accelerated and as a result thereof any amounts payable by FCI to BNPLC under or in connection with this Lease or the other Operative Documents are determined to constitute interest for the actual period of existence of this Lease in excess of the interest that would have accrued at the Maximum Rate for such period, BNPLC shall, at its option, either refund to FCI the amount of such excess or credit such excess as a Qualified Payment (and thus reduce Stipulated Loss Value, the Break Even Price and other amounts, the determination of which depend upon Qualified Payments 45 52 credited to FCI) and thereby shall render inapplicable any and all penalties of any kind provided by applicable laws as a result of such excess interest. If BNPLC shall receive money (or anything else) which is determined to constitute interest and which would increase the effective interest rate received by BNPLC under or in connection with this Lease or the other Operative Documents to a rate in excess of the Maximum Rate, the amount determined to constitute interest in excess of the Maximum Rate shall, immediately following such determination, at the option of BNPLC, be returned to FCI or credited as a Qualified Payment, in which event any and all penalties of any kind under applicable law as a result of such excess interest shall be inapplicable. If BNPLC shall not actually receive, but shall contract for, request or demand, a payment of money (or anything else) which is determined to constitute interest and which would increase the effective interest rate contracted for or charged to a rate in excess of the Maximum Rate, BNPLC shall be entitled, following such determination, to waive or rescind the contractual claim, request or demand for the amount determined to constitute interest in excess of the lawful rate, in which event any and all penalties of any kind under applicable law as a result of such excess interest shall be inapplicable. By execution of this Lease and the Purchase Documents, FCI agrees that if, at any time, FCI should have reason to believe that the transactions evidenced by this Lease or the other Operative Documents are in fact usurious, it will give BNPLC notice of such condition, and FCI agrees that BNPLC shall have ninety days in which to make appropriate refund or other adjustment in order to correct such condition if it in fact exists. The term "applicable law" as used in this subparagraph shall mean the laws of the State of California or the laws of the United States, whichever laws allow the greater rate of interest, as such laws now exist or may be changed or amended or come into effect in the future. [The signature pages follow.] 46 53 IN WITNESS WHEREOF, FCI and BNPLC have caused this Amended and Restated Lease Agreement to be executed as of July 16, 1998. "FCI" FORCE COMPUTERS, INC. By: /s/ LEONARD J. ZANONI --------------------------------------- Printed Name: Leonard J. Zanoni Title: Vice President & Chief FInancial Officer 54 [Continuation of signature pages to Amended and Restated Lease Agreement dated to be effective July 16, 1998] "BNPLC" BNP LEASING CORPORATION By: /s/ LLOYD G. COX ------------------------------------- Name: LLOYD G. COX Title: Vice President 47 55 Exhibit A LEGAL DESCRIPTION All of that certain real property situated in the City of San Jose, County of Santa Clara, State of California, described as follows: Parcel 1 as shown on that Parcel Map filed for record in the office of the Recorder of the County of Santa Clara, State of California on July 1, 1998 in Book 704 of Maps at Pages 11-12. Exhibit A - Page 1 56 Exhibit B PERMITTED ENCUMBRANCES This conveyance is subject to the following matters, but only to the extent the same are still valid and in full force and effect: 1. Liens securing TAXES AND ASSESSMENTS, not yet due and payable. 2. Easement - In Favor Of: County of Santa Clara For: Ingress and egress Recorded: June 28, 1968 in Book 8174, Page 148, Official Records Affects: a portion of the Land as follows: Beginning at the most Northerly corner of that certain 5.545 acre parcel shown upon that certain Record of Survey recorded October 24, 1950 in Book 29 of Maps, at page 6, Santa Clara County Records; thence along the Northeasterly line of said 5.545 acre parcel, said Northeasterly line being also the Southwesterly line of that certain 0.441 acre parcel described as Parcel Two of Exhibit A in the deed recorded in Book 6500, at pages 101, 102, 103, Official Records of Santa Clara County S. 17(Degree) E. 26.44 feet to the true point of beginning and continuing along said Northeasterly and Southwesterly line S. 17(Degree) E. 34.81 feet; thence leaving said Northeasterly and Southwesterly line N. 11(Degree) 31' 33" E. 48.16 feet to a point on the Northeasterly line of said 0.441 acre parcel thence along last mentioned Northeasterly line N. 17(Degree) W. 18.93 feet to the most Northerly corner thereof, said Northerly corner also being the most Northerly corner of that strip of land 23 feet wide, shown parallel and adjacent to the aforementioned 5.545 acre parcel as shown upon said Record of Survey; thence leaving last said Northerly corner N. 73(Degree) 00' E. 10.29 feet; thence N. 11(Degree) 31' 33" E. 117.37 feet; thence along the arc of a curve to the left the tangent of which bears S. 32(Degree) 47' 30" W. having a radius of 300.00 feet through an angel of 30(Degree) 24' 44" for an arc distance of 159.24 feet to the true point of beginning. 3. Easement - In Favor Of: City of San Jose, a municipal corporation For: Public service facilities, slope purposes, sanitary sewer purposes Recorded: May 8, 1985 in Book J340, Page 1040, Official Records Affects: Those street areas of Fontanoso Avenue, Fontanoso Way, Hellyer Avenue, Branham Lane and Silver Creek Valley Road. Reference to the records is hereby made for further particulars, as to the description of the exact location. 4. Easement - In Favor Of: Pacific Bell For: Underground communication facilities and necessary fixtures and appurtenances Recorded: December 20, 1985 in Book J555, Page 160, Official Records Affects: those portions shown as 1E on Exhibit "B" to deed from B B & K, a general partnership, to the City of San Jose, recorded May 8, 1985 in Book J340, Pages 1045 through 1062. Exhibit B - Page 1 57 Exhibit C NOTICE BY FCI OF ELECTION NOT TO MAKE CONSTRUCTION-PERIOD INDEMNITY PAYMENT - INTENTIONALLY DELETED - Exhibit C - Page 1 58 Exhibit D NOTICE OF REQUEST FOR ACTION BY BNPLC BNP Leasing Corporation 12201 Merit Drive Suite 860 Dallas, Texas 75251 Attention: Lloyd G. Cox Re: Amended and Restated Lease Agreement dated as of July 16, 1998, between FCI, 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. Pursuant to subparagraph 7.(a) of the Lease, requests the following of BNPLC: [INSERT HERE A SPECIFIC DESCRIPTION OF THE ACTION REQUESTED - E.G., "PLEASE EXECUTE THE ENCLOSED APPLICATION FOR BUILDING PERMIT REQUIRED BY THE CITY IN CONNECTION WITH CONSTRUCTION OF CERTAIN IMPROVEMENTS WHICH ARE PART OF THE CONSTRUCTION PROJECT."] PLEASE NOTE: SUBPARAGRAPH 7.(a) OF THE LEASE OBLIGATES BNPLC NOT TO UNREASONABLY REFUSE TO COMPLY WITH THE FOREGOING REQUEST, SUBJECT TO TERMS AND CONDITIONS SET FORTH IN THAT SUBPARAGRAPH. FCI HEREBY CERTIFIES TO BNPLC THAT AFTER CAREFUL CONSIDERATION FCI BELIEVES THAT ALL SUCH TERMS AND CONDITIONS ARE SATISFIED IN THE CASE OF THE FOREGOING REQUEST, AND FCI HEREBY RATIFIES AND CONFIRMS ITS OBLIGATION TO INDEMNIFY BNPLC AGAINST ANY LOSSES BNPLC MAY INCUR OR SUFFER BECAUSE OF ITS COMPLIANCE WITH SUCH REQUEST AS PROVIDED IN SUBPARAGRAPH 5.(d) OF THE LEASE. FCI respectfully requests that BNPLC respond to this notice as soon as reasonably possible. Executed this _____ day of ______________, 19___. FORCE COMPUTERS, INC. Name:_________________________ Title:__________________________ Exhibit D - Page 1 59 Exhibit E NOTICE OF REQUEST REQUIRING AN EXPEDITED RESPONSE BNP Leasing Corporation 12201 Merit Drive Suite 860 Dallas, Texas 75251 Attention: Lloyd G. Cox Re: Amended and Restated Lease Agreement dated as of July 16, 1998, between FCI, 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. FCI asks for an EXPEDITED RESPONSE to the following request, which is a request made by FCI pursuant to subparagraph 7.(a) of the Lease: [INSERT HERE A SPECIFIC DESCRIPTION OF THE ACTION REQUESTED - E.G., "PLEASE EXECUTE THE ENCLOSED APPLICATION FOR BUILDING PERMIT REQUIRED BY THE CITY IN CONNECTION WITH CONSTRUCTION OF CERTAIN IMPROVEMENTS WHICH ARE PART OF THE CONSTRUCTION PROJECT."] PLEASE NOTE: SUBPARAGRAPH 7.(a) OF THE LEASE OBLIGATES BNPLC NOT TO UNREASONABLY REFUSE TO COMPLY WITH THE FOREGOING REQUEST, SUBJECT TO TERMS AND CONDITIONS SET FORTH IN THAT SUBPARAGRAPH. FCI HEREBY CERTIFIES TO BNPLC THAT AFTER CAREFUL CONSIDERATION FCI BELIEVES THAT ALL SUCH TERMS AND CONDITIONS ARE SATISFIED IN THE CASE OF THE FOREGOING REQUEST, AND FCI HEREBY RATIFIES AND CONFIRMS ITS OBLIGATION TO INDEMNIFY BNPLC AGAINST ANY LOSSES BNPLC MAY INCUR OR SUFFER BECAUSE OF ITS COMPLIANCE WITH SUCH REQUEST AS PROVIDED IN SUBPARAGRAPH 5.(d) OF THE LEASE. As you consider the foregoing request, please understand that FCI must ask for an expedited request for the following reasons: [INSERT HERE A BRIEF DESCRIPTION OF THE NEED FOR AN EXPEDITED RESPONSE - E.G., "TO AVOID CRITICAL PATH DELAYS IN THE CONSTRUCTION CONTEMPLATED BY THE LEASE, FCI MUST SUBMIT THE ENCLOSED APPLICATION FOR BUILDING PERMIT TO THE CITY OF WITHIN 15 DAYS, AND UNFORTUNATELY THE CITY HAS ONLY RECENTLY INDICATED THAT FCI WILL NEED THE SIGNATURE OF BNPLC ON THE APPLICATION."] For the reasons stated above, FCI respectfully requests that BNPLC respond to this notice as soon as possible. Although FCI would appreciate a sooner response, FCI believes that it would be unreasonable for BNPLC not to respond to this notice on or before: Exhibit E - Page 1 60 [INSERT HERE A REASONABLE DEADLINE FOR THE RESPONSE - BUT IN NO EVENT PRIOR TO 10 BUSINESS DAYS AFTER THE DATE OF THIS NOTICE - TAKING INTO ACCOUNT THE MATERIALS THAT BNPLC WILL HAVE TO REVIEW TO EVALUATE FCI'S REQUEST AND THE PARTICULAR REASONS FOR FCI'S NEED FOR AN EXPEDITED RESPONSE] Executed this _____ day of ______________, 19___. FORCE COMPUTERS, INC. Name:_________________________ Title:__________________________ Exhibit E - Page 2 61 Exhibit F INSURANCE REQUIREMENTS I. LIABILITY INSURANCE: A. FCI must maintain commercial general liability ("CGL") insurance on an occurrence basis, affording afford immediate protection to the limit of not less than $20,000,000 combined single limit for bodily and personal injury, death and property damage in respect of any one occurrence. B. Any deductible or self-insured retention applicable to the CGL insurance shall not exceed $1,000 at any time when FCI shall continue to have the right to exercise any Issue 97-10 Election, or shall have previously exercised an Issue 97-10 Election. After the expiration of FCI's right to exercise any Issue 97-10 Election, and provided no Issue 97-10 Election has been exercised by FCI, FCI may increase any deductible or self-insured retention applicable to such insurance, but not to an amount in excess of $3,000,000. C. The forms of insurance policies (including endorsements) used to provide the CGL insurance required by this Lease, and the insurance company or companies providing the CGL insurance, must be acceptable to BNPLC. BNPLC shall have the right from time to time and at any time to review and approve such policy forms (including endorsements) and the insurance company or companies providing the insurance. Without limiting the generality of the foregoing, BNPLC may reasonably require (and unless and until FCI is otherwise notified by BNPLC, BNPLC does require) that such insurance be provided under forms and by companies consistent with the following: (1) Forms: CGL Insurance must be provided on Insurance Services Office ("ISO") forms CG 0001 1093 or CG 0001 0695. (2) Rating Requirements: Insurance must be provided through insurance or reinsurance 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 VI or better. (3) Required Endorsements: CGL Insurance must be endorsed to provide or include: (a) blanket contractual liability coverage which insures contractual liability under the indemnifications set forth in this Lease (though such coverage or the amount thereof shall in no way limit such indemnifications); (b) in any policy containing a general aggregate limit, ISO form amendment "Aggregate Limits of Insurance Per Location" CG 2504 1185; (c) a waiver of subrogation, using ISO form CG 2404 1093 (and under the commercial umbrella, if any), in favor of "BNP Leasing Corporation and other Interested Parties (as defined in the Amended and Restated Lease Agreement between Force Computers, Inc. and BNP Leasing Corporation dated July 16, 1998)"; (d) ISO additional insured form CG 2026 1185, without modification (and under the Exhibit F - Page 1 62 commercial umbrella, if any), designating as additional insureds "BNPLC and other Interested Parties, as defined in the Amended and Restated Lease Agreement between Force Computers, Inc. and BNP Leasing Corporation dated July 16, 1998)"; and (e) provisions entitling BNPLC to 30 days' notice from the insurer prior to any cancellation, nonrenewal or material modification to the CGL coverage. (4) Other Insurance: Each policy to contain standard CGL "other insurance" wording, unmodified in any way that would make it excess over or contributory with the additional insured's own commercial general liability coverage. II. PROPERTY INSURANCE: A. FCI must maintain property insurance in "special form" or against "all risks," providing the broadest available coverage for all Improvements and equipment included in the Property, with no exclusions for vandalism, malicious mischief, or sprinkler leakage, and including coverage against earthquake and all coverage perils normally included within the definitions of extended coverage, vandalism, malicious mischief and, if the Property is in a flood zone, flood. During any period of significant construction on any Improvements, the property insurance must include builder's completed value risk insurance for such Improvements. B. The property insurance must provide coverage in the amount no less than replacement value (exclusive of land, foundation, footings, excavations and grading) 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. Subject to the approval of BNPLC, FCI will be responsible for determining the amount of property insurance to be maintained from time to time, but FCI must maintain such coverage on an agreed value basis to eliminate the effects of coinsurance. C. Any deductible or self-insured retention applicable to the property insurance shall not exceed $1,000 at any time when FCI shall continue to have the right to exercise any Issue 97-10 Election, or shall have previously exercised an Issue 97-10 Election. After the expiration of FCI's right to exercise any Issue 97-10 Election, and provided no Issue 97-10 Election has been exercised by FCI, FCI may increase any deductible or self-insured retention applicable to such insurance, but not to an amount in excess of $3,000,000. D. The property insurance shall cover not only the value of FCI's interest in the Improvements, but also the interest of BNPLC, with BNPLC shown as an insured as its interests may appear. E. The forms of insurance policies (including endorsements) used to provide the property insurance required by this Lease, and the insurance company or companies providing the property insurance, must be acceptable to BNPLC. BNPLC shall have the right from time to time and at any time to review and approve such policy forms (including endorsements) and the insurance company or companies providing such insurance. Without limiting the generality of the foregoing, BNPLC may reasonably require (and unless and until FCI is otherwise notified by BNPLC, BNPLC does require) that such insurance be provided under forms and by companies consistent with the following: (1) Rating Requirements: Insurance to be provided through insurance or reinsurance companies rated by the A.M. Best Company of Oldwick, New Jersey as having (a) a policyholder's rating of A- or better, (b) a reported financial information rating of no less than VI, Exhibit F - Page 2 63 and (c) in the case of each insurance or reinsurance company, a reported financial information rating which indicates an adjusted policyholders' surplus equal to or greater than the underwriting exposure that such company has under the insurance or reinsurance it is providing for the Property. (2) Required Endorsements: FCI's property Insurance must be endorsed to provide or include: (a) a waiver of subrogation in favor of "BNPLC and other Interested Parties, as defined in the Amended and Restated Lease Agreement between Force Computers, Inc. and BNP Leasing Corporation dated July 16, 1998)"; (b) that FCI's insurance is primary, with any policies of BNPLC or other Interested Parties being excess, secondary and noncontributing; (c) that the protection afforded to BNPLC by such insurance shall not be reduced or impaired by acts or omissions of FCI or any other beneficiary or insured; and (d) that BNPLC must be notified at least thirty days prior to any cancellation, nonrenewal or reduction of insurance coverage. III. OTHER INSURANCE RELATED REQUIREMENTS: A. BNPLC must be notified in writing immediately by FCI of claims against FCI that might cause a reduction below seventy-five percent (75%) of any aggregate limit of any policy. B. FCI's Property insurance must be evidenced by ACORD form 27 "Evidence of Property Insurance" completed and interlineated in a manner satisfactory to BNPLC to show compliance with the requirements of this Exhibit. B. FCI's CGL insurance must be evidenced by ACORD form 25 "Certificate of Insurance" completed and interlineated in a manner satisfactory to BNPLC to show compliance with the requirements of this Exhibit. C. Such evidence of required insurance must be delivered upon execution of this Lease and new certificate or evidence of insurance must be delivered no later than 30 days prior to expiration of existing policy. D. Copies of endorsements must be attached to ACORD forms 25 and 27 delivered to BNPLC. Exhibit F - Page 3 64 Exhibit G COMPLIANCE CERTIFICATE BNP Leasing Corporation 12201 Merit Drive Suite 860 Dallas, Texas 75251 Attention: Lloyd G. Cox Gentlemen: The undersigned, as _____________________________ of Solectron Corporation ("Guarantor"), does hereby certify on behalf of Guarantor and Force Computers, Inc. ("FCI") that the following are true: 1. This Certificate is furnished pursuant to subparagraph 16.(b)(ii) of that certain Amended and Restated Lease Agreement dated as of July 16, 1998 (the "LEASE"; the terms defined therein being used herein as therein defined) between FCI and you. 2. No Event of Default or material Default by FCI under the Lease has occurred and is continuing. 3. The representations and warranties of FCI in the Operative Documents are true and correct in all material respects as of the date hereof as though made on and as of the date hereof. 4. The representations and warranties of Guarantor in Section 9 of the Guaranty are true and correct in all material respects as of the date hereof as though made on and as of the date hereof. 5. Annex 1 attached hereto sets forth financial data and computations evidencing Guarantor's compliance with certain covenants established in Schedule A attached to the Guaranty, all of which data and computations are complete, true and correct. Executed this _____ day of ______________, 19___. Solectron Corporation Name:_________________________ Title:________________________ Exhibit G - Page 1 65 Annex 1 To Compliance Certificate For the _________________ Ended ________________, 19___ NOTE: References to Sections below are intended to refer to the Sections in Part 3 of Schedule A to the Guaranty.
Actual Required/Permitted ------ ------------------ 1. Section 3.09 - Adjusted Leverage As of the last day of each fiscal Ratio quarter, the amount which is not greater than (a) 1.75 to 1.00 from the Effective Date through and including February 28, 1998, (b) 1.50 to 1.00 from May 31, 1998 through and including February 28, 1999, (c) 1.25 to 1.00 from May 31, 1999 through and including February 28, 2000, and (d) 1.00 to 1.00 thereafter. Adjusted Leverage Ratio calculation (A) Consolidated Funded Debt $ -------- plus Guarantee obligations -------- plus Indebtedness with respect to synthetic leases and securitized assets plus Indebtedness with respect to letters of credit (including the -------- Letters of Credit) minus Permitted Subordinated -------- Indebtedness TOTAL $ -------- (B) operating income $ -------- plus depreciation and amortization charges -------- TOTAL $ -------- RATIO OF (A) TO (B) --------
Exhibit G - Page 2 66
Actual Required/Permitted ------ ------------------ 2. Section 3.10 - Minimum Consolidated Tangible Net Worth As of the last day of each fiscal quarter following April 30, 1997, the amount that is not less than the sum of (without duplication) 80% of Consolidated Tangible Net Worth measured as of the end of the fiscal quarter ended February 28, 1997, plus 50% of consolidated net income (without subtracting losses or acquisition-related charges) for each fiscal quarter ended after the fiscal quarter ended February 28, 1997, minus 100% of all acquisition-related charges if such charges are recorded in the same fiscal quarter in which the applicable acquisition is consummated. (A) Consolidated Tangible Net Worth calculation: total shareholders' equity $ ------- minus intangible assets -------- Consolidated Tangible Net Worth $ ------- (B) Minimum Consolidated Tangible Net Worth calculation: Beginning minimum amount $ -------- plus 50% of quarterly net income -------- for each fiscal quarter subsequent to the quarter ended February 28, 1997, with no reduction for losses or acquisition-related charges minus 100% of all acquisition- related charges if such charges are recorded in the same fiscal quarter in which the applicable acquisition is consummated Minimum Consolidated Tangible $ Net Worth -------- (A) MINUS (B) $ --------
Exhibit G - Page 3 67
Actual Required/Permitted ------ ------------------ 3. Section 3.11 - Modified Quick At the end of any fiscal quarter of Ratio Guarantor when (1) the rating the rating established by Moody's for the Index Debt of Guarantor is below Ba2 or (2) the rating established by S&P for the Index Debt of Guarantor is below BB, or (3) neither Moody's nor S&P maintains a rating for the Index Debt of Guarantor, the Modified Quick Ratio is to be not less than 1.0 to 1.0. (A) Quick Assets calculation: unencumbered cash $ -------- plus unencumbered short term cash investments --------- plus unencumbered marketable --------- securities which are classified as short term investments according to GAAP plus unencumbered net accounts --------- receivable plus fair market value of the following to the extent not otherwise already included in Quick Assets and to the extent having maturities of not longer than two years: securities issued or fully --------- guaranteed by the United States government or any agency thereof and backed by the full faith and credit of the United States
Exhibit G - Page 4 68
Actual Required/Permitted ------ ------------------ certificates of deposit, time -------- deposits, Eurodollar time deposits, repurchase agreements, or banker's acceptances that are (A) 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 (B) rated not less than A- by Standard & Poor's Corporation or less than A by Moody's Investors Service, Inc. corporate or municipal bonds --------- rated not less than A- by Standard & Poor's Corporation or less than A by Moody's Investors Service, Inc. TOTAL --------- (B) Current Liabilities according to $ GAAP --------- (C) Payments not included in Current $ Liabilities maturing within 12 --------- months on Indebtedness or which are the subject of any Guarantee RATIO OF (A) TO [(B) +(C)] ---------
Exhibit G - Page 5 69 Exhibit H NOTICE OF LIBOR PERIOD ELECTION BNP Leasing Corporation 12201 Merit Drive Suite 860 Dallas, Texas 75251 Attention: Lloyd G. Cox Re: Amended and Restated Lease Agreement dated as of July 16, 1998, between Force Computers, Inc., 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___. FORCE COMPUTERS, INC. Name:_________________________ Title:_________________________ [cc all Participants] Exhibit H - Page 1 70 Schedule 1 LIST OF DEVELOPMENT DOCUMENTS -- NONE - 71 Schedule 2 LIST OF CLAIMS PENDING OR THREATENED AGAINST THE PROPERTY -- NONE -- 72 LIST OF DEFINED TERMS FOR AGREEMENTS BETWEEN BNP LEASING CORPORATION AND FORCE COMPUTERS, INC. DATED AS OF JULY 16, 1998 73 TABLE OF CONTENTS
PAGE DEFINED TERM NUMBER - ----------------------------------------------------------------------------------------------------- ABSOLUTE FCI CONSTRUCTION OBLIGATIONS...............................................................1 ACTIVE NEGLIGENCE...................................................................................1 ADDITIONAL RENT.....................................................................................1 ADMINISTRATIVE AGENCY FEES..........................................................................1 ADVANCE DATE........................................................................................1 AFFILIATE...........................................................................................2 APPLICABLE LAWS.....................................................................................2 APPLICABLE PURCHASER................................................................................2 ATTORNEYS' FEES.....................................................................................2 BALANCE OF UNPAID CONSTRUCTION-PERIOD INDEMNITY PAYMENTS............................................2 BANKING RULES CHANGE................................................................................2 BASE RENT...........................................................................................2 BASE RENT COMMENCEMENT DATE.........................................................................2 BASE RENT DATE......................................................................................3 BASE RENT PERIOD....................................................................................3 BNPLC...............................................................................................4 BNPLC'S PARENT......................................................................................4 BREAKAGE COSTS......................................................................................4 BREAK EVEN PRICE....................................................................................4 BUSINESS DAY........................................................................................4 CAPITAL ADEQUACY CHARGES............................................................................5 CARRYING COSTS......................................................................................5 CLOSING CERTIFICATE.................................................................................5 CMA SUSPENSION EVENT................................................................................5 CMA SUSPENSION NOTICE...............................................................................5 CMA SUSPENSION PERIOD...............................................................................5 CMA TERMINATION EVENT...............................................................................5 CODE................................................................................................5 COMMITMENT FEE......................................................................................5 COMPLETION NOTICE...................................................................................5 CONSTRUCTION ADVANCES...............................................................................5 CONSTRUCTION ADVANCE REQUEST........................................................................5 CONSTRUCTION ALLOWANCE..............................................................................5 CONSTRUCTION MANAGEMENT AGREEMENT...................................................................5 CONSTRUCTION MILESTONE..............................................................................6 CONSTRUCTION PERIOD.................................................................................6 CONSTRUCTION-PERIOD INDEMNITY PAYMENTS..............................................................6 CONSTRUCTION PROJECT................................................................................6 DEBT................................................................................................6 DEDUCTIBLE JUDGMENT.................................................................................6 DEFAULT.............................................................................................6 DEFAULT RATE........................................................................................7 DEFECTIVE WORK......................................................................................7 DESIGNATED SALE DATE................................................................................7 DEVELOPMENT DOCUMENTS...............................................................................7 EFFECTIVE DATE......................................................................................8
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PAGE DEFINED TERM NUMBER - ----------------------------------------------------------------------------------------------------- EFFECTIVE RATE......................................................................................8 ENVIRONMENTAL CONSULTANT............................................................................8 ENVIRONMENTAL LAWS..................................................................................8 ENVIRONMENTAL LOSSES................................................................................8 ENVIRONMENTAL REPORT................................................................................9 ERISA...............................................................................................9 ERISA AFFILIATE.....................................................................................9 ERISA TERMINATION EVENT.............................................................................9 ESCROWED PROCEEDS...................................................................................9 ESTABLISHED MISCONDUCT.............................................................................10 EUROCURRENCY LIABILITIES...........................................................................10 EURODOLLAR RATE RESERVE PERCENTAGE.................................................................10 EVENT OF DEFAULT...................................................................................10 EXCESS FUNDING COMMITMENT..........................................................................10 EXCLUDED TAXES.....................................................................................10 EXISTING CONTRACT..................................................................................11 FAIR MARKET VALUE..................................................................................11 FCI................................................................................................11 FCI'S EXTENDED REMARKETING PERIOD..................................................................11 FCI'S EXTENDED REMARKETING RIGHT...................................................................12 FCI'S INITIAL REMARKETING RIGHTS AND OBLIGATIONS...................................................12 FED FUNDS RATE.....................................................................................12 FOCB NOTICE........................................................................................12 FUNDED CONSTRUCTION ALLOWANCE......................................................................12 FUNDING ADVANCES...................................................................................12 FUTURE WORK........................................................................................12 GAAP...............................................................................................12 GUARANTOR..........................................................................................12 GUARANTY...........................................................................................12 HAZARDOUS SUBSTANCE................................................................................12 HAZARDOUS SUBSTANCE ACTIVITY.......................................................................13 IMPOSITIONS........................................................................................13 IMPROVEMENTS.......................................................................................13 INDEX DEBT.........................................................................................13 INDUSTRIAL HYGIENIST...............................................................................13 INITIAL FUNDING ADVANCE............................................................................14 INTERESTED PARTY...................................................................................14 ISSUE 97-1 NON-PERFORMANCE-RELATED SUBJECTIVE EVENT OF DEFAULT.....................................14 ISSUE 97-10 ELECTION...............................................................................14 ISSUE 97-10 PREPAYMENT.............................................................................14 LAND...............................................................................................15 LANDLORD'S ELECTION TO CONTINUE CONSTRUCTION.......................................................15 LEASE..............................................................................................15 LIBOR..............................................................................................15 LIBOR PERIOD ELECTION..............................................................................15 LIEN...............................................................................................16 LIENS REMOVABLE BY BNPLC...........................................................................16
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PAGE DEFINED TERM NUMBER - ----------------------------------------------------------------------------------------------------- LIST OF DEFINED TERMS...............................................................................16 LOSS CUTOFF DATE....................................................................................16 LOSSES..............................................................................................17 MATERIAL ENVIRONMENTAL COMMUNICATION................................................................17 MAXIMUM CONSTRUCTION ALLOWANCE......................................................................17 MAXIMUM PERMITTED PREPAYMENT........................................................................17 MAXIMUM REMARKETING OBLIGATION......................................................................17 MINIMUM EXTENDED REMARKETING PRICE..................................................................17 MOODY'S.............................................................................................17 NORMAL TENANT IMPROVEMENTS..........................................................................17 NOTICE OF FCI'S INTENT TO TERMINATE.................................................................18 OPERATIVE DOCUMENTS.................................................................................18 OUTSTANDING CONSTRUCTION ALLOWANCE..................................................................18 PARTICIPANT.........................................................................................18 PARTICIPATION AGREEMENT.............................................................................18 PERMITTED ENCUMBRANCES..............................................................................18 PERMITTED HAZARDOUS SUBSTANCE USE...................................................................18 PERMITTED HAZARDOUS SUBSTANCES......................................................................19 PERMITTED TRANSFER..................................................................................19 PERSON..............................................................................................19 PERSONAL PROPERTY...................................................................................19 PLAN................................................................................................19 POTENTIAL LIEN CLAIMANTS............................................................................19 PRIME RATE..........................................................................................20 PRIOR WORK..........................................................................................20 PROJECT COSTS.......................................................................................20 PROJECTED COST OVERRUNS.............................................................................21 PROPERTY............................................................................................21 PURCHASE AGREEMENT..................................................................................21 PURCHASE OPTION.....................................................................................21 QUALIFIED PAYMENTS..................................................................................21 REAL PROPERTY.......................................................................................21 REIMBURSABLE CONSTRUCTION-PERIOD COSTS..............................................................21 REMEDIAL WORK.......................................................................................21 RENT................................................................................................22 RESIDUAL RISK PERCENTAGE............................................................................22 RESPONSIBLE FINANCIAL OFFICER.......................................................................22 S&P.................................................................................................22 SCOPE CHANGE........................................................................................22 SELLER..............................................................................................22 SPREAD..............................................................................................22 STIPULATED LOSS VALUE...............................................................................24 SUBSIDIARY..........................................................................................24 SUPPLEMENTAL PAYMENT................................................................................24 TERM................................................................................................24 THIRD PARTY CONTRACT................................................................................24 THIRD PARTY SALE NOTICE.............................................................................24
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PAGE DEFINED TERM NUMBER - ----------------------------------------------------------------------------------------------------- THIRD PARTY SALE PROPOSAL...........................................................................24 THIRD PARTY TARGET PRICE............................................................................24 TRANSACTION EXPENSES................................................................................25 UNFUNDED BENEFIT LIABILITIES........................................................................25 VOLUNTARY FCI CONSTRUCTION CONTRIBUTIONS............................................................25 VOLUNTARY RETENTION OF THE PROPERTY.................................................................25 WORK................................................................................................25
-iv- 77 LIST OF DEFINED TERMS As used in the Lease to which this List of Defined Terms is attached and in the other Operative Documents (as defined below) into which this List of Defined Terms is incorporated by reference: "ABSOLUTE FCI CONSTRUCTION OBLIGATIONS" means the following: (1) Construction-Period Indemnity Payments required because of or in connection with or arising out of Environmental Losses incurred or suffered by any Interested Party; (2) Construction-Period Indemnity Payments required because of or in connection with or arising out of Losses incurred or suffered by BNPLC, when such Losses would not have been incurred or suffered but for any act or any omission of FCI or of any FCI's contractors or subcontractors during the period that the Construction Management Agreement remains in force or during any other period that FCI remains in possession or control of the Construction Project; (3) Construction-Period Indemnity Payments required because of or in connection with or arising out of Losses incurred or suffered by BNPLC that would not have been incurred but for any fraud, misapplication of funds (including Construction Advances), illegal acts, or willful misconduct on the part of the FCI or its employees or agents or any other party for whom FCI is responsible; and (4) Construction-Period Indemnity Payments required because of or in connection with or arising out of Losses incurred or suffered by BNPLC that would not have been incurred but for any bankruptcy proceeding involving FCI. For purposes of this definition, "acts and omissions of FCI" shall include (i) any decision by FCI to make any Scope Change, (ii) any failure of FCI to maintain insurance required by the Lease or the Construction Management Agreement, (iii) any decision not to continue or complete Work under the Construction Management Agreement because of a change in FCI's facility needs or in FCI's plans to meet its facility needs (such as, for example, a decision by FCI to lease or acquire another less expensive facility as an alternative to the Improvements), (iv) any failure of FCI to correct Defective Work performed prior to a termination of the Construction Management Agreement as provided in subparagraphs 5(D) or 5(E) thereof, and (v) any other breach by FCI of the Construction Management Agreement. "ACTIVE NEGLIGENCE" of any Person (including BNPLC) means, and is limited to, the negligent conduct on the Property (and not mere omissions) by such Person or by others acting and authorized to act on such Person's behalf in a manner that proximately causes actual bodily injury or property damage for which FCI does not carry (and is not obligated by the Lease to carry) insurance. "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 Property or as a party to the transactions described in the Lease, (2) any negligent failure of any other Interested 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 transactions described in the Lease, or (3) the exercise in a lawful manner by BNPLC (or any party lawfully claiming through or under BNPLC) of any right or remedy provided in or under the Lease or any other Operative Document. "ADDITIONAL RENT" shall have the meaning assigned to it in subparagraph 4.(c) of the Lease. "ADMINISTRATIVE AGENCY FEES" shall have the meaning assigned to it in subparagraph 4.(e) of the Lease. "ADVANCE DATE" means, regardless of whether any Construction Advance shall actually be made thereon, 78 the first Business Day of every calendar month, beginning with July 16, 1998 and continuing regularly thereafter to and including the Base Rent Commencement Date. "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. Notwithstanding the foregoing, for purposes of the Lease and the Purchase Agreement, FCI's "Affiliates" will not include any Person domiciled outside the United States. "APPLICABLE LAWS" means any or all of the following, to the extent applicable to FCI or the Property or the Lease or the other Operative Documents: restrictive covenants; zoning ordinances and building codes; flood disaster laws; health, safety and environmental laws and regulations; the Americans with Disabilities Act and other laws pertaining to disabled persons; and other laws, statutes, ordinances, rules, permits, regulations, orders, determinations and court decisions. "APPLICABLE PURCHASER" means any third party designated by FCI to purchase BNPLC's interest in the Property and in any Escrowed Proceeds as provided in the Purchase Agreement. "ATTORNEYS' FEES" means the reasonable fees and expenses of counsel to the parties incurring the same, excluding costs or expenses of in-house counsel (whether or not accounted for as general overhead or administrative expenses), but otherwise including 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 all such reasonable fees and expenses incurred with respect to appeals, arbitrations and bankruptcy proceedings, and whether or not any manner of proceeding is brought with respect to the matter for which such fees and expenses were incurred. "BALANCE OF UNPAID CONSTRUCTION-PERIOD INDEMNITY PAYMENTS" shall have the meaning assigned to it in subparagraph 1(A)(1) of the Purchase Agreement. "BANKING RULES CHANGE" means either: (1) the introduction of or any change after the Effective Date (other than any change by way of imposition or increase of reserve requirements included in the Eurodollar Rate Reserve Percentage) in any law or regulation applicable to BNPLC, BNPLC's Parent or any other Participant, or in the generally accepted interpretation by the institutional lending community of any such law or regulation, or in the interpretation of any such law or regulation asserted by any regulator, court or other governmental authority or (2) the compliance by BNPLC, BNPLC's Parent or any other Participant with any new guideline or new request after the Effective Date from any central bank or other governmental authority (whether or not having the force of law). "BASE RENT" means the rent payable by FCI pursuant to subparagraph 4.(a) of the Lease. "BASE RENT COMMENCEMENT DATE" means the earlier of (1) the last day that constitutes first business day of a calendar month and that is no more than 364 days after the Effective Date, (2) the first Business Day of the first calendar month to follow by twenty days or more the date upon which any Completion Notice is given as provided in the Construction Management Agreement or in the Lease, (3) the first Business Day of the first calendar month to follow by twenty days or more BNPLC's receipt of a notice from FCI, given before FCI has exercised any Issue 97-10 Election and setting forth FCI's express, unconditional, unequivocal and irrevocable (A) List of Defined Terms - Page 2 79 waiver of any right to make any Issue 97-10 Election, and (B) election to accelerate the Base Rent Commencement Date by delivery such notice, notwithstanding that after the Base Rent Commencement Date, FCI shall have no further right to Construction Advances under the Construction Management Agreement or the Lease, or (4) the first Business Day of the first calendar month upon which the Funded Construction Allowance shall equal or exceed the Maximum Construction Allowance. Notwithstanding the forgoing, if for any reason (including a termination of the Construction Management Agreement) FCI has not completed the Construction Project thirty days in advance of the scheduled Base Rent Commencement Date determined pursuant to the first sentence of this definition, BNPLC shall be entitled (but not obligated) to extend the Base Rent Commencement Date one or more times and at any time before the Construction Project actually is complete and ready for occupancy. To so extend the Base Rent Commencement Date, BNPLC shall notify FCI thereof and of the date to which the Base Rent Commencement Date is extended, which may be the first Business Day of any calendar month designated by BNPLC in the notice of extension, provided that BNPLC will not so designate any date more than sixty days after the date upon which the Construction Project is expected by BNPLC (at the time of the designation) to be complete. "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 Base Rent Commencement Date, then the first Business Day of the first calendar month following the Base Rent Commencement Date shall be the first Base Rent Date. (b) If the LIBOR Period Election in effect on the Base Rent Commencement Date is three months or six months, then the first Business Day of the third calendar month following the Base Rent Commencement 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 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 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 Base Rent Commencement Date falls on the first Business Day of June, 1999 and a LIBOR Period Election of six months commences on the Base Rent Commencement 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 Base Rent Commencement 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: List of Defined Terms - Page 3 80 (1) If the LIBOR Period Election for a Base Rent Period is one month 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 FCI 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, FCI 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. "BNPLC" means BNP Leasing Corporation, a Delaware corporation. "BNPLC'S PARENT" means BNPLC's Affiliate, Banque Nationale de Paris, a bank organized and existing under the laws of France and any successors of such bank. "BREAKAGE COSTS" means any and all costs, losses or expenses incurred or sustained by BNPLC's Parent (as a Participant or otherwise) or any other Participant, for which BNPLC's Parent or the Participant shall request reimbursement from BNPLC, because of the resulting liquidation or redeployment of deposits or other funds: (1) used to make or maintain Funding Advances upon application of a Qualified Payment or upon any sale of the Property pursuant to the Purchase Agreement, if such application or sale occurs on any day other than the last day of a Construction Period or Base Rent Period; or (2) reserved to provide a Construction Advance that FCI requests, but thereafter declines to take for any reason, or that FCI requests but is not permitted to take because of its failure to satisfy any of the conditions specified in the Construction Management Agreement. Breakage Costs will include, for example, losses attributable to any decline in LIBOR as of the effective date of any application described in the clause (1) preceding, as compared to LIBOR used to determine the Effective Rate then in effect. Each determination by BNPLC's Parent or the applicable Participant of Breakage Costs shall, in the absence of clear and demonstrable error, be conclusive and binding upon FCI. "BREAK EVEN PRICE" shall have the meaning assigned to it in subparagraph 1(A)(1) of the Purchase Agreement. "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 List of Defined Terms - Page 4 81 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). "CAPITAL ADEQUACY CHARGES" means any additional amounts BNPLC's Parent or any other Participant requests BNPLC to pay as compensation for an increase in required capital as provided in subparagraph 5.(c)(ii) of the Lease. "CARRYING COSTS" means the charges added to and made a part of the Outstanding Construction Allowance (and thus also added to and made a part of the Funded Construction Allowance) from time to time on and before the Base Rent Commencement Date pursuant to and as more particularly described in subparagraph 6.(a) of the Lease. "CLOSING CERTIFICATE" means the Amended and Restated Closing Certificate and Agreement dated as of July 16, 1998 executed by FCI in favor of BNPLC, as such Closing Certificate may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. "CMA SUSPENSION EVENT" shall have the meaning assigned to it in subparagraph 5(A) of the Construction Management Agreement. "CMA SUSPENSION NOTICE" shall have the meaning assigned to it in subparagraph 5(B)(1) of the Construction Management Agreement. "CMA SUSPENSION PERIOD" shall have the meaning assigned to it in subparagraph 5(C) of the Construction Management Agreement. "CMA TERMINATION EVENT" shall have the meaning assigned to it in subparagraph 5(B) of the Construction Management Agreement. "CODE" means the Internal Revenue Code of 1986, as amended. "COMMITMENT FEE" shall have the meaning assigned to it in subparagraph 4.(d) of the Lease. "COMPLETION NOTICE" means (1) a notice required by subparagraph 1(B) of the Construction Management Agreement from FCI to BNPLC, advising BNPLC when construction of the Construction Project is substantially complete, or (2) a notice permitted by subparagraph 6.(f) of the Lease from BNPLC to FCI, advising FCI after any Landlord's Election to Complete Construction when construction of the Construction Project is substantially complete or that BNPLC no longer intends to continue such construction. "CONSTRUCTION ADVANCES" means (1) actual advances of funds made by or on behalf of BNPLC to or on behalf of FCI pursuant to Paragraph 2 of the Construction Management Agreement, and (2) amounts considered as Construction Advances pursuant to subparagraph 6.(d) of the Lease. "CONSTRUCTION ADVANCE REQUEST" shall have the meaning assigned to it in subparagraph 2(C)(1) of the Construction Management Agreement. "CONSTRUCTION ALLOWANCE" means the allowance, consisting of Construction Advances and Carrying Costs, which is to be provided for the Construction Project as more particularly described in the Construction Management List of Defined Terms - Page 5 82 Agreement and Paragraph 6 of the Lease. "CONSTRUCTION MANAGEMENT AGREEMENT" means a Construction Management Agreement dated as of July 16, 1998 (as from time to time supplemented, amended or restated) pursuant to which BNPLC has authorized FCI to construct certain improvements on the Land and agreed to provide a construction allowance for such construction on and subject to the terms and conditions described therein. "CONSTRUCTION MILESTONE" shall have the meaning assigned to it in subparagraph 5(B)(2) of the Construction Management Agreement. "CONSTRUCTION PERIOD" means each successive period of approximately one month, with the first Construction Period beginning on and including the Effective Date and ending on but not including the first Advance Date. Each successive Construction Period after the first Construction Period 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, until the last Construction Period, which shall end on but not include the earlier of the Base Rent Commencement Date or any Designated Sale Date upon which FCI or any Applicable Purchaser shall purchase BNPLC's interest in the Property pursuant to the Purchase Agreement. "CONSTRUCTION-PERIOD INDEMNITY PAYMENTS" shall have the meaning assigned to it in subparagraph 5.(e)(ii) of the Lease. "CONSTRUCTION PROJECT" means the new buildings or other substantial Improvements to be constructed, or the alteration of existing Improvements, as described generally in Exhibit B attached to the Construction Management Agreement. "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 another Person against loss in respect of, indebtedness or obligations of others of the kinds referred to in the preceding clauses (i) through (v); (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. "DEDUCTIBLE JUDGMENT" means a final, liquidated judgment against BNPLC, the execution of which has not been and will not be stayed pending appeal by BNPLC, secured by a judgment lien filed against the Property which constitutes a Lien Removable by BNPLC. "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. List of Defined Terms - Page 6 83 "DEFAULT RATE" means, for any period prior to the Designated Sale Date, a floating per annum rate equal to two percent (2%) above the Prime Rate, and for any period commencing on or after the Designated Sale Date, Default Rate shall mean a floating per annum rate equal to five percent (5%) above the Prime Rate. However, in no event will the "Default Rate" at any time exceed the maximum interest rate permitted by law. "DEFECTIVE WORK" shall have the meaning assigned to it in subparagraph 1(A)(2)(e) of the Construction Management Agreement. "DESIGNATED SALE DATE" means the earlier of: (1) the first Business Day of August, 2003; or (2) any Business Day designated as such in an irrevocable, unconditional notice given by FCI to BNPLC before FCI has made an Issue 97-10 Election; provided, that if the Business Day so designated by FCI is earlier than sixty days after the date of such notice, then the notice will be of no effect for purposes of this definition; and provided, further, to be effective for purposes of this definition, the notice must include an express, unconditional, unequivocal and irrevocable (A) waiver by FCI of any remaining right FCI may have under any of the Operative Documents to make any Issue 97-10 Election, and (B) acknowledgment by FCI that because of FCI's election to accelerate the Designated Sale Date, the Maximum Remarketing Obligation will equal the Break Even Price under the Purchase Agreement; or (3) any Business Day designated as such in an irrevocable, unconditional notice given by FCI to BNPLC after FCI has made an Issue 97-10 Election (a notice which FCI might give, for example, to force the commencement of FCI's Extended Remarketing Period); provided, that if the Business Day so designated by FCI is earlier than sixty days after the date of such notice or is earlier than the Base Rent Commencement Date, then the notice will be of no effect for purposes of this Definition; and provided, further, to be effective for purposes of this definition, the notice must include an express, unconditional, unequivocal and irrevocable acknowledgment by FCI that (A) because FCI has previously made an Issue 97-10 Election, BNPLC has the right to collect Issue 97-10 Prepayments under the Operative Documents and such right will continue unaffected by the notice, and (B) because of FCI's election to accelerate the Designated Sale Date, the Maximum Remarketing Obligation will equal the Break Even Price under the Purchase Agreement; or (4) any Business Day designated as such in a notice given by BNPLC to FCI after the effective date of any termination of the Construction Management Agreement as provided in subparagraphs 5(D) or 5(E) thereof; or (5) any Business Day designated as such in a notice given by BNPLC to FCI after BNPLC's receipt of a notice from FCI setting forth FCI's election to terminate the Purchase Option and FCI's Initial Remarketing Rights and Obligations as provided in subparagraph 4(B) thereof; or (6) any Business Day designated as such in a notice given by BNPLC to FCI when any Event of Default has occurred and is continuing. "DEVELOPMENT DOCUMENTS" means the contracts, ordinances and other documents described in Schedule 1 attached to the Lease, if any, as the same may be modified from time to time in accordance with the Lease and the Closing Certificate (including modifications authorized pursuant to subparagraphs 7.(a) and 7.(b) of the Lease), List of Defined Terms - Page 7 84 and any applications, permits or certificates concerning or affecting the use or development of the Property that may be submitted, issued or executed from time to time as contemplated in such contracts, ordinances and other documents or that BNPLC may hereafter execute, approve or consent to at the request of FCI. "EFFECTIVE DATE" means July 16, 1998. "EFFECTIVE RATE" means for each Construction Period and for each Base Rent Period, the per annum rate determined by dividing (A) LIBOR for such Construction Period or Base Rent Period, as the case may be, by (B) one hundred percent (100%) minus the Eurodollar Rate Reserve Percentage for such Construction Period or Base Rent Period. If LIBOR or the Eurodollar Rate Reserve Percentage changes from Construction Period to Construction Period or from Base Rent Period to Base Rent Period, then the Effective Rate shall be automatically increased or decreased as of the date of such change, as the case may be, without prior notice to FCI. If for any reason BNPLC determines that it is impossible or unreasonably difficult to determine the Effective Rate with respect to a given Construction Period or Base Rent Period in accordance with the foregoing, then the "EFFECTIVE RATE" for that Construction Period or Base Rent Period shall equal any published index or per annum interest rate determined in good faith by BNPLC's Parent to be comparable to LIBOR 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 BNPLC's Parent's comparison of past eurodollar market rates to past yields on such Treasury obligations. Any determination by BNPLC of the Effective Rate under this definition shall, in the absence of clear and demonstrable error, be conclusive and binding upon FCI. "ENVIRONMENTAL CONSULTANT" means a qualified individual employed by a qualified firm. Individuals shall be deemed qualified if they (i) possess at least five years of experience in performing environmental, engineering and consulting services; (ii) have performed or supervised at least five projects involving remediation of soil contaminated with hazardous substances, including at least one project similar to the Remedial Work; (iii) have all licenses required under applicable law for the Remedial Work; and (iv) have at least a bachelor's degree in the physical sciences or a related field from an accredited college or university. A firm shall be deemed qualified if it is: (i) a nationally recognized, reputable environmental and/or engineering firm in the business of providing professional environmental engineering and consulting services; (ii) has experience and expertise in projects involving the Remedial Work; (iii) maintains policies of insurance which are approved by BNPLC in its reasonable discretion. "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 the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 (as amended, "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, "RCRA"). "ENVIRONMENTAL LOSSES" means Losses suffered or incurred by any Interested Party relating to or arising out of, based on or as a result of: (i) any Hazardous Substance Activity that occurs or is alleged to have occurred on or prior to the Loss Cutoff Date; (ii) any violation on or prior to the Loss Cutoff Date of Environmental Laws relating to the 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 that occurs or is alleged to have occurred in whole List of Defined Terms - Page 8 85 or in part on or prior to the Loss Cutoff Date; 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 Interested Party which relates to, arises from, is based on, or results from any of the matters described in clauses (i), (ii) or (iii) of this definition, or any allegation of any such matters. For purposes of determining whether Losses constitute "Environmental Losses," any actual or alleged Hazardous Substance Activity or violation of Environmental Laws relating to the Property will be presumed to have occurred prior to the Loss Cutoff Date unless FCI establishes by clear and convincing evidence to the contrary that the relevant Hazardous Substance Activity or violation of Environmental Laws did not occur or commence prior to the Loss Cutoff Date. Even if after the Loss Cutoff Date Losses are incurred by or asserted against a particular Interested Party that would not have been incurred or asserted, but for any matter described in clauses (i), (ii) or (iii) of this definition, or an allegation of any such matter, then such Losses will constitute Environmental Losses. "ENVIRONMENTAL REPORT" means collectively the following reports, which were provided by FCI to BNPLC or otherwise obtained by BNPLC prior to the execution of the Lease: (1) Phase 1 Environmental Site Assessment Report, Fontanoso Way Property, San Jose, California, Dated April 22, 1998, prepared by Lita D. Freeman of Kleinfelder, Inc., and (2) Environmental Report dated April 27, 1998, prepared by Elizabeth Ward of Washington Advisors. "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. "ERISA AFFILIATE" means any Person who for purposes of Title IV of ERISA is a member of FCI's controlled group, or under common control with FCI, within the meaning of Section 414 of the Internal Revenue Code, and the regulations promulgated and rulings issued thereunder. "ERISA TERMINATION EVENT" means (i) the occurrence with respect to any Plan of a reportable event described in Section 4043(c) of ERISA for which any penalty or notice thereof has not been waived pursuant to regulations, rulings, or notices issued by the Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation under Section 4043(a) of ERISA, or (ii) 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 (other than in connection with a standard termination of a fully funded Plan pursuant to Section 4041 of ERISA), or (iii) the institution of proceedings to terminate any Plan by the Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or (iv) any other event or condition which would constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. "ESCROWED PROCEEDS" means, subject to the exclusions specified in the next sentence, any money that is received by BNPLC from time to time during the Term (and any interest earned thereon) from any party (1) under any property insurance policy as a result of damage to the Property, (2) as compensation for any restriction imposed by any governmental authority upon the use or development of the Property or for the condemnation of the Property or any portion thereof, (3) because of any judgment, decree or award for injury or damage to the 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 Property; provided, however, in determining the amount of "Escrowed Proceeds" there shall be deducted all expenses and costs of every type, kind and nature (including Attorneys' Fees) incurred by BNPLC to collect such proceeds. Notwithstanding the foregoing, "Escrowed Proceeds" will not include (A) any payment to BNPLC by a Participant or an Affiliate of BNPLC that is made to compensate BNPLC for the Participant's or Affiliate's share of any Losses BNPLC may incur as a result of any of the events described in the preceding clauses (1) through (4), (B) any money or proceeds that have been applied as a Qualified Payment or to pay any Breakage List of Defined Terms - Page 9 86 Costs or other costs incurred in connection with a Qualified Payment, (C) any money or proceeds that, after no less than ten days notice to FCI, BNPLC returns or pays to a third party because of BNPLC's good faith belief that such return or payment is required by law, (D) any money or proceeds paid by BNPLC to FCI or offset against any amount owed by FCI, or (E) any money or proceeds used by BNPLC in accordance with the Lease for repairs or the restoration of the Property or to obtain development rights or the release of restrictions that will inure to the benefit of future owners or occupants of the Property. Until Escrowed Proceeds are paid to FCI pursuant to Paragraph 11 of the Lease, transferred to a purchaser under the Purchase Agreement as therein provided or applied as a Qualified Payment or as otherwise described in the preceding sentence, BNPLC 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. "ESTABLISHED MISCONDUCT" of a Person means, and is limited to: (1) if the Person is bound by the Lease or the Purchase Agreement, a breach by such Person of the express provisions of the Lease or the Purchase Agreement that continues beyond any period for cure provided therein, and (2) conduct of such Person or its Affiliates that has been determined to constitute wilful misconduct or Active Negligence in or as a necessary element of a final judgment rendered against such Person by a court with jurisdiction to make such determination. Established Misconduct of one Interested Party shall not be attributed to a second Interested Party unless the second Interested Party is an Affiliate of the first. Negligence which does not constitute Active Negligence shall not in any event constitute Established Misconduct. For purposes of this definition, "conduct of a Person" will include (1) the conduct of an employee of that Person, but only to the extent that the employee is acting within the scope of his employment by that Person, as determined in or as a necessary element of a final judgment rendered against such Person by a court with jurisdiction to make such determination, and (2) the conduct of an agent of that Person (such as an independent environmental consultant engaged by that Person), but only to the extent that the agent is, as determined in or as a necessary element of a final judgment rendered against such Person by a court with jurisdiction to make such determination, (x) acting within the scope of the authority granted to him by such Person, (y) not acting with the consent or approval of or under the direction of FCI or FCI's Affiliates, employees or agents, and (z) not acting in good faith to mitigate Losses that such Person may suffer because of a breach or repudiation by FCI of the Closing Certificate or Lease or the Purchase Agreement. "EUROCURRENCY LIABILITIES" shall have the meaning assigned to it in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "EURODOLLAR RATE RESERVE PERCENTAGE" means, for purposes of determining the Effective Rate for any Construction Period or Base Rent 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 any emergency, supplemental or other marginal reserve requirement) for BNPLC's Parent 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. "EVENT OF DEFAULT" shall have the meaning assigned to it in subparagraph 17.(a) of the Lease. "EXCESS FUNDING COMMITMENT" shall have the meaning assigned to it in subparagraph 2(C)(2)(b) of the Construction Management Agreement. "EXCLUDED TAXES" means (1) all federal, state and local income taxes upon Base Rent, Commitment Fees, Administrative Agency Fees, any interest paid to BNPLC or any Participant pursuant to subparagraph 4.(h) of the List of Defined Terms - Page 10 87 Lease and any additional compensation claimed by BNPLC pursuant to subparagraph 5.(c)(ii) of the Lease; (2) all federal, state and local income taxes upon any amounts paid as reimbursement for or to satisfy Losses incurred by BNPLC or any Participant to the extent such taxes are offset by a corresponding reduction of BNPLC's or the applicable Participant's income taxes because of BNPLC's or such Participant's deduction of the reimbursed Losses from its taxable income or because of any tax credits attributable thereto; (3) taxes imposed by any governmental authority outside the United States of America; and (4) any transfer or change of ownership taxes assessed because of BNPLC's transfer or conveyance to any third party of BNPLC's rights or interests in the Lease or the Purchase Agreement or the Property, but excluding any such taxes assessed because of any transfer described in clauses (4) or (6) of the definition of Permitted Transfer below. For purposes of this definition, income taxes shall include any state or local taxes on the net income of BNPLC or a Participant, as the case may be, whether or not designated as an "income tax" or "franchise tax" and regardless of any future increase in tax rates used to compute such taxes. If, however, a change in Applicable Laws after the Effective Date results in an increase in such taxes for any reason other than an increase in the applicable tax rates (e.g., a disallowance of deductions that would otherwise be available against payments described in clause (1) of this definition), then for purposes of computing the taxes that constitute "Excluded Taxes," the change in law will not be considered. "EXISTING CONTRACT" means the Agreement of Purchase and Sale and Joint Escrow Instructions dated December, 1997 (as amended), originally between Berg & Berg Enterprises as seller and Solectron Corporation as buyer, covering the Land described in Exhibit A of the Lease. "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 FCI has fulfilled and can be expected to continue to fulfill its obligations under the Lease and other Operative Documents; that FCI has maintained the Property in compliance with all Applicable Laws [including Environmental Laws]; that any construction commenced on the Land but not completed prior to the Designated Sale Date shall not reduce the value of the Property; that all Improvements are self-sufficient in the sense that any easements or offsite facilities needed under the Development Documents or otherwise for the use of the Improvements will be available at no additional cost to the owner of the Improvements; that FCI has repaired and restored the Property after any damage following fire or other casualty; that FCI has restored the remainder of the Property after any partial taking by eminent domain; that FCI 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, including any assessment liens, but not including Liens Removable by BNPLC; that no conditions or circumstances on or about the Property [such as the presence of an endangered species] is discovered that will impede development of the Property; that development of the Property will not be hindered or delayed because of the limited availability of utilities or water; that any purchaser paying fair market value for the Property will receive copies of all of FCI's books and records which are necessary or useful to a future owner's or occupant's use of the Property in the manner permitted by the Lease, including books and records evidencing the testing and validation of the Property for the uses permitted by the Lease; that without undue cost or delay any such purchaser can obtain any necessary permits or licenses needed to use the Property for the purposes permitted by the Lease; and that FCI has cured any title defects affecting the Property other than Liens Removable by BNPLC, all in accordance with the standards and requirements of the Lease [as though the Lease were continuing in force], and the Closing Certificate) as determined by an independent MAI Certified General Real Estate Appraiser reasonably satisfactory to BNPLC who has five years or more experience appraising similar properties in and around Santa Clara County, California. "FCI" means Force Computers, Inc., a Delaware corporation. "FCI'S EXTENDED REMARKETING PERIOD" shall have the meaning assigned to it in subparagraph 2(A) of the List of Defined Terms - Page 11 88 Purchase Agreement. "FCI'S EXTENDED REMARKETING RIGHT" shall have the meaning assigned to it in subparagraph 2(A) of the Purchase Agreement. "FCI'S INITIAL REMARKETING RIGHTS AND OBLIGATIONS" shall have the meaning assigned to it in subparagraph 1(A)(2) of the Purchase Agreement. "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 BNPLC's Parent from three Federal funds brokers of recognized standing selected by BNPLC's Parent. All determinations of the Fed Funds Rate by BNPLC's Parent shall, in the absence of clear and demonstrable error, be binding and conclusive upon FCI. "FOCB NOTICE" shall have the meaning assigned to it in subparagraph 5(E) of the Construction Management Agreement. "FUNDED CONSTRUCTION ALLOWANCE" means on any day the Outstanding Construction Allowance on that day, including all Construction Advances and Carrying Costs added to the Outstanding Construction Allowance on or prior to that day, plus the amount of any Qualified Payments deducted on or prior to that day in the calculation of such Outstanding Construction Allowance, less any Voluntary FCI Construction Contributions added on or prior to that day in the calculation of such Qualified Payments. "FUNDING ADVANCES" means (1) the Initial Funding Advance and (2) all future advances made by BNPLC's Parent or any other Participant to or on behalf of BNPLC to allow BNPLC to provide the Construction Allowance under the Lease. "FUTURE WORK" shall have the meaning assigned to it in subparagraph 2(C)(2)(b) of the Construction Management Agreement. "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 16.(b) of the Lease (except for changes concurred in by FCI's independent public accountants). "GUARANTOR" means Solectron Corporation, a Delaware corporation. "GUARANTY" means the Amended and Restated Guaranty dated as of July 16, 1998 given by Guarantor to BNPLC, guaranteeing the obligations of FCI under the Lease, Purchase Agreement and Closing Certificate, as such Guaranty may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. "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 List of Defined Terms - Page 12 89 a "hazardous substance," "hazardous material," "hazardous waste," "extremely hazardous waste or substance," "infectious waste," "toxic substance," "toxic pollutant," or any other formulation intended to define, list or classify substances by reason of deleterious properties, including 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. "HAZARDOUS SUBSTANCE ACTIVITY" means any actual, proposed or threatened use, storage, holding, release (including 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 Property, including 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 Property and any resulting residual Hazardous Substance contamination in, on or under the Property. "HAZARDOUS SUBSTANCE ACTIVITY" also means any existence of Hazardous Substances on the Property that would cause the Property or the owner or operator thereof to be in violation of, or that would subject the Property to any remedial obligations under, any Environmental Laws, including CERCLA and RCRA, assuming disclosure to the applicable governmental authorities of all relevant facts, conditions and circumstances pertaining to the Property. "HAZARDOUS SUBSTANCE ACTIVITY" does not, however, include events or circumstances that do not affect the Property on or about other properties owned or operated by FCI. "IMPOSITIONS" means 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 the Lease or which are imposed upon BNPLC or the Property because of the ownership, leasing, occupancy, sale or operation of the Property, or any part thereof or interest therein, or relating to or required to be paid by any of the Permitted Encumbrances or the Development Documents, excluding only Excluded Taxes. "IMPOSITIONS" shall include real estate taxes imposed because of a change of use or ownership of the Property on or prior to the date of any sale by BNPLC pursuant to the Purchase Agreement. "IMPROVEMENTS" means any and all (1) buildings and other real property improvements now or hereafter erected on the Land, and (2) equipment (e.g., HVAC systems, elevators and plumbing fixtures) attached to the buildings or other real property improvements, the removal of which would cause structural or other material damage to the buildings or other real property improvements or would materially and adversely affect the value or use of the buildings or other real property improvements. "INDEX DEBT" means senior, unsecured, long-term indebtedness for borrowed money of Guarantor that is not guaranteed by any other Person or subject to any other credit enhancement. "INDUSTRIAL HYGIENIST" means an industrial hygienist certified by the American Board of Industrial Hygiene who is experienced with required and appropriate health and safety standards and good industrial hygiene practice related to operations at hazardous waste sites. List of Defined Terms - Page 13 90 "INITIAL FUNDING ADVANCE" means, collectively, the advances of made by BNPLC's Parent (directly or through one or more of its Affiliates) to or on behalf of BNPLC on or prior to the effective date of the Lease to cover the cost of BNPLC's acquisition of the Property and certain Transaction Expenses and other amounts described in this definition. The amount of the Initial Funding Advance may be confirmed by a separate closing certificate executed by FCI as of the Effective Date. To the extent that BNPLC does not itself use the entire Initial Funding Advance to pay Transaction Expenses incurred by BNPLC or for other purposes described in the preceding sentence, the remainder thereof is being advanced to FCI, with the understanding that FCI will use any such amount advanced for one or more of the following purposes: (1) the payment or reimbursement of Transaction Expenses incurred by FCI; (2) the payment or reimbursement of expenses incurred by FCI in connection with the Construction Project, including the planning, design, engineering, construction and permitting of thereof; (3) the maintenance of the Property; or (4) the payment of Rents next due. "INTERESTED PARTY" means each of (1) BNPLC, its Affiliates and its successors and assigns as to the Property or any part thereof or any interest therein, (2) BNPLC's Parent, and (3) any other Participants and their permitted successors and assigns under the Participation Agreement; provided, however, none of the following shall constitute an Interested Party: (a) any Person to whom BNPLC may transfer an interest in the Property by a conveyance that is not a Permitted Transfer and others that cannot lawfully claim an interest in the Property except through or under such a transfer by BNPLC, (b) FCI or any Person that cannot lawfully claim an interest in the Property except through or under a conveyance from FCI, or (c) any Applicable Purchaser under the Purchase Agreement and any Person that cannot lawfully claim an interest in the Property except through or under a conveyance from such Applicable Purchaser. "ISSUE 97-1 NON-PERFORMANCE-RELATED SUBJECTIVE EVENT OF DEFAULT" means an Event of Default that is unrelated to the Property or the use or maintenance thereof and that results solely from (A) a breach by FCI or Guarantor of a provision in any Operative Document or the Guaranty, the occurrence of which breach cannot be objectively determined, or (B) any other event described in clauses (vi), (vii), (viii), (ix), (x), (xi), (xii), (xiv) or (xvi) of subparagraph 17(a) of the Lease, the occurrence of which event cannot be objectively determined. For example, an Event of Default under subparagraph 17.(a)(vii) of the Lease resulting solely from a failure of FCI to "generally" pay its debts as such debts become due (in contrast to a failure of FCI to pay Rent to BNPLC as it becomes due under the Lease) would constitute an Issue 97-1 Non-performance-related Subjective Event of Default. In no event, however, will the term "Issue 97-10 Non-performance-related Subjective Event of Default" include an Event of Default resulting from (1) a failure of FCI to make any payment required to BNPLC under the Operative Documents, (2) a breach by Guarantor of any of sections 3.09, 3.10 or 3.11 of PART 3 of Schedule A attached to the Guaranty (which set forth financial ratio covenants), (3) any failure of FCI to use, maintain and insure the Property in accordance with the requirements of the Lease, or (4) any failure of FCI to pay the full amount of any Supplemental Payment on the Designated Sale Date as required by the Purchase Agreement. Except as provided in subparagraph 1(A)(2)(c)(i) of the Purchase Agreement, the characterization of any Event of Default as an Issue 97-10 Non-performance-related Subjective Event of Default will not affect the rights or remedies available to BNPLC because of the Event of Default. "ISSUE 97-10 ELECTION" means any of the following elections by FCI: (1) an election to terminate the Construction Management Agreement as provided in subparagraph 5(D) thereof; and (2) an election to terminate FCI's Initial Remarketing Rights and Obligations as provided in subparagraph 4(B) of the Purchase Agreement. "ISSUE 97-10 PREPAYMENT" means a payment to BNPLC, required by subparagraph 4.(f) of the Lease or by subparagraphs 4(B) or 4(C) of the Purchase Agreement, equal in each case to (A) the Maximum Permitted Prepayment, computed as of the date on which the payment becomes due, less (B) the accreted value of any prior List of Defined Terms - Page 14 91 payments actually received by BNPLC from FCI constituting Issue 97-10 Prepayments or Voluntary FCI Construction Contributions. For purposes of the preceding sentence, "accreted value" of a payment shall mean the amount of the payment plus an amount equal to the interest that would have accrued on the payment if it bore interest at the Effective Rate. "LAND" means the land as described in Exhibit A attached to the Lease, Closing Certificate and Purchase Agreement. However, upon any amendment to the Lease which modifies the land covered thereby, the land covered by the Closing Certificate and Purchase Agreement shall automatically be so modified. "LANDLORD'S ELECTION TO CONTINUE CONSTRUCTION" shall have the meaning assigned to it in subparagraph 6.(d) of the Lease. "LEASE" means the Amended and Restated Lease Agreement dated as of July 16, 1998 between BNPLC, as landlord, and FCI, as tenant, pursuant to which FCI has agreed to lease BNPLC's interest in the Property, as such Lease Agreement may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. "LIBOR" means, for purposes of determining the Effective Rate for each Construction Period or Base Rent Period, the rate determined by BNPLC'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 BNPLC'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. BNPLC shall instruct BNPLC'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 Construction Period or Base Rent Period, as the case may be, (ii) in an amount equal or comparable to the total (projected on the applicable date of determination by BNPLC's Parent) Stipulated Loss Value on the first day of such period, and (iii) for a time equal or comparable to the length of such period. If BNPLC'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. If for any reason BNPLC's Parent determines that it is impossible or unreasonably difficult to determine LIBOR with respect to a given Construction Period or Base Rent Period in accordance with the foregoing, or if BNPLC's Parent shall determine that it is unlawful (or any central bank or governmental authority shall assert that it is unlawful) for BNPLC, BNPLC's Parent or any Participant to provide or maintain Funding Advances during any Construction Period or Base Rent Period for which Carrying Costs or 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 BNPLC's Parent shall, in the absence of clear and demonstrable error, be binding and conclusive upon FCI. "LIBOR PERIOD ELECTION" for the first Base Rent Period means one month and for any subsequent Base Rent Period means a period of one month, three months or six months as designated by FCI at least ten Business Days prior to the commencement of such Base Rent Period by a notice given to BNPLC in the form of Exhibit H attached to the Lease. (For purposes of the Lease a LIBOR Period Election for any Base Rent Period shall also be considered the LIBOR Period Election in effect on (1) the Base Rent Commencement Date or 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 so designated by FCI shall remain in effect for the entire Base Rent Period specified in FCI's notice to BNPLC (provided such Base Rent Period commences at least ten Business Days after BNPLC's receipt of the notice) and for all subsequent Base Rent Periods until a new designation becomes effective in accordance with the provisions set forth in this definition. Notwithstanding the List of Defined Terms - Page 15 92 foregoing, however: (1) FCI shall not be entitled to designate a LIBOR Period Election that would cause a Base Rent Period to extend beyond the end of the scheduled Term; (2) changes in the LIBOR Period Election shall become effective only upon the commencement of a new Base Rent Period; and (3) if FCI fails to make a LIBOR Period Election consistent with the foregoing requirements for any Base Rent Period, or 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 deemed to be one month. "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 lease in the nature thereof, any agreement to sell receivables with recourse, 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 the Lease. "LIENS REMOVABLE BY BNPLC" means, and is limited to, Liens encumbering the Property that are asserted (1) other than as contemplated by the Lease or the Purchase Agreement, by BNPLC itself, (2) by third parties lawfully claiming through or under BNPLC (which for purposes of the Lease shall include any judgment liens established against the Property because of a judgment rendered against BNPLC and shall also include any liens established against the Property to secure past due Excluded Taxes), or (3) by third parties lawfully claiming under a deed or other instrument duly executed by BNPLC; provided, however, Liens Removable by BNPLC shall not include (A) any Permitted Encumbrances or Development Documents (regardless of whether claimed through or under BNPLC), (B) any of the Operative Documents or any other document executed by BNPLC with the knowledge of (and without objection by) FCI's counsel contemporaneously with the execution and delivery of the Operative Documents, (C) Liens which are neither lawfully claimed through or under BNPLC (as described above) nor claimed under a deed or other instrument duly executed by BNPLC, (D) Liens claimed by FCI or claimed through or under a conveyance made by FCI, (E) Liens arising because of BNPLC's compliance with Applicable Law, the Lease, Permitted Encumbrances, the Development Documents or any written request made by FCI, (F) Liens securing the payment of property taxes or other amounts assessed against the Property by any governmental authority, other than to secure the payment of past due Excluded Taxes or to secure damages caused by (and attributed by any applicable principles of comparative fault to) BNPLC's own Established Misconduct or the Established Misconduct of BNPLC's Parent or BNPLC's other Affiliates, (G) Liens resulting from or arising in connection with any breach by FCI of the Closing Certificate, the Lease or the Purchase Agreement; or (H) Liens resulting from or arising in connection with any Permitted Transfer that occurs after any Designated Sale Date upon which, for any reason, FCI or an Affiliate of FCI or any Applicable Purchaser shall not purchase BNPLC's interest in the Property pursuant to the Purchase Agreement for a net price to BNPLC (when taken together with any additional payments made by FCI pursuant to Paragraph 1(A)(2) of the Purchase Agreement, in the case of a purchase by an Applicable Purchaser) equal to Stipulated Loss Value. "LIST OF DEFINED TERMS" means this List of Defined Terms, which is attached to the Lease and incorporated by reference into the other Operative Documents. "LOSS CUTOFF DATE" means the later of the dates upon which (i) the Lease terminates, (ii) FCI surrenders possession of the Property or (iii) FCI ceases to have any leasehold or other interest in the Property under the Lease or otherwise. List of Defined Terms - Page 16 93 "LOSSES" means the following, to the extent (but only to the extent) resulting from, arising out of or in connection with events or circumstances (including the condition of the Property) that actually or allegedly occurred or existed or may hereafter occur or exist on or before the Loss Cutoff Date: any and all losses, liabilities, damages (whether actual, consequential, punitive or otherwise denominated), demands, claims, administrative or legal proceedings, actions, judgments, causes of action, assessments, fines, penalties, costs and expenses (including 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. For purposes of determining whether any loss, liability, damage, demand, claim, administrative or legal proceeding, action, judgment, cause of action, assessment, fine, penalty, cost or expense constitutes a "Loss," the events or circumstances relating thereto will be presumed to have occurred prior to the Loss Cutoff Date unless FCI establishes by clear and convincing evidence to the contrary that the relevant events or circumstances did not occur or exist prior to the Loss Cutoff Date. "MATERIAL ENVIRONMENTAL COMMUNICATION" means a communication between FCI or its agents and a regulatory agency or third party, which causes, or potentially could cause (whether by implementation of or response to said communication), a material change in the scope, duration, or nature of any Remedial Work. "MAXIMUM CONSTRUCTION ALLOWANCE" means an amount equal to $16,000,000, less the Initial Funding Advance. "MAXIMUM PERMITTED PREPAYMENT" as of any date means the amount equal to the lesser of the following: (1) the sum of: (A) eighty-nine and nine-tenths of one percent (89.9%) of the aggregate of (i) all Project Costs paid or incurred on or prior to such date, plus (ii) ninety-seven percent (97%) of Carrying Costs added to the Outstanding Construction Allowance on or prior to such date; plus (B) any amount by which the value of BNPLC's interest in the Land and its appurtenances are less than the price paid by BNPLC for the same as determined reasonably and in good faith by BNPLC after consulting with an independent appraiser; or (2) eighty-nine and nine-tenths of one percent (89.9%) of Stipulated Loss Value on such date. "MAXIMUM REMARKETING OBLIGATION" shall have the meaning indicated in subparagraph 1(A)(2)(c) of the Purchase Agreement. "MINIMUM EXTENDED REMARKETING PRICE" shall have the meaning assigned to it in subparagraph 2(B) of the Purchase Agreement. "MOODY'S" means Moody's Investor Service, Inc. "NORMAL TENANT IMPROVEMENTS" shall have the meaning assigned to it in subparagraph 3(A) of the Construction Management Agreement. List of Defined Terms - Page 17 94 "NOTICE OF FCI'S INTENT TO TERMINATE" shall have the meaning assigned to it in subparagraph 5(D) of the Construction Management Agreement. "OPERATIVE DOCUMENTS" means the Closing Certificate, the Lease, the Construction Management Agreement and the Purchase Agreement. "OUTSTANDING CONSTRUCTION ALLOWANCE" shall have the meaning assigned to it in subparagraph 6.(a) of the Lease. "PARTICIPANT" means BNPLC's Parent, Allied Irish Banks PLC, Bank of America National Trust and Savings Association, Security Pacific Leasing Corporation, First Union National Bank, Mellon Bank, N.A., Standard Chartered Bank and any other Person that, upon becoming a party to the Participation Agreement by executing a supplement thereto as contemplated therein, agrees from time to time to participate in all or some of the risks and rewards to BNPLC of the Lease, the Purchase Agreement and the Closing Certificate. As of the Effective Date, the only Participant is BNPLC's Parent, but BNPLC may agree after the Effective Date to share in risks and rewards of the Lease, the Purchase Agreement, and the Closing Certificate with other Participants. However, no Person other than BNPLC's Parent, Allied Irish Banks PLC, Bank of America National Trust and Savings Association, Security Pacific Leasing Corporation, First Union National Bank, Mellon Bank, N.A., Standard Chartered Bank and their respective Affiliates shall qualify as a Participant for purposes of the Lease, the Purchase Agreement, the Closing Certificate or other agreements concerning the Property to which SGC is a party unless such Person became a party to the Participation Agreement by executing a supplement to that agreement as contemplated therein and, at the time of execution of the supplement either (i) such Person had obtained SGC's prior written approval (which approval will not be unreasonably withheld), or (ii) an Event of Default had occurred and was continuing. "PARTICIPATION AGREEMENT" means the Amended and Restated Participation Agreement dated as of the Effective Date, between BNPLC and the Participants and any other Participants that may become parties thereto as contemplated therein, pursuant to which BNPLC's Parent has agreed to participate in the risks and rewards to BNPLC of the 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. "PERMITTED ENCUMBRANCES" means (i) the encumbrances and other matters affecting the Property that are set forth in Exhibit B attached to the Lease, (ii) any easement agreement or other document affecting title to the Property executed by BNPLC at the request of or with the consent of FCI, (iii) any liens from time to time imposed to secure only ad valorem taxes on the Property which, at the time in question, are not delinquent, and (iv) the terms and conditions of the Existing Contract that survived the conveyance of the Land from Seller to BNPLC. "PERMITTED HAZARDOUS SUBSTANCE USE" means the use, generation, 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, generation, storage and disposal shall not: (1) exceed that reasonably required for the construction of the Construction Project in accordance with the Lease and the Construction Management Agreement or for the operation of the Property for the purposes expressly permitted under subparagraph 3.(a) of the Lease; or (2) include any disposal, discharge or other release of Hazardous Substances from the Property in List of Defined Terms - Page 18 95 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 FCI 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 Property in a manner that requires a RCRA treatment, storage or disposal permit, including a landfill, incinerator or other waste disposal facility. "PERMITTED HAZARDOUS SUBSTANCES" means Hazardous Substances used and reasonably required for the construction of the Construction Project or for the use of the Property by FCI and its permitted subtenants and assigns for the purposes expressly permitted by subparagraph 3.(a) of the Lease, in either case 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 usual and customary office, laboratory and janitorial products. "PERMITTED TRANSFER" means any one or more of the following: (1) the creation or conveyance of rights and interests in favor of the BNPLC's Parent or other Participants pursuant to the terms and conditions of the Participation Agreement, provided that in any case where rights or interests in the Property are so created or conveyed, the rights or interests are made expressly subject to the rights of FCI under the Lease and the Purchase Agreement; (2) any assignment or conveyance by BNPLC to any present or future Participant of any lien or security interest against the Property (in contrast to a conveyance of BNPLC's fee estate) or of any interest in Rent, payments required by or under the Purchase Agreement or payments to be generated from the Property after the Term, provided that such assignment or conveyance is made expressly subject to the rights of FCI under the Lease and the Purchase Agreement; (3) any agreement to exercise or refrain from exercising rights or remedies under the Lease or the Purchase Agreement made by BNPLC with any present or future Participant; (4) any assignment or conveyance by BNPLC requested by FCI or required by any Permitted Encumbrance, by Development Documents, by the Purchase Agreement or by Applicable Laws; (5) conveyances or transfers by BNPLC or its Affiliates to BNPLC or its Affiliates, provided that in the case of any such conveyance or transfer that covers any interest in the Property, the conveyance or transfer is made expressly subject to the rights of FCI under the Lease and the Purchase Agreement; or (6) any other assignment or conveyance by BNPLC when an Event of Default shall have occurred and be continuing or after a Landlord's Election to Continue Construction or after the Designated Sale Date (provided, that if the assignment or conveyance constitutes a sale of BNPLC's fee estate in the Property, and if at the time of the sale FCI's Extended Remarketing Right under Paragraph 2 of the Purchase Agreement has not expired or been terminated as provided in the Purchase Agreement, then the sale will be subject to FCI's Extended Remarketing Right.) "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. "PERSONAL PROPERTY" shall have the meaning assigned to it on page 2 of the Lease. "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 Internal Revenue Code and is either (i) maintained by FCI, Guarantor or any List of Defined Terms - Page 19 96 Subsidiary of FCI or Guarantor for employees of FCI, Guarantor or any Subsidiary of FCI or Guarantor or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which FCI, Guarantor or any Subsidiary of FCI or Guarantor is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions. "POTENTIAL LIEN CLAIMANTS" means (1) general contractors, or (2) other parties who have filed any required statutory notices, or who have actually notified BNPLC or FCI of claims, in order to preserve or establish their right to a mechanic's or materialman's lien against the Property in connection with any Construction Project. "PRIME RATE" means the prime interest rate or equivalent charged by BNPLC's Parent in the United States of America as announced or published by BNPLC's Parent from time to time, which need not be the lowest interest rate charged by BNPLC's Parent. If for any reason BNPLC's Parent does not announce or publish a prime rate or equivalent, the prime rate or equivalent announced or published by either Citibank, N.A. or any New York branch or office of Credit Commercial de France as selected by BNPLC shall be used to compute the rate describe in the preceding sentence. 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 Effective Date without notice to FCI as of the effective time of each change in rates described in this definition. "PRIOR WORK" shall have the meaning assigned to it in subparagraph 2(C)(2)(b) of the Construction Management Agreement. "PROJECT COSTS" means the following: 1. costs incurred for the Work (as defined in the Construction Management Agreement), including not only hard costs incurred for the new Improvements described in Exhibit B attached to the Construction Management Agreement, but also the following costs to the extent reasonably incurred in connection with the Construction Project: o soft costs, such as architectural fees, engineering fees and fees and costs paid in connection with obtaining project permits and approvals required by governmental authorities or the Development Documents, o site preparation costs, and o costs of offsite and other public improvements required as conditions of governmental approvals for the Construction Project; 2. costs incurred to maintain insurance required by (and consistent with the requirements of) the Lease prior to the Base Rent Commencement Date; 3. a fraction of the cost of title insurance incurred to satisfy the condition set forth in subparagraph 5(B)(3)(a) of the Construction Management Agreement, the numerator of which fraction is the difference computed by subtracting the price paid by BNPLC for the Land from the maximum dollar amount of coverage provided by the title insurance, and the denominator of which fraction is equal to such maximum dollar amount of coverage; 4. Impositions that have accrued or become due under the Lease prior to the Base Rent List of Defined Terms - Page 20 97 Commencement Date; and 5. cancellation or termination fees or other compensation payable by FCI or BNPLC pursuant to any contract concerning the Construction Project made by FCI or BNPLC with any general contractor, architect, engineer or other third party because of any election by FCI or BNPLC to cancel or terminate such contract. "PROJECTED COST OVERRUNS" shall have the meaning assigned to it in subparagraph 4(A) of the Construction Management Agreement. "PROPERTY" means the Personal Property and the Real Property, collectively. "PURCHASE AGREEMENT" means the Amended and Restated Purchase Agreement dated as of July 16, 1998 between BNPLC and FCI pursuant to which FCI has agreed to purchase or to arrange for the purchase by a third party of BNPLC's interest in the Property, as such Purchase Agreement may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. "PURCHASE OPTION" shall have the meaning assigned to it in subparagraph 1(A)(1) of the Purchase Agreement. "QUALIFIED PAYMENTS" means (A) any Issue 97-10 Prepayments received by BNPLC, (B) any Voluntary FCI Construction Contributions received by BNPLC pursuant to subparagraph 4(C) of the Construction Management Agreement, and (C) any payments received by BNPLC from time to time during the Term (1) under any property insurance policy as a result of damage to the Property, (2) as compensation for any restriction placed upon the use or development of the Property or for the condemnation of the Property or any portion thereof, (3) because of any judgment, decree or award for injury or damage to the 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 Property; provided, however, that (x) in determining the amount of "Qualified Payments", there shall be deducted all expenses and costs of every kind, type and nature (including taxes, Breakage Costs and Attorneys' Fees) incurred by BNPLC with respect to the collection or application of such payments, (y) "Qualified Payments" shall not include any payment to BNPLC by a Participant or an Affiliate of BNPLC that is made to compensate BNPLC for the Participant's or Affiliate's share of any Losses BNPLC 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 BNPLC that BNPLC has paid or is obligated to pay to FCI for the restoration or repair of the Property or that BNPLC is holding as Escrowed Proceeds pursuant to Paragraph 11 of the Lease or any other provision of the Lease. 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 BNPLC 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 BNPLC as provided in subparagraph 11.(c) of the Lease. "REAL PROPERTY" shall have the meaning assigned to it on page 1 of the Lease. "REIMBURSABLE CONSTRUCTION-PERIOD COSTS" shall have the meaning assigned to it in Paragraph 2 of the Construction Management Agreement. "REMEDIAL WORK" means any investigation, monitoring, clean-up, containment, remediation, removal, List of Defined Terms - Page 21 98 payment of response costs, or restoration work and the preparation and implementation of any closure or other required remedial plans that any governmental agency or political subdivision requires or approves (or could reasonably be expected to require if it was aware of all relevant circumstances concerning the Property), whether by judicial order or otherwise, because of the presence of or suspected presence of Hazardous Substances in, on, under or about the Property or because of any prior Hazardous Substance Activity. Without limiting the generality of the foregoing, Remedial Work also means any obligations imposed upon or undertaken by FCI pursuant to Development Documents or any recommendations or proposals made therein. "RENT" means the Base Rent and all Additional Rent. "RESIDUAL RISK PERCENTAGE" means fifteen percent (15%) or such greater percentage, but in no event greater than eighteen percent (18%), as is necessary to cause the Lease to satisfy the FAS 13 "90% test" for an operating lease under GAAP. At any time after the Base Rent Commencement Date, upon request of either BNPLC or FCI, the parties will execute a written acknowledgment of the amount of the Residual Risk Percentage (not less than 15% and not more than 18%) calculated in accordance with this definition. "RESPONSIBLE FINANCIAL OFFICER" means the chief financial officer, the controller, the treasurer or the assistant treasurer of either FCI or Guarantor, as the case may be. "S&P" means Standard and Poor's Corporation. "SCOPE CHANGE" shall have the meaning assigned to it in subparagraph 1(A)(1)(b) of the Construction Management Agreement. "SELLER" means Berg & Berg Enterprises. "SPREAD", means: (A) From July 16, 1998 through and including November 30, 1998, for each Construction Period or period beginning on and including a Base Rent Date and ending on but not including the next Base Rent Date, the amount established as described below in this definition on the date that is two Business Days prior to such period by reference to the stated (or published, implied) rating by S&P or by Moody's applicable to the Index Debt on that date. The Spread shall be established at the Level in the pricing grid below which corresponds to the rating of S&P and Moody's, respectively, applicable to the Index Debt; provided that (a) if one, but not both, of Moody's or S&P shall not have in effect a rating (stated or published, implied) for the Index Debt, then the Spread shall be determined solely with reference to the available rating by the rating agency that still rates the Index Debt; (b) if the ratings established by Moody's and S&P for the Index Debt shall indicate two different but consecutive Levels, the Spread shall be based on the more favorable to Guarantor of the two Levels; (c) if the ratings established by Moody's and S&P for the Index Debt shall indicate two different but nonconsecutive Levels, the Spread shall be the average of the Spreads corresponding to such Levels; (d) if the rating 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 on the date on which it is first announced by the applicable rating agency; (e) notwithstanding anything to the contrary in (a) through (d) above, but subject to (f) and (g) below, if either the rating established by Moody's for the Index Debt of Guarantor is below Ba2 or the rating established by S&P for the Index Debt of Guarantor is below BB, the Spread shall be 80.0 basis points; (f) notwithstanding anything to the contrary in (a) through (e) above, but subject to (g) below, if Moody's does not establish a rating for the Index Debt of Ba2 or higher (including if Moody's has ceased to establish any rating for the Index Debt) and S&P does not List of Defined Terms - Page 22 99 establish a rating for the Index Debt of BB or higher (including if S&P has ceased to establish any rating of the Index Debt), the Spread shall be the difference computed by subtracting the Effective Rate from the rate that is 50.0 basis points above the Prime Rate; and (g) notwithstanding anything to the contrary in (a) through (f) above, on any date where an Event of Default has occurred and is continuing, the Spread shall equal the Default Rate less the Effective Rate.
LEVELS S&P RATING MOODY'S RATING MARGIN - ------------------------------------------------------------------------------------------------ Level I BBB+ (or better) Baa1 (or better) 32.5 basis points Level II BBB Baa2 40.0 basis points Level III BBB- Baa3 48.75 basis points Level IV BB+ Ba1 67.5 basis points Level V BB Ba2 80.0 basis points
All determinations of the Spread by BNPLC shall, in the absence of clear and demonstrable error, be binding and conclusive for purposes of the Lease. Further BNPLC may, but shall not be required, to rely on the determination of the Spread set forth in any certificate delivered by Guarantor pursuant to subparagraph 16.(b)(ii) of the Lease, and no reduction in the Spread will be effective because of an improvement in the S&P Rating or the Moody's Rating before the date that Guarantor has notified BNPLC thereof by delivery of such a certificate. (B) From and after December 1, 1998, for each Construction Period or period beginning on and including a Base Rent Date and ending on but not including the next Base Rent Date, the amount established as described below in this definition on the date that is two Business Days prior to such period by reference to the stated (or published, implied) rating by S&P or by Moody's applicable to the Index Debt on that date. The Spread shall be established at the Level in the pricing grid below which corresponds to the rating of S&P and Moody's, respectively, applicable to the Index Debt; provided that (a) if one, but not both, of Moody's or S&P shall not have in effect a rating (stated or published, implied) for the Index Debt, then the Spread shall be determined solely with reference to the available rating by the rating agency that still rates the Index Debt; (b) if the ratings established by Moody's and S&P for the Index Debt shall indicate two different but consecutive Levels, the Spread shall be based on the more favorable to Guarantor of the two Levels; (c) if the ratings established by Moody's and S&P for the Index Debt shall indicate two different but nonconsecutive Levels, the Spread shall be the average of the Spreads corresponding to such Levels; (d) if the rating 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 on the date on which it is first announced by the applicable rating agency; (e) notwithstanding anything to the contrary in (a) through (d) above, but subject to (f) and (g) below, if either the rating established by Moody's for the Index Debt of Guarantor is below Ba2 or the rating established by S&P for the Index Debt of Guarantor is below BB, the Spread shall be 80.0 basis points; (f) notwithstanding anything to the contrary in (a) through (e) above, but subject to (g) below, if Moody's does not establish a rating for the Index Debt of Ba2 or higher (including if Moody's has ceased to establish any rating for the Index Debt) and S&P does not establish a rating for the Index Debt of BB or higher (including if S&P has ceased to establish any rating of the Index Debt), the Spread shall be the difference computed by subtracting the Effective Rate from the rate that is 50.0 basis points List of Defined Terms - Page 23 100 above the Prime Rate; and (g) notwithstanding anything to the contrary in (a) through (f) above, on any date where an Event of Default has occurred and is continuing, the Spread shall equal the Default Rate less the Effective Rate.
LEVELS S&P RATING MOODY'S RATING MARGIN - ----------------------------------------------------------------------------------------------- Level I BBB+ (or better) Baa1 (or better) 40 basis points Level II BBB Baa2 50 basis points Level III BBB- Baa3 60 basis points Level IV BB+ Ba1 75 basis points Level V BB Ba2 95 basis points
All determinations of the Spread by BNPLC shall, in the absence of clear and demonstrable error, be binding and conclusive for purposes of the Lease. Further BNPLC may, but shall not be required, to rely on the determination of the Spread set forth in any certificate delivered by Guarantor pursuant to subparagraph 16.(b)(ii) of the Lease, and no reduction in the Spread will be effective because of an improvement in the S&P Rating or the Moody's Rating before the date that Guarantor has notified BNPLC thereof by delivery of such a certificate. "STIPULATED LOSS VALUE" as of any date means the amount equal to the sum of the Initial Funding Advance, plus the sum of all Construction Advances and Carrying Costs added to the Outstanding Construction Allowance on or prior to such date, minus all funds received by BNPLC and applied as Qualified Payments on or prior to such date. Under no circumstances will any payment of Base Rent, Commitment Fees or Administrative Agency Fees reduce Stipulated Loss Value. "SUBSIDIARY" means any corporation of which another corporation owns, directly or indirectly, such number of outstanding shares as have more than fifty percent (50%) of the ordinary voting power for the election of directors. "SUPPLEMENTAL PAYMENT" shall have the meaning assigned to it in subparagraph 1(A)(2)(c) of the Purchase Agreement. "TERM" shall have the meaning assigned to it in Paragraph 1.(a) of the Lease. "THIRD PARTY CONTRACT" shall have the meaning assigned to it in subparagraph 1(A)(2)(b) of the Construction Management Agreement. "THIRD PARTY SALE NOTICE" shall have the meaning assigned to it in subparagraph 2(C) of the Purchase Agreement. "THIRD PARTY SALE PROPOSAL" shall have the meaning assigned to it in subparagraph 2(C) of the Purchase Agreement. "THIRD PARTY TARGET PRICE" shall have the meaning assigned to it in subparagraph 2(C) of the Purchase Agreement. List of Defined Terms - Page 24 101 "TRANSACTION EXPENSES" means costs incurred in connection with the preparation and negotiation of the Operative Documents and related documents and the consummation of the transactions contemplated therein. "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 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 FCI or Guarantor or any ERISA Affiliate of FCI or Guarantor under Title IV of ERISA. "VOLUNTARY FCI CONSTRUCTION CONTRIBUTIONS" shall have the meaning assigned to it in subparagraph 4(C) of the Construction Management Agreement. "VOLUNTARY RETENTION OF THE PROPERTY" means an affirmative election made by BNPLC to keep the Property pursuant to, and under the circumstances described in subparagraph 1(A)(2)(a) of the Purchase Agreement. "WORK" shall have the meaning assigned to it in subparagraph 1(A)(2)(a) of the Construction Management Agreement. List of Defined Terms - Page 25 EX-10.5 8 AMENDED AND RESTATED PURCHASE AGREEMENT 1 EXHIBIT 10.5 ================================================================================ $16,000,000 AMENDED AND RESTATED PURCHASE AGREEMENT BETWEEN BNP LEASING CORPORATION ("BNPLC") AND FORCE COMPUTERS, INC. ("FCI") JULY 16, 1998 (SAN JOSE, CALIFORNIA) ================================================================================ PURSUANT TO AND AS MORE PARTICULARLY PROVIDED IN PARAGRAPH 15 OF THIS AGREEMENT, THE LEASE REFERENCED HEREIN AND THIS PURCHASE AGREEMENT ARE TO CONSTITUTE, FOR INCOME TAX PURPOSES ONLY, A FINANCING ARRANGEMENT OR CONDITIONAL SALE. AS PROVIDED IN PARAGRAPH 15 OF THIS AGREEMENT, BNPLC AND FCI EXPECT THAT FCI (AND NOT BNPLC) SHALL BE TREATED AS THE TRUE OWNER OF THE PROPERTY FOR INCOME TAX PURPOSES, THEREBY ENTITLING FCI (AND NOT BNPLC) TO TAKE DEPRECIATION DEDUCTIONS AND OTHER TAX BENEFITS AVAILABLE TO THE OWNER. 2 TABLE OF CONTENTS
Page ---- 1 FCI'S OPTIONS AND OBLIGATIONS ON THE DESIGNATED SALE DATE............................1 (A) Right to Purchase; Right and Obligation to Remarket...........................1 (B) Determination of Fair Market Value............................................3 (C) Designation of the Purchaser..................................................3 2 FCI'S RIGHTS AND OPTIONS AFTER THE DESIGNATED SALE DATE..............................3 (A) FCI's Extended Right to Remarket..............................................3 (B) Definition of Minimum Extended Remarketing Price..............................4 (C) BNPLC's Right to Sell.........................................................5 (D) FCI's Right to Excess Sales Proceeds..........................................5 3 TERMS OF CONVEYANCE UPON PURCHASE....................................................5 4 SURVIVAL AND TERMINATION OF THE RIGHTS AND OBLIGATIONS OF FCI AND BNPLC..............6 (A) Status of this Agreement Generally............................................6 (B) Election by FCI to Terminate the Purchase Option and FCI's Initial Remarketing Rights and Obligations Prior to the Base Rent Commencement Date...............6 (C) Election by BNPLC to Terminate the Purchase Option and FCI's Initial Remarketing Rights and Obligations............................................7 (D) Automatic Termination of Certain Rights of FCI................................7 (E) Termination of FCI's Extended Remarketing Rights to Permit a Sale by BNPLC....7 (F) Payment Only to BNPLC.........................................................8 (G) Remedies Under the Other Operative Documents..................................8 5 EFFECT OF SALE UPON INTERVENING ENCUMBRANCES.........................................8 6. OTHER REPRESENTATIONS, WARRANTIES AND COVENANTS OF FCI...............................8 (A) No Default or Violation.......................................................8 (B) No Suits......................................................................9 (C) Enforceability................................................................9 (D) Organization..................................................................9 (E) Omissions.....................................................................9 7 CERTAIN REMEDIES CUMULATIVE..........................................................9 8. ATTORNEYS' FEES AND LEGAL EXPENSES...................................................9 9. ESTOPPEL CERTIFICATE.................................................................9 10. SUCCESSORS AND ASSIGNS..............................................................10 11. MISCELLANEOUS.......................................................................10
3 (A) Notices......................................................................10 (B) Severability.................................................................12 (C) No Implied Waiver............................................................12 (D) NO IMPLIED REPRESENTATIONS BY BNPLC..........................................12 (E) Entire Agreement.............................................................12 (F) Time is of the Essence.......................................................12 (G) Governing Law................................................................12 (H) Paragraph Headings...........................................................13 (I) Other Terms and References...................................................13 (J) Not a Partnership, Etc.......................................................13 12. WAIVER OF JURY TRIAL................................................................13 13. ADDITIONAL RIGHTS OF BNPLC RELATING TO ESCROWED PROCEEDS............................14 14. SECURITY FOR BNPLC'S OBLIGATIONS....................................................14 15. INCOME TAX REPORTING................................................................14 Exhibits and Schedules Exhibit A....................................................................Legal Description Exhibit B................................................................Special Warranty Deed Exhibit C...............................................Preliminary Change of Ownership Report Exhibit D..........................................................Bill of Sale and Assignment Exhibit E........................................................Acknowledgment and Disclaimer Exhibit F................................................................Intentionally Deleted Exhibit G..............................................................Secretary's Certificate Exhibit H..................................................Instruction Letter to Title Insurer Exhibit I...................................................................FIRPTA Certificate Exhibit J...............................................Indemnity for Liens Removable by BNPLC Exhibit K...............................................Notice by FCI of Election to Terminate List of Defined Terms.......................................................Shared Definitions
(ii) 4 AMENDED AND RESTATED PURCHASE AGREEMENT This PURCHASE AGREEMENT (this "AGREEMENT"), by and between BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"), and FORCE COMPUTERS, INC., a Delaware corporation ("FCI"), is dated as of July 16, 1998, the Effective Date. ("EFFECTIVE DATE" and other capitalized terms used and not otherwise defined in this Agreement are intended to have the meanings assigned to them in the List of Defined Terms attached to and made a part of the Amended and Restated Lease Agreement dated of even date herewith between BNPLC, as landlord, and FCI, as tenant. By this reference, such List of Defined Terms is incorporated into and made a part of this Agreement for all purposes.) RECITALS A. Pursuant to the Existing Contract, which covers the Land described in Exhibit A, BNPLC acquired the Land and any appurtenances thereto from Seller contemporaneously with the execution of a Purchase Agreement dated July 16, 1998. B. Contemporaneously herewith FCI and BNPLC are executing an Amended and Restated Lease Agreement dated the date hereof pursuant to which BNPLC has agreed to lease to FCI certain Land and Improvements thereon which are described in the Lease and to provide to FCI funding for the construction of Improvements to be owned by BNPLC. The Amended and Restated Lease (as from time to time supplemented, amended or restated, the "LEASE") incorporates changes to a prior Lease Agreement dated July 16, 1998, and supersedes and replaces the prior Lease Agreement in its entirety. (BNPLC's interests in the Land, the Improvements and in all other real and personal property from time to time covered by the Lease and included within the "Property" as defined therein are hereinafter collectively referred to as the "PROPERTY".) C. Contemporaneously herewith FCI and BNPLC are executing a Construction Management Agreement dated the date hereof (as from time to time supplemented, amended or restated, the "CONSTRUCTION MANAGEMENT AGREEMENT"), pursuant to which BNPLC has authorized FCI to construct certain improvements on the land covered by the Lease and agreed to provide a construction allowance for such construction on and subject to the terms and conditions described therein. D. Contemporaneously herewith FCI is executing an Amended and Restated Closing Certificate and Agreement dated the date hereof (as from time to time supplemented, amended or restated, the "CLOSING CERTIFICATE"), pursuant to which FCI has made certain representations to BNPLC concerning the Property and has agreed to indemnify BNPLC for certain matters relating to the Property. The Amended and Restated Closing Certificate incorporates changes to a prior Closing Certificate dated as of July 16, 1998, and supersedes and replaces the prior Closing Certificate in its entirety. E. FCI and BNPLC are executing this Amended and Restated Purchase Agreement dated the date hereof (as from time to time supplemented, amended or restated the "PURCHASE AGREEMENT") pursuant to which FCI has agreed to purchase or arrange for the purchase of the Property as more particularly provided herein. The Amended and Restated Purchase Agreement incorporates changes to a prior Purchase Agreement dated as of July 16, 1998, and supersedes and replaces the prior Purchase Agreement in its entirety. AGREEMENTS 1. FCI'S OPTIONS AND OBLIGATIONS ON THE DESIGNATED SALE DATE. 5 (A) Right to Purchase; Right and Obligation to Remarket. Whether or not an Event of Default shall have occurred and be continuing or the Lease shall have been terminated, but subject to Paragraph 4 below: (1) FCI shall have the right (the "PURCHASE OPTION") to purchase or cause an Affiliate of FCI to purchase BNPLC's interest in the Property and in Escrowed Proceeds, if any, on the Designated Sale Date for a cash price equal to the Break Even Price. As used herein, "BREAK EVEN PRICE" means an amount equal, on the Designated Sale Date, to Stipulated Loss Value, plus all costs and expenses (including appraisal costs, withholding taxes (if any) other than Excluded Taxes, and Attorneys' Fees) incurred in connection with any sale of BNPLC's interests in the Property under this Agreement or in connection with collecting payments due hereunder, and plus an amount equal to the Balance of Unpaid Construction-Period Indemnity Payments, but less the amount of any Deductible Judgment that FCI may elect to pay on or before the Designated Sale Date in order to remove the Deductible Judgment as a Lien against the Property. As used herein, the "BALANCE OF UNPAID CONSTRUCTION-PERIOD INDEMNITY PAYMENTS" means an amount equal to the sum of Construction-Period Indemnity Payments, if any, that FCI elected not to pay pursuant to subparagraph 5(e)(ii) of the Lease, plus interest accruing at the Default Rate, compounded annually, on each such payment from the date such payment would have become but for FCI's election not to pay it as permitted by subparagraph 5(e)(ii) of the Lease. (2) If for any reason whatsoever (including any termination of FCI's Purchase Option as described in subparagraph 4(D) below), neither FCI nor an Affiliate of FCI purchases BNPLC's interest in the Property and in any Escrowed Proceeds on the Designated Sale Date as provided in the preceding subparagraph 1(A)(1), then FCI shall have the following rights and obligations (collectively, "FCI'S INITIAL REMARKETING RIGHTS AND OBLIGATIONS"): (a) First, FCI shall have the right (but not the obligation) to cause an Applicable Purchaser who is not an Affiliate of FCI to purchase BNPLC's interest in the Property and any Escrowed Proceeds on the Designated Sale Date for a net cash purchase price not below the lesser of (I) Fair Market Value, or (II) the Break Even Price. If, however, a net cash price actually tendered or to be tendered to BNPLC by an Applicable Purchaser identified by FCI in accordance with the preceding sentence is below the amount equal to the Break Even Price less any Supplemental Payment tendered by FCI as described below, then BNPLC may affirmatively elect to decline such tender and to keep the Property and any Escrowed Proceeds rather than sell to the Applicable Purchaser (a "VOLUNTARY RETENTION OF THE PROPERTY"). (b) Second, if the cash price actually paid by an Applicable Purchaser to BNPLC on the Designated Sale Date exceeds the Break Even Price, FCI shall be entitled to such excess, subject, however, to BNPLC's right to offset against such excess any and all sums that are then due from FCI to BNPLC under the other Operative Documents. (c) Third, if for any reason whatsoever (including any failure of FCI to cause an Applicable Purchaser to tender a purchase price to BNPLC or any Voluntary Retention of the Property) the amount of the Break Even Price exceeds any cash sales proceeds actually received by BNPLC on the Designated Sale Date in connection with a sale of BNPLC's interest in the Property and any Escrowed Proceeds pursuant to this Agreement (such excess being hereinafter called a "DEFICIENCY"), then FCI shall have the obligation to pay to BNPLC on the Designated Sale Date a supplemental payment (the "SUPPLEMENTAL PAYMENT") equal to the 2 6 lesser of the (1) the Deficiency or (2) Maximum Remarketing Obligation. As used herein, "MAXIMUM REMARKETING OBLIGATION" means a dollar amount determined in accordance with the following provisions: (1) "MAXIMUM REMARKETING OBLIGATION" will equal the product of (i) Stipulated Loss Value on the Designated Sale Date, times (ii) 100% minus the Residual Risk Percentage, provided that both of the following conditions are satisfied: (x) The Designated Sale Date shall occur on the first Business Day of August, 2003, as provided in clause (1) of the definition of Designated Sale Date in the List of Defined Terms attached to the Lease; and (y) No Event of Default, other than an Issue 97-1 Non-performance-related Subjective Event of Default, shall occur on or be continuing on the Designated Sale Date. (2) If either of the conditions listed in subparagraph 1) preceding are not satisfied, "MAXIMUM REMARKETING OBLIGATION" will equal the Break Even Price. Notwithstanding the foregoing, in the event of any Voluntary Retention of the Property, the amount of the Supplemental Payment calculated as provided in this subparagraph (c) will be reduced (but not below zero) by the amount of any Escrowed Proceeds held by and that will be retained by BNPLC after the Designated Sale Date. If any Supplemental Payment or other amount payable to BNPLC pursuant to this subparagraph 1(A) is not actually paid to BNPLC on the Designated Sale Date, FCI shall pay interest on the past due amount computed at the Default Rate from the Designated Sale Date. However, FCI shall be entitled to a credit against the interest required by the preceding sentence equal to the Base Rent, if any, actually paid by FCI pursuant to the Lease for any period after the Designated Sale Date. (B) Determination of Fair Market Value. To give BNPLC the opportunity before the Designated Sale Date to have Fair Market Value determined by an appraiser (as provided in the definition of Fair Market Value), FCI must, unless FCI concedes that Fair Market Value will be no less than the Break Even Price on the Designated Sale Date, provide BNPLC with a Remarketing Notice. As used in this Agreement, "REMARKETING NOTICE" means a notice given by FCI to BNPLC (and to each of the Participants) no earlier than two hundred seventy days before the Designated Sale Date and no later than one hundred and eighty days before the Designated Sale Date, specifying that FCI does not concede that Fair Market Value will be greater than the Break Even Price. No Remarketing Notice will be required if FCI does concede that Fair Market Value will equal or exceed the Break Even Price on the Designated Sale Date. But if for any reason (including any acceleration of the Designated Sale Date as provided in the definition thereof in the List of Defined Terms attached to the Lease) FCI 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 determining any Supplemental Payment required by this Agreement, be deemed to be no less than the Residual Risk Percentage of Stipulated Loss Value on the Designated Sale Date. (C) Designation of the Purchaser. To give BNPLC the opportunity before the Designated Sale Date to prepare the deed and other documents that BNPLC must tender pursuant to Paragraph 3 3 7 (collectively, the "SALE CLOSING DOCUMENTS"), FCI must, by a notice to BNPLC given at least twenty days prior to the Designated Sale Date, specify irrevocably, unequivocally and with particularity any party who will purchase BNPLC's interest in the Property as provided in subparagraph 1(A). If for any reason FCI fails to so specify a party who will in accordance with the terms and conditions set forth herein purchase BNPLC's interest in the Property (be it FCI itself, an Affiliate of FCI or another Applicable Purchaser), BNPLC shall be entitled to postpone the tender of the Sale Closing Documents until a date after the Designated Sale Date and not more than twenty days after FCI finally does so specify a party, but such postponement will not relieve or postpone the obligation of FCI to make a Supplemental Payment on the Designated Sale Date as provided in Paragraph 1(A)(2)(c). 2. FCI'S RIGHTS AND OPTIONS AFTER THE DESIGNATED SALE DATE. (A) FCI's Extended Right to Remarket. During the period commencing on the Designated Sale Date and ending on the second anniversary of the Designated Sale Date ("FCI'S EXTENDED REMARKETING PERIOD"), FCI shall have the right ("FCI'S EXTENDED REMARKETING RIGHT") to cause an Applicable Purchaser who is not an Affiliate of FCI to purchase BNPLC's interest in the Property for a cash purchase price not below the lesser of (I) the Minimum Extended Remarketing Price (as defined below), or (II) the Third Party Target Price (as defined below) specified in any Third Party Sale Notice (as defined below) given by BNPLC pursuant to subparagraph 2(C)(2) within the ninety days prior to the date (the "FINAL SALE DATE") upon which BNPLC receives such purchase price from the Applicable Purchaser. FCI's Extended Remarketing Right shall, however, be subject to all of the following conditions: (1) No Event of Default shall occur on or be continuing on the Designated Sale Date. (2) BNPLC's interest in the Property and in Escrowed Proceeds, if any, shall not have been sold on the Designated Sale Date as provided in Paragraph 1, and on the Designated Sale Date FCI shall have paid the full amount of any Supplemental Payment to BNPLC required by subparagraph 1(A)(2)(c). (If, however, as provided in subparagraph 4(B) FCI shall have properly exercised its right to terminate FCI's Initial Remarketing Rights and Obligations and paid an Issue 97-10 Prepayment to BNPLC, then payment of the Supplemental Payment shall not be a condition to FCI's Extended Remarketing Right.) (3) No Voluntary Retention of the Property shall have occurred as described in subparagraph 1(A)(2)(a). (4) FCI's Extended Remarketing Right shall not have been terminated by BNPLC pursuant to subparagraph 4(E) below. (5) At least thirty days prior to the Final Sale Date, FCI shall have notified BNPLC of (x) the date proposed by FCI as the Final Sale Date (which must be a Business Day), (y) the full legal name of the Applicable Purchaser and such other information as will be required to prepare the Sale Closing Documents, and (z) the amount of the purchase price that the Applicable Purchaser will pay (consistent with the minimum required pursuant to this subparagraph 2(A)) for BNPLC's interest in the Property. (B) Definition of Minimum Extended Remarketing Price. As used herein, "MINIMUM EXTENDED REMARKETING PRICE" means an amount equal to the sum of the following: 4 8 (1) the amount by which the Stipulated Loss Value computed on the Designated Sale Date exceeds any Supplemental Payment actually paid to BNPLC on the Designated Sale Date, together with interest on such excess computed at the Default Rate from the period commencing on the Designated Sale Date and ending on the Final Sale Date, plus (2) all costs and expenses (including withholding taxes [if any] other than Excluded Taxes and Attorneys' Fees) incurred in connection with the sale of BNPLC's interest in the Property to the Applicable Purchaser, and plus (3) the sum of all Impositions, insurance premiums and other Losses of every kind suffered or incurred by BNPLC or any other Interest Party with respect to the ownership, operation or maintenance of the Property on or after the Designated Sale Date, together with interest on such Impositions, insurance premiums and other Losses computed at the Default Rate from the date the paid or incurred to the Final Sale Date. Notwithstanding the foregoing, in no event will the Minimum Extended Remarketing Price be less than the fair market value of the Property if any Balance of Unpaid Construction-Period Indemnity Payments remains after FCI shall have properly exercised its right to terminate FCI's Initial Remarketing Rights and Obligations and paid an Issue 97-10 Prepayment to BNPLC as provided in subparagraph 4(B). (C) BNPLC's Right to Sell. After the Designated Sale Date, if the interest of BNPLC in the Property has not already been sold pursuant to Paragraph 1 of this Agreement, BNPLC shall have the right to sell the Property or offer the Property for sale on any terms believed to be appropriate by BNPLC in its sole good faith business judgment; provided, however, that so long as the conditions to FCI's Extended Remarketing Rights specified in subparagraph 2(A) continue to be satisfied: (1) BNPLC shall not sell the Property to an Affiliate of BNPLC on terms less favorable than those which BNPLC would require from a prospective purchaser not an Affiliate of BNPLC; (2) If BNPLC receives a written proposal (including any "letter of intent" or other nonbinding expression of interest) outlining the purchase price and general business terms upon which a prospective purchaser is interested in a possible purchase of the Property, and if on the basis of such proposal (the "THIRD PARTY SALE PROPOSAL") BNPLC intends and desires to enter into further negotiations for a more definitive purchase and sale agreement with the prospective purchaser, then BNPLC shall, prior to entering into negotiations for a more definitive purchase and sale agreement, submit the Third Party Sale Proposal to FCI with a notice (the "THIRD PARTY SALE NOTICE") explaining that (A) BNPLC is then prepared to accept a price not below an amount specified in such Third Party Sale Notice (the "THIRD PARTY TARGET PRICE") from the prospective purchaser if BNPLC and the prospective purchaser reach agreement on other terms and conditions to be incorporated into the more definitive purchase and sale agreement, and (B) FCI's Extended Remarketing Right may be terminated pursuant to subparagraph 4(E) of this Agreement unless FCI causes an Applicable Purchaser to consummate a purchase of BNPLC's interest in the Property pursuant to this Paragraph 2 within ninety days after the date of such Third Party Sale Notice. (D) FCI's Right to Excess Sales Proceeds. If the cash price actually paid by any third party purchasing the Property from BNPLC prior to the second anniversary of the Designated Sale Date, including any Applicable Purchaser purchasing from BNPLC pursuant to this Paragraph 2, exceeds the Minimum 5 9 Remarketing Price, FCI shall be entitled to such excess: provided, however, BNPLC shall be entitled to offset against such excess any and all sums that are then due from FCI to BNPLC under the other Operative Documents; and, provided further, that BNPLC may deduct and retain any Balance of Unpaid Construction-Period Indemnity Payments from the excess unless FCI shall have properly exercised its right to terminate FCI's Initial Remarketing Rights and Obligations and paid an Issue 97-10 Prepayment to BNPLC as provided in subparagraph 4(B). 3. TERMS OF CONVEYANCE UPON PURCHASE. Subject to any postponement permitted by subparagraph 1(C), and provided BNPLC has not affirmatively elected a Voluntary Retention of the Property as permitted by subparagraph 1(A)(2)(a), promptly after the tender of the purchase price and any other payments to BNPLC required by and pursuant to the Paragraph 1 or Paragraph 2, as applicable, BNPLC must convey all of BNPLC's right, title and interest in the Land, Improvements and other Property by BNPLC's execution, acknowledgment (where appropriate) and delivery of the Sale Closing Documents to FCI or the Applicable Purchaser, as the case may be, subject only to the Permitted Encumbrances and any other encumbrances that do not constitute Liens Removable by BNPLC. However, such conveyance shall not include the right to receive any payment under the indemnities under the Operative Documents 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 or alleged to have occurred 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. The Sale Closing Documents used to accomplish such conveyance shall consist of the following: (1) a Deed in the form attached as Exhibit B, (2) a State of California Tax Certificate in the form attached as Exhibit C, (3) a Bill of Sale and Assignment of Lease and Intangible Assets in the form attached as Exhibit D, (4) an Acknowledgment of Disclaimer of Representations and Warranties in the form attached as Exhibit E, which FCI or the Applicable Purchaser must execute and return to BNPLC, (5) a Secretary's Certificate in the form attached as Exhibit G, (6) a letter to the title insurance company insuring title to the Property in the form attached as Exhibit H, (7) a certificate concerning tax withholding in the form attached as Exhibit I, and (8) if applicable, an Indemnity for Liens Removable by BNPLC in the form attached hereto as Exhibit J. The Indemnity for Liens Removable by BNPLC described in the preceding sentence shall be required if, but only if, before the other Sale Closing Documents are tendered by BNPLC in accordance with this Agreement, FCI shall have identified, provided a written list to BNPLC of, and been unable to obtain a commitment for title insurance against, any title encumbrances that FCI believes in good faith may constitute Liens Removable by BNPLC and that, if valid, would constitute Liens Removable by BNPLC. Any such Indemnity will be completed by attaching a list of such identified encumbrances as Annex B thereto. If for any reason BNPLC fails to tender the Sale Closing Documents as required by this Paragraph 3, BNPLC may cure such refusal at any time before thirty days after receipt of a demand for such cure from FCI. 4. SURVIVAL AND TERMINATION OF THE RIGHTS AND OBLIGATIONS OF FCI AND BNPLC. (A) Status of this Agreement Generally. Except as expressly provided herein, this Agreement shall not terminate, nor shall FCI have any right to terminate this Agreement, nor shall FCI be entitled to any reduction of the Break Even Price, Deficiency, Maximum Remarketing Obligation or Supplemental Payment hereunder, nor shall the obligations of FCI to BNPLC under Paragraph 1 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 by eminent domain or otherwise for any reason, (iii) the prohibition, limitation or restriction of FCI'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 FCI or any party claiming under FCI by paramount title or otherwise, (v) FCI'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 6 10 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 FCI to make payment to and, if applicable, to cause the Applicable Purchaser to make payment to BNPLC under Paragraph 1 shall be separate and independent covenants and agreements from BNPLC's obligations under this Agreement or any other agreement between BNPLC and FCI. (B) Election by FCI to Terminate the Purchase Option and FCI's Initial Remarketing Rights and Obligations Prior to the Base Rent Commencement Date. At any time prior to the Base Rent Commencement Date, FCI may elect to terminate both the Purchase Option and FCI's Initial Remarketing Rights and Obligations, subject to the following conditions: (1) To be effective, any such election to terminate must be made after FCI shall have given Notice of FCI's Election to Terminate pursuant to Paragraph 5(D) of the Construction Management Agreement, but prior to the Base Rent Commencement Date. (2) To be effective, any such election to terminate must be made by giving BNPLC and the Participants a notice thereof in the form attached as Exhibit K prior to the Base Rent Commencement Date. (3) No termination pursuant to this subparagraph 4(B) shall be effective, notwithstanding any notice FCI may have given as described in the preceding clause (2), unless contemporaneously with the giving of the notice (and in any event prior to the Base Rent Commencement Date) FCI shall deliver to BNPLC an Issue 97-10 Prepayment. (4) If for any reason whatsoever, including any bona fide dispute over the amount of any required Issue 97-10 Prepayment, BNPLC does not receive both the notice described in the preceding clause (2) and a full Issue 97-10 Prepayment as described in the preceding clause (3) prior to the Base Rent Commencement Date, then without any notice or other action by the parties to this Agreement FCI shall cease to have any option to terminate pursuant to this subparagraph 4(B). (C) Election by BNPLC to Terminate the Purchase Option and FCI's Initial Remarketing Rights and Obligations. BNPLC shall be entitled to terminate both the Purchase Option and FCI's Initial Remarketing Rights and Obligations, as BNPLC deems appropriate in its sole and absolute discretion, at any time after receiving a notice given by FCI to make or attempt to make any Issue 97-10 Election. Upon any such termination by BNPLC, FCI shall be required to pay BNPLC an Issue 97-10 Prepayment. (D) Automatic Termination of Certain Rights of FCI. Without limiting BNPLC's right to enforce FCI's obligation to make a Supplemental Payment and other amounts required by this Purchase Agreement, FCI's Purchase Option and all rights included in FCI's Initial Remarketing Rights and Obligations hereunder (to be distinguished from FCI's Extended Remarketing Right) shall terminate automatically if: (1) BNPLC shall have elected to keep the Property in accordance with subparagraph 1(A)(2)(a); or (2) FCI shall have failed on the Designated Sale Date to make or cause to be made all payments to BNPLC required by this Agreement or by the other Operative Documents (including the payment on the Designated Sale Date of the purchase price required from an Applicable Purchaser if an Applicable Purchaser is to purchase from BNPLC as provided in subparagraph 1(A)(2)(a)). 7 11 Notwithstanding the foregoing, if BNPLC does not receive all payments due under this Agreement or other Operative Documents on the Designated Sale Date, FCI may nonetheless tender to BNPLC the full Break Even Price and all amounts then due under the Operative Documents, together with interest on the total Break Even 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 days after the Designated Sale Date, BNPLC must accept it and promptly thereafter deliver any Escrowed Proceeds and the Sale Closing Documents listed in Paragraph 3 to FCI. (E) Termination of FCI's Extended Remarketing Rights to Permit a Sale by BNPLC. At any time more than ninety days after BNPLC has delivered a Third Party Sale Notice to FCI as described in subparagraph 2(C)(2), BNPLC may terminate FCI's Extended Remarketing Rights contemporaneously with the consummation of a sale of the Property by BNPLC to any third party (be it the prospective purchaser named in the Third Party Sale Notice or another third party) at a price equal to or in excess of the Third Party Target Price specified in the Third Party Sale Notice, so as to permit the sale of the Property unencumbered by FCI's Extended Remarketing Rights. (F) Payment Only to BNPLC. All amounts payable under this Agreement by FCI and, if applicable, by an 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 subparagraph 1(A), on the Designated Sale Date FCI must pay all amounts then due to BNPLC under the Lease. BNPLC will remit any excess amounts due FCI pursuant to the last sentence of subparagraph 1(A)(2) or pursuant to subparagraph 2(D) promptly after BNPLC's receipt of the same. To the extent, if any, that FCI claims and is entitled to claim a reduction in the Break Even Price because of any Deductible Judgment, as provided in the definition of Break Even Price above, FCI must pay such Deductible Judgment for the account of BNPLC contemporaneously with the payment of the other amounts required by subparagraph 1(A). (G) Remedies Under the Other Operative Documents. No repossession of or re-entering upon the Property or exercise of any other remedies available to BNPLC under the Lease or other Operative Documents shall terminate FCI's rights or obligations hereunder, all of which shall survive BNPLC's exercise of remedies under the other Operative Documents. FCI acknowledges that the consideration for this Agreement is separate and independent of the consideration for the Lease, the Construction Management Agreement and the Closing Certificate, and FCI's obligations hereunder shall not be affected or impaired by any event or circumstance that would excuse FCI from performance of its obligations under such other Operative Documents. 5. EFFECT OF SALE UPON INTERVENING ENCUMBRANCES. Any conveyance of the Property to FCI or any Applicable Purchaser pursuant to this Agreement shall cut off and terminate any interest in the Land, Improvements or other Property claimed by, through or under BNPLC, including any interest claimed by the Participants and including any Liens Removable by BNPLC (such as, but not limited to, any judgment liens established against the Property because of a judgment rendered against BNPLC and any leasehold or other interests conveyed by BNPLC in the ordinary course of BNPLC's business), but not obligations of FCI to BNPLC under the indemnities in the Lease or other Operative Documents then due 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. 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 FCI hereby. Further, FCI 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 FCI nor any Applicable Purchaser shall be responsible for the proper distribution or application of 8 12 any such payments by BNPLC; and any such payment to BNPLC shall discharge the obligation of FCI to cause such payment to all Persons claiming an interest in such payment. The parties shall record a memorandum of this Agreement for purposes of effecting constructive notice to all Persons of FCI's rights under this Agreement, including its rights under this subparagraph. 6. OTHER REPRESENTATIONS, WARRANTIES AND COVENANTS OF FCI. FCI represents, warrants and covenants as follows: (A) No Default or Violation. The execution, delivery and performance by FCI of this Agreement does not and will not constitute a breach or default under any other material agreement or contract to which FCI is a party or by which FCI is bound or which affects the Property, and does not violate or contravene any law, order, decree, rule or regulation to which FCI is subject, and such execution, delivery and performance by FCI 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, FCI's property pursuant to the provisions of any of the foregoing. (B) No Suits. Other than matters, if any, disclosed in Schedule 2 attached to the Lease, there are no judicial or administrative actions, suits, proceedings or investigations pending or, to FCI's knowledge, threatened that will adversely affect the Property or the validity, enforceability or priority of this Agreement, and FCI 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 use, occupancy or operation of the Property. (C) Enforceability. The execution, delivery and performance by FCI of this Agreement is duly authorized and does not require the consent or approval of any governmental body or other regulatory authority that has not heretofore been obtained and is not in contravention of or conflict with any applicable laws or any term or provision of FCI's articles of incorporation or bylaws. This Agreement is a valid, binding and legally enforceable obligation of FCI, in accordance with its 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. (D) Organization. FCI is duly incorporated and legally existing under the laws of the State of Delaware and is duly qualified to do business in the State of California. FCI 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 fulfill its obligations under this Agreement. (E) Omissions. None of FCI's representations or warranties contained in this Agreement or in any other document, certificate or written statement furnished to BNPLC by or on behalf of FCI in connection with this Agreement 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. 7. CERTAIN 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. 9 13 8. 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. 9. ESTOPPEL CERTIFICATE. Either party to this Agreement will, upon not less than twenty days' prior request by the other party hereto, 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 responding party has knowledge. Any such statement may be relied upon by any Participant or prospective purchaser or permitted assignee of BNPLC or FCI with respect to the Property. 10. SUCCESSORS AND ASSIGNS. The terms, provisions, covenants and conditions hereof shall be binding upon FCI and BNPLC and their respective permitted successors and assigns and shall inure to the benefit of FCI and BNPLC and all permitted transferees, mortgagees, successors and assignees of FCI and BNPLC with respect to the Property; provided, that the rights of BNPLC hereunder shall not pass to FCI or any Applicable Purchaser or any subsequent owner claiming through FCI or an Applicable Purchaser. 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 other Operative Documents pursuant to a Permitted Transfer, and if BNPLC's successor in interest assumes in writing for the benefit of FCI liability for the obligations imposed upon BNPLC by this Agreement and the other Operative Documents on and subject to the express terms set out herein and therein, then BNPLC shall thereby be released from any further obligations arising under this Agreement or other Operative Documents after the date of such assumption, and FCI agrees to look solely to each successor in interest of BNPLC for performance of such obligations. 11. MISCELLANEOUS. (A) Notices. Each provision of this Agreement, or of any Applicable Laws with reference to the sending, mailing or delivery of any notice or demand hereunder, or with reference to the making of any payment required hereunder, shall be deemed to be complied with when and if the following steps are taken: (1) All payments required to be paid by FCI or any Applicable Purchaser to BNPLC hereunder shall be paid to BNPLC in immediately available funds by wire transfer to: Federal Reserve Bank of New York ABA 026007689 Banque Nationale de Paris /BNP/ BNP San Francisco /AC/ 14334000176 /Ref/ Solectron (Force Computers Synthetic Lease) 10 14 or at such other place and in such other manner as BNPLC may designate in a notice to FCI. Time is of the essence as to all payments of FCI under this Agreement. (2) All payments required to be made by BNPLC to FCI pursuant to the last sentence of subparagraph 1(A)(2) or pursuant to subparagraph 2(D) shall be paid to FCI in immediately available funds at the address of FCI set forth below or as FCI may otherwise direct by notice sent in accordance herewith. (3) All notices, demands, approvals, consents and other communications to be made hereunder to or by the parties hereto must, to be effective for purpose of this Agreement, be in writing. Notices, demands and other communications required or permitted hereunder are to be sent to the addresses set forth below (or in the case of communications to Participants, at the addresses set forth in Schedule 1 attached to 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 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 12201 Merit Drive Suite 860 Dallas, Texas 75251 Attention: Lloyd G. Cox Telecopy: (214) 788-9140 With a copy to: Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Rafael Lumanlan or Gavin Holles 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 FCI: 11 15 Force Computers, Inc. 777 Gibraltar Drive, Building #5 Milpitas, CA 95035 Attn: Chief Financial Officer Telecopy: (408) 956-6059 With a copy to: Wilson, Sonsini, Goodrich & Rosati 650 Page Mill Palo Alto, California 94304-1050 Attention: Real Estate Department/DSS Telecopy: (415) 493-6811 (B) Severability. If any term or provision of this Agreement 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 Agreement, 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. Further, the obligations of FCI hereunder, to the maximum extent possible, shall be deemed to be separate, independent and in addition to, not in lieu of, the obligations of FCI under the other Operative Documents. In the event of any inconsistency between the terms of this Agreement and the terms and provisions of the other Operative Documents, the terms and provisions of this Agreement shall control. (C) No Implied Waiver. The failure of BNPLC or FCI 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 Agreement shall not be construed as a waiver or a relinquishment thereof for the future. The waiver of or redress for any breach of this Agreement 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 BNPLC of any payment hereunder with knowledge of the breach of any covenant or agreement contained in this Agreement shall not be deemed a waiver of such breach, and no waiver of any provision of this Agreement shall be deemed to have been made unless expressed in writing and signed by the waiving party. (D) NO IMPLIED REPRESENTATIONS BY BNPLC. BNPLC AND BNPLC'S AGENTS HAVE MADE NO REPRESENTATIONS OR PROMISES WITH RESPECT TO THE PROPERTY EXCEPT AS EXPRESSLY SET FORTH HEREIN AND IN THE OTHER OPERATIVE DOCUMENTS SIGNED BY BNPLC, AND NO RIGHTS, EASEMENTS OR LICENSES ARE ACQUIRED BY FCI BY IMPLICATION OR OTHERWISE EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE OTHER OPERATIVE DOCUMENTS. (E) Entire Agreement. This Agreement, the other Operative Documents and the other documents dated as of July 16, 1998, which are being executed by FCI and executed or accepted by BNPLC contemporaneously with the execution of this Agreement supersede any prior negotiations and agreements between BNPLC and FCI concerning the Property, and no amendment or modification of this Agreement shall be binding or valid unless expressed in a writing executed by both parties hereto. (F) Time is of the Essence. Time is of the essence as to all obligations of FCI and BNPLC and all notices required of FCI and BNPLC under this Agreement. 12 16 (G) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to conflict or choice of laws. (H) 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. (I) Other Terms and References. Words of any gender used in this Agreement 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 Agreement, 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 Agreement 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 BNPLC is a party or of which BNPLC is an intended beneficiary, without the consent of BNPLC. All accounting terms used but not specifically defined herein shall be construed in accordance with GAAP. The words "this Agreement", "herein", "hereof", "hereby", "hereunder" and words of similar import when used in this Agreement refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The phrases "this Paragraph" and "this subparagraph" and similar phrases used herein refer only to the Paragraphs or subparagraphs in which the phrase occurs. As used herein the word "or" is not exclusive. As used herein the words "include", "including" and similar terms shall be construed as if followed by "without limitation to". (1) Not a Partnership, Etc. NOTHING IN THIS AGREEMENT IS INTENDED TO BE OR TO CREATE ANY PARTNERSHIP, JOINT VENTURE, OR OTHER JOINT ENTERPRISE BETWEEN BNPLC AND FCI. NEITHER THE EXECUTION OF THIS AGREEMENT NOR THE ADMINISTRATION OF THIS AGREEMENT OR OTHER DOCUMENTS REFERENCED HEREIN BY BNPLC, NOR ANY OTHER RIGHT, DUTY OR OBLIGATION OF BNPLC UNDER OR PURSUANT TO THIS AGREEMENT OR SUCH DOCUMENTS IS INTENDED TO BE OR TO CREATE ANY FIDUCIARY OBLIGATIONS OF BNPLC TO FCI. 12. WAIVER OF JURY TRIAL. BNPLC AND FCI EACH HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER DOCUMENT OR DEALINGS BETWEEN THEM RELATING TO THIS AGREEMENT OR THE 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 contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. FCI 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. FCI and BNPLC 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 AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS 13 17 AGREEMENT OR THE PROPERTY. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. 13. ADDITIONAL RIGHTS OF BNPLC RELATING TO ESCROWED PROCEEDS. BNPLC shall be entitled to deliver any Escrowed Proceeds it holds on the Designated Sale Date directly to FCI or to any Applicable Purchaser purchasing BNPLC's interest in the Property and the Escrowed Proceeds pursuant to this Agreement notwithstanding any prior actual or attempted conveyance or assignment by FCI, voluntary or otherwise, of any right to receive the same; BNPLC shall not be responsible for the proper distribution or application by FCI or any Applicable Purchaser of any such Escrowed Proceeds paid over to FCI or the Applicable Purchaser; and any such payment of Escrowed Proceeds to FCI or an Applicable Purchaser shall discharge any obligation of BNPLC to deliver the same to all Persons claiming an interest therein. 14. SECURITY FOR BNPLC'S OBLIGATIONS. To secure FCI's right to purchase the Property pursuant to this Agreement and 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 FCI a lien and security interest against all rights, title and interests of BNPLC from time to time in and to the Land, Improvements and other Property. FCI may enforce such lien and security interest judicially after any such breach by BNPLC, but not otherwise. FCI 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, subject to the condition that BNPLC unequivocally and effectively waive, following any such judicial foreclosure of the lien and security interest granted in this Paragraph, BNPLC's right of redemption. Contemporaneously with the execution of this Agreement, FCI 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 FCI shall be entitled to record such memorandum at any time prior to the Designated Sale Date. 15. INCOME TAX REPORTING. BNPLC and FCI intend this Agreement and the Lease to have a form for income taxes which is different than the form of this Agreement and the Lease for other purposes, and thus the parties acknowledge and agree as follows: (1) FOR PURPOSES OF DETERMINING THEIR RESPECTIVE FEDERAL, STATE AND LOCAL INCOME TAX OBLIGATIONS, BNPLC and FCI believe and intend that this Agreement and the Lease constitute a financing arrangement or conditional sale. Both BNPLC and FCI agree to report this Agreement and the Lease as a financing arrangement or conditional sale on their respective income tax returns (the "REQUIRED REPORTING"), unless such Required Reporting is challenged in writing by the Internal Revenue Service or another governmental authority with jurisdiction (a "TAX CHALLENGE"). Consistent with the foregoing, BNPLC and FCI expect that FCI (and not BNPLC) shall be treated as the true owner of the Property for income tax purposes, thereby entitling FCI (and not BNPLC) to take depreciation deductions and other tax benefits available to the owner. FCI shall also report all interest earned on Escrowed Proceeds as FCI's income for federal, state and local income tax purposes. REFERENCES IN THIS AGREEMENT OR IN THE LEASE TO A "LEASE" OR THE "LEASED PROPERTY" ARE NOT INTENDED FOR INCOME TAX PURPOSES TO REFLECT THE INTENT OF BNPLC OR FCI AS TO THE FORM OF THE TRANSACTIONS COVERED BY, OR THE PROPER CHARACTERIZATION OF, THIS AGREEMENT AND THE LEASE. (2) FOR ALL OTHER PURPOSES, INCLUDING THE DETERMINATION OF THE APPROPRIATE FINANCIAL ACCOUNTING FOR THIS AGREEMENT AND THE DETERMINATION OF THEIR RESPECTIVE RIGHTS AND REMEDIES UNDER STATE LAW, BNPLC and FCI believe and intend that (i) the Lease constitutes a true Lease, not a mere financing 14 18 arrangement, enforceable in accordance with its express terms (and neither this Paragraph 15 nor the provisions referencing this Paragraph on the title page of this Agreement nor the corresponding provisions in the Lease are intended to affect the enforcement of any other provisions of this Agreement or the Lease) and (ii) this Agreement shall constitute a separate and independent contract, enforceable in accordance with the express terms and conditions set forth herein. In this regard, FCI acknowledges that FCI asked BNPLC to participate in the transactions evidenced by this Agreement and the Lease as a landlord and owner of the Property, not as a lender. Although other transactions might have been used to accomplish similar results, FCI expects to receive certain material accounting and other advantages through the use of a lease transaction. Accordingly, and notwithstanding the Required Reporting for income tax purposes, FCI cannot equitably deny that this Agreement and the Lease should be construed and enforced in accordance with their respective terms, rather than as a mortgage or other security device, in any action brought by BNPLC to enforce this Agreement or the Lease. In the event of a Tax Challenge, BNPLC and FCI shall each provide to the other copies of all notices from the Internal Revenue Service or any other governmental authority presenting the Tax Challenge. Further, before changing from the Required Reporting because of a Tax Challenge, BNPLC and FCI shall each consider in good faith any reasonable suggestions received from the other party to this Agreement about an appropriate response to the Tax Challenge; provided, however, that the suggestions are set forth in a notice delivered no later than thirty Business Days after the suggesting party is first notified of the Tax Challenge; and, provided further, that when presented with a Tax Challenge, BNPLC shall have the right to change from the Required Reporting rather than participate in any litigation or other legal proceeding against the Internal Revenue Service or another governmental authority. In any event, FCI shall indemnify BNPLC and defend and hold BNPLC harmless from and against all Losses imposed on or asserted against or incurred by BNPLC by reason of, in connection with or arising out of any such challenge or any resulting recharacterization of this Agreement or the Lease required by the Internal Revenue Service or another governmental authority, including any additional taxes that may become due upon any sale under this Agreement, to the extent (if any) that such Losses are not offset by tax savings to BNPLC resulting from additional depreciation deductions or other tax benefits of the recharacterization. [The signature pages follow.] 15 19 IN WITNESS WHEREOF, FCI and BNPLC have caused this Purchase Agreement to be executed as of July 16, 1998. "FCI" FORCE COMPUTERS, INC. By: /s/ Leonard J. Zanoni ------------------------------------- Printed Name: Leonard J. Zanoni Title: Vice President & Chief Financial Officer 20 [Continuation of signature pages to Purchase Agreement dated to be effective July 16, 1998] "BNPLC" BNP LEASING CORPORATION By: /s/ LLOYD G. COX ------------------------------------- Name: Lloyd G. Cox Title: Vice President 21 EXHIBIT A LEGAL DESCRIPTION All of that certain real property situated in the City of San Jose, County of Santa Clara, State of California, described as follows: Parcel 1 as shown on that Parcel Map filed for record in the office of the Recorder of the County of Santa Clara, State of California on July 1, 1998 in Book 704 of Maps at Pages 11-12. 22 EXHIBIT B CORPORATE GRANT DEED RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: NAME: [FCI or the Applicable Purchaser] ADDRESS: _________________________________ ATTN: _________________________________ CITY: _________________________________ STATE: _________________________________ Zip: _________________________________ BNP LEASING CORPORATION, a Delaware corporation (hereinafter called "Grantor"), for and in consideration of the sum of Ten Dollars ($10.00) and other valuable consideration paid to Grantor by [FCI or the Applicable Purchaser] (hereinafter called "Grantee"), the receipt and sufficiency of which are hereby acknowledged, does hereby GRANT to Grantee the real property described in Annex A attached hereto and hereby made a part hereof, 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 (collectively, the "Property"); provided, however, this conveyance is made by Grantor and accepted by Grantee subject to all zoning and other ordinances affecting the Property, all general or special assessments due and payable after the date hereof, all encroachments, variations in area or in measurements, boundary line disputes, roadways and other matters not of record which would be disclosed by a current survey and inspection of the Property, and the encumbrances listed in Annex B attached hereto and made a part hereof (collectively, the "Permitted Encumbrances"). 23 IN WITNESS WHEREOF, this Deed is executed by Grantor on this ____ day of ______________, _______. The address of Grantee is: _______________________________ _______________________________ BNP LEASING CORPORATION Date: As of ___________________ By: _____________________________________ Its: Attest: _________________________________ Its: Exhibit B - Page 2 24 STATE OF ____________ ) ) SS COUNTY OF ___________ ) 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 ___________________________ Exhibit B - Page 3 25 ANNEX A LEGAL DESCRIPTION [DRAFTING NOTE: TO THE EXTENT THAT THE "LAND" COVERED BY THE LEASE CHANGES FROM TIME TO TIME BECAUSE OF ADJUSTMENTS FOR WHICH FCI REQUESTS BNPLC'S CONSENT OR APPROVAL AS PROVIDED IN THE LEASE, SO TOO WILL THE DESCRIPTION OF THE LAND BELOW CHANGE. ANY SUCH CHANGES WILL BE INCORPORATED INTO THE DESCRIPTION BELOW AND THIS "DRAFTING NOTE" WILL BE DELETED BEFORE THE DEED TO WHICH THIS DESCRIPTION IS ATTACHED IS ACTUALLY EXECUTED AND DELIVERED.] All of that certain real property situated in the City of San Jose, County of Santa Clara, State of California, described as follows: Parcel 1 as shown on that Parcel Map filed for record in the office of the Recorder of the County of Santa Clara, State of California on July 1, 1998 in Book 704 of Maps at Pages 11-12. Exhibit B - Page 4 26 ANNEX B PERMITTED ENCUMBRANCES [DRAFTING NOTE: TO THE EXTENT THAT ENCUMBRANCES (OTHER THAN "LIENS REMOVABLE BY BNPLC") ARE IDENTIFIED IN ADDITION TO THOSE DESCRIBED BELOW, SUCH ADDITIONAL ENCUMBRANCES WILL BE ADDED TO THE LIST BELOW AND THIS "DRAFTING 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" UNDER THE LEASE FROM TIME TO TIME OR BECAUSE OF FCI'S REQUEST FOR BNPLC'S CONSENT OR APPROVAL TO AN ADJUSTMENT AS PROVIDED IN THE LEASE.] This conveyance is subject to all encumbrances not constituting a "Lien Removable by BNPLC" (as defined in the List of Defined Terms attached to the Lease Agreement referenced in item #1 of the list below), including the following matters to the extent the same are still valid and in force: 1. Amended and Restated Lease Agreement dated as of July 16, 1998, by and between BNP Leasing Corporation, as lessor, and Force Computers, Inc., as lessee. 2. Liens securing TAXES AND ASSESSMENTS, not yet due and payable. 3. Easement - In Favor Of: County of Santa Clara For: Ingress and egress Recorded: June 28, 1968 in Book 8174, Page 148, Official Records Affects: a portion of the Land as follows: Beginning at the most Northerly corner of that certain 5.545 acre parcel shown upon that certain Record of Survey recorded October 24, 1950 in Book 29 of Maps, at page 6, Santa Clara County Records; thence along the Northeasterly line of said 5.545 acre parcel, said Northeasterly line being also the Southwesterly line of that certain 0.441 acre parcel described as Parcel Two of Exhibit A in the deed recorded in Book 6500, at pages 101, 102, 103, Official Records of Santa Clara County S. 17(Degree) E. 26.44 feet to the true point of beginning and continuing along said Northeasterly and Southwesterly line S. 17(Degree) E. 34.81 feet; thence leaving said Northeasterly and Southwesterly line N. 11(Degree) 31' 33" E. 48.16 feet to a point on the Northeasterly line of said 0.441 acre parcel thence along last mentioned Northeasterly line N. 17(Degree) W. 18.93 feet to the most Northerly corner thereof, said Northerly corner also being the most Northerly corner of that strip of land 23 feet wide, shown parallel and adjacent to the aforementioned 5.545 acre parcel as shown upon said Record of Survey; thence leaving last said Northerly corner N. 73(Degree) 00' E. 10.29 feet; thence N. 11(Degree) 31' 33" E. 117.37 feet; thence along the arc of a curve to the left the tangent of which bears S. 32(Degree) 47' 30" W. having a radius of 300.00 feet through an angel of 30(Degree) 24' 44" for an arc distance of 159.24 feet to the true point of beginning. 4. Easement - In Favor Of: City of San Jose, a municipal corporation For: Public service facilities, slope purposes, sanitary sewer purposes Recorded: May 8, 1985 in Book J340, Page 1040, Official Records Exhibit B - Page 5 27 Affects: Those street areas of Fontanoso Avenue, Fontanoso Way, Hellyer Avenue, Branham Lane and Silver Creek Valley Road. Reference to the records is hereby made for further particulars, as to the description of the exact location. 5. Easement - In Favor Of: Pacific Bell For: Underground communication facilities and necessary fixtures and appurtenances Recorded: December 20, 1985 in Book J555, Page 160, Official Records Affects: those portions shown as 1E on Exhibit "B" to deed from B B & K, a general partnership, to the City of San Jose, recorded May 8, 1985 in Book J340, Pages 1045 through 1062. Exhibit B - Page 6 28 EXHIBIT C See the form of Preliminary Change of Ownership Report attached to and made a part of this Exhibit C. 29 THIS SPACE FOR RECORDER'S USE PRELIMINARY CHANGE OF OWNERSHIP REPORT THIS REPORT IS NOT A PUBLIC DOCUMENT (To be completed by transferee (buyer) prior to transfer of the subject property in accordance with Section 480.3 of the Revenue and Taxation Code.) ____________________________________________________________________________________________________________________________________ SELLER/TRANSFEROR: ____________________________________________________________________ FOR ASSESSOR'S USE ONLY SELLER RECORDING DATE: _________________ DOCUMENT NO. _________________________________ Cluster ____________ OC1 ________________ OC2 ________________ BUYER/TRANSFEREE: DT _________________ INT ________________ RC _________________ SP$ ________________ ASSESSOR'S IDENTIFICATION NUMBER(S) ___________________________________________________ DTT $_______________ # Pcl. _____________ LA ___ Page Parcel PROPERTY ADDRESS OR LOCATION: _________________________________________________________ No Street __________________________________________ _________________________________________________________ City State Zip Code A Preliminary Change in Ownership Report must be filed with each conveyance in the MAIL TAX INFORMATION TO: County Recorder's office for the county where the property is located; this NAME: _________________________________________________________________________________ particular form may be used in all 58 counties of California. ADDRESS: ______________________________________________________________________________ Street No City State Zip Code ___________________________________________________________________________________________________________________________________ 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".
30 - ---------------------------------------------------------------------------------------------------------------------------------- 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 ________/________/, 19________ or intended occupancy ________/________/, 19________ Month Day Month Day 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).
31 EXHIBIT D BILL OF SALE AND ASSIGNMENT OF LEASE AND INTANGIBLE ASSETS Reference is made to: (1) that certain Amended and Restated Purchase Agreement between BNP Leasing Corporation ("ASSIGNOR") and Force Computers, Inc., dated as of July 16, 1998 (the "PURCHASE AGREEMENT"); (2) that certain Amended and Restated Lease Agreement between Assignor, as landlord, and Force Computers, Inc., as tenant, dated as of July 16, 1998 (the "LEASE"); and (3) that certain Amended and Restated Closing Certificate and Agreement by Force Computers, Inc. in favor of Assignor, dated as of July 16, 1998 (the "CLOSING CERTIFICATE"). (Capitalized terms used and not otherwise defined in this document are intended to have the meanings assigned to them in the List of Defined Terms attached to and made a part of the Lease.) As contemplated by the Amended and Restated Purchase Agreement, Assignor hereby sells, transfers and assigns unto [FCI 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) the Lease; (b) 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; and (c) all other property included within the definition of "Property" as set forth in the Purchase Agreement, including but not limited to any of the following transferred to Assignor by the tenant pursuant to Paragraph 8 of the Lease or otherwise acquired by Assignor, at the time of the execution and delivery of the Lease and Purchase Agreement or thereafter, by reason of Assignor's status as the owner of any interest in the Property: (1) any goods, equipment, furnishings, furniture, chattels and tangible personal property of whatever nature that are located on the Property and all renewals or replacements of or substitutions for any of the foregoing; (ii) the rights of Assignor, existing at the time of the execution of the Lease and Purchase Agreement or thereafter arising, under Permitted Encumbrances or Development Documents (both as defined in the Lease); and (iii) any other permits, licenses, franchises, certificates, and other rights and privileges related to the Property that Assignee would have acquired if Assignee had itself purchased the land included in the Property. Provided, however, excluded from this conveyance and reserved to Assignor are any rights or privileges of Assignor under the following ("EXCLUDED RIGHTS"): (1) the indemnities set forth in the Lease and the Closing Certificate, whether such rights are presently known or unknown, including rights of the Assignor to be indemnified against environmental claims of third parties as provided in the Closing Certificate which may not presently be known, (2) provisions in the Lease that establish the right of Assignor to recover any accrued unpaid rent under the Lease which may be outstanding as of the date hereof, (3) agreements between Assignor and "BNPLC's Parent" or any "Participant," both as defined in the Lease, or any modification or extension thereof, or (4) any other instrument being delivered to Assignor contemporaneously herewith pursuant to the Purchase Agreement. To the extent that this conveyance does include any rights to receive future payments under the Lease, such rights ("INCLUDED RIGHTS") shall be subordinate to Assignor's Excluded Rights, and Assignee hereby waives any rights to enforce Included Rights until such time as Assignor has received all payments to which it remains entitled by reason of Excluded Rights. If any amount shall be paid to Assignee on account of any Included Rights at any time before Assignor has received all payments to which it is entitled 32 because of Excluded Rights, such amount shall be held in trust by Assignee for the benefit of Assignor, shall be segregated from the other funds of Assignee and shall forthwith be paid over to Assignor to be held by Assignor as collateral for, or then or at any time thereafter applied in whole or in part by Assignor against, the payments due to Assignor because of Excluded Rights, whether matured or unmatured, in such order as Assignor shall elect. Assignor does for itself and its successors 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 a Lien Removable by BNPLC, but not otherwise. 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. IN WITNESS WHEREOF, the parties have executed this instrument as of _______________, _____. ASSIGNOR: BNP LEASING CORPORATION a Delaware corporation By: _____________________________________________________ Its: ____________________________________________________ ASSIGNEE: [FCI OR THE APPLICABLE PURCHASER], a ________ corporation By: _____________________________________________________ Its: ____________________________________________________ Exhibit D - Page 2 33 STATE OF ____________ ) ) SS COUNTY OF ___________ ) 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 ________________________ STATE OF ____________ ) ) SS COUNTY OF ___________ ) 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 ________________________ Exhibit D - Page 3 34 ANNEX A LEGAL DESCRIPTION [DRAFTING NOTE: TO THE EXTENT THAT THE "LAND" COVERED BY THE LEASE CHANGES FROM TIME TO TIME BECAUSE OF ADJUSTMENTS FOR WHICH FCI REQUESTS BNPLC'S CONSENT OR CHANGE. ANY SUCH CHANGES WILL BE INCORPORATED INTO THE DESCRIPTION BELOW AND THIS "DRAFTING NOTE" WILL BE DELETED BEFORE THE DOCUMENT TO WHICH THIS DESCRIPTION IS ATTACHED IS ACTUALLY EXECUTED AND DELIVERED.] All of that certain real property situated in the City of San Jose, County of Santa Clara, State of California, described as follows: Parcel 1 as shown on that Parcel Map filed for record in the office of the Recorder of the County of Santa Clara, State of California on July 1, 1998 in Book 704 of Maps at Pages 11-12. Exhibit D - Page 4 35 EXHIBIT E ACKNOWLEDGMENT OF DISCLAIMER OF REPRESENTATIONS AND WARRANTIES THIS ACKNOWLEDGMENT OF DISCLAIMER OF REPRESENTATIONS AND WARRANTIES (this "Certificate") is made as of ___________________, ____, by [FCI 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 deed and (2) a Bill of Sale and Assignment of Lease 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 Established Misconduct of BNPLC. As used in the preceding sentence, "ESTABLISHED MISCONDUCT" is intended to have, and be limited to, the meaning given to it in the List of Defined Terms attached to the Amended and Restated Purchase Agreement between BNPLC and Force Computers, Inc. dated as of July 16, 1998, pursuant to which BNPLC is delivering the Conveyancing Documents. 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 ________________, ____. [FCI OR THE APPLICABLE PURCHASER] By: _____________________________________ Name: _______________________________ Title: ______________________________ 36 EXHIBIT F INTENTIONALLY DELETED 37 EXHIBIT G SECRETARY'S CERTIFICATE The undersigned, [Secretary or Assistant 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 SALE CLOSING 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 and title] 38 CORPORATE RESOLUTIONS OF BNP LEASING CORPORATION WHEREAS, pursuant to that certain Amended and Restated Purchase Agreement (herein called the "Purchase Agreement") dated as of July 16, 1998, by and between BNP Leasing Corporation (the "Corporation") and Force Computers, Inc. ("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 __________, 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 G - Page 2 39 EXHIBIT H BNP LEASING CORPORATION 12201 MERIT DRIVE SUITE 860 DALLAS, TEXAS 75251 __________, ______ [Title Insurance Company] _________________________ _________________________ _________________________ Re: Recording of (1) Deed and (2) Bill of Sale and Assignment of Lease and Intangible Assets to [FCI OR THE APPLICABLE PURCHASER] ("Purchaser") Ladies and Gentlemen: BNP Leasing Corporation has executed and delivered to Purchaser (1) a Deed and (2) Bill of Sale and Assignment of Lease and Intangible Assets, each in the form attached to this letter. You are hereby authorized and directed to record such documents at the request of Purchaser. Sincerely, 40 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 [FCI 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 75-2252918; 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: ___________, ____. BNP LEASING CORPORATION, a Delaware corporation By: ___________________________________________ Name: _____________________________________ Title: ____________________________________ 41 EXHIBIT J INDEMNITY FOR LIENS REMOVABLE BY BNPLC THIS INDEMNITY AGREEMENT (this "AGREEMENT") is made as of _________________, _____, by FORCE COMPUTERS, INC., a Delaware corporation ("PURCHASER") [OR THE APPLICABLE PURCHASER] and BNP LEASING CORPORATION, a Delaware corporation ("SELLER") and ___________________________ ("TITLE COMPANY"). R E C I T A L S A. Purchaser is acquiring the land described in Annex A attached hereto and any improvements located thereon (the "PROPERTY") pursuant to the terms and conditions of that certain Amended and Restated Purchase Agreement dated as of July 16, 1998 by between Seller and Purchaser [or FCI] (the "PURCHASE AGREEMENT"). B. In connection with its acquisition of the Property, Seller has been notified as contemplated by the Purchase Agreement that the matters described in Annex B attached hereto (the "RELEVANT ENCUMBRANCES") have been identified as encumbrances upon title to the Property and that such matters, to the extent valid, constitute Liens Removable by BNPLC (as defined below). C. Because of such notice to Seller, Seller is required by the Purchase Agreement to tender this Indemnity Agreement to Purchaser. 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: Seller must promptly remove any of the Relevant Encumbrances that constitute "LIENS REMOVABLE BY BNPLC" (which for purposes of this Indemnity Agreement shall have the meaning assigned to it in the List of Defined Terms attached to the Purchase Agreement). Seller must also pay, indemnify and hold harmless Purchaser, the Title Company, the Purchaser's successors and assigns as to the Property and the Title Company's successors and assigns as to any title insurance policy issued to Purchaser by the Title Company covering the Property from and against any and all liabilities, damages, claims, actions, judgments, costs and expenses (including, without limitation, reasonable attorneys' fees) caused by Seller's failure to promptly remove any of the Relevant Encumbrances that constitute Liens Removable by BNPLC. Nothing herein shall be construed as an admission by Seller that any of the Relevant Encumbrances do constitute Liens Removable by BNPLC or as imposing a duty upon Seller to remove or defend against claims arising out of any Relevant Encumbrances that do not constitute Liens Removable by BNPLC. Nothing herein contained shall limit Purchaser's rights or remedies under the Purchase Agreement because of any failure by BNPLC to remove all Liens Removable by BNPLC before conveying the Property. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. SELLER, PURCHASER AND THE TITLE COMPANY EACH HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER DOCUMENT, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE 42 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. Purchaser, Seller and the Title Company 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. Purchaser, Seller and the Title Company 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 OR THIS AGREEMENT. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] Exhibit J - Page 2 43 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. "Seller" BNP LEASING CORPORATION, a Delaware corporation By: ___________________________________________ Name: _____________________________________ Title: ____________________________________ "Purchaser" FORCE COMPUTERS, INC., a Delaware corporation By: ___________________________________________ Name: _____________________________________ Title: ____________________________________ "Title Company" ____________________________________________, a __________________________ By: ___________________________________________ Name: _____________________________________ Title: ____________________________________ Exhibit J - Page 3 44 ANNEX A LEGAL DESCRIPTION [DRAFTING NOTE: TO THE EXTENT THAT THE "LAND" COVERED BY THE LEASE CHANGES FROM TIME TO TIME BECAUSE OF ADJUSTMENTS FOR WHICH FCI REQUESTS BNPLC'S CONSENT OR APPROVAL AS PROVIDED IN THE LEASE, SO TOO WILL THE DESCRIPTION OF THE LAND BELOW CHANGE. ANY SUCH CHANGES WILL BE INCORPORATED INTO THE DESCRIPTION BELOW AND THIS "DRAFTING NOTE" WILL BE DELETED BEFORE THE DOCUMENT TO WHICH THIS DESCRIPTION IS ATTACHED IS ACTUALLY EXECUTED AND DELIVERED.] All of that certain real property situated in the City of San Jose, County of Santa Clara, State of California, described as follows: Parcel 1 as shown on that Parcel Map filed for record in the office of the Recorder of the County of Santa Clara, State of California on July 1, 1998 in Book 704 of Maps at Pages 11-12. Exhibit J - Page 4 45 ANNEX B Relevant Encumbrances [THIS ANNEX IS TO BE COMPLETED BY A LIST OF POSSIBLE LIENS REMOVABLE BY BNPLC IDENTIFIED BY FCI AND AGAINST WHICH FCI HAS NOT BEEN ABLE TO OBTAIN TITLE INSURANCE.] Exhibit J - Page 5 46 Exhibit K NOTICE OF ELECTION TO TERMINATE THE PURCHASE OPTION AND FCI'S INITIAL REMARKETING RIGHTS AND OBLIGATIONS BNP Leasing Corporation 12201 Merit Drive Suite 860 Dallas, Texas 75251 Attention: Lloyd G. Cox Re: Amended and Restated Purchase Agreement dated as of July 16, 1998 (the "PURCHASE AGREEMENT"), between Force Computers, Inc. ("FCI") and BNP Leasing Corporation ("BNPLC") Gentlemen: Capitalized terms used in this letter are intended to have the meanings assigned to them in the Purchase Agreement referenced above. This letter shall constitute a notice, given before the Base Rent Commencement Date pursuant to subparagraph 4(B) of the Purchase Agreement, of FCI's election to terminate the Purchase Option and FCI's Initial Remarketing Rights and Obligations. FCI irrevocably elects to terminate the Purchase Option and FCI's Initial Remarketing Rights and Obligations effective immediately, subject only to the conditions described below. FCI ACKNOWLEDGES THAT THE ELECTION MADE BY FCI DESCRIBED ABOVE CONSTITUTES AN ISSUE 97-10 ELECTION UNDER AND AS DEFINED IN THE OPERATIVE DOCUMENTS. FCI also acknowledges that its right to terminate the Purchase Option and FCI's Initial Remarketing Rights and Obligations is subject to the condition precedent that FCI shall have delivered a Notice of FCI's Intent to Terminate, as necessary to terminate the Construction Management Agreement pursuant to Paragraph 5(D) thereof. Accordingly, if for any reason FCI has not already sent a Notice of FCI's Intent to Terminate, the Purchase Option and FCI's Initial Remarketing Rights and Obligations shall not terminate by reason of this notice. FCI further acknowledges that no termination of the Purchase Option and FCI's Initial Remarketing Rights and Obligations by FCI pursuant to this notice shall be effective, unless contemporaneously with the giving of this notice FCI shall deliver to BNPLC a full Issue 97-10 Prepayment. FCI hereby covenants to pay, if FCI has not already done so, a full Issue 97-10 Prepayment to BNPLC. Finally, FCI acknowledges that a termination of the Purchase Option and FCI's Initial Remarketing Rights and Obligations pursuant to this notice shall cause the Lease to terminate as of the Base Rent Commencement Date pursuant to subparagraph 1(b) of the Lease. 47 Executed this _____ day of ______________, 19___. FORCE COMPUTERS, INC. Name: ___________________________________ Title: __________________________________ [cc all Participants] Exhibit K - Page 2 EX-10.6 9 AMENDED AND RESTATED GUARANTY 1 EXHIBIT 10.6 ================================================================================ AMENDED AND RESTATED GUARANTY FROM SOLECTRON CORPORATION, ("GUARANTOR") IN FAVOR OF BNP LEASING CORPORATION, ("BNPLC") EFFECTIVE AS OF JULY 16, 1998 ================================================================================ 2 AMENDED AND RESTATED GUARANTY THIS AMENDED AND RESTATED GUARANTY is made as of July 16, 1998, by SOLECTRON CORPORATION, a Delaware corporation ("GUARANTOR"), in favor of BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"). RECITALS 1. Guarantor owns directly one hundred percent (100%) of the outstanding shares of capital stock of Force Computers, Inc., a Delaware corporation ("FCI"). 2. Contemporaneously herewith FCI and BNPLC are executing an Amended and Restated Lease Agreement dated the date hereof (as from time to time supplemented, amended or restated, the "LEASE"), pursuant to which BNPLC has agreed to lease to FCI certain land and improvements thereon which are described in the Lease. The Amended and Restated Lease Agreement incorporates changes to a prior Lease Agreement dated as of July 16, 1998, and supersedes and replaces the prior Lease Agreement in its entirety. 3. Contemporaneously herewith FCI and BNPLC are executing a Construction Management Agreement dated the date hereof (as from time to time supplemented, amended or restated, the "CONSTRUCTION MANAGEMENT AGREEMENT"), pursuant to which BNPLC has authorized FCI to construct certain improvements on the land covered by the Lease and agreed to provide a construction allowance for such construction on and subject to the terms and conditions described therein. 4. Contemporaneously herewith FCI and BNPLC are executing an Amended and Restated Purchase Agreement dated the date hereof (as from time to time supplemented, amended or restated, the "PURCHASE AGREEMENT"), pursuant to which FCI has agreed to purchase or arrange for the purchase of the Property as more particularly provided therein. The Amended and Restated Purchase Agreement incorporates changes to a prior Purchase Agreement dated as of July 16, 1998, and supersedes and replaces the prior Purchase Agreement in its entirety. 5. Contemporaneously herewith FCI is executing an Amended and Restated Closing Certificate and Agreement dated the date hereof (as from time to time supplemented, amended or restated, the "CLOSING CERTIFICATE"), pursuant to which FCI has made certain representations to BNPLC concerning the Property and has agreed to indemnify BNPLC for certain matters relating to the Property. The Amended and Restated Closing Certificate incorporates changes to a prior Closing Certificate dated as of July 16, 1998, and supersedes and replaces the prior Closing Certificate in its entirety. 6. As a condition precedent to BNPLC's execution of the Lease and Purchase Agreement, as amended and restated, and the Construction Management Agreement, BNPLC requires that Guarantor execute and deliver to BNPLC this Amended and Restated Guaranty of FCI's obligations under the Lease, the Construction Management Agreement, the Purchase Agreement and the Closing Certificate. This Amended and Restated Guaranty incorporates changes to a prior Guaranty dated as of July 16, 1998, and hereby supersedes and replaces the prior Guaranty in its entirety. 3 7. The board of directors of Guarantor has determined that Guarantor's execution, delivery and performance of this Amended and Restated Guaranty may reasonably be expected to benefit Guarantor, directly or indirectly, and are in the best interests of Guarantor. NOW, THEREFORE, in consideration of the premises, of the benefits which will inure to Guarantor from the transactions contemplated by the Lease, the Construction Management Agreement, the Purchase Agreement and the Closing Certificate and of Ten Dollars and other good and valuable consideration, the receipt and sufficiency of all of which are hereby acknowledged, and in order to induce BNPLC to enter into the Lease and Purchase Agreement, Guarantor hereby agrees with BNPLC as follows: AGREEMENTS Section 1. Definitions. Reference is hereby made to the Lease, the Construction Management Agreement, Purchase Agreement and the Closing Certificate for all purposes. All capitalized terms used in this Guaranty which are defined in the Lease and the List of Defined Terms attached to the Lease and not otherwise defined herein shall have the same meanings when used herein. All references herein to any Obligation Document or other document or instrument refer to the same as from time to time amended, supplemented or restated. As used herein the following terms shall have the following meanings: "Designated Covenants" means, collectively, all of the covenants and agreements of FCI contained in the Lease, the Construction Management Agreement, the Purchase Agreement and the Closing Certificate. "Designated Representations" means, collectively, all of the representations and warranties of FCI contained in the Lease, the Construction Management Agreement, the Purchase Agreement and the Closing Certificate. "Obligations" means collectively all of the indebtedness, obligations, and undertakings which are guaranteed by Guarantor, as described in subsections (a) and (b) of Section 2. "Obligation Documents" means the Lease, the Management Agreement, the Purchase Agreement, the Closing Certificate and all other documents and instruments (other than this Guaranty) under, by reason of which, or pursuant to which any or all of the Obligations are evidenced, governed, secured, or otherwise dealt with, and all other documents, instruments and agreements hereafter delivered in connection herewith or therewith. "Obligors" means FCI and any other guarantors or obligors, primary or secondary, of any or all of the Obligations, excluding Guarantor. "Security" means any rights, properties, or interests of BNPLC, under the Obligation Documents or otherwise, which provide recourse or other benefits to BNPLC in connection with the Obligations or the non-payment or non-performance thereof. Section 2. Guaranty. Subject only to Section 3 below: 2 4 (a) Guarantor hereby irrevocably, absolutely, and unconditionally guarantees to BNPLC the prompt, complete, and full payment when due, and no matter how the same shall become due, of all sums payable under the Lease, the Construction Management Agreement, the Purchase Agreement and the Closing Certificate. Without limiting the generality of the foregoing, Guarantor's liability hereunder shall extend to and include all post-petition interest, expenses, and other duties and liabilities of FCI described above in this subsection (a), or below in the following subsections (b) and (c), which would be owed by FCI but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization, or similar proceeding involving FCI. (b) The Guarantor hereby irrevocably, absolutely, and unconditionally guarantees to BNPLC (i) that each Designated Representation is true and correct and (ii) that each Designated Covenant will be performed promptly and completely when due, no matter how the same shall become due. (c) Without limiting the foregoing, BNPLC shall be entitled to recover from Guarantor any expenses, losses and damages which BNPLC may incur or suffer (including but not limited to any loss, reduction or delay in amounts paid to BNPLC) as a result of the failure of any Designated Representation to be true and correct or as a result of the failure of Guarantor to cause any Designated Covenant to be performed (without regard to any event or circumstance which may be asserted by Guarantor as having excused, prevented or limited such performance by Guarantor). All rights, powers and remedies of BNPLC for such failure to cause any such covenant or undertaking to be performed are cumulative. (d) If either FCI or the Guarantor fails to pay or perform any Obligation as described in the immediately preceding subsections (a), (b) or (c), the Guarantor will incur the additional obligation to pay to BNPLC, and the Guarantor will forthwith upon demand by BNPLC, the amount of any and all reasonable expenses, including fees and disbursements of BNPLC's counsel, and of any experts or agents retained by BNPLC, which BNPLC may incur as a result of such failure. (e) As between Guarantor and BNPLC, this Guaranty shall be considered a primary liability of Guarantor. Section 3 Express Grace and Cure Periods. This Guaranty is not intended to nullify any grace or cure period expressly provided for the benefit of FCI in the Lease, the Construction Management Agreement, the Purchase Agreement or the Closing Certificate. Accordingly, any payment required of FCI by the Lease, the Construction Management Agreement, the Purchase Agreement or the Closing Certificate, for which a grace or cure period is expressly provided therein, will not be considered due for purposes of this Guaranty until such grace or cure period expires. Similarly, any performance obligation imposed upon FCI by the Lease, the Construction Management Agreement, the Purchase Agreement or the Closing Certificate, for which a grace or cure period is expressly provided therein, will not be considered to have been breached unless FCI's failure to perform such obligation continues upon the expiration of such grace or cure period. Section 4 Unconditional Guaranty. (a) No action which BNPLC may take or omit to take in connection with any of the Obligation Documents, any of the Obligations (or any other indebtedness owing by FCI to BNPLC), or any Security, and no course of dealing of BNPLC with any Obligor or any other Person, shall release or diminish Guarantor's obligations, liabilities, agreements or duties hereunder, affect this Guaranty in 3 5 any way, or afford Guarantor any recourse against BNPLC, regardless of whether any such action or inaction may increase any risks to or liabilities of BNPLC or any Obligor or increase any risk to or diminish any safeguard of any Security. Without limiting the foregoing, Guarantor hereby expressly agrees that BNPLC may, from time to time, without notice to or the consent of Guarantor, do any or all of the following: (i) Amend, change or modify, in whole or in part, any one or more of the Obligation Documents and give or refuse to give any waivers or other indulgences with respect thereto. (ii) Neglect, delay, fail, or refuse to take or prosecute any action for the collection or enforcement of any of the Obligations, to foreclose or take or prosecute any action in connection with any Security or Obligation Document, to bring suit against any Obligor or any other Person, or to take any other action concerning the Obligations or the Obligation Documents. (iii) Change, rearrange, extend, or renew the time, rate, terms, or manner for payment or performance of any one or more of the Obligations (whether for principal, interest, fees, expenses, indemnifications, affirmative or negative covenants, or otherwise). (iv) Compromise or settle any unpaid or unperformed Obligation or any other obligation or amount due or owing, or claimed to be due or owing, under any Obligation Document. (v) Take, exchange, amend, eliminate, surrender, release, or subordinate any or all Security for any or all of the Obligations, accept additional or substituted Security therefor, and perfect or fail to perfect BNPLC's rights in any or all Security. (vi) Discharge, release, substitute or add Obligors. (vii) Apply all monies received from Obligors or others, or from any Security for any of the Obligations, as BNPLC may determine to be in its best interest, without in any way being required to marshall Security or assets or to apply all or any part of such monies upon any particular Obligations. (b) No action or inaction of any Obligor or any other Person, and no change of law or circumstances, shall release or diminish Guarantor's obligations, liabilities, agreements, or duties hereunder, affect this Guaranty in any way, or afford Guarantor any recourse against BNPLC. Without limiting the foregoing, the obligations, liabilities, agreements, and duties of Guarantor under this Guaranty shall not be released, diminished, impaired, reduced, or affected by the occurrence of any or all of the following from time to time, even if occurring without notice to or without the consent of Guarantor: (i) Any voluntary or involuntary liquidation, dissolution, sale of all or substantially all assets, marshalling of assets or liabilities, receivership, conservatorship, assignment for the benefit of creditors, insolvency, bankruptcy, reorganization, arrangement, or composition of any Obligor or any other proceedings involving any Obligor or any of the assets of any Obligor under laws for the protection of debtors, or any discharge, impairment, modification, release, or limitation of the liability of, or stay of actions or lien enforcement proceedings against, any 4 6 Obligor, any properties of any Obligor, or the estate in bankruptcy of any Obligor in the course of or resulting from any such proceedings. (ii) The failure by BNPLC to file or enforce a claim in any proceeding described in the immediately preceding subsection (i) or to take any other action in any proceeding to which any Obligor is a party. (iii) The release by operation of law of any Obligor from any of the Obligations or any other obligations to BNPLC. (iv) The invalidity, deficiency, illegality, or unenforceability of any of the Obligations or the Obligation Documents, in whole or in part, any bar by any statute of limitations or other law of recovery on any of the Obligations, or any defense or excuse for failure to perform on account of force majeure, act of God, casualty, impossibility, impracticability, or other defense or excuse whatsoever. (v) The failure of any Obligor or any other Person to sign any guaranty or other instrument or agreement within the contemplation of any Obligor or BNPLC. (vi) The fact that Guarantor may have incurred directly part of the Obligations or is otherwise primarily liable therefor. (vii) Without limiting any of the foregoing, any fact or event (whether or not similar to any of the foregoing) which in the absence of this provision would or might constitute or afford a legal or equitable discharge or release of or defense to a guarantor or surety other than the actual payment and performance by Guarantor under this Guaranty. (c) BNPLC may invoke the benefits of this Guaranty before pursuing any remedies against any Obligor or any other Person and before proceeding against any Security now or hereafter existing for the payment or performance of any of the Obligations. BNPLC may maintain an action against Guarantor on this Guaranty without joining any Obligor therein and without bringing a separate action against any Obligor. (d) If any payment to BNPLC by any Obligor is held to constitute a preference or a voidable transfer under applicable state or federal laws, or if for any other reason BNPLC is required to refund such payment to the payor thereof or to pay the amount thereof to any other Person, such payment to BNPLC shall not constitute a release of Guarantor from any liability hereunder, and Guarantor agrees to pay such amount to BNPLC on demand and agrees and acknowledges that this Guaranty shall continue to be effective or shall be reinstated, as the case may be, to the extent of any such payment or payments. (e) This is a continuing guaranty and shall apply to and cover all Obligations and renewals and extensions thereof and substitutions therefor from time to time. Section 5 Waiver. Guarantor waives all notices of the creation, renewal, extension or accrual of any of the Obligations and notice or proof of reliance by BNPLC on this Guaranty or acceptance of this Guaranty. The Obligations shall conclusively be considered to have been created, contracted or incurred in reliance on this Guaranty, and all dealings between BNPLC and FCI shall likewise be conclusively presumed to have been had or consummated in reliance on this Guaranty. Guarantor also 5 7 waives (to the extent permitted by applicable law) all requirements of notice, presentment, protest or demand on it, FCI or any other Person, all other notices and demands whatsoever relating to the Obligations and any requirement that BNPLC file a claim with a court in any bankruptcy or similar proceedings of FCI or first proceed against FCI or any other Person or first realize on any collateral security held by it or otherwise exhaust any right, power or remedy under any document or against BNPLC or any other Person before proceeding against Guarantor under this Guaranty. BNPLC shall have no responsibility to notify Guarantor of FCI's financial condition or FCI's incurrence or performance of the Obligations. WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER PROVISION SET FORTH IN THIS GUARANTY, GUARANTOR HEREBY WAIVES, TO THE MAXIMUM EXTENT SUCH WAIVER IS PERMITTED BY LAW, ANY AND ALL DEFENSES ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF (A) CALIFORNIA CIVIL CODE SECTIONS 2808, 2809, 2810, 2815, 2819, 2820, 2821, 2838, 2839, 2845, 2848, 2849, AND 2850, (B) TO THE EXTENT APPLICABLE, CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 580a, 580b, 580c, 580d AND 726, AND (C) TO THE EXTENT APPLICABLE, CHAPTER 2 OF TITLE 14 OF THE CALIFORNIA CIVIL CODE. Guarantor warrants and agrees that each of the waivers set for in this Guaranty is made with full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any of such waivers are determined to be contrary to any applicable law or public policy, such waivers shall be effective only to the maximum extent permitted by law. Section 6 Exercise of Remedies. BNPLC shall have the right to enforce, from time to time, in any order and at BNPLC's sole discretion, any rights, powers and remedies which BNPLC may have under the Obligation Documents, this Guaranty or otherwise. No failure on the part of BNPLC to exercise, and no delay in exercising, any right hereunder or under any Obligation Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right preclude any other or further exercise thereof or the exercise of any other right. The rights, powers and remedies of BNPLC provided herein and in the Obligation Documents are cumulative and are in addition to, and not exclusive of, any other rights, powers or remedies provided by law or in equity. The rights of BNPLC hereunder are not conditional or contingent on any attempt by BNPLC to exercise any of its rights under any Obligation Document against any Obligor or any other Person. Section 7 Limited Subrogation. Until all of the Obligations have been paid and performed in full Guarantor shall have no right, by reason of or in connection with this Guaranty, to exercise any right of subrogation, reimbursement, indemnity, exoneration, contribution or any other claim which it may now or hereafter have against or to any Obligor or any Security, and Guarantor hereby waives any rights to enforce any such remedy which Guarantor may have against FCI and any right to participate in any Security until such time. If any amount shall be paid to Guarantor on account of any such subrogation or other rights, any such other remedy, or any Security at any time when all of the Obligations and all other expenses guaranteed pursuant hereto shall not have been paid in full, such amount shall be held in trust for the benefit of BNPLC, shall be segregated from the other funds of Guarantor and shall forthwith be paid over to BNPLC to be held by BNPLC as collateral for, or then or at any time thereafter applied in whole or in part by BNPLC against, all or any portion of the Obligations, whether matured or unmatured, in such order as BNPLC shall elect. Section 8 Successors and Assigns. Guarantor's rights or obligations hereunder may not be assigned or delegated, but this Guaranty and such obligations shall pass to and be fully binding upon the successors of Guarantor, as well as Guarantor. This Guaranty shall apply to and inure to the benefit of BNPLC and its successors or assigns. Without limiting the generality of the immediately 6 8 preceding sentence, BNPLC may assign, grant a participation in, or otherwise transfer any Obligation held by it or any portion thereof, and BNPLC may assign or otherwise transfer its rights or any portion thereof under any Obligation Document, to any other Person, and such other Person shall thereupon become vested with all of the benefits in respect thereof granted to BNPLC hereunder unless otherwise expressly provided by BNPLC in connection with such assignment or transfer. Section 9 Representations, Warranties and Covenants of Guarantor. Guarantor hereby represents, warrants and covenants to BNPLC as follows: (a) The Recitals at the beginning of this Guaranty are true and correct in all material respects. (b) The direct or indirect value of the consideration received and to be received by Guarantor in connection herewith is reasonably worth at least as much as the liability and obligations of Guarantor hereunder, and the incurrence of such liability and obligations in return for such consideration may reasonably be expected to benefit Guarantor, directly or indirectly. (c) The execution, delivery and performance by Guarantor of this Guaranty do not and will not constitute a breach or default under any other material agreement or contract to which Guarantor is a party or by which Guarantor is bound or which affects the Property, and do not violate or contravene any law, order, decree, rule or regulation to which Guarantor is subject, and such execution, delivery and performance by Guarantor 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, Guarantor's property pursuant to the provisions of any of the foregoing. (d) There are no judicial or administrative actions, suits, proceedings or investigations pending or, to Guarantor's knowledge, threatened that will adversely affect the Property or the validity, enforceability or priority of this Guaranty, and Guarantor 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 use, occupancy or operation of the Property. No condemnation or other like proceedings are pending or, to Guarantor's knowledge, threatened against the Property. (e) The execution, delivery and performance by Guarantor of this Guaranty are duly authorized and does 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 Guarantor's articles of incorporation or bylaws. This Guaranty is a valid, binding and legally enforceable obligation of Guarantor, in accordance with its 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. (f) Guarantor is not "insolvent" on the date hereof (that is, the sum of Guarantor's absolute and contingent liabilities, including the Obligations, does not exceed the fair market value of Guarantor's assets) and has no outstanding liens, suits, garnishments or court actions which could render Guarantor insolvent or bankrupt. Guarantor's capital is adequate for the businesses in which Guarantor is engaged and intends to be engaged. Guarantor has not incurred (whether hereby or otherwise), nor does Guarantor intend to incur or believe that it will incur, debts which will be beyond its ability to pay as such debts mature. There has not been filed by or, to Guarantor's knowledge, against Guarantor a petition in bankruptcy or a petition or answer seeking an assignment for the benefit 7 9 of creditors, the appointment of a receiver, trustee, custodian or liquidator with respect to Guarantor or any significant portion of Guarantor'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 BNPLC relating to Guarantor are true, correct and complete in all material respects. No material adverse change has occurred in the financial position of Guarantor and its Subsidiaries as reflected in Guarantor's financial statements covering the fiscal period ended December 31, 1997. (g) Guarantor is duly incorporated and legally existing under the laws of the State of Delaware. Guarantor 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 fulfill its obligations under this Guaranty. Guarantor has the corporate power and adequate authority, rights and franchises to own Guarantor's property and to carry on Guarantor's business as now conducted and is duly qualified and in good standing in each state in which the character of Guarantor's business makes such qualification necessary (including 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 Guarantor and its Subsidiaries, taken as a whole. (h) Guarantor is not and will not become an "employee benefit plan" (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA. The assets of Guarantor do not and will not in the future constitute "plan assets" of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101. Guarantor is not and will not become a "governmental plan" within the meaning of Section 3(32) of ERISA. Transactions by or with Guarantor are not subject to state statutes regulating investments of and fiduciary obligations with respect to governmental plans. No ERISA Termination Event has occurred with respect to any Plan of Guarantor and Guarantor and all its Subsidiaries are in compliance with ERISA. Neither Guarantor nor any of its Subsidiaries is required to contribute to, or has any other absolute or contingent liability in respect of, any "multi employer plan" as defined in Section 4001 of ERISA. As of the Effective Date no "accumulated funding deficiency" (as defined in Section 412(a) of the Code) exists with respect to any Plan of Guarantor, whether or not waived by the Secretary of the Treasury or his delegate, and the current value of the benefits of each Plan of Guarantor, if any, equals or is less than the current value of such Plan's assets available for the payment of such benefits. (i) None of the representations or warranties of Guarantor or FCI contained in this Guaranty or the Obligation Documents or any other document, certificate or written statement furnished to BNPLC by or on behalf of Guarantor or FCI 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. (j) Guarantor shall, upon request of BNPLC, (i) promptly correct any error or omission which may be discovered in the contents of this Guaranty 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 Guaranty and to subject to this Guaranty any property intended by the terms hereof to be covered hereby, including any renewals, additions, substitutions, replacements or appurtenances to the Property; (iii) execute, acknowledge, deliver, procure and record or file any document or instrument deemed advisable by BNPLC to protect its rights in and to the 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 8 10 as may be necessary, desirable or proper in the reasonable determination of BNPLC to enable BNPLC, BNPLC's Parent and any other Participants to comply with the requirements or requests of any agency or authority having jurisdiction over them. Section 10 Covenants Incorporated by Reference to Schedule A. So long as Guarantor shall continue to have any obligations under this Guaranty, Guarantor shall comply with each and every requirement set forth in Schedule A attached hereto and made a part hereof; provided, however, to the extent that any of the Obligations or requirements set forth in other provisions of this Guaranty are more stringent than the requirements set forth in Schedule A, the more stringent Obligations or requirements set forth herein shall control. Section 11 Ownership of FCI. So long as Guarantor shall continue to have any obligations under this Guaranty, Guarantor shall continue to own directly one hundred percent (100%) of the outstanding shares of capital stock of FCI. Section 12 No Oral Change. No amendment of any provision of this Guaranty shall be effective unless it is in writing and signed by Guarantor and BNPLC, and no waiver of any provision of this Guaranty, and no consent to any departure by Guarantor therefrom, shall be effective unless it is in writing and signed by BNPLC, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Section 13 Invalidity of Particular Provisions. If any term or provision of this Guaranty shall be determined to be illegal or unenforceable all other terms and provisions hereof shall nevertheless remain effective and shall be enforced to the fullest extent permitted by applicable law. Section 14 Headings and References. The headings used herein are for purposes of convenience only and shall not be used in construing the provisions hereof. The words "this Guaranty," "this instrument," "herein," "hereof," "hereby" and words of similar import refer to this Guaranty as a whole and not to any particular subdivision unless expressly so limited. The phrases "this section" and "this subsection" and similar phrases refer only to the subdivisions hereof in which such phrases occur. The word "or" is not exclusive, and the word "including" (in its various forms) means "including without limitation". Pronouns in masculine, feminine and neuter genders shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. Section 15 Term. This Guaranty shall be irrevocable until all of the Obligations have been completely and finally paid and performed, Guarantor shall have paid all amounts that may be required hereunder, the Obligation Documents have been terminated, and all obligations and undertakings of FCI under, by reason of, or pursuant to the Obligation Documents have been completely performed, and this Guaranty is thereafter subject to reinstatement as provided in Section 3(d). All extensions of credit and financial accommodations heretofore or hereafter made by BNPLC to FCI shall be conclusively presumed to have been made in acceptance hereof and in reliance hereon. Section 16 Notices. Any notice or communication required or permitted hereunder shall be given as provided in the Lease and if to Guarantor at its address set forth below: TO GUARANTOR: Solectron Corporation 777 Gibraltar Drive, Building #5 9 11 Milpitas, California 95035 Attn: Chief Financial Officer Telecopy: (408) 956-6059 or to such other address or to the attention of such other individual as hereafter shall be designated in writing by Guarantor to BNPLC sent in accordance herewith. Section 17 Counterparts. This Guaranty may be executed in any number of counterparts, each of which when so executed shall be deemed to constitute one and the same Guaranty. SECTION 18 GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. Section 19 Waiver of a Jury Trial. GUARANTOR AND BNPLC EACH HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY. 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. Guarantor and BNPLC each acknowledge that this waiver is a material inducement to enter into a business relationship, that BNPLC has already relied on the waiver in entering into the Lease, the Construction Management Agreement, the Purchase Agreement and the Closing Certificate and the other documents referred to herein, and that each will continue to rely on the waiver in their related future dealings. BNPLC and Guarantor 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 GUARANTY OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS GUARANTY. In the event of litigation, this Guaranty may be filed as a written consent to a trial by the court. IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty as of the date first written above. SOLECTRON CORPORATION By: /s/ SUSAN WANG ---------------------------- Name (print): SUSAN WANG Title: SR. V.P. & CFO 10 12 Schedule A FINANCIAL AND OTHER COVENANTS OF GUARANTOR PART 1 ADDITIONAL DEFINITIONS 1.01 Definitions Applicable in this Schedule. For purposes of this Schedule A, the following capitalized terms will have the following respective meanings: "Adjusted Leverage Ratio" means with respect to Guarantor and its Subsidiaries on a consolidated basis at the end of any fiscal quarter, the ratio of (a) (without duplication) (i) Consolidated Funded Debt plus (ii) Guarantee obligations plus (iii) Indebtedness with respect to synthetic leases and securitized assets plus (iv) Indebtedness in respect to letters of credit minus (v) Permitted Subordinated Indebtedness, to (b) (i) operating income plus (ii) depreciation and amortization charges, in each case, for the period of the four fiscal quarters ended on the applicable date of determination. "Capital Lease Obligations" means the obligations of any Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Consolidated Funded Debt" means, as of the last day of any fiscal quarter, the sum for Guarantor and its Subsidiaries as of such day, of, without duplication, (a) the aggregate outstanding principal amount of Indebtedness for borrowed money and (b) the aggregate outstanding capitalized amount of Capital Lease Obligations, all as determined on a consolidated basis in accordance with GAAP. "Consolidated Tangible Assets" means, as of the last day of any fiscal quarter of Guarantor, all tangible assets on the consolidated balance sheet of Guarantor and its Subsidiaries, as determined on a consolidated basis in accordance with GAAP. "Consolidated Tangible Net Worth" means as of the last day of any fiscal quarter of Guarantor, (a) total shareholders' equity of Guarantor and its Subsidiaries minus (b) the aggregate amount of all intangible assets on the consolidated balance sheet of Guarantor and its Subsidiaries, all as determined on a consolidated basis in accordance with GAAP. "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. "Existing Credit Agreement" means the Credit Agreement dated as of April 29, 1997, among Guarantor as Borrower, Bank of America National Trust and Savings Association, as Agent and Issuing Bank, and other financial institutions named therein. 13 "Guarantee" of or by any Person (the "guarantor") means, for the purposes of this Schedule only and not for the purposes of the Obligation Documents, any obligation, contingent or otherwise of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor") in any matter, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. "Indebtedness" of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid (excluding deferred compensation obligations owed to current and former directors, officers and employees), (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable, measured in accordance with GAAP, incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty supporting Indebtedness, (j) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances, and (k) all obligations, contingent or otherwise, with respect to synthetic leases or securitized assets. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. "Lien" means, for the purpose of this Schedule only and not for the purposes of the Obligation Documents, with respect to any asset (a) a mortgage, deed of trust, lien, pledge, hypothecation, encumbrance or security interest in, on or of such asset, and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement relating to such asset. "Material Adverse Effect" means a material adverse effect on (a) the business, assets, operations, prospects or condition, financial or otherwise, of Guarantor and its Subsidiaries taken as a whole, (b) the ability of Guarantor to perform its obligations under this Guaranty if called upon to do so, or (c) the ability of FCI to perform its Obligations under the Obligation Documents; or (d) the rights of or benefits available to BNPLC or the Participants under the Obligation Documents. "Modified Quick Ratio" means, as computed with respect to Guarantor and its Subsidiaries on a consolidated basis, the ratio of (1) their Quick Assets to (2) the sum (without duplication of any item) Schedule A - Page 2 14 of their Current Liabilities and any payments maturing within 12 months on any Indebtedness of Guarantor or its Subsidiaries or on Indebtedness of any other Person which is the subject of any Guarantee made by Guarantor or its Subsidiaries. "Permitted Contest" means a contest of the validity or amount of any payment claimed to be due from Guarantor or a Subsidiary where (a) the contest is undertaken by Guarantor or such Subsidiary in good faith by appropriate proceedings, (b) Guarantor or such Subsidiary shall have set aside on its books adequate reserves with respect thereto in accordance with GAAP, and (c) the failure to make such payment pending such contest could not reasonably be expected to result in a Material Adverse Effect. "Permitted Encumbrances" means, for the purposes of this Guaranty only and not for the purposes of the Obligation Documents: (a) Liens imposed by law by any governmental authority for taxes that are not yet due or are the subject of a Permitted Contest. (b) Carriers' warehousemen's, mechanics', material men's, repairmen's and other like Liens imposed by law, and any other involuntary, statutory or common law Lien arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are the subject of a Permitted Contest. (c) Pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations. (d) Deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business. (e) Easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of Guarantor or any Subsidiary. (f) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under the Lease. (g) Liens which constitute rights of set-off of a customary nature or banker's Liens with respect to amounts on deposit arising by operation of law in connection with arrangements entered into with banks in the ordinary course of business. (h) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods. (i) Leases or subleases and licenses and sublicenses granted to others in the ordinary course of business not interfering in any material respect with the business of Guarantor or its Subsidiaries taken as a whole, and any interest or title of any lessor or licensor Schedule A - Page 3 15 under any lease or license. The term "Permitted Encumbrances" shall not include any Lien securing Indebtedness. "Permitted Subordinated Indebtedness" means Indebtedness of Guarantor, the payment of which is expressly subordinated (on terms satisfactory to BNPLC) to the Obligations. "Quick Assets" means the sum (without duplication of any item) of unencumbered cash, plus unencumbered short term cash investments, plus other unencumbered marketable securities which are classified as short term investments according to GAAP, plus unencumbered current net accounts receivable, plus the fair market value of certain long-term investments hereinafter described. 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 determination of Quick Assets, the owner of the assets (be it Guarantor or one of its Subsidiaries) 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 the owner's control. The following assets (and only the following assets) will qualify as "long-term investments" to be included in Quick Assets to the extent (and only to the extent) that, at the time of the determination of Quick Assets, they shall not be classified as short term investments in accordance with GAAP and shall have maturities of not longer than two years: (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 (A) 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 (B) rated not less than A- by Standard & Poor's Corporation or less than A by Moody's Investors Service, Inc.; and (3) corporate or municipal bonds rated not less than A- by Standard & Poor's Corporation or less than A by Moody's Investors Service, Inc. "Special Purpose Subsidiary" means any bankruptcy remote special purpose subsidiary of Guarantor formed for the purpose of selling undivided interests in accounts receivable and/or other assets transferred by Guarantor and/or any of its Subsidiaries to such subsidiary for financing purposes, including Solectron Funding Corporation, a corporation organized or to be organized under the laws of the state of Delaware. "Subsidiary" means, for purposes of this Schedule only and not for the purposes of the Obligation Documents, with respect to Guarantor or any Special Purpose Subsidiary (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date. Schedule A - Page 4 16 PART 2 DELIVERY OF INFORMATION 2.01. Financial Statements and Other Information. Guarantor will furnish to BNPLC and to each Participant of which Guarantor has been notified: (a) within 90 day's after the end of each fiscal year of Guarantor, its audited consolidated balance sheet and related statements of operations, changes in shareholders' equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by KPMG Peat Marwick or other independent public accountants of recognized national standing (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of Guarantor and consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; (b) within 60 days after the end of each of the first three fiscal quarters of each fiscal year of Guarantor, its consolidated balance sheet and related statements of operations and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its senior or executive financial officers as presenting fairly in all material respects the financial condition and results of operations of Guarantor and consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; (c) concurrently with any delivery of financial statements under clauses (a) or (b) above, a completed compliance certificate of a senior or executive financial officer of Guarantor in form and content reasonably acceptable to BNPLC; (d) concurrently with any delivery of consolidated financial statements under clause (a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their audit of such consolidated financial statements of any Event of Default or a Default under the Obligation Documents insofar as it relates to accounting matters (which certificate may be limited to the extent required by accounting rules or guidelines); (e) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by Guarantor or any Subsidiary with the Securities and Exchange Commission, or any governmental authority succeeding to any or all of the functions of said commission, or with any national securities exchange, or distributed by Guarantor to its shareholders generally, as the case may be; (f) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of Guarantor or any Subsidiary, or compliance with the terms of the Obligation Documents, as the BNPLC or any Participant may reasonably request; and Schedule A - Page 5 17 (g) promptly upon becoming aware thereof, notice of the effectiveness of any rating of any Index Debt by S&P or Moody's and notice of the effectiveness of any change in any rating of any Index Debt by S&P or Moody's. 2.02. Notices of Material Events. Guarantor will furnish to BNPLC and each Participant prompt written notice of the following: (a) The filing or commencement of any action, suit or proceeding by or before any arbitrator or governmental authority against or affecting Guarantor or any Subsidiary thereof that could reasonably be expected to result in a Material Adverse Effect. (b) The occurrence of any ERISA Termination Event that, alone or together with any other ERISA Termination Events that have occurred, could reasonably be expected to result in liability of Guarantor and its Subsidiaries in an aggregate amount exceeding $5,000,000. (c) Any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Paragraph 2.02 shall be accompanied by a statement of a senior or executive financial officer or other executive officer of Guarantor setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. PART 3 NEGATIVE COVENANTS 3.01. Subsidiary Indebtedness. No Subsidiary will create, incur, assume or permit to exist any Indebtedness, except: (a) Indebtedness existing on the Effective Date and set forth in schedule 6.01 attached to the Existing Credit Agreement (a copy of which schedule is also attached hereto for convenience) and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof. (b) Indebtedness of any Subsidiary to Guarantor or any other Subsidiary. (c) Guarantees by any Subsidiary of Indebtedness of Guarantor or of any other Subsidiary to the extent such Indebtedness is permitted under the Obligation Documents and other material agreements governing the Indebtedness of Guarantor. (d) Indebtedness of any Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; provided that (i) such Indebtedness is incurred prior to or within 120 days after such acquisition or the completion of such construction or improvement, and (ii) the aggregate principal amount of Indebtedness permitted by this clause (d) when aggregated (without Schedule A - Page 6 18 duplication) with all Indebtedness incurred under clause (g) below, with the aggregate amount of all claims and obligations secured by Liens permitted pursuant to clauses (d) and (f) of Paragraph 3.02 and with the aggregate book value or sale price of the assets sold in sale and leaseback transactions permitted pursuant to Paragraph 3.03 does not exceed 30% of Consolidated Tangible Assets as of the last day of the most recent fiscal period in respect of which financial statements shall have been delivered pursuant to Paragraph 2.01 of this Schedule. (e) Indebtedness of any Person that becomes a Subsidiary after April 30, 1997; provided that such Indebtedness exists at the time such Person becomes a Subsidiary and is not created in contemplation of or in connection with such Person becoming a Subsidiary. (f) Indebtedness of any Subsidiary as an account party in respect of trade letters of credit. (g) Other unsecured Indebtedness of the Subsidiaries in an aggregate principal amount outstanding at any time that, when aggregated (without duplication) with all Indebtedness incurred under clause (d) above, with the aggregate amount of all claims and obligations secured by Liens permitted pursuant to clauses (d) and (f) of Paragraph 3.02 and with the aggregate book value or sale price of the assets sold in sale and leaseback transactions permitted pursuant to Paragraph 3.03 does not exceed 30% of Consolidated Tangible Assets as of the last day of the most recent fiscal period in respect of which financial statements shall have been delivered pursuant to Paragraph 2.01 of this Schedule. (h) (i) Indebtedness of any Special Purpose Subsidiary; or (ii) Indebtedness of any other Subsidiary incurred by such Subsidiary in connection with the incurrence of Indebtedness by any Special Purpose Subsidiary. 3.02. Liens. Guarantor will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except: (a) Permitted Encumbrances and Liens securing Capital Lease Obligations permitted under subparagraph 3.01(d), and any renewal or extension of any such Permitted Encumbrance or Lien so long as the principal amount of the obligations secured thereby is not increased; (b) any Lien on any property or asset of Guarantor or any Subsidiary existing on April 30, 1997 and set forth in schedule 6.02 attached to the Existing Credit Agreement (a copy of which schedule is also attached hereto for convenience); provided that (i) such Lien shall not apply to any other property or asset of Guarantor or any Subsidiary and (ii) such Lien shall secure only those obligations which it secures on the date hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (c) any Lien existing on any property or asset prior to the acquisition thereof by Guarantor or any Subsidiary or existing on any property or asset (including attachments, accessions, replacements or proceeds thereof) of any Person that becomes a Subsidiary after Schedule A - Page 7 19 April 30, 1997 prior to the time such Person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition of such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property or assets of Guarantor or any Subsidiary, and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be, and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (d) Liens on fixed or capital assets acquired, constructed or improved by Guarantor or any Subsidiary (including replacements or proceeds of such assets and including any Capital Lease Obligations); provided that (i) in the case of any Subsidiary, such security interest secure Indebtedness permitted by clause (d) of Paragraph 3.01, (ii) such security interests and the Indebtedness secured thereby are incurred prior to or within 120 days after such acquisition or the completion of such construction or improvement, (iii) the Indebtedness secured thereby does not exceed 100% of the cost of acquiring, constructing or improving such fixed or capital assets, (iv) such security interest shall not apply to any other property or assets of Guarantor or any Subsidiary, and (v) the aggregate amount of such Indebtedness when aggregated (without duplication) with all Indebtedness incurred under clauses (d) and (g) of Paragraph 3.01, with the aggregate amount of all claims secured by Liens permitted pursuant to clause (f) below and with the aggregate book value or sale price of the assets sold in sale and leaseback transactions permitted pursuant to Paragraph 3.03 does not exceed 30% of Consolidated Tangible Assets as of the last day of the most recent fiscal period in respect of which financial statements shall have been delivered pursuant to Paragraph 2.01; (e) Liens securing claims of any Special Purpose Subsidiary against any other Subsidiary and sales or assignments of accounts receivable (or interests therein) by any Subsidiary to a Special Purpose Subsidiary and by any Special Purpose Subsidiary; and (f) other Liens securing claims in an aggregate amount at any time outstanding that when aggregated (without duplication) with (i) all obligations of any Special Purpose Subsidiary secured by liens, (ii) all Indebtedness incurred under clauses (d) and (g) of Paragraph 3.01, (iii) the aggregate amount of all obligations secured by Liens permitted pursuant to clause (d) above and (iv) the aggregate book value or sale price of the assets sold in sale and leaseback transactions permitted pursuant to Paragraph 6.03, does not exceed 30% of Consolidated Tangible Assets as of the last day of the most recent fiscal period of Guarantor in respect of which financial statements shall have been delivered pursuant to Paragraph 2.01, provided that the dollar amount of claims and other obligations (other than claims or other obligations of any Subsidiary in favor of any Special Purpose Subsidiary which is directly or indirectly wholly owned by Guarantor and inchoate indemnity obligations) secured by accounts receivable does not exceed the greater of $130,000,000 or 35% of Guarantor's aggregate accounts receivable (including such accounts receivable sold to any Special Purpose Subsidiary) calculated on a consolidated basis. 3.03. Sale and Leaseback Transactions. Guarantor will not, and will not permit any Subsidiary to, enter into any arrangement, directly or indirectly, with any Person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred; provided, however, that Schedule A - Page 8 20 notwithstanding the above, Guarantor or any Subsidiary may engage in any sale and leaseback transaction if, immediately after the consummation of such transaction, the aggregate book value or sale price of the assets sold in sale and leaseback transactions referred to in this Paragraph 3.03, when aggregated (without duplication) with all Indebtedness incurred under clauses (d) and (g) of Paragraph 3.01 and with the aggregate amount of all claims and obligations secured by Liens permitted pursuant to clauses (d) and (f) of Paragraph 3.02, does not exceed 30% of Consolidated Tangible Assets as of the last day of the most recent fiscal period in respect of which financial statements shall have been delivered pursuant to Paragraph 2.01. 3.04. Fundamental Changes. (a) Guarantor will not, and will not permit any Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or any substantial portion of its assets, or all or substantially all of the capital stock of any of the Subsidiaries (in each case, whether now owned or hereafter acquired), or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Event of Default or default under the Obligation Documents shall have occurred and be continuing (i) any Person may merge into or consolidate with Guarantor in a transaction in which Guarantor is the surviving corporation, (ii) any Person may merge into any Subsidiary in a transaction in which the surviving entity is a Subsidiary, (iii) any Subsidiary may sell, transfer, lease or otherwise dispose of its assets to Guarantor or to another Subsidiary, (iv) any Subsidiary may liquidate or dissolve if Guarantor determines in good faith that such liquidation or dissolution is in the best interests of Guarantor and is not materially disadvantageous to BNPLC or the Participants and any distribution or other transfer of assets in connection with such liquidation or dissolution is made to Guarantor or another Subsidiary in an amount consistent with such person's ownership percentage of the Subsidiary being dissolved or liquidated, (v) Guarantor and the Subsidiaries may sell, lease or otherwise dispose of property in any individual transaction not related to any other such transaction if the aggregate fair market value of the assets sold, leased or otherwise disposed of in such transaction is less than $2,000,000, (vi) Guarantor and/or any of the Subsidiaries may sell or otherwise transfer their accounts receivable and other assets to any Special Purpose Subsidiary and/or any Special Purpose Subsidiary may sell or otherwise transfer such accounts receivable or other property (or interests therein) if otherwise permitted under Paragraph 3.02(f), and (vii) Guarantor and the Subsidiaries may sell, lease or otherwise dispose of property in any other transaction in the ordinary course of business, provided that, with respect to transactions outside of the ordinary course of business, the aggregate fair market value of all assets sold, leased or otherwise disposed of in transactions under this clause (vii) shall not when taken together at the time of each such sale, lease or other disposition exceed 25% of Consolidated Tangible Assets as of the last day of the most recent fiscal period in respect of which financial statements shall have been delivered pursuant to Paragraph 2.01 at such time. (b) Guarantor will not, and will not permit any of its Subsidiaries to, engage to any material extent in any line of business material to Guarantor and the Subsidiaries, taken as a whole, other than businesses currently conducted by Guarantor and the Subsidiaries and businesses reasonably related thereto. 3.05 Intentionally Omitted. Schedule A - Page 9 21 3.06. Fiscal Year. Guarantor will not change its fiscal year end from August 31. 3.07. Restrictive Agreements. Guarantor will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of Guarantor or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to Guarantor or any other Subsidiary or to Guarantee Indebtedness of Guarantor or any other Subsidiary if any such prohibition, restriction or condition is more burdensome than any similar prohibition, restriction or condition contained in this Schedule; provided that (i) the foregoing shall not apply to restrictions and conditions imposed by law or by any the Existing Credit Agreement, (ii) the foregoing shall not apply to restrictions and conditions existing prior to and identified in the schedule 6.07 attached to the Existing Credit Agreement (a copy of which schedule is also attached hereto for convenience), but shall apply to any amendment or modification expanding the scope of any such restriction or condition unless otherwise permitted under this Paragraph 3.07, (iii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Schedule if such restrictions or conditions apply only to the property or assets securing such Indebtedness, (v) clause (a) of the foregoing shall not apply to customary provisions in leases and other contracts restricting the assignment thereof, (vi) the foregoing shall not apply to such restrictions and conditions applicable to any Subsidiary acquired after April 30, 1997 if such restrictions and conditions existed at the time such Subsidiary was acquired and were not created in anticipation of such acquisition, (vii) the foregoing shall not apply to one or more Subsidiaries having any such restriction or condition so long as any such Subsidiary individually shall not account for more than 5% of the gross revenues for the most recently ended fiscal year of Guarantor and the Subsidiaries, taken as a whole, and each such Subsidiary together with all other such Subsidiaries in the aggregate shall not account for more than 10% of the gross revenues for the most recently ended fiscal year of Guarantor and the Subsidiaries, taken as a whole, (viii) the foregoing shall not apply to any working capital facility entered into by a Subsidiary organized under the laws of any foreign country, and (ix) the foregoing shall not apply to any Special Purpose Subsidiary or to any agreement or other arrangement entered into by Guarantor or any of the Subsidiaries incidental to a transaction involving a Special Purpose Subsidiary, which transaction is otherwise permitted under the terms of this Schedule and the Obligations Documents. 3.08. Distributions. Guarantor shall not declare or make, and shall not suffer or permit any of its Subsidiaries to declare or make, any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any shares of any class of its capital stock, or purchase, redeem or otherwise acquire for value any shares of its capital stock or any warrants, rights or options to acquire such shares, now or hereafter outstanding, if any Event of Default or default under the Existing Credit Agreement then exists or would result therefrom. 3.09. Adjusted Leverage Ratio. Guarantor will not permit its Adjusted Leverage Ratio, as calculated as of the last day of each fiscal quarter of Guarantor, to be greater than (a) 1.50 to 1.00 from the Effective Date through and including February 28, 1999, (b) 1.25 to 1.00 from May 31, 1999 through and including February 28, 2000, and (c) 1.00 to 1.00 thereafter. Schedule A - Page 10 22 3.10. Consolidated Tangible Net Worth. Guarantor will not permit its Consolidated Tangible Net Worth as of the last day of each fiscal quarter of Guarantor following April 30, 1997 to be less than the sum of (without duplication) 80% of Consolidated Tangible Net Worth measured as of the end of the fiscal quarter ended February 28, 1997, plus 50% of consolidated net income (without subtracting losses or acquisition related charges) for each fiscal quarter ended after the fiscal quarter ended February 28, 1997, minus 100% of all acquisition-related charges if such charges are recorded in the same fiscal quarter in which the applicable acquisition is consummated. 3.11. Modified Quick Ratio. At the end of any fiscal quarter of Guarantor when (1) the rating established by Moody's for the Index Debt of Guarantor is below Ba2 or (2) the rating established by S&P for the Index Debt of Guarantor is below BB, or (3) neither Moody's nor S&P maintains a rating for the Index Debt of Guarantor, Guarantor shall not permit the Modified Quick Ratio to be less than 1.0 to 1.0. Schedule A - Page 11 23 ATTACH SCHEDULES 6.01, 6.02 AND 6.07 FROM THE EXISTING CREDIT AGREEMENT Schedule A - Page 12 24 Schedule 3.13: Copyrights, Patents, Trademarks and Licenses Infringement Claims None. Schedule 6.01: Subsidiary Indebtedness
Name of Subsidiary Agreement ------------------ ---------------------------------------------- Solectron Scotland Limited $4.918 million Credit Facility with Royal Bank of Scotland Solectron Technology, Inc. $30.488 million Credit Agreement with Standard SDN BHD Chartered Bank and DCB Bank Solectron GmbH $5,000 Credit Agreement with Commerzebank $7 million L-T note from Landersgirekasse Oeffentliche Bank $2 million Credit Agreement with Hewlett Packard Company for purchase of inventory at acquisition Solectron Japan, Inc. $22.425 million Credit Agreement with Bank of Tokyo Mitsubishi Ltd. Fine Pitch Technology, Inc. $89,000 Equipment Loan from San Jose National Bank Force Computers, Inc. $1.038 million Credit Facility with Dresdner Bank Tokyo $8.876 million Credit Facility with Stadtoparkasse Munich $5.917 million Credit Facility with Hypobanck Munich $5.917 million Credit Facility with Reuschelbank $655,000 Credit Facility with Barclays Bank $500,000 Credit Facility with Bank Leumi $7.5 million Credit Facility with Comerica Bank
Schedule 6.02: Liens 1. Solectron Corporation
Secretary of State - California ------------------------------- Secured Party Description of Collateral Filing Date File Number - ---------------------------------- ------------------------------- ----------- ----------- Equitable Life Leasing Corporation Specific Equipment and Proceeds 1-26-93 88020525 Xerox Corporation Office Equipment and Proceeds 6-22-92 92137563
-2- 25
Secured Party Description of Collateral Filing Date File Number - ---------------------------------- -------------------------------- ----------- ----------- Taylor Made Office Systems, Inc. Specific Equipment and Proceeds 4-15-94 94074579 Hewlett Packard Company Specific Equipment and Proceeds 5-11-94 94093984 Hewlett Packard Company Specific Equipment and Proceeds 3-2-95 9506661264 Hewlett Packard Company Specific Equipment and Proceeds 8-28-95 9524460015 Taylor Made Office Systems, Inc. Specific Equipment and Proceeds 12-19-95 9535560504 Taylor Made Office Systems, Inc. Specific Equipment and Proceeds 3-1-96 9606760948 Taylor Made Office Systems, Inc. Specific Equipment and Proceeds 7-24-96 9620860481 Associates Leasing, Inc. Computer Equipment and Proceeds 1-10-97 9701360025 Security Pacific Equipment Leasing, Inc. Specific Equipment and Proceeds 5-1-95 85169376 Security Pacific Equipment Leasing, Inc. Computer Equipment and Proceeds 8-21-95 85270060 MNLC/BALTC Leasing Partners Specific Equipment and Proceeds 4-2-92 87117094 Security Pacific Equipment Leasing, Inc. Computer Equipment and Proceeds 5-6-92 87217647 Equitable Life Leasing Corporation Computer Equipment and Proceeds 10-20-92 87314510 G.E. Capital Corporation Specific Equipment and Proceeds 2-18-93 88046793 NEMLC Leasing Associates No. 3 Specific Equipment and Proceeds 1-11-93 88063091 Security Pacific Equipment Leasing Specific Equipment and Proceeds 12-27-94 90067753 Deutsch Credit Corporation Specific Equipment and Proceeds 4-3-95 90101368 Security Pacific Equipment Leasing, Inc. Specific Equipment and Proceeds 5-1-95 90172604 Hewlett Packard Company Computer Equipment and Proceeds 5-4-92 92099518 Lease Plan USA, Inc. Specific Equipment and Proceeds 5-12-92 92107399 Hewlett Packard Company Specific Equipment and Proceeds 7-13-92 92153799 Hewlett Packard Company Specific Equipment and Proceeds 10-6-92 92216939 Hewlett Packard Company Specific Equipment and Proceeds 10-16-92 92223550 Hewlett Packard Company Specific Equipment and Proceeds 10-27-92 92231425 Hewlett Packard Company Specific Equipment and Proceeds 4-1-93 92241883 Equitable Life Leasing Corporation Specific Equipment and Proceeds 1-28-94 93018954 Hewlett Packard Company Specific Equipment and Proceeds 4-22-93 9308147 Hewlett Packard Company Specific Equipment and Proceeds 5-12-93 93096482 MetLife Capital, L.P. Computer Equipment and Proceeds 1-28-94 93113136 Hewlett Packard Company Specific Equipment and Proceeds 6-4-93 93114108 Hewlett Packard Company Specific Equipment and Proceeds 6-16-93 93122297 United States Leasing International, Inc. Computer Equipment and Proceeds 11-5-93 93223327 Capital Preferred Yield Fund - II, L.P. Specific Equipment and Proceeds 4-7-94 93234553 Avnet Computer Technologies, Inc. Specific Equipment and Proceeds 2-4-94 94021647 Hewlett Packard Company Specific Equipment and Proceeds 4-25-94 94081377 Hewlett Packard Company Specific Equipment and Proceeds 5-4-94 94088238 Hewlett Packard Company Specific Equipment and Proceeds 5-20-94 94101661 Hewlett Packard Company Specific Equipment and Proceeds 7-18-94 94145012
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Secured Party Description of Collateral Filing Date File Number - -------------------------------- ------------------------------- ----------- ----------- Hewlett Packard Company Specific Equipment and Proceeds 8-30-94 94178790 BNP Leasing Corporation Specific Equipment and Proceeds 9-8-94 94185412 Hewlett Packard Company Specific Equipment and Proceeds 9-21-94 9428560112 BNP Leasing Corporation Specific Equipment and Proceeds 9-27-94 9429360076 Hewlett Packard Company Specific Equipment and Proceeds 11-28-94 9434761275 Comdisco, Inc. Specific Equipment and Proceeds 12-8-94 9434960578 Hewlett Packard Company Specific Equipment and Proceeds 12-14-94 9500361142 Hewlett Packard Company Specific Equipment and Proceeds 1-26-95 9503360328 Hewlett Packard Company Specific Equipment and Proceeds 2-10-95 9504860699 Hewlett Packard Company Specific Equipment and Proceeds 2-10-95 9504860715 Hewlett Packard Company Specific Equipment and Proceeds 2-21-95 9505960514 Hewlett Packard Company Specific Equipment and Proceeds 3-6-95 9506860234 Hewlett Packard Company Specific Equipment and Proceeds 4-28-95 9512160498 Hewlett Packard Company Specific Equipment and Proceeds 4-28-95 9512160513 Hewlett Packard Company Specific Equipment and Proceeds 6-5-95 9515960516 Hewlett Packard Company Specific Equipment and Proceeds 6-5-95 9515960526 Hewlett Packard Company Specific Equipment and Proceeds 9-5-95 9525560208 Hewlett Packard Company Specific Equipment and Proceeds 9-5-95 9525560219 Hewlett Packard Company Specific Equipment and Proceeds 9-26-95 9527260307 Pitney Bowes Credit Corporation Specific Equipment and Proceeds 1-22-96 9602360211 Hewlett Packard Company Specific Equipment and Proceeds 1-29-96 9603060985 Copelco Capital, Inc. Specific Equipment and Proceeds 4-25-96 9608261042 Copelco Capital, Inc. Specific Equipment and Proceeds 6-19-96 9617660616 Copelco Capital, Inc. Specific Equipment and Proceeds 7-30-96 9621460705 Hewlett Packard Company Specific Equipment and Proceeds 8-9-96 9622661204 Copelco Capital, Inc. Specific Equipment and Proceeds 11-26-96 9633161377 Comdisco, Inc. Specific Equipment and Proceeds 2-10-97 9704260387 Comdisco, Inc. Specific Equipment and Proceeds 2-24-97 9705660119 Hewlett Packard Company Specific Equipment and Proceeds 7-7-93 93138136 Taylor Made Office Systems, Inc. Specific Equipment and Proceeds 8-21-95 9523560031
Liens of the Company pursuant to that Lease Agreement, dated as of September 6, 1994 (as amended from time to time) between BNP Leasing Company and Solectron Corporation. 2. Solectron Washington, Inc. Department of Licensing-Washington -4- 27
Secured Party Description of Collateral Filing Date File Number - ------------------------------------ ------------------------- ----------- ----------- GTE Northwest Specific Equipment 9-20-93 93-263-0729 AT&T Capital Services, Inc. Specific Equipment 11-3-95 95-307-0414 3. Solectron Texas, Inc.
Secretary of State - Texas Secured Party Description of Collateral Filing Date File Number - ------------------------------------ ------------------------- ----------- ----------- General Electric Capital Corporation Electronic Equipment 8-26-96 96704367 4. Fine Pitch Technology
Secretary of State - California Secured Party Description of Collateral Filing Date File Number - ------------------------------------ ------------------------- ----------- ----------- San Jose National Bank Specific Equipment 2-29-95 9504660745 San Jose National Bank Specific Equipment 4-3-95 9509560531 San Jose National Bank Specific Equipment 12-13-95 9534860123 5. Force Computers, Inc.
Secretary of State - California Secured Party Description of Collateral Filing Date File Number - ------------------------------------ ------------------------- ----------- ----------- Taylor Made Office Systems, Inc. Specific Equipment 10-11-94 9430660823 Taylor Made Office Systems, Inc. Specific Equipment 8-21-95 9523460666 Taylor Made Office Systems, Inc. Specific Equipment 6-13-94 94119361 6. Solectron Technology, Inc. (Charlotte)
Secretary of State - North Carolina Secured Party Description of Collateral Filing Date File Number - ------------------------------------ ------------------------- ----------- ----------- Hewlett Packard Company Specific Equipment 2-22-93 0000970502
Schedule 6.07; Restrictive Agreements Indenture dated as of February 15, 1996 governing the terms of issuance of 7 3/8% Senior Notes due 2006. Contains a covenant restricting the Company's ability to encumber certain items of its property. -5- 28 Lease Agreement dated as of September 6, 1994 (as amended from time to time) between BNP Leasing Company and Solectron Corporation. Includes all covenants by cross reference in Article VI of this Credit Agreement. The Force Computers, Inc. credit facilities contains (1) restrictions on its ability to pay dividends to Solectron and (2) its ability to encumber any of its assets except for ordinary course involuntary liens and equipment finance and purchase money security interests. -6- EX-10.7 10 LEASE AGREEMENT DATED 10/20/98 1 EXHIBIT 10.7 ================================================================================ $50,000,000 LEASE AGREEMENT BETWEEN BNP LEASING CORPORATION ("BNPLC") AND SOLECTRON GEORGIA CORPORATION ("SGC") OCTOBER 20, 1998 (GWINNETT COUNTY, GEORGIA) ================================================================================ PURSUANT TO AND AS MORE PARTICULARLY PROVIDED IN SUBPARAGRAPH 26 OF THIS LEASE, THIS LEASE AND THE PURCHASE AGREEMENT REFERENCED HEREIN ARE TO CONSTITUTE, FOR INCOME TAX PURPOSES ONLY, A FINANCING ARRANGEMENT OR CONDITIONAL SALE. AS PROVIDED IN SUBPARAGRAPH 26 OF THIS LEASE, BNPLC AND SGC EXPECT THAT SGC (AND NOT BNPLC) SHALL BE TREATED AS THE TRUE OWNER OF THE PROPERTY FOR INCOME TAX PURPOSES, THEREBY ENTITLING SGC (AND NOT BNPLC) TO TAKE DEPRECIATION DEDUCTIONS AND OTHER TAX BENEFITS AVAILABLE TO THE OWNER. 34083.1 2 TABLE OF CONTENTS
Page ---- 1. TERM...............................................................................2 (a) Scheduled Term................................................................2 (b) Automatic Termination as of the Base Rent Commencement Date Resulting From an Election by SGC to Terminate the Purchase Option and SGC's Initial Remarketing Rights and Obligations............................................3 (c) Election by BNPLC to Terminate After an Issue 97-10 Election..................3 (d) Election by SGC to Terminate After Accelerating the Designated Sale Date......3 (e) Extension of the Term.........................................................3 2. NO LEASE TERMINATION...............................................................4 (a) Status of Lease...............................................................4 (b) Waiver by SGC.................................................................4 3. USE AND CONDITION OF THE PROPERTY..................................................5 (a) Use...........................................................................5 (b) Condition of the Property.....................................................5 (c) Consideration for and Scope of Waiver.........................................5 4. RENT...............................................................................6 (a) Base Rent Generally...........................................................6 (b) Calculation of and Due Dates for Base Rent....................................6 (i) Amount Payable On the Base Rent Commencement Date.......................6 (ii) Determination of Subsequent Payment Due Dates...........................6 (iii) Base Rent Formula.......................................................6 (c) Additional Rent...............................................................7 (d) Commitment Fees...............................................................7 (e) Administrative Agency Fees....................................................7 (f) Issue 97-10 Prepayments.......................................................7 (g) No Demand or Setoff...........................................................8 (h) Default Interest and Order of Application.....................................8 5. PAYMENT OF EXECUTORY COSTS AND LOSSES RELATED TO THE PROPERTY......................8 (a) "Net" Lease Generally.........................................................8 (b) Impositions...................................................................8 (c) Increased Costs; Capital Adequacy Charges.....................................9 (d) SGC's Payment of Other Losses; General Indemnification........................9 (e) Exceptions and Qualifications to Indemnities.................................11 (f) Withholding Taxes............................................................12 6. CONSTRUCTION OF NEW IMPROVEMENTS AND ACQUISITION OF EXISTING IMPROVEMENTS.........13
3 (a) Advances; Outstanding Construction Allowance.................................13 (b) Calculation of Carrying Costs................................................13 (i) Carrying Costs Formula.................................................13 (ii) Limits on the Amount of Carrying Costs.................................14 (c) SGC's Right to Control the Construction Project..............................14 (d) Landlord's Election to Continue Construction.................................14 (i) Take Control of the Property...........................................14 (ii) Continuation of Construction...........................................14 (iii) Arrange for Turnkey Construction.......................................15 (iv) Suspension or Termination of Construction..............................15 (e) Powers Coupled With an Interest..............................................16 (f) Completion Notice............................................................16 7. OTHER OBLIGATIONS OF AND LIMITED REPRESENTATIONS BY BNPLC.........................16 (a) Cooperation of BNPLC to Facilitate Construction and Development..............16 (b) Actions Permitted by SGC Without BNPLC's Consent.............................17 (c) Waiver of Landlord's Liens...................................................18 (d) Limited Representations by BNPLC Concerning Accounting Matters...............18 (e) Other Limited Representations by BNPLC.......................................19 (i) No Default or Violation................................................19 (ii) No Suits...............................................................19 (iii) Enforceability.........................................................20 (iv) Organization...........................................................20 (v) Not a Foreign Person...................................................20 (f) Keeping Proprietary Information Confidential.................................20 8. STATUS OF PROPERTY ACQUIRED WITH FUNDS PROVIDED BY BNPLC..........................20 9. ENVIRONMENTAL.....................................................................21 (a) Environmental Covenants by SGC...............................................21 (b) Right of BNPLC to do Remedial Work Not Performed by SGC......................22 (c) Environmental Inspections and Reviews........................................22 (d) Communications Regarding Environmental Matters...............................23 10. INSURANCE REQUIRED AND CONDEMNATION...............................................23 (a) Liability Insurance..........................................................23 (b) Property Insurance...........................................................24 (c) Failure to Obtain Insurance..................................................24 (d) Condemnation.................................................................24 11. APPLICATION OF INSURANCE AND CONDEMNATION PROCEEDS................................25 (a) Collection of Insurance and Condemnation Proceeds Generally..................25 (b) Administration of Remaining Proceeds; SGC's Obligation to Restore............25 (c) Special Provisions Concerning CMA Termination Events, Events of Default and Qualified Payments.......................................................26 (d) Takings of All or Substantially All of the Property..........................26 (e) Waiver of Subrogation........................................................26
(ii) 4 12. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF SGC CONCERNING THE PROPERTY...........................................................27 (a) Compliance with Covenants and Laws...........................................27 (b) Operation of Property........................................................27 (c) Debts for Construction, Maintenance, Operation or Development................28 (d) Repair, Maintenance, Alterations and Additions...............................28 (e) Compliance With Permitted Encumbrances and Development Contracts.............28 (f) Modification of Permitted Encumbrances and Development Contracts.............29 (g) Books and Records Concerning the Property....................................29 13. ASSIGNMENT AND SUBLETTING BY SGC..................................................29 (a) BNPLC's Consent Required.....................................................29 (b) Standard for BNPLC's Consent to Assignments and Certain Other Matters........29 (c) Consent Not a Waiver.........................................................30 14. ASSIGNMENT BY BNPLC...............................................................30 (a) Restrictions on Transfers....................................................30 (b) Effect of Permitted Transfer or other Assignment by BNPLC....................30 15. BNPLC'S RIGHT OF ACCESS...........................................................30 16. OTHER REPRESENTATIONS, WARRANTIES AND COVENANTS OF SGC............................31 (a) Negative Covenants...........................................................31 (i) Multi employer ERISA Plans............................................31 (ii) Prohibited ERISA Transaction..........................................31 (b) Financial Statements; Required Notices; Certificates as to Default...........31 (c) No Default or Violation......................................................32 (d) No Suits.....................................................................32 (e) Enforceability...............................................................32 (f) Financial Matters............................................................33 (g) Organization.................................................................33 (h) ERISA........................................................................33 (i) Use of Proceeds..............................................................33 (j) Investment Company Act.......................................................34 (k) Omissions....................................................................34 (l) Not a Foreign Person.........................................................34 (m) Further Assurances...........................................................34 17. EVENTS OF DEFAULT.................................................................34 (a) Definition of Events of Default..............................................34 18. REMEDIES..........................................................................36 (a) Basic Remedies...............................................................36 (b) Notice Required So Long As SGC 's Purchase Option and Initial Remarketing Rights and Obligations Continue Under the Purchase Agreement.................38 (c) Enforceability...............................................................38 (d) Remedies Cumulative..........................................................38 19. DEFAULT BY BNPLC..................................................................39
(iii) 5 20. QUIET ENJOYMENT...................................................................39 21. SURRENDER UPON TERMINATION........................................................39 22. HOLDING OVER BY SGC...............................................................39 23. INDEPENDENT OBLIGATIONS EVIDENCED BY THE OTHER OPERATIVE DOCUMENTS................40 24. WAIVER OF JURY TRIAL..............................................................40 25. MISCELLANEOUS.....................................................................40 (a) Notices......................................................................40 (b) Severability.................................................................42 (c) No Merger....................................................................42 (d) No Implied Waiver............................................................42 (e) NO IMPLIED REPRESENTATIONS BY BNPLC..........................................42 (f) Entire Agreement.............................................................42 (g) Binding Effect...............................................................43 (h) Time is of the Essence.......................................................43 (i) Governing Law................................................................43 (j) Paragraph Headings...........................................................43 (k) Other Terms and References...................................................43 (l) Not a Partnership, Etc.......................................................43 26. INCOME TAX REPORTING..............................................................43 27. PROPRIETARY INFORMATION AND CONFIDENTIALITY.......................................44 28. USURY SAVINGS CLAUSE..............................................................45
EXHIBITS AND SCHEDULES Exhibit A....... ..............................................Legal Description Exhibit B.............................................Permitted Encumbrance List Notice by SGC of Election Not to Make Construction-Period Exhibit C......................................................Indemnity Payment Exhibit D.........................Standard Notice of Request for Action by BNPLC Exhibit E......................Notice of Request Requiring an Expedited Response Exhibit F.................................................Insurance Requirements Exhibit G.................................................Compliance Certificate Exhibit H.............................................Libor Period Election Form (iv) 6 Schedule 1.........................................List of Development Documents Schedule 2.............List of Claims Pending or Threatened Against the Property List of Defined Terms.........................................Shared Definitions (v) 7 LEASE AGREEMENT This LEASE AGREEMENT (this "LEASE"), by and between BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"), and SOLECTRON GEORGIA CORPORATION, a Georgia corporation ("SGC"), is dated as of October 20, 1998, the Effective Date. ("EFFECTIVE DATE" and other capitalized terms used and not otherwise defined in this Lease are intended to have the meanings assigned to them in the List of Defined Terms attached to and made a part of this Lease.) RECITALS Pursuant to the Existing Contract, which covers the Land described in Exhibit A, BNPLC is acquiring the Land and any appurtenances thereto from Seller contemporaneously with the execution of this Lease. In anticipation of BNPLC's acquisition of the Land, BNPLC and SGC have reached agreement as to the terms and conditions upon which BNPLC is willing to lease the Land to SGC and to lease to SGC the improvements to be acquired pursuant to the Existing Contract or constructed on the Land as hereinafter provided, and by this Lease BNPLC and SGC desire to evidence such agreement. GRANTING CLAUSES In consideration of the rent to be paid and the covenants and agreements to be performed by SGC, as hereinafter set forth, BNPLC does hereby LEASE, DEMISE and LET unto SGC for the term hereinafter set forth all right, title and interest of BNPLC, now owned or hereafter acquired, in and to: (1) the Land; (2) any and all Improvements acquired from Seller pursuant to the Existing Contract, contemporaneously with the execution of this Lease or in the future as provided in the Existing Contract; (3) all easements and other rights appurtenant to the Land or to the Improvements, whether now owned or hereafter acquired by BNPLC; and (4) (A) any land lying within the right-of-way of any street, open or proposed, adjoining the Land, (B) any sidewalks and alleys adjacent to the Land and (C) any strips and gores between the Land and abutting land. BNPLC's interest in all property described in clauses (1) through (4) above are hereinafter referred to collectively as the "REAL PROPERTY". To the extent, but only to the extent, that assignable rights or interests in, to or under the following have been or will be acquired by BNPLC under the Existing Contract or acquired by BNPLC pursuant to Paragraph 8 below, BNPLC also hereby grants and assigns to SGC for the term of this Lease the right to use and enjoy (and, in the case of contract rights, to enforce) such rights or interests of BNPLC: (a) any goods, equipment, furnishings, furniture and other tangible 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; 8 (b) the benefits, if any, conferred upon the owner of the Real Property by the Permitted Encumbrances (including the Ground Lease) and Development Documents; and (c) any permits, licenses, franchises, certificates, and other rights and privileges against third parties (including the lessee under the Ground Lease) related to the Real Property. Such rights and interests of BNPLC, whether now existing or hereafter arising, are hereinafter collectively called the "PERSONAL PROPERTY". The Real Property and the Personal Property are hereinafter sometimes collectively called the "PROPERTY." However, the leasehold estate conveyed hereby and SGC's rights hereunder are expressly made subject and subordinate to the terms and conditions of this Lease, to the matters listed in Exhibit B and all other Permitted Encumbrances (including the Ground Lease), and to any other claims or encumbrances not constituting Liens Removable by BNPLC. FURTHER, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS LEASE OR IN ANY OTHER OPERATIVE DOCUMENT: (1) SGC SHALL NOT INTERFERE WITH (AND NO RIGHT OR ESTATE IN THE PROPERTY IS GRANTED TO SGC HEREBY OR BY ANY OTHER OPERATIVE DOCUMENT THAT WOULD ENTITLE SGC TO INTERFERE WITH) THE RIGHTS OF THE LESSEE UNDER THE GROUND LEASE TO THE POSSESSION AND QUIET ENJOYMENT OF THE PORTION OF THE LAND COVERED BY THE GROUND LEASE. (2) BNPLC AND SGC INTEND THAT THE RIGHTS OF THE LESSEE UNDER THE GROUND LEASE SHALL CONTINUE ON AND SUBJECT TO THE TERMS AND CONDITIONS SET FORTH THEREIN, UNAFFECTED BY THIS LEASE OR ANY OTHER OPERATIVE DOCUMENT OR THE EXERCISE BY BNPLC OR SGC OF ANY RIGHTS OR REMEDIES PROVIDED HEREIN OR IN THE OTHER OPERATIVE DOCUMENTS. (3) IF, WHETHER BY SUBSEQUENT WRITTEN AGREEMENT OF BNPLC AND SGC OR OTHERWISE, THIS LEASE OR ANY OTHER OPERATIVE DOCUMENT SHOULD TERMINATE DURING THE TERM OF THE GROUND LEASE, THE GROUND LEASE SHALL SURVIVE SUCH TERMINATION. GENERAL TERMS AND CONDITIONS The Property is leased by BNPLC to SGC and is accepted and is to be used and possessed by SGC upon and subject to the following terms and conditions: 1. TERM. (a) Scheduled Term. This Lease is intended to be an effective and binding obligation upon BNPLC and SGC throughout the period (the "TERM") commencing on and including the Effective Date and ending on the first Business Day of October, 2003, unless extended or sooner terminated as expressly herein provided; however, the rights of SGC as the tenant hereunder to the use, occupancy and possession of the Land and the Improvements will not commence until the Base Rent Commencement Date. Prior to the Base Rent Commencement Date, SGC will have the right under and pursuant to the rights and authority granted to it by the Construction Management Agreement to the use, occupancy and possession of the Land and the Improvements in its capacity 2 9 as construction manager. Such right of SGC as construction manager will be to the exclusion of BNPLC, but subject to the terms and conditions set forth therein, herein and in the other Operative Documents, so long as the Construction Management Agreement remains in force. (b) Automatic Termination as of the Base Rent Commencement Date Resulting From an Election by SGC to Terminate the Purchase Option and SGC's Initial Remarketing Rights and Obligations. If SGC terminates the Purchase Option and SGC's Initial Remarketing Rights and Obligations prior to the Base Rent Commencement Date pursuant to subparagraph 4(B) of the Purchase Agreement, then this Lease shall terminate automatically on the Base Rent Commencement Date. Just as any such termination of the Purchase Option and SGC's Initial Remarketing Rights and Obligations shall be subject to the condition (set forth in subparagraph 4(B) of the Purchase Agreement) that SGC pay an Issue 97-10 Prepayment to BNPLC, so too will the termination of this Lease pursuant to this subparagraph be subject the condition that SGC make the Issue 97-10 Prepayment to BNPLC. (c) Election by BNPLC to Terminate After an Issue 97-10 Election. BNPLC shall be entitled to terminate this Lease, as BNPLC deems appropriate in its sole and absolute discretion, at any time after receiving a notice given by SGC to make or attempt to make any Issue 97-10 Election. Upon any termination of this Lease by BNPLC pursuant to this subparagraph, SGC must pay to BNPLC an Issue 97-10 Prepayment. (d) Election by SGC to Terminate After Accelerating the Designated Sale Date. Provided SGC has not made any Issue 97-10 Election, SGC shall be entitled to accelerate the Designated Sale Date (and thus accelerate the purchase of BNPLC's interest in the Property by SGC or by an Applicable Purchaser pursuant to the Purchase Agreement) by sending a notice to BNPLC as provided in clause (2) of the definition of "Designated Sale Date" in the List of Defined Terms. In the event, because of SGC's election to so accelerate the Designated Sale Date or for any other reason, the Designated Sale Date occurs before the end of the scheduled Term, SGC may terminate this Lease on or after the Designated Sale Date; provided, however, as a condition to any such termination by SGC, SGC must have done the following prior to the termination: (i) purchased or caused an Applicable Purchaser to purchase the Property pursuant to the Purchase Agreement and satisfied all of SGC's other obligations under the Purchase Agreement; (ii) paid to BNPLC all Base Rent, all Commitment Fees, all Administrative Agency Fees and all other Rent due on or before or accrued through the Designated Sale Date; and (iii) paid any Breakage Costs caused by BNPLC's sale of the Property pursuant to the Purchase Agreement. (e) Extension of the Term. The Term may be extended at the option of SGC 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, BNPLC and SGC must have agreed in writing upon, and received the written consent and approval of BNPLC's Parent and all other Participants to (1) a corresponding extension not only to the date for the expiration of the Term specified above in this Section, but also to the date specified in clause (1) of the definition of Designated Sale Date in the List of Defined Terms attached hereto, and (2) an adjustment to the Rent that SGC 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 BNPLC and SGC, each in its sole and absolute discretion; (B) there must be no Event of Default continuing hereunder at the time of SGC's exercise of its option to extend; (C) prior to any such extension, SGC must have 3 10 completed the Construction Project in accordance with the Construction Management Agreement and must not have made any Issue 97-10 Election; and (D) immediately prior to any such extension, this Lease must remain in effect. With respect to the condition that BNPLC and SGC must have agreed upon the Rent required for any extension of the Term, neither SGC nor BNPLC is willing to submit itself to a risk of liability or loss of rights hereunder for being judged unreasonable. Accordingly, both SGC and BNPLC 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 SGC 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 SGC shall continue without interruption and without any loss of priority over other interests in or claims against the Property that may be created or arise after the date hereof and before the extension. 2. NO LEASE TERMINATION. (a) Status of Lease. Except as expressly provided herein, this Lease shall not terminate, nor shall SGC have any right to terminate this Lease, nor shall SGC be entitled to any abatement of the Rent, nor shall the obligations of SGC under this Lease be excused, for any reason whatsoever, including any of the following: (i) any damage to or the destruction of all or any part of the Property from whatever cause, (ii) the taking of the Property or any portion thereof by eminent domain or otherwise for any reason, (iii) the prohibition, limitation or restriction of SGC'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 SGC or of anyone claiming through or under SGC (provided, that if SGC is wrongfully evicted by BNPLC or by any third party lawfully exercising its rights under a Lien Removable by BNPLC, then SGC will have the remedies described in Paragraph 19 below), (v) any default on the part of BNPLC under this Lease or under any other agreement to which BNPLC and SGC are parties, (vi) the inadequacy in any way whatsoever of the design, construction, assembly or installation of any improvements, fixtures or tangible personal property included in the Property, it being understood that BNPLC has not made, does not make and will not make any representation express or implied as to the adequacy thereof, (vii) any latent or other defect in the Property or any change in the condition thereof or the existence with respect to the Property of any violations of Applicable Laws, (viii) any breach by Seller of the surviving provisions of the Existing Contract, (ix) any breach of the Ground Lease by the lessee thereunder, or (x) any other cause whether similar or dissimilar to the foregoing. It is the intention of the parties hereto that the obligations of SGC hereunder shall be separate and independent of the covenants and agreements of BNPLC, that the Base Rent and all other sums payable by SGC hereunder shall continue to be payable in all events and that the obligations of SGC 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. (b) Waiver by SGC. Without limiting the foregoing, SGC waives to the extent permitted by Applicable Laws, except as otherwise expressly provided herein, all rights to which SGC 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 Property or any part thereof or (ii) to any abatement, suspension, deferment or reduction of the Rent. However, nothing in this Paragraph 2 shall be construed as a waiver by SGC of any right SGC may have at law or in equity to the following remedies, whether because of BNPLC's failure to remove a Lien Removable by BNPLC or because of any other default by BNPLC under this Lease that continues beyond the period for cure provided in Paragraph 19: (i) the recovery of monetary damages, (ii) injunctive relief in case of the violation, or attempted or threatened violation, by BNPLC of any of the express covenants, agreements, conditions or provisions of this Lease which are binding upon BNPLC (including the confidentiality provisions set forth in 4 11 subparagraph 7.(f) below), or (iii) a decree compelling performance by BNPLC of any of the express covenants, agreements, conditions or provisions of this Lease which are binding upon BNPLC. 3. USE AND CONDITION OF THE PROPERTY. (a) Use. Subject to the Permitted Encumbrances, the Development Documents and the terms hereof, SGC may use and occupy the Property during the Term, but only for the following purposes and other lawful purposes incidental thereto: (i) manufacturing, engineering, assembly, warehousing and laboratory-based research and development of circuit boards, computer-related and other electronic products; (ii) administrative and office space; (iii) cafeteria, library, and other support function uses that SGC may provide to its employees; and (iv) other lawful uses approved in advance and in writing by BNPLC, which approval will not be unreasonably withheld after completion of the Construction Project (but SGC acknowledges that BNPLC's withholding of such approval shall be reasonable if BNPLC determines in good faith that (i) giving the approval may materially increase BNPLC's risk of liability for any existing or future environmental problem, or (ii) giving the approval is likely to substantially increase BNPLC's administrative burden of complying with or monitoring SGC's compliance with the requirements of this Lease or other Operative Documents). Although the term "products" in this subparagraph may include products designed to detect, monitor, neutralize, handle or process Hazardous Substances, the use of the Property by SGC shall not include bringing Hazardous Substances onto the Property for the purpose of testing or demonstrating any such products. (b) Condition of the Property. SGC ACKNOWLEDGES THAT IT HAS CAREFULLY AND FULLY INSPECTED THE PROPERTY AND ACCEPTS THE PROPERTY 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. SGC ALSO ACCEPTS THE PROPERTY WITHOUT ANY COVENANT, REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, BY BNPLC OR ITS AFFILIATES REGARDING THE TITLE THERETO OR THE RIGHTS OF ANY PARTIES IN POSSESSION OF ANY PART THEREOF, EXCEPT AS EXPRESSLY SET FORTH IN PARAGRAPH 20. BNPLC 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 PROPERTY OR FOR ANY VIOLATIONS WITH RESPECT THERETO OF APPLICABLE LAWS. NOR SHALL BNPLC BE REQUIRED TO FURNISH TO SGC ANY FACILITIES OR SERVICES OF ANY KIND, INCLUDING WATER, STEAM, HEAT, GAS, AIR CONDITIONING, ELECTRICITY, LIGHT OR POWER. (c) Consideration for and Scope of Waiver. The provisions of subparagraph 3.(b) above have been negotiated by BNPLC and SGC after due consideration for the Rent payable hereunder and are intended to be a complete exclusion and negation of any representations or warranties of BNPLC or its Affiliates, express or implied, with respect to the Property that may arise pursuant to any law now or hereafter in effect or otherwise, except as expressly set forth herein. 5 12 However, such exclusion of representations and warranties by BNPLC and its Affiliates is not intended to impair any representations or warranties made by other parties, including any architects, engineers or contractors engaged to work on the Construction Project, the benefit of which is to pass to SGC during the Term because of the definition of Personal Property and Property above. 4. RENT. (a) Base Rent Generally. On the Base Rent Commencement Date and on each Base Rent Date through the end of the Term, SGC shall pay BNPLC rent ("BASE RENT"). Each payment of Base Rent must be received by BNPLC no later than 10:00 a.m. (Central time) on the date it becomes due; if received after 10:00 a.m. (Central time) it will be considered for purposes of this Lease as received on the next following Business Day. BNPLC shall notify SGC of the amount of each payment of Base Rent (calculated as provided in subparagraph 4.(b)) at least three days before the date upon which it first becomes due. However, any failure by BNPLC to so notify SGC shall not constitute a waiver of BNPLC's right to payment, but absent such notice SGC shall not be in default for any underpayment resulting therefrom if SGC, in good faith, reasonably estimates the payment required, makes a timely payment of the amount so estimated and corrects any underpayment within three Business Days after being notified by BNPLC of the underpayment. (b) Calculation of and Due Dates for Base Rent. Payments of Base Rent shall be calculated and become due as follows: (i) Amount Payable On the Base Rent Commencement Date. The Base Rent payable on the Base Rent Commencement Date shall equal the difference (if any) between (a) the total amount that would have been added to the Outstanding Construction Allowance as Carrying Costs on such date if not for the limit set forth in subparagraph 6.(b)(ii), and (b) the Carrying Costs actually added on such date to the Outstanding Construction Allowance. (ii) Determination of Subsequent Payment Due Dates. For all Base Rent Periods subject to a LIBOR Period Election of one month 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 SGC or any Applicable Purchaser purchases BNPLC'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 BNPLC under the Purchase Agreement. (iii) Base Rent Formula. Each installment of Base Rent payable for any Base Rent Period shall equal: o Stipulated Loss Value on the first day of such Base Rent Period, times o the sum of (a) the Effective Rate with respect to such Base Rent Period, plus (b) the Spread for the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, times 6 13 o the number of days in the period from and including the preceding Base Rent Date to but not including the Base Rent Date upon which the installment is due, divided by o three hundred sixty. Assume, only for the purpose of illustration: that prior to the first day of a Base Rent Period subject to a LIBOR Period Election of one month the Construction Allowance has been fully funded, but a total of $35,000,000 of Qualified Payments have been received by BNPLC, leaving a Stipulated Loss Value of $15,000,000; that the Effective Rate for such Base Rent Period is 6%; that the Spread for such period is thirty-two and one-half basis points (32.5/100 of 1%); and that such Base Rent Period contains exactly thirty days. Under such assumptions, the Base Rent for the hypothetical Base Rent Period will equal: $15,000,000 x (6% + .325%) x 30/360 = $79,062.50 (c) Additional Rent. All amounts which SGC is required to pay to or on behalf of BNPLC 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", and together Base Rent and Additional Rent are herein sometimes called "RENT"). (d) Commitment Fees. For each Construction Period SGC shall pay BNPLC a fee (a "COMMITMENT FEE") equal to: o twelve and one-half basis points (12.5/100 of 1%), times an amount equal to: (i) the Maximum Construction Allowance, less (ii) the Funded Construction Allowance on the first day of such Construction Period; times o the number of days in such Construction Period; divided by o three hundred sixty. SGC shall pay Commitment Fees in arrears on the first Business Day of February, May, August and November of each calendar year, beginning with November 1, 1998 and continuing regularly throughout the Term so long as Commitment Fees have accrued and remain unpaid. However, if any Commitment Fees shall have accrued and remain unpaid on the date BNPLC's interest in the Property is sold pursuant to the Purchase Agreement, such accrued unpaid Commitment Fees shall be due on the date of the sale. (e) Administrative Agency Fees. Upon execution and delivery of this Lease by BNPLC, and again on each anniversary of the date hereof, SGC shall pay to BNPLC an administrative fee (an "ADMINISTRATIVE AGENCY FEE") in the amount set forth in the letter agreement dated as of July 22, 1998 between BNPLC, SGC and Guarantor and other affiliates of SGC. Each Administrative Agency Fee shall represent Additional Rent for the Construction Period or Base Rent Period during which it is paid. (f) Issue 97-10 Prepayments. Following any Issue 97-10 Election or any CMA Termination Event under (and as defined in) the Construction Management Agreement, SGC shall make an Issue 97-10 Prepayment to BNPLC within three Business Days after receipt of any demand for such a payment. BNPLC may 7 14 demand an Issue 97-10 Prepayment pursuant to this subparagraph at any time and from time to time (as Project Costs increase) after any Issue 97-10 Election or CMA Termination Event. (g) No Demand or Setoff. Except as expressly provided herein, SGC shall pay all Rent without notice or demand and without counterclaim, deduction, setoff or defense. (h) Default 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. Subject to any requirements of Applicable Law, BNPLC shall be entitled to apply any amounts paid by or on behalf of SGC against any Rent then past due in the order the same became due or in such other order as BNPLC may elect. 5. PAYMENT OF EXECUTORY COSTS AND LOSSES RELATED TO THE PROPERTY. (a) "Net" Lease Generally. Subject only to the exceptions listed in subparagraph 5.(e) below, it is the intention of BNPLC and SGC that the Base Rent, Commitment Fees, Administrative Agency Fees and other payments herein specified shall be absolutely net to BNPLC and that SGC shall pay all costs, expenses and obligations of every kind relating to the Property or this Lease which may arise or become due, including: (i) any taxes payable by virtue of BNPLC's receipt of amounts paid to or on behalf of BNPLC in accordance with this Paragraph 5; (ii) any amount for which BNPLC is or becomes liable with respect to the Permitted Encumbrances or the Development Documents; and (iii) any costs incurred by BNPLC (including Attorneys' Fees) because of BNPLC's acquisition or ownership of any interest in the Property or because of this Lease or the transactions contemplated herein. (b) Impositions. Subject only to the exceptions listed in subparagraph 5.(e) below, SGC shall pay or cause to be paid prior to delinquency all ad valorem taxes assessed against the Property and other Impositions. If requested by BNPLC from time to time, SGC shall furnish BNPLC with receipts showing payment of all Impositions at least ten days prior to the applicable default date therefor. Notwithstanding the foregoing, SGC may in good faith, by appropriate proceedings, contest the validity, applicability or amount of any asserted Imposition, and pending such contest SGC shall not be deemed in default hereunder because of the Imposition if (1) SGC diligently prosecutes such contest to completion in a manner reasonably satisfactory to BNPLC, and (2) SGC 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, in any event each such contest shall be concluded and the contested Impositions must be paid by SGC prior to the earlier of (i) the date that any criminal action is overtly threatened or instituted against BNPLC or its directors, officers or employees because of the nonpayment thereof or (ii) the date any writ or order is issued under which any property owned or leased by BNPLC (including the Property) may be seized or sold or any other action is taken or overtly threatened against BNPLC or against any property owned or leased by BNPLC because of the nonpayment thereof, (iii) any Designated Sale Date upon which, for any reason, SGC or an Affiliate of SGC or any Applicable Purchaser shall not purchase BNPLC's interest in the Property pursuant to the Purchase Agreement for a net price to BNPLC (when taken together with any additional payments made by SGC pursuant to Paragraph 1(A)(2) of the Purchase Agreement, in the case of a purchase by an Applicable Purchaser) equal to Stipulated Loss Value, or (iv) any date upon which the Construction Management Agreement or this Lease or SGC's Initial Remarketing Rights and Obligations may be terminated because of or following any Issue 97-10 Election. 8 15 (c) Increased Costs; Capital Adequacy Charges. Subject only to the exceptions listed in subparagraph 5.(e) below: (i) If, after the Effective Date, there shall be any increase in the cost to BNPLC's Parent or any other Participant agreeing to make or making, funding or maintaining advances to BNPLC in connection with the Property because of any Banking Rules Change, then SGC shall from time to time, pay to BNPLC for the account of BNPLC's Parent or such other Participant, as the case may be, additional amounts sufficient to compensate BNPLC's Parent or the Participant for such increased cost. A certificate as to the amount of such increased cost, submitted to BNPLC and SGC by BNPLC's Parent or the other Participant, shall be conclusive and binding upon SGC, absent clear and demonstrable error. (ii) BNPLC's Parent or any other Participant may demand additional payments ("CAPITAL ADEQUACY CHARGES") if BNPLC's Parent or the other Participant determines that any Banking Rules Change 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 advances made or to be made to BNPLC to permit BNPLC to maintain BNPLC's investment in the Property or to make Construction Advances. To the extent that BNPLC's Parent or another Participant demands Capital Adequacy Charges as compensation for the additional capital requirements reasonably allocable to such investment or advances, SGC shall pay to BNPLC for the account of BNPLC's Parent or the other Participant, as the case may be, the amount so demanded. (iii) Any amount to be paid by SGC under this subparagraph 5.(c) shall be due within ten days after a demand for such payment is made upon SGC. (d) SGC's Payment of Other Losses; General Indemnification. Subject only to the exceptions listed in subparagraph 5.(e) below: (i) All Losses (including Environmental Losses) asserted against or incurred or suffered by BNPLC or other Interested Parties at any time and from time to time by reason of, in connection with or arising out of (A) their ownership or alleged ownership of any interest in the Property or the Rents, (B) the use and operation of the Property, (C) the negotiation or administration of this Lease or other Operative Documents, (D) the making of Funding Advances, (E) any Construction Project, (F) the breach by SGC of this Lease or any other document executed by SGC in connection herewith, (G) any failure of the Property or SGC itself to comply with Applicable Laws, (H) Hazardous Substance Activities, including those occurring prior to the Effective Date, (I) any bodily or personal injury or death or property damage occurring in or upon or in the vicinity of the Property through any cause whatsoever, or (J) the Permitted Encumbrances (including the Ground Lease and the surviving provisions of the Existing Contract), shall be paid by SGC, and SGC shall indemnify and defend BNPLC and other Interested Parties from and against all such Losses. (However, the indemnity in the preceding sentence shall not be construed to make SGC liable to both BNPLC and any Participant or other party claiming through BNPLC for the same costs, expenses or damages. Nor will such indemnity be construed to make SGC liable for any allocation of general overhead or internal administrative expenses of BNPLC, BNPLC's Parent or any other Interested Party except to the extent allowed by subparagraph 5.(c)(i) because of a Banking Rules Change after the date of this Lease. Nor will such indemnity be construed to limit SGC's right to reimbursement for Reimbursable Construction-Period Costs under the Construction Management Agreement.) (ii) THE INDEMNITIES AND RELEASES PROVIDED HEREIN FOR THE BENEFIT OF BNPLC AND OTHER INTERESTED PARTIES, INCLUDING THE INDEMNITY SET FORTH 9 16 THE PRECEDING SUBPARAGRAPH 5.(d)(i), SHALL APPLY EVEN IF AND WHEN THE SUBJECT MATTERS OF THE INDEMNITIES AND RELEASES ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OR STRICT LIABILITY OF BNPLC OR ANOTHER INTERESTED PARTY. FURTHER, SUCH INDEMNITIES AND RELEASES WILL APPLY EVEN IF INSURANCE OBTAINED BY SGC OR REQUIRED OF SGC BY THIS LEASE OR OTHER OPERATIVE DOCUMENTS IS NOT ADEQUATE TO COVER LOSSES AGAINST OR FOR WHICH THE INDEMNITIES AND RELEASES ARE PROVIDED. SGC'S LIABILITY, HOWEVER, FOR ANY FAILURE TO OBTAIN INSURANCE REQUIRED BY THIS LEASE OR OTHER OPERATIVE DOCUMENTS WILL NOT BE LIMITED TO LOSSES AGAINST WHICH INDEMNITIES ARE PROVIDED HEREIN, IT BEING UNDERSTOOD THAT SUCH INSURANCE IS INTENDED TO DO MORE THAN PROVIDE A SOURCE OF PAYMENT FOR LOSSES AGAINST WHICH BNPLC AND OTHER INTERESTED PARTIES ARE ENTITLED TO INDEMNIFICATION BY THIS LEASE. (iii) Costs and expenses for which SGC shall be responsible pursuant to this subparagraph 5.(d) will include appraisal fees, filing and recording fees, inspection fees, survey fees, taxes, brokerage fees and commissions, abstract fees, title policy fees, Uniform Commercial Code search fees, escrow fees and Attorneys' Fees incurred by BNPLC with respect to the Property, whether such costs and expenses are incurred at the time of execution of this Lease or at any time during the Term. Such costs and expenses will also include Attorneys' Fees or other costs incurred to evaluate lien releases and other information submitted by SGC with requests for Construction Advances. (iv) SGC's obligations under this subparagraph 5.(d) shall survive the termination or expiration of this Lease. Any amount to be paid by SGC under this subparagraph 5.(d) shall be due within ten days after a demand for such payment is made upon SGC. (v) If an Interested Party notifies SGC of any claim or proceeding included in, or any investigation or allegation concerning, Losses for which SGC is responsible pursuant to this subparagraph 5.(d), SGC shall assume on behalf of the Interested Party and conduct with due diligence and in good faith the investigation and defense thereof and the response thereto with counsel selected by SGC, but reasonably satisfactory to the Interested Party; provided, that the Interested 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, proceeding, investigation or allegation involves both SGC and the Interested Party and the Interested 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 SGC, then the Interested Party shall have the right to select separate counsel to participate in the investigation and defense of and response to such claim, proceeding, investigation or allegation on its own behalf, and SGC shall pay or reimburse the Interested Party for all Attorney's Fees incurred by the Interested Party because of the selection of such separate counsel. If SGC fails to assume promptly (and in any event within fifteen days after being notified of the applicable claim, proceeding, investigation or allegation) the defense of the Interested Party, then the Interested Party may contest (or settle, with the prior written consent of SGC, which consent will not be unreasonably withheld) the claim, proceeding, investigation or allegation at SGC's expense using counsel selected by the Interested Party. Moreover, if any such failure by SGC continues for thirty days or more after SGC is notified of any such claim, proceeding, investigation or allegation, the Interested Party may elect not to contest or continue contesting the same and instead settle (or pay in full) all claims related thereto without SGC's consent and without releasing SGC from any obligations to the Interested Party under this subparagraph 5.(d) so long as, in the written opinion of reputable counsel to the Interested Party, the settlement (or payment in full) is clearly advisable. 10 17 (e) Exceptions and Qualifications to Indemnities. (i) BNPLC acknowledges and agrees that nothing in the preceding subparagraphs of this Paragraph 5 shall be construed to require SGC to pay or reimburse an Interested Party for: (1) Excluded Taxes; (2) Losses incurred or suffered by such Interested Party that are proximately caused by (and attributed by any applicable principles of comparative fault to) the Established Misconduct of that Interested Party; (3) withholding of taxes permitted by subparagraph 5.(f); (4) general overhead or internal administrative expenses of BNPLC or any other Interested Party, except to the extent allowed by subparagraph 5.(c)(i) because of changes described in that subparagraph after the Effective Date; (5) Losses incurred or suffered by Participants in connection with their negotiation or execution of the Participation Agreement (or supplements making them parties thereto) or in connection with any due diligence they may undertake before entering into the Participation Agreement; (6) Losses incurred or suffered by any Interested Party after, and not proximately caused by events or circumstances that actually or allegedly occurred or existed on or before, the later of the dates upon which (A) this Lease terminates or expires, or (B) SGC surrenders possession of the Property. Further, without limiting BNPLC's rights (as provided in other provisions of this Lease and other Operative Documents) to include the following in the calculation of the Outstanding Construction Allowance, Stipulated Loss Value, the Break Even Price and the Maximum Permitted Prepayment (as applicable) or to collect Base Rent, Issue 97-10 Prepayments, a Supplemental Payment and other amounts, the calculation of which depends upon the Outstanding Construction Allowance, Stipulated Loss Value, the Break Even Price and the Maximum Permitted Prepayment, BNPLC acknowledges and agrees that nothing in subparagraph 5.(a) or the preceding subparagraphs of this Paragraph 5 shall be construed to require SGC to pay or reimburse an Interested Party for: a) costs paid by BNPLC with the proceeds of the Initial Funding Advance as part of the Transaction Expenses; or b) Construction Advances, including costs and expenditures incurred or paid by or on behalf of BNPLC after any Landlord's Election to Continue Construction, to the extent that such costs and expenditures are considered to be Construction Advances pursuant to subparagraph 6.(d). (ii) Notwithstanding anything to the contrary in the preceding subparagraphs of this Paragraph 5, SGC's liability for payments required by the preceding subparagraphs of this Paragraph 5, and not excused by the preceding subparagraph 5.(e)(i), prior to substantial completion of the Construction Project ("CONSTRUCTION-PERIOD INDEMNITY PAYMENTS") shall be subject to the following provisions: a) SGC may decline to pay any Construction-Period Indemnity Payments other than the following (it being understood that SGC's payment of the following Construction-Period Indemnity Payments shall not be subject to any abatement or deferral by anything contained in this subparagraph 5.(e)(ii)): (1) Construction-Period Indemnity Payments eligible for reimbursement to SGC under the terms and conditions of the Construction Management Agreement; and (2) Construction-Period Indemnity Payments that constitute Absolute SGC Construction Obligations. b) Any Construction-Period Indemnity Payment SGC is excused from paying by this 11 18 subparagraph 5.(e)(ii), together with interest thereon at the Default Rate, will be included in the calculation of the Break Even Price under (and as defined in) the Purchase Agreement. (iii) Further, if an Interested Party receives a written notice of Losses that such Interested Party believes are covered by the indemnity in subparagraph 5.(d)(i), then such Interested Party will be expected to promptly furnish a copy of such notice to SGC. The failure to so provide a copy of the notice to SGC shall not excuse SGC from its obligations under subparagraph 5.(d)(i); provided, that if SGC is unaware of the matters described in the notice and such failure renders unavailable defenses that SGC might otherwise assert, or precludes actions that SGC might otherwise take, to minimize its obligations, then SGC shall be excused from its obligation to indemnify such Interested Party (and any Affiliate of such Interested Party) against the Losses, if any, which would not have been incurred or suffered but for such failure. For example, if BNPLC fails to provide SGC with a copy of a notice of an obligation covered by the indemnity set out in subparagraph 5.(d)(i) and SGC is not otherwise already aware of such obligation, and if as a result of such failure BNPLC becomes liable for penalties and interest covered by the indemnity in excess of the penalties and interest that would have accrued if SGC had been promptly provided with a copy of the notice, then SGC will be excused from any obligation to BNPLC (or any Affiliate of BNPLC) to pay the excess. (f) Withholding Taxes. Notwithstanding anything else to the contrary in this Paragraph 5, but subject to the provisions of this subparagraph 5.(f), to the extent required by law SGC may deduct United States and Georgia withholding taxes imposed as a way of collecting or in lieu of Excluded Taxes on payments of Base Rent, Commitment Fees, Administrative Agency Fees, any interest payable pursuant to subparagraph 4.(h) or any additional compensation claimed by BNPLC pursuant to subparagraph 5.(c)(ii) (collectively, "INCOME PAYMENTS") from Income Payments, without obligation to gross up, indemnify or otherwise increase payments in consequence thereof. Such withholding, without obligation to gross up, indemnify or otherwise increase payments in consequence thereof, will be permitted if, but only if: (i) in the case of withholding for Excluded Taxes imposed by the United States of America, the Person entitled to receive Income Payments (whether BNPLC, as the original landlord named herein, or an assignee of the original landlord's rights hereunder, a "PAYEE") is not exempt from withholding by reason of having been organized under the laws of the United States of America or any State thereof, and such Person shall not have provided SGC with three counterparts of each of the forms prescribed by the Internal Revenue Service (Form 1001 or 4224, or successor forms, as the case may be) claiming for Payee an exemption from federal withholding on all Income Payments; (ii) in the case of withholding for Excluded Taxes imposed by the State of Georgia, the Payee is not exempt from withholding by reason of having been qualified to do business in Georgia or otherwise, and such Person shall not have provided SGC with three (3) counterparts of the forms (if any) prescribed by the Georgia taxing authorities claiming for Payee an exemption from Georgia withholding on all Income Payments; (iii) at least thirty days prior to any withholding from or reduction of Income Payments, SGC shall have notified the Payee that SGC believes the withholding is required and permitted by this subparagraph; and (iv) the withholding taxes on the Income Payments would have been assessed even if the applicable taxing authorities had characterized the transactions evidenced by this Lease and the Purchase Agreement as a financing arrangement. 12 19 Any Payee exempt from withholding for Excluded Taxes imposed by the United States of America by reason of having been organized under the laws of the United States of America or any State thereof shall provide to SGC statements conforming to the requirements of Treasury Regulation 1.1441-5(b) or any successor thereto (which statements may be made on a Form W-9). If SGC shall ever be required to pay Excluded Taxes that BNPLC has failed to pay when due because of SGC's failure to withhold from payments made under this Lease, BNPLC shall reimburse SGC for such Excluded Taxes and for any penalties or interest thereon charged to SGC. Nothing in this subparagraph 5.(f) shall excuse SGC from its obligation under subparagraph 5.(c)(i) to compensate BNPLC for increased costs attributable to any change in law relating to withholding taxes after the Effective Date. 6. CONSTRUCTION OF NEW IMPROVEMENTS AND ACQUISITION OF EXISTING IMPROVEMENTS. (a) Advances; Outstanding Construction Allowance. The Construction Management Agreement entitles SGC to receive from BNPLC - subject to the terms and conditions set forth in the Construction Management Agreement - Construction Advances on Advance Dates from time to time to pay or reimburse SGC for the costs of acquiring existing Improvements after the Effective Date pursuant to the Existing Contract, for the costs of the Construction Project and for certain other costs described in the Construction Management Agreement. In addition, BNPLC may from time to time make expenditures or incur costs constituting Construction Advances after a Landlord's Election to Continue Construction as described in subparagraph 6.(d). As used herein, references to the "OUTSTANDING CONSTRUCTION ALLOWANCE" mean the difference on the date in question (but not less than zero) of (A) the total Construction Advances made by or on behalf of BNPLC on or prior to the date in question, plus (B) all Carrying Costs added on or prior to the date in question, less (C) any funds received and applied as Qualified Prepayments on or prior to the date in question. Charges ("CARRYING COSTS") shall accrue as described below for each Construction Period 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). However, if for any reason Stipulated Loss Value (and thus the Outstanding Construction Allowance included as a component thereof) must be determined as of any date between Advance Dates, the Outstanding Construction Allowance determined on such date shall include not only Carrying Costs added on or before the immediately preceding Advance Date computed as described below, but also Carrying Costs accruing on and after such preceding Advance Date to but not including the date in question. (b) Calculation of Carrying Costs. Carrying Costs shall be calculated as follows: (i) Carrying Costs Formula. Carrying Costs accruing for any Construction Period shall equal: o Stipulated Loss Value on the first day of such Construction Period, times o the sum of: (A) the Spread, plus (B) the Effective Rate with respect to such Construction Period, times o the number of days in the period from and including the preceding Advance Date to but not including the Advance Date upon which the period ends, divided by o three hundred sixty. 13 20 (ii) Limits on the Amount of Carrying Costs. Notwithstanding the foregoing, however, because the Construction Allowance available to SGC under the Construction Management Agreement is limited in amount to the Maximum Construction Allowance, and because Carrying Costs are to be charged against the Construction Allowance, Carrying Costs added to the Outstanding Construction Allowance on the Base Rent Commencement Date shall not exceed the amount that can be added without causing the Funded Construction Allowance to exceed the Maximum Construction Allowance. If, because of an extension of the Base Rent Commencement Date by BNPLC (as described in the definition thereof in the List of Defined Terms) or because of any Landlord's Election to Continue Construction, the Funded Construction Allowance already exceeds the Maximum Construction Allowance, then no Carrying Costs will be added to the Outstanding Construction Allowance on the Base Rent Commencement Date. (c) SGC's Right to Control the Construction Project. Subject to BNPLC's rights under subparagraph 6.(d) of this Lease, the Construction Management Agreement grants to SGC the sole right and responsibility for designing and constructing the Construction Project, it being understood that although title to all Improvements will pass directly to BNPLC (as more particularly provided in Paragraph 8), BNPLC's obligation with respect to the Construction Project shall be limited to the making of advances under and subject to the conditions set forth in the Construction Management Agreement. No contractor or other third party shall be entitled to require BNPLC to make advances as a third party beneficiary of this Lease or of the Construction Management Agreement or otherwise. (d) Landlord's Election to Continue Construction. Without limiting BNPLC's other rights and remedies under this Lease, and without terminating this Lease or SGC's obligations hereunder or under any of the other documents referenced herein, in the event of any termination of the Construction Management Agreement as provided in subparagraph 5(D) or subparagraph 5(E) thereof, BNPLC shall be entitled (but not obligated) to take whatever action it deems necessary or appropriate by the use of legal proceedings or otherwise to continue or complete the Construction Project in a manner substantially consistent (to the extent practicable under Applicable Laws) with the general description of the Construction Project set forth in Exhibit B to the Construction Management Agreement and with the permitted use of the Property set forth in subparagraph 3.(a). (As used herein, "LANDLORD'S ELECTION TO CONTINUE CONSTRUCTION" means any election by BNPLC to continue or complete the Construction Project pursuant to the preceding sentence.) After any Landlord's Election to Continue Construction, BNPLC may do any one or more of the following pursuant to this subparagraph without further notice and regardless of whether any Event of Default is then continuing: (i) Take Control of the Property. BNPLC may cause SGC and any contractors or other parties on the Property to vacate the Property until the Construction Project is complete or BNPLC elects not to continue work on the Construction Project. (ii) Continuation of Construction. BNPLC may perform or cause to be performed any work to complete or continue the construction of the Construction Project. In this regard, so long as work ordered or undertaken by BNPLC is substantially consistent (to the extent practicable under Applicable Laws) with the general description of the Construction Project set forth in Exhibit B to the Construction Management Agreement and the permitted use of the Property set forth in subparagraph 3.(a), BNPLC shall have complete discretion to: a) proceed with construction according to such plans and specifications as BNPLC may from time to time approve; b) establish and extend construction deadlines as BNPLC from time to time deems 14 21 appropriate, without obligation to adhere to the deadlines for Construction Milestones set forth in the Construction Management Agreement; c) hire, fire and replace architects, engineers, contractors, construction managers and other consultants as BNPLC from time to time deems appropriate, without obligation to use, consider or compensate architects, engineers, contractors, construction managers or other consultants previously selected or engaged by SGC; d) determine the compensation that any architect, engineer, contractor, construction manager or other consultant engaged by BNPLC will be paid, and the terms and conditions that will govern the payment of such compensation (including whether payment will be due in advance, over the course of construction or on some other basis and including whether contracts will be let on a fixed price basis, a cost plus a fee basis or some other basis), as BNPLC from time to time deems appropriate; e) pay, settle or compromise existing or future bills and claims which are or may be liens against the Property or as BNPLC considers necessary or desirable for the completion of the Construction Project or the removal of any clouds on title to the Property; f) prosecute and defend all actions or proceedings in connection with the construction of the Construction Project; g) select and change interior and exterior finishes for the Improvements and landscaping as BNPLC from time to time deems appropriate; and h) generally do anything that SGC itself might have done if SGC had satisfied or obtained BNPLC's waiver of the conditions specified therein. (iii) Arrange for Turnkey Construction. Without limiting the generality of the foregoing, BNPLC may engage any contractor or real estate developer BNPLC believes to be reputable to take over and complete construction of the Construction Project on a "turnkey" basis. (iv) Suspension or Termination of Construction. Notwithstanding any Landlord's Election to Continue Construction, BNPLC may subsequently elect at any time to suspend or terminate further construction without obligation to SGC. For purposes of this Lease and other Operative Documents (including the determination of the Outstanding Construction Allowance, Stipulated Loss Value, the Break Even Price and the Maximum Permitted Prepayment), after any Landlord's Election to Continue Construction, all costs and expenditures incurred or paid by or on behalf of BNPLC to complete or continue construction as provided in this subparagraph shall be considered Construction Advances and (to the extent BNPLC capitalizes the same in accordance with GAAP) Project Costs, regardless of whether they cause the Funded Construction Allowance to exceed the Maximum Construction Allowance. Further, as used in the preceding sentence, "costs incurred" by BNPLC will include costs that BNPLC has become obligated to pay to any third party that is not an Affiliate of BNPLC (including any contractor), even if the payments for which BNPLC has become so obligated will constitute prepayments for work or services to be rendered after payment and notwithstanding that BNPLC's obligations for the payments may be conditioned upon matters beyond BNPLC's control. For example, even if a construction contract between BNPLC and a contractor excused BNPLC from making further progress payments to the contractor upon SGC's failure to make any required Issue 97-10 15 22 Prepayment hereunder, the obligation to make a progress payment would nonetheless be "incurred" by BNPLC, for purposes of determining whether BNPLC has incurred costs considered to be Project Costs and Construction Advances, when BNPLC's obligation to pay it became subject only to SGC's payment of the Contingent Rental Prepayment or other conditions beyond BNPLC's control. If and to the extent, however, BNPLC does incur costs considered as Construction Advances under this subparagraph, but (1) BNPLC does not actually pay the costs and after incurring them BNPLC is fully and finally excused from the obligation to pay them for any reason other than a breach by SGC of this Lease or other Operative Documents, or (2) BNPLC receives a refund of such costs, then the costs BNPLC is excused from paying or refunded to BNPLC shall be considered Qualified Prepayments. (e) Powers Coupled With an Interest. BNPLC's rights under subparagraph 6.(d) are intended to constitute powers coupled with an interest which cannot be revoked. (f) Completion Notice. After any Landlord's Election to Continue Construction, BNPLC may provide a notice (a "COMPLETION NOTICE") to SGC, advising SGC that construction of the Construction Project is substantially complete or that BNPLC no longer intends to continue such construction at that time. 7. OTHER OBLIGATIONS OF AND LIMITED REPRESENTATIONS BY BNPLC. (a) Cooperation of BNPLC to Facilitate Construction and Development. During the Term BNPLC shall take any action reasonably requested by SGC to facilitate the acquisition of existing Improvements after the Effective Date pursuant to the Existing Contract and the construction and use of the Property permitted by this Lease; provided, however, that: (i) This subparagraph 7.(a) shall not impose upon BNPLC the obligation to take any action that can be taken by SGC, SGC's Affiliates or anyone else other than BNPLC as the owner of the Land, the Improvements or any other interests in the Property. (ii) BNPLC shall not be required by this subparagraph 7.(a) to make any payment to another Person unless BNPLC shall first have received funds from SGC, in excess of any other amounts due from SGC hereunder, sufficient to make the payment. (This clause (ii) will not be construed as limiting the right of SGC to obtain additional Construction Advances, on and subject to the terms and conditions set forth in the Construction Management Agreement, for payments SGC itself may pay or incur an obligation to pay to another Person.) (iii) BNPLC shall have no obligations whatsoever under this subparagraph at any time after an Issue 97-10 Election by SGC, after a Landlord's Election to Continue Construction or when an Event of Default shall have occurred and be continuing. (iv) SGC must request any action to be taken by BNPLC pursuant to this subparagraph, and such request must be specific and in writing, if required by BNPLC at the time the request is made. A suggested form for such a request is attached as Exhibit D. (v) No action may be required of BNPLC pursuant to this subparagraph 7.(a) that could constitute a violation of any Applicable Laws or compromise or constitute a waiver of BNPLC's rights under other provisions of this Lease or the other Operative Documents or that for any other reason is reasonably objectionable to BNPLC. 16 23 The actions BNPLC shall take pursuant to this subparagraph 7.(a) if reasonably requested by SGC will include, subject to the conditions listed in the proviso above, joining in or consenting to any (i) grant of easements, licenses, rights of way, and other rights in the nature of easements encumbering the Real Property, (ii) release or termination of easements, licenses, rights of way or other rights in the nature of easements which are for the benefit of the Real Property or any portion thereof, (iii) dedication or transfer of portions of the Land not improved with a building, for road, highway or other public purposes, (iv) agreements (other than with SGC or its Affiliates) for the use and maintenance of common areas, for reciprocal rights of parking, for ingress and egress and for amendments to any Permitted Encumbrances or Development Documents (including amendments to the Development Documents that SGC may reasonably request to facilitate construction or development on land owned by it or its Affiliates other than the Land), (V) instruments necessary or desirable for the exercise or enforcement of rights under the Permitted Encumbrances, the Development Documents or any contract, permit, license, franchise or other right included within the term "Property", (VI) permit applications or other documents reasonably required to accommodate the construction or alteration of Improvements otherwise permitted by this Lease, (VII) confirmations of SGC's rights under any particular provisions of this Lease which SGC may wish to provide to a third party, (IX) execution or filing of a tract or parcel map subdividing the Real Property into lots or parcels or reconfiguring existing parcels, (X) agreements providing development incentives or tax abatements with respect to the Property. However, the determination of whether any such action is reasonably requested or reasonably objectionable to BNPLC may depend in whole or in part upon the extent to which the requested action shall result in a lien to secure payment or performance obligations against BNPLC's interest in the Property, shall cause a decrease in the value of the Property to less than sixty percent (60%) of Stipulated Loss Value after any Qualified Payments that may result from such action are taken into account, or shall impose upon BNPLC any present or future obligations greater than the obligations BNPLC is willing to accept in reliance on the indemnifications provided by SGC hereunder. Upon request by SGC, BNPLC shall also provide 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), certifying the dates to which the Base Rent and other amounts payable by SGC hereunder have been paid, stating whether BNPLC is aware of any default by SGC that may exist hereunder and confirming BNPLC's agreements concerning landlord's liens and other matters set forth in subparagraph 7.(c); it being intended that any such statement by BNPLC may be relied upon by anyone with whom SGC may intend to enter into an agreement for construction of the Improvements or other significant agreements concerning the Property. Any Losses incurred by BNPLC because of any action taken pursuant to this subparagraph 7.(a) shall be covered by the indemnification set forth in subparagraph 5.(d). Further, for purposes of such indemnification, any action taken by BNPLC will be deemed to have been made at the request of SGC if made pursuant to any request of counsel to or any officer of SGC (or with their knowledge, and without their objection) in connection with the execution or administration of this Lease or the other Operative Documents. To avoid construction delays or for other reasonable cause, SGC may ask BNPLC for an expedited response to any request for action made by SGC pursuant to this subparagraph 7.(a) by delivering such request with a notice substantially in the form attached hereto as Exhibit E. BNPLC shall endeavor in good faith to respond promptly to any such notice after the receipt of any such notice by an officer of BNPLC. (b) Actions Permitted by SGC Without BNPLC's Consent. No refusal by BNPLC to execute or join in the execution of any agreement, application or other document requested by SGC pursuant to the preceding subparagraph 7.(a) shall preclude SGC from itself executing such agreement, application or other document; provided, that in doing so SGC is not purporting to act for BNPLC and does not thereby create or 17 24 expand any obligations or restrictions that encumber the Property. Further, subject to the other terms and conditions of this Lease, SGC shall be entitled to do any of the following in SGC's own name and to the exclusion of BNPLC during the Term without any notice to or consent of BNPLC so long as no Landlord's Election to Continue Construction has occurred, so long as no Event of Default has occurred and is continuing and so long as SGC is not purporting to act for BNPLC and does not thereby create or expand any obligations or restrictions that encumber the Property: (i) perform obligations arising under and exercise and enforce the rights of SGC or the owner of the Real Property under the Development Documents and Permitted Encumbrances; (ii) perform obligations arising under and exercise and enforce the rights of SGC or the owner of the Real Property with respect to any other contracts or documents (such as building permits) included within the Personal Property; and (iii) recover and retain any monetary damages or other benefit inuring to SGC or the owner of the Real Property through the enforcement of any rights, contracts or other documents included within the Personal Property (including the Development Documents and Permitted Encumbrances); provided, that to the extent any such monetary damages may become payable as compensation for an adverse impact on value of the Property, the rights of BNPLC and SGC hereunder with respect to the collection and application of such monetary damages shall be the same as for condemnation proceeds payable because of a taking of all or any part of the Property. (c) Waiver of Landlord's Liens. BNPLC waives any security interest, statutory landlord's lien or other interest BNPLC may have in or against computer equipment and other tangible personal property placed on the Land from time to time that SGC or its Affiliates own or lease from other lessors; provided, however, that BNPLC does not waive its interest in or rights with respect to equipment or other property included within the "Property" as described in Paragraph 8. Although computer equipment or other tangible personal property may be "bolted down" or otherwise firmly affixed to Improvements, it shall not by reason thereof become part of the Improvements if it can be removed without causing structural or other material damage to the Improvements and without rendering HVAC or other major building systems inoperative and if it does not otherwise constitute "Property" as provided in Paragraph 8. (d) Limited Representations by BNPLC Concerning Accounting Matters. BNPLC is not expected or required to represent or warrant that this Lease or the Purchase Agreement will qualify for any particular accounting treatment under GAAP. However, to permit SGC to determine for itself the appropriate accounting for this Lease and the Purchase Agreement, BNPLC does represent to SGC as of the Effective Date: (i) Equity capital invested in BNPLC is greater than three percent (3%) of the aggregate of all lease funding amounts (including participations) of BNPLC. Such equity capital investments constitute equity in legal form and are reflected as shareholders' equity in the financial statements and accounting records of BNPLC. (ii) BNPLC is one hundred percent (100%) owned by French American Bank Corporation, which is one hundred percent (100%) owned by BNPLC's Parent. (iii) BNPLC leases properties of substantial value to more than fifteen tenants. (iv) All parties to whom BNPLC has any material obligations known to BNPLC are (and are 18 25 expected to be) Affiliates of BNPLC's Parent, Participants, or participants with BNPLC in other leasing deals or loans made by BNPLC, or other tenants or borrowers in such other leasing deals or loans. (v) BNPLC has substantial assets in addition to the Property, assets which BNPLC believes to have a value far in excess of the value of the Property. (vi) Other than any Funding Advances provided from time to time by Participants under the Participation Agreement, BNPLC expects to obtain all Funding Advances from Banque Nationale de Paris or other Affiliates of BNPLC (including Funding Advances to cover Carrying Costs and other amounts to be capitalized as part of the Outstanding Construction Allowance, and assuming that SGC uses the Maximum Construction Allowance under this Lease), and to the extent that Banque Nationale de Paris or such other Affiliates themselves borrow or accept bank deposits to obtain the funds needed to provide such Funding Advances, the obligation to repay such funds shall not be limited, by agreement or corporate structure, to payments collected from SGC or otherwise recovered from the Property. (vii) BNPLC has not obtained residual value insurance or a residual value guarantee from any third party to ensure the recovery of its investment in the Property. (viii) BNPLC does not intend to take any action during the term of this Lease that would change, or anticipate any change in, any of the facts listed above in this subparagraph. SGC shall have the right to ask BNPLC questions from time to time concerning BNPLC's financial condition, concerning matters relevant to the proper accounting treatment of this Lease on SGC's financial statements and accounting records (including the amount of BNPLC's equity capital as a percentage of the aggregate of all lease funding amounts [including participations] by BNPLC) or concerning BNPLC's ability to perform under this Lease or other Operative Documents, to which questions BNPLC shall promptly respond. Such response, however, may be limited to a statement that BNPLC will not provide requested information; provided, however, BNPLC must notify SGC in writing if at any time during the Term BNPLC ceases to be 100% owned, directly or indirectly, by Banque Nationale de Paris, or if at any time during the Term BNPLC believes it could not represent that the statements in clauses (i), (v) and (vii) above continue to be accurate, whether because of a change in the capital structure of BNPLC, a purchase of residual value insurance with respect to the Property or otherwise. (e) Other Limited Representations by BNPLC. BNPLC represents that: (i) No Default or Violation. The execution, delivery and performance by BNPLC of this Lease and the other Operative Documents do not and will not constitute a breach or default under any material contract or agreement to which BNPLC is a party or by which BNPLC is bound and do not, to the knowledge of BNPLC, violate or contravene any law, order, decree, rule or regulation to which BNPLC is subject. (As used in this subparagraph 7.(e), "BNPLC'S KNOWLEDGE" means the present actual knowledge of Lloyd Cox, the current officer of BNPLC having primary responsibility for the negotiation of this Lease.) (ii) No Suits. There are no judicial or administrative actions, suits, proceedings or investigations pending or, to BNPLC's knowledge, threatened against BNPLC that are reasonably likely to affect BNPLC's interest in the Property or the validity, enforceability or priority of this Lease or the other Operative Documents, and BNPLC 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 BNPLC or its interest in the Property. 19 26 (iii) Enforceability. The execution, delivery and performance of this Lease and the other Operative Documents by BNPLC are duly authorized, are not in contravention of or conflict with any term or provision of BNPLC's articles of incorporation or bylaws and do not, to BNPLC'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 other Operative Documents are valid, binding and legally enforceable obligations of BNPLC 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, BNPLC makes no representation or warranty that conditions imposed by zoning ordinances or other state or local Applicable Laws to the purchase, ownership, lease or operation of the Property have been satisfied. (iv) Organization. BNPLC is duly incorporated and legally existing under the laws of Delaware and is (or will become, if necessary to lawfully perform hereunder) duly qualified to do business in the State of Georgia. BNPLC has or will obtain on a timely basis, at SGC's expense to the extent so provided in the other provisions of this Lease, all requisite power and all governmental certificates of authority, licenses, permits, qualifications and other documentation necessary to own and lease the Property and to perform its obligations under this Lease. (v) Not a Foreign Person. BNPLC is not a "foreign person" within the meaning of Sections 1445 and 7701 of the Code (i.e., BNPLC 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). (f) Keeping Proprietary Information Confidential. BNPLC agrees to use reasonable precautions to keep confidential any "proprietary information" (as defined in Paragraph 27) that BNPLC may receive from SGC or otherwise discover with respect to SGC or SGC's business pursuant to this Lease or any investigation by BNPLC hereunder, except for disclosures: (i) specifically and previously authorized in writing by SGC; (ii) to any permitted assignee of BNPLC as to any interest in the Property so long as the assignee has agreed in writing to use its reasonable efforts to keep such information confidential in accordance with the terms of this subparagraph; (iii) to legal counsel, accountants, auditors, environmental consultants and other professional advisors to BNPLC so long as BNPLC shall inform such persons in writing (if practicable) of the confidential nature of such information and shall direct them to treat such information confidentially; (iv) to regulatory officials having jurisdiction over BNPLC or BNPLC's Parent (provided that the disclosing party shall request confidential treatment of the disclosed information, if practicable); (v) as required by legal process (provided that the disclosing party shall request confidential treatment of the disclosed information, if practicable); (vi) of information which has previously become publicly available through the actions or inactions of a Person other than BNPLC not, to BNPLC's knowledge, in breach of an obligation of confidentiality to SGC; and (vii) to any Participant so long as the Participant has not repudiated the confidentiality provision concerning SGC's proprietary information set forth in the Participation Agreement. 8. STATUS OF PROPERTY ACQUIRED WITH FUNDS PROVIDED BY BNPLC. Subject in each case to SGC's rights under the other provisions of this Lease, all Improvements sold by Seller pursuant to the Existing Contract (including those sold after the Effective Date as provided in the Existing Contract) and all Improvements constructed during the term of this Lease shall be owned by BNPLC and shall constitute "Property" covered by this Lease. Further, subject in each case to SGC's rights under the other provisions of this Lease, all furnishings, furniture, chattels, permits, licenses, franchises, certificates and other personal property of whatever nature shall have been acquired on behalf of BNPLC by SGC, shall be owned by BNPLC and shall constitute "Property" covered by this Lease, to the extent heretofore or hereafter acquired, in whole or in part, with any portion of the 20 27 Initial Funding Advance provided to SGC or with any Construction Advances or other funds for which SGC has received or hereafter receives reimbursement from the Initial Funding Advance or Construction Advances, as shall all renewals or replacements of or substitutions for any such Property. SGC shall not authorize or permit the transfer of title to the Improvements or to any other such Property to pass through SGC or SGC's Affiliates before it is transferred to BNPLC from contractors, suppliers, vendors or other third Persons. Nothing herein shall constitute authorization of SGC by BNPLC to bind BNPLC to any construction contract or other agreement with a third Person, but any construction contract or other agreement executed by SGC for the acquisition or construction of Improvements or other components of the Property may provide for the transfer of title as required by the preceding sentence. Upon request of BNPLC made when any Event of Default has occurred and is continuing, SGC shall deliver to BNPLC an inventory describing all significant items of Personal Property (and, in the case of tangible personal property, showing the make, model, serial number and location thereof) other than Improvements, with a certification by SGC that such inventory is true and complete and that all items specified in the inventory are covered by this Lease free and clear of any Lien other than the Permitted Encumbrances or Liens Removable by BNPLC. 9. ENVIRONMENTAL. (a) Environmental Covenants by SGC. SGC covenants that: (i) SGC shall not conduct or permit others to conduct Hazardous Substance Activities, except Permitted Hazardous Substance Use and Remedial Work. (ii) SGC shall not discharge or permit the discharge of anything on or from the Property that would require any permit under applicable Environmental Laws, other than (1) storm water runoff, (2) waste water discharges through a publicly owned treatment works, (3) discharges that are a necessary part of any Remedial Work, and (4) other similar discharges consistent with the definition herein of Permitted Hazardous Substance Use, in each case in strict compliance with Environmental Laws. (iii) Following any discovery that Remedial Work is required by Environmental Laws or otherwise reasonably required, and to the extent not inconsistent with the other provisions of this Lease, SGC shall promptly perform and diligently and continuously pursue such Remedial Work, in each case in strict compliance with Environmental Laws; provided, however, SGC shall not be required to perform the Remedial Work that Seller is obligated to perform, and that Seller does perform as it is obligated to do, pursuant to and within the deadlines imposed by the Existing Contract. BNPLC and SGC intend that the right to enforce Seller's obligations to perform Remedial Work (lead cleanup) under the Existing Contract be included in the intangible Personal Property covered by this Lease. Accordingly, SGC will have the right during the Term (and SGC hereby undertakes the responsibility) to cause Seller to perform, and to verify Seller's performance of, the Remedial Work contemplated by the Existing Contract in accordance with the standards and deadlines specified therein. Further, SGC shall not allow its own employees or other invitees to use the building on the land covered by the Ground Lease until such Remedial Work is complete; provided, however, that this provision shall not be construed to prohibit the use of such building as reasonably required to monitor or complete such Remedial Work; and provided, further, that until the building is actually conveyed by the Seller to BNPLC as provided in the Existing Contract (whereupon the Ground Lease is to terminate according to its terms), it is understood that nothing in this Lease will be construed as purporting to authorize or require BNPLC or SGC to interfere with the use and occupancy of the building by the Seller or the lessee under the Ground Lease as provided in the Existing Contract and the Ground Lease. 21 28 (iv) If requested by BNPLC in connection with any significant Remedial Work required by this subparagraph, SGC shall retain an independent Environmental Consultant or Industrial Hygienist, as appropriate, to evaluate any significant new information generated during SGC's implementation of the Remedial Work and to discuss with SGC whether such new information indicates the need for any additional measures that SGC should take to protect the health and safety of persons (including, without limitation, employees, contractors and subcontractors and their employees) or to protect the environment. SGC shall implement any such additional measures to the extent required with respect to the Property by Environmental Laws or otherwise reasonably required and to the extent not inconsistent with the other provisions of this Lease. (b) Right of BNPLC to do Remedial Work Not Performed by SGC. If SGC's failure to cure any breach of the covenants set forth in subparagraph 9.(a) continues beyond the Environmental Cure Period (as defined below), BNPLC may, in addition to any other remedies available to it, after notifying SGC of the Remedial Work BNPLC believes is needed, conduct all or any part of the Remedial Work. To the extent that Remedial Work done by BNPLC pursuant to the preceding sentence (including any removal of Hazardous Substances) is reasonably required, or is required or believed by BNPLC in good faith to be required by Applicable Law or by any demand, regulation or guideline of any governmental authority (whether or not having the force of law), the cost thereof shall be a demand obligation owing by SGC to BNPLC. As used in this subparagraph, "ENVIRONMENTAL CURE PERIOD" means the period ending on the earlier of: (1) one hundred twenty days after SGC is notified of the breach which must be cured within such period, (2) the date that any writ or order is issued for the levy or sale of any property owned by BNPLC (including the Property) because of such breach, (3) the date that any criminal action is overtly threatened or instituted against BNPLC or any of its directors, officers or employees because of such breach, (4) a Designated Sale Date upon which, for any reason, SGC or an Affiliate of SGC or any Applicable Purchaser shall not purchase BNPLC's interest in the Property pursuant to the Purchase Agreement for a net price to BNPLC (when taken together with any additional payments made by SGC pursuant to Paragraph 1(A)(2) of the Purchase Agreement, in the case of a purchase by an Applicable Purchaser) equal to Stipulated Loss Value; or (5) any date upon which the Construction Management Agreement or this Lease or SGC's Initial Remarketing Rights and Obligations may be terminated because of or following any Issue 97-10 Election (c) Environmental Inspections and Reviews. BNPLC reserves the right to retain an Environmental Consultant or Industrial Hygienist to review any report prepared by SGC or to conduct BNPLC's own investigation to confirm whether SGC is complying with the requirements of this Paragraph 9. SGC grants (subject to the Ground Lease) to BNPLC and to BNPLC's agents, employees, consultants and contractors the right during reasonable business hours and after reasonable notice to enter upon the Property to inspect the Property and to perform such tests as BNPLC deems necessary or appropriate to review or investigate Hazardous Substances in, on, under or about the Property or any discharge or suspected discharge of Hazardous Substances into groundwater or surface water from the Property. SGC shall promptly reimburse BNPLC for the reasonable fees of its Environmental Consultants and Industrial Hygienists and the costs of any such inspections and tests; provided, however, BNPLC's right to reimbursement for the reasonable fees of any consultant engaged as provided in this subparagraph or for the costs of any inspections or test undertaken as provided in this subparagraph shall be limited to the following circumstances: (1) an Event of Default or CMA Termination Event shall have occurred; (2) BNPLC shall have retained the consultant to establish the condition of the Property just prior to any conveyance thereof pursuant to the Purchase Agreement or just prior to the expiration of this Lease; (3) BNPLC shall have retained the consultant to satisfy any regulatory requirements applicable to BNPLC or its Affiliates; or (4) BNPLC shall have retained the consultant because BNPLC has been notified of a violation of Environmental Laws concerning the Property or BNPLC otherwise reasonably believes that SGC has not complied with the requirements of this Paragraph 9. 22 29 (d) Communications Regarding Environmental Matters. (i) SGC shall immediately advise BNPLC and Participants of (1) any discovery of any event or circumstance which would render any of the representations of SGC herein or in the Closing Certificate concerning environmental matters materially inaccurate or misleading if made at the time of such discovery and assuming that SGC was aware of all relevant facts, (2) any Remedial Work (or change in Remedial Work) required or undertaken by SGC or its Affiliates in response to any (A) discovery of any Hazardous Substances on, under or about the Property other than Permitted Hazardous Substances or (B) any claim for damages resulting from Hazardous Substance Activities, (3) SGC's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property which would or could reasonably be expected to cause the Property or any part thereof to be subject to any ownership, occupancy, transferability or use restrictions under Environmental Laws, or (4) any investigation or inquiry of any failure or alleged failure by SGC to comply with Environmental Laws affecting the Property by any governmental authority responsible for enforcing Environmental Laws. In such event, SGC shall deliver to BNPLC within thirty days after BNPLC's request (or such longer period as may be reasonably required, but in any event within ninety days after BNPLC's request), a preliminary written environmental plan setting forth a general description of the action that SGC proposes to take with respect thereto, if any, to bring the Property into compliance with Environmental Laws or to correct any breach by SGC of this Paragraph 9, including any proposed Remedial 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 BNPLC may reasonably request. (ii) SGC shall provide BNPLC and Participants with copies of all material written communications with federal, state and local governments, or agencies relating to the matters listed in the preceding clause (i). SGC shall also provide BNPLC and Participants with copies of any correspondence from third Persons which threaten litigation over any significant failure or alleged significant failure of SGC to maintain or operate the Property in accordance with Environmental Laws. (iii) Prior to SGC's submission of a Material Environmental Communication which relates to the matters listed in the preceding clause (i) to any governmental or regulatory agency or third party, SGC shall, to extent practicable, deliver to BNPLC and Participants a draft of the proposed submission (together with the proposed date of submission), and in good faith assess and consider any comments of BNPLC regarding the same. Promptly after BNPLC's request, SGC shall meet with BNPLC to discuss the submission, shall provide any additional information reasonably requested by BNPLC and shall provide a written explanation to BNPLC addressing the issues raised by comments (if any) of BNPLC regarding the submission, including a reasoned analysis supporting any decision by SGC not to modify the submission in accordance with comments of BNPLC. 10. INSURANCE REQUIRED AND CONDEMNATION. (a) Liability Insurance. Throughout the Term SGC shall maintain commercial general liability insurance against claims for bodily and personal injury, death and property damage occurring in or upon or resulting from any occurrence in or upon the Property under one or more insurance policies that satisfy the requirements set forth in Exhibit F. SGC shall deliver and maintain with BNPLC for each liability insurance policy required by this Lease written confirmation of the policy and the scope of the coverage provided thereby issued by the applicable insurer or its authorized agent, which confirmation must also satisfy the requirements set forth in Exhibit F. 23 30 (b) Property Insurance. Throughout the Term SGC will keep all Improvements (including all alterations, additions and changes made to the Improvements) insured against fire and other casualty under one or more property insurance policies that satisfy the requirements set forth in Exhibit F. SGC shall deliver and maintain with BNPLC for each property insurance policy required by this Lease written confirmation of the policy and the scope of the coverage provided thereby issued by the applicable insurer or its authorized agent, which confirmation must also satisfy the requirements set forth in Exhibit F. If any of the Property is destroyed or damaged by fire, explosion, windstorm, hail or by any other casualty against which insurance shall have been required hereunder, (i) BNPLC may, but shall not be obligated to, make proof of loss if not made promptly by SGC after notice from BNPLC, (ii) each insurance company concerned is hereby authorized and directed to make payment for such loss directly to BNPLC for application as required by Paragraph 11, and (iii) BNPLC may settle, adjust or compromise any and all claims for loss, damage or destruction under any policy or policies of insurance (provided, that so long as no SGC has made no Issue 97-10 Election, no Landlord's Election to Continue Construction shall have occurred and no Event of Default shall have occurred and be continuing, BNPLC must obtain SGC's consent to any such settlement). If any casualty shall result in damage to or loss or destruction of the Property, SGC shall give immediate notice thereof to BNPLC and Paragraph 11 shall apply. Notwithstanding the foregoing, SGC shall have the right as SGC deems appropriate to settle, adjust or compromise any insurance claim for damage to the Property that cannot reasonably be asserted for more than $3,000,000 if (and after) SGC completes the Construction Project pursuant to the Construction Management Agreement and so long no Event of Default shall have occurred and be continuing; and SGC may directly receive and hold the proceeds of such claim if (and after) SGC completes the Construction Project pursuant to the Construction Management Agreement and so long as no Landlord's Election to Continue Construction shall have occurred and no Event of Default shall have occurred and be continuing and so long as SGC applies such proceeds as required by subparagraph 11.(b). (c) Failure to Obtain Insurance. If SGC fails to obtain any insurance or to provide confirmation of any such insurance as required by this Lease, BNPLC shall be entitled (but not required) to obtain the insurance that SGC has failed to obtain or for which SGC has not provided the required confirmation and, without limiting BNPLC's other remedies under the circumstances, BNPLC may require SGC to reimburse BNPLC for the cost of such insurance and to pay interest thereon computed at the Default Rate from the date such cost was paid by BNPLC until the date of reimbursement by SGC. (d) Condemnation. Immediately upon obtaining knowledge of the institution of any proceedings for the condemnation of the Property or any portion thereof, or any other similar governmental or quasi-governmental proceedings arising out of injury or damage to the Property or any portion thereof, each party shall notify the other (provided, however, BNPLC shall have no liability for its failure to provide such notice) of the pendency of such proceedings. SGC shall, at its expense, diligently prosecute any such proceedings and shall consult with BNPLC, 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 Property and all judgments, decrees and awards for injury or damage to the Property shall be paid to BNPLC as Escrowed Proceeds for application as provided in Paragraph 11. BNPLC is hereby authorized, in the name of SGC, at any time when an Event of Default shall have occurred and be continuing, or otherwise with SGC's prior consent, to execute and deliver valid acquittances for, and to appeal from, any such judgment, decree or award concerning condemnation of any of the Property. BNPLC 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, SGC shall have the right as SGC deems 24 31 appropriate to settle, adjust or compromise any claim for any taking of less than all or substantially all of the Property if the claim cannot reasonably be asserted for more than $3,000,000 and if (and after) SGC completes the Construction Project pursuant to the Construction Management Agreement and if no Event of Default shall have occurred and be continuing; and SGC may directly receive and hold the proceeds of any such claim if (and after) SGC completes the Construction Project pursuant to the Construction Management Agreement and so long as no Event of Default shall have occurred and be continuing and so long as SGC applies such proceeds as required by subparagraph 11.(b). 11. APPLICATION OF INSURANCE AND CONDEMNATION PROCEEDS. (a) Collection of Insurance and Condemnation Proceeds Generally. Subject to BNPLC's rights under this Paragraph 11, and so long as no CMA Termination Event shall have occurred and no Event of Default shall have occurred and be continuing, SGC shall be entitled to use all property insurance and condemnation proceeds payable with respect to the Property during the Term for the restoration and repair of the Property or any remaining portion thereof. Except as provided in the last sentence of subparagraph 10.(b) and the last sentence of subparagraph 10.(d), all insurance and condemnation proceeds received with respect to the Property (including proceeds payable under any insurance policy covering the Property which is maintained by SGC) shall be paid to BNPLC and then applied as follows: (i) First, such proceeds shall be used to reimburse BNPLC 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 BNPLC as Escrowed Proceeds and used to reimburse SGC for the actual cost of the repair, restoration or replacement of the Property. However, any Remaining Proceeds not needed for such purpose shall be applied by BNPLC as Qualified Payments, as provided in subparagraph 11.(c), after SGC notifies BNPLC that they are not needed for repairs, restoration or replacement. (b) Administration of Remaining Proceeds; SGC's Obligation to Restore. Any Remaining Proceeds held by BNPLC as Escrowed Proceeds shall be deposited by BNPLC in an interest bearing account as provided in the definition of Escrowed Proceeds in the attached List of Defined Terms and shall be paid to SGC or to third parties as SGC may direct as the applicable repair, restoration or replacement progresses and upon compliance by SGC with such terms, conditions and requirements as may be reasonably imposed by BNPLC, but in no event shall BNPLC be required to pay Escrowed Proceeds to SGC in excess of the actual cost to SGC of the applicable repair, restoration or replacement, as evidenced by invoices or other documentation reasonably satisfactory to BNPLC, it being understood that BNPLC may retain and apply any such excess as a Qualified Payment. In any event, SGC 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 in the attached List of Defined Terms. Further, notwithstanding the inadequacy of the Remaining Proceeds held by BNPLC as Escrowed Proceeds, if any, or anything herein to the contrary, SGC must, after any taking of less than all or substantially all of the Property by condemnation and after any damage to the Property by fire or other casualty, either: (i) promptly restore or improve the Property or the remainder thereof to a value no less than sixty percent (60%) of Stipulated Loss Value (computed after the application of any Remaining Proceeds as a Qualified Payment) and to a reasonably safe and sightly condition; or 25 32 (ii) promptly restore the Property to a reasonably safe and sightly condition and pay to BNPLC for application as a Qualified Payment the amount (if any), as determined by BNPLC, needed to reduce Stipulated Loss Value (computed after the application of such amount and any available Remaining Proceeds as Qualified Payments) to no more than one hundred sixty-seven percent (167%) of the then-current market value of the Property or remainder thereof. (c) Special Provisions Concerning CMA Termination Events, Events of Default and Qualified Payments. If a CMA Termination Event shall have occurred, or an Event of Default shall have occurred and be continuing, then notwithstanding the foregoing, BNPLC shall be entitled to receive and collect all insurance or condemnation proceeds payable with respect to the Property, and BNPLC shall be entitled to either, at the discretion of BNPLC, (A) hold all Remaining Proceeds as Escrowed Proceeds until paid to SGC as reimbursement for the actual and reasonable cost of repairing, restoring or replacing the Property when SGC has completed such repair, restoration or replacement, or (B) apply such proceeds as Qualified Payments when and to the extent deemed appropriate by BNPLC. When no CMA Termination Event shall have occurred and no Event of Default shall have occurred and be continuing, BNPLC shall apply any Remaining Proceeds paid to it (or other amounts available for application as a Qualified Payment) as a Qualified Payment on any date that BNPLC is directed to do so by a notice from SGC; provided, that if such a notice from SGC specifies an effective date for a Qualified Payment that is less than five Business Days after BNPLC's actual receipt of the notice, BNPLC may postpone the date of the Qualified Payment to any date not later than five Business Days after BNPLC's receipt of the notice. In any event, except when BNPLC is required by the preceding sentence to apply Remaining Proceeds or other amounts as a Qualified Payment on an Advance Date or Base Rent Date, BNPLC may deduct Breakage Costs incurred in connection with any Qualified Payment from the Remaining Proceeds or other amounts available for application as the Qualified Payment, and SGC will reimburse BNPLC upon request for any such Breakage Costs that BNPLC incurs but does not deduct. (d) Takings of All or Substantially All of the Property. In the event of any taking of all or substantially all of the Property, BNPLC 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 Property by condemnation exceeds the sum of the Remaining Proceeds resulting from such condemnation, then BNPLC shall be entitled to recover the excess from SGC upon demand as an additional Qualified Payment, whereupon this Lease shall terminate. Any taking of so much of the Real Property as, in BNPLC's reasonable good faith judgment, makes it impracticable to restore or improve the remainder thereof as required by part (1) of subparagraph 11.(b) shall be considered a taking of substantially all the Property for purposes of this Paragraph 11. (e) Waiver of Subrogation. Without limiting SGC's obligations to make repairs under other provisions of this Lease, BNPLC and SGC each waive any right of recovery against the other, and the other's agents, officers or employees, for any damage to the Property or to the personal property situated from time to time in or on the Real 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 11.(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 subparagraph. SGC shall cause the insurance policies required of SGC by this Lease to be properly endorsed, if necessary, to prevent any loss of coverage because of the waivers set forth in this subparagraph. If such endorsements are not available at commercially reasonable rates, the waivers set forth in this subparagraph shall be ineffective to the extent that such waivers would cause required insurance with respect to the Property to be impaired. 26 33 12. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF SGC CONCERNING THE PROPERTY. SGC represents, warrants and covenants as follows: (a) Compliance with Covenants and Laws. The use of the Property permitted by this Lease complies, or will comply after SGC obtains available permits as the tenant under this Lease, in all material respects with all Applicable Laws. SGC has obtained or will promptly obtain all utility, building, health and operating permits as may be required by any governmental authority or municipality having jurisdiction over the Property for the construction contemplated herein and the use of the Property permitted by this Lease. (b) Operation of Property. SGC shall operate the Property in a good and workmanlike manner and in a manner that causes it to comply in all material respects with Applicable Laws. (For purposes of this Lease, "material" noncompliance with Applicable Law will include any noncompliance, the correction of which has been requested by a governmental authority, or because of which a threat of action against the Property or BNPLC has been asserted by a governmental authority.) SGC shall not use or occupy or allow the use or occupancy of the Property in any manner which violates any Applicable Law in any material respect 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 could, individually or in the aggregate, reduce the value of the Property and leave the Property with a value of less than sixty percent (60%) of Stipulated Loss Value, SGC shall not: (i) initiate or permit any zoning reclassification of the Property; (ii) seek any variance under existing zoning ordinances applicable to the Property; (iii) use or permit the use of the 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 Property; or (v) consent to the annexation of the Property to any municipality. If a change in the zoning or other Applicable Laws affecting the permitted use or development of the Property shall occur that BNPLC determines will reduce the then-current market value of the Property, and if after such reduction the then-current market value of the Property shall be less than sixty percent (60%) of Stipulated Loss Value in the reasonable judgment of BNPLC, then SGC shall pay BNPLC an amount equal to such excess for application as a Qualified Payment. SGC shall not cause or consent to any drilling or exploration for, or extraction, removal or production of, minerals from the surface or subsurface of the Property. If SGC receives a notice or claim from any federal, state or other governmental authority that the Property is not in compliance with any Applicable Law in any material respect, or that any action may be taken against BNPLC because the Property does not comply with any Applicable Law, SGC shall promptly furnish a copy of such notice or claim to BNPLC. Notwithstanding the foregoing, SGC may in good faith, by appropriate proceedings, contest the validity and applicability of any Applicable Law with respect to the Property, and pending such contest SGC shall not be deemed in default hereunder because of the violation of such Applicable Law, if SGC diligently prosecutes such contest to completion in a manner reasonably satisfactory to BNPLC, and if SGC promptly causes the 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 Property; provided, however, in any event such contest shall be concluded and the violation of such Applicable Law must be corrected by SGC and any claims asserted against BNPLC or the Property because of such violation must be paid by SGC, all prior to the earlier of (i) the date that any criminal action is overtly threatened or instituted against BNPLC or any of its directors, officers or employees because of such violation, (ii) the date that any action is taken or overtly threatened by any governmental authority against BNPLC or any property owned by BNPLC (including the Property) because of such violation, (iii) a Designated Sale Date upon which, for any reason, SGC or an Affiliate of SGC or any Applicable Purchaser shall not purchase BNPLC's interest in the Property pursuant to the Purchase Agreement for a net price to BNPLC (when taken together with any additional payments made by SGC pursuant to Paragraph 1(A)(2) of the Purchase Agreement, in the case of a purchase by an Applicable Purchaser) equal to Stipulated Loss Value, or (iv) any date upon which the Construction Management Agreement or this Lease or SGC's Initial Remarketing Rights and Obligations may 27 34 be terminated because of or following any Issue 97-10 Election. (c) Debts for Construction, Maintenance, Operation or Development. SGC shall cause all debts and liabilities incurred in the construction, maintenance, operation or development of the Property, including all debts and liabilities for labor, material and equipment and all debts and charges for utilities servicing the Property, to be promptly paid; provided, nothing in this subparagraph will be construed to make SGC liable for Liens Removable by BNPLC or Excluded Taxes. Notwithstanding the foregoing, SGC 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 SGC shall not be deemed in default under this subparagraph because of the contested lien if (1) within thirty days after being asked to do so by BNPLC, SGC bonds over to BNPLC's reasonable satisfaction all such contested liens against the Property alleged to secure an amount in excess of $5,000,000 (individually or in the aggregate), (2) SGC diligently prosecutes such contest to completion in a manner reasonably satisfactory to BNPLC, and (3) SGC 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 must be paid by SGC prior to the earlier of (i) the date that any criminal action is overtly threatened or instituted against BNPLC or its directors, officers or employees because of the nonpayment thereof, (ii) the date that any writ or order is issued under which the Property or any other property in which BNPLC has an interest may be seized or sold or any other action is taken or overtly threatened against BNPLC or any property in which BNPLC has an interest because of the nonpayment thereof, (iii) a Designated Sale Date upon which, for any reason, SGC or an Affiliate of SGC or any Applicable Purchaser shall not purchase BNPLC's interest in the Property pursuant to the Purchase Agreement for a net price to BNPLC (when taken together with any additional payments made by SGC pursuant to Paragraph 1(A)(2) of the Purchase Agreement, in the case of a purchase by an Applicable Purchaser) equal to Stipulated Loss Value, or (iv) any date upon which the Construction Management Agreement or this Lease or SGC's Initial Remarketing Rights and Obligations may be terminated because of or following any Issue 97-10 Election (d) Repair, Maintenance, Alterations and Additions. SGC shall keep the Property in good order, operating condition and appearance, causing all necessary repairs, renewals and replacements to be promptly made, and will not allow any of the Property to be materially misused, abused or wasted. To the extent that any of the following could, individually or in the aggregate, reduce the value of the Property and leave the Property with a value of less than sixty percent (60%) of Stipulated Loss Value, SGC shall not: (i) fail to promptly replace any worn-out fixtures or material items of tangible Personal Property covered by this Lease with fixtures or other tangible Personal Property comparable to the replaced fixtures or Personal Property when new, (ii) remove from the Property any fixtures or tangible Personal Property of significant value covered by this Lease except such as are replaced by SGC by articles of equal suitability and value, free and clear of any Lien other than Permitted Encumbrances or Liens Removable by BNPLC, or (iii) make any significant alterations to any Improvements after they are completed. Without limiting the foregoing, SGC will notify BNPLC before making any alterations to the Improvements which could materially reduce the market value of the Property or which change the general character of the Property or which impair in any significant manner the useful life or utility of any Improvements. Nothing in this subparagraph is intended to limit SGC's rights and obligations under other provisions of this Lease with respect to the construction of the initial or any subsequent Construction Project permitted by other provisions of this Lease. (e) Compliance With Permitted Encumbrances and Development Contracts. SGC shall comply with and will cause to be performed all of the covenants, agreements and obligations imposed upon the owner of 28 35 any interest in the Property by the Permitted Encumbrances (including the Ground Lease) or the Development Contracts. Without limiting the foregoing, SGC shall cause all amounts to be paid when due, the payment of which is secured by any Lien against the Property created by the Permitted Encumbrances. Also SGC shall cause the testing for lead contamination contemplated in the Existing Contract to be performed in an appropriate manner and shall keep BNPLC informed as to the status of Seller's efforts to cleanup lead contamination as required by the Existing Contract. (f) Modification of Permitted Encumbrances and Development Contracts. SGC shall not enter into, initiate, approve or consent to any modification of any Permitted Encumbrance or Development Contract that would create or expand or purport to create or expand obligations or restrictions which would encumber the Property without the prior consent of BNPLC. Whether BNPLC must give any such consent requested by SGC during the term of this Lease shall be governed by subparagraph 7.(a). (g) Books and Records Concerning the Property. SGC shall keep books and records that are accurate and complete in all material respects for the Property and will, subject to Paragraph 27, permit all such books and records (including 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 BNPLC. 13. ASSIGNMENT AND SUBLETTING BY SGC. (a) BNPLC's Consent Required. Without the prior consent of BNPLC, SGC shall not assign, transfer, mortgage, pledge or hypothecate this Lease or any interest of SGC hereunder and shall not sublet all or any part of the Property, by operation of law or otherwise; provided, that, if (and after) SGC completes the Construction Project pursuant to the Construction Management Agreement and so long as no Event of Default has occurred and is continuing, SGC shall be entitled without the consent of BNPLC to (1) assign SGC's rights under this Lease and the other Operative Documents to an Affiliate of SGC (including any Affiliate of SGC that is the surviving entity after a merger permitted by subsection 3.04(a) of Schedule A attached to the Guaranty) pursuant to a written assignment unconditionally providing that the Affiliate assumes SGC's obligations hereunder and thereunder and (unless SGC has been merged into the Affiliate pursuant to a merger permitted by subsection 3.04(a) of Schedule A attached to the Guaranty) that SGC ratifies and confirms for the benefit of BNPLC SGC's responsibility and liability to BNPLC under this Lease and the other Operative Documents, and (2) sublet all or any portion of the Property if: (i) any sublease by SGC is made expressly subject and subordinate to the terms hereof; (ii) no sublease purports to grant the subtenant thereunder rights to use or occupy the Property after the expiration or termination of this Lease, other than rights expressly conditioned upon a purchase by SGC of the Property pursuant to the Purchase Agreement; (iii) the uses permitted by such sublease are limited to uses expressly permitted by subparagraph 3.(a) above; and (iv) less than forty-nine percent (49%) of any completed Improvements are at any time subleased by SGC to anyone other than its own Affiliates. (b) Standard for BNPLC's Consent to Assignments and Certain Other Matters. Consents and approvals of BNPLC which are required by this Paragraph 13 will not be unreasonably withheld, but SGC acknowledges that BNPLC's withholding of such consent or approval shall be reasonable if BNPLC determines 29 36 in good faith that (1) giving the approval may materially increase BNPLC's risk of liability for any existing or future environmental problem, (2) giving the approval is likely to substantially increase BNPLC's administrative burden of complying with or monitoring SGC's compliance with the requirements of this Lease, or (3) any transaction for which SGC has requested the consent or approval would negate SGC'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 BNPLC to a sale, assignment, transfer, mortgage, pledge or hypothecation of this Lease or SGC's interest hereunder, and no assignment or subletting of the Property or any part thereof in accordance with this Lease or otherwise with BNPLC's consent, shall release SGC from liability hereunder; and any such consent shall apply only to the specific transaction thereby authorized and shall not relieve SGC from any requirement of obtaining the prior consent of BNPLC to any further sale, assignment, transfer, mortgage, pledge or hypothecation of this Lease or any interest of SGC hereunder. 14. ASSIGNMENT BY BNPLC. (a) Restrictions on Transfers. Except by a Permitted Transfer, BNPLC shall not assign, transfer, mortgage, pledge, encumber or hypothecate this Lease or the other Operative Documents or any interest of BNPLC in and to the Property during the Term without the prior consent of SGC. (b) Effect of Permitted Transfer or other Assignment by BNPLC. If, without breaching subparagraph 14.(a), BNPLC sells or otherwise transfers the Property and assigns all of its rights under this Lease and the other Operative Documents, and if BNPLC's successor in interest to all such rights assumes in writing for the benefit of SGC BNPLC's obligations under this Lease and the other Operative Documents on and subject to the express terms and conditions set out herein and therein, then BNPLC shall thereby be released from any obligations arising after such assumption under this Lease or the other Operative Documents (other than any liability for a breach of the landlord's obligation to provide Construction Advances), and SGC shall look solely to each successor in interest of BNPLC for performance of such obligations. 15. BNPLC'S RIGHT OF ACCESS (a) BNPLC and BNPLC's representatives may (subject to the Ground Lease) enter the Property, after three Business Days advance notice to SGC (except in the event of an emergency, when no advance notice will be required), for the purpose of performing any work BNPLC is authorized to undertake by the next subparagraph or for the purpose confirming whether SGC has complied with the requirements of this Lease at any time BNPLC may reasonably question such compliance. So long as SGC remains in possession of the Property, BNPLC or BNPLC's representative will, before making any such inspection or performing any such work on the Property, if then requested to do so by SGC to maintain security: (i) sign in at SGC's security or information desk if SGC has such a desk on the premises, (ii) wear a visitor's badge or other reasonable identification provided by SGC when BNPLC or BNPLC's representative first arrives at the Property, (iii) permit an employee of SGC to observe such inspection or work, and (iv) comply with other similar reasonable nondiscriminatory security, health or safety requirements of SGC, as SGC may establish from time to time in accordance with good industry practices, provided that such other requirements do not, individually or in the aggregate, substantially interfere with or delay inspections or work of BNPLC authorized by this Lease. (b) If SGC fails to perform any act or to take any action which hereunder SGC is required to perform or take, or to pay any money which hereunder SGC is required to pay, and if such failure or action constitutes an Event of Default or causes BNPLC or any director, officer, employee or Affiliate of BNPLC to be 30 37 overtly threatened with criminal prosecution or renders BNPLC's interest in the 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, BNPLC may, perform or cause to be performed such act or take such action or pay such money. Any expenses so incurred by BNPLC, and any money so paid by BNPLC, shall be a demand obligation owing by SGC to BNPLC. Further, BNPLC, 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 BNPLC to do any work which under any provision of this Lease SGC may be required to perform, and the performance thereof by BNPLC shall not constitute a waiver of SGC's default. BNPLC may during the progress of any such work permitted by BNPLC hereunder on or in the Property keep and store upon the Property all necessary materials, tools, and equipment. BNPLC shall not in any event be liable for inconvenience, annoyance, disturbance, loss of business, or other damage to SGC or the subtenants of SGC by reason of making such repairs or the performance of any such work on or in the Property, or on account of bringing materials, supplies and equipment into or through the 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 [and attributed by any applicable principles of comparative fault to] the Established Misconduct of BNPLC), and the obligations of SGC under this Lease shall not thereby be excused in any manner. 16. OTHER REPRESENTATIONS, WARRANTIES AND COVENANTS OF SGC. SGC represents, warrants and covenants as follows: (a) Negative Covenants. Without the prior written consent of BNPLC in each case, neither SGC nor any of its Affiliates shall: (i) Multi employer ERISA Plans. Incur or permit any Affiliate to incur any obligation to contribute to any "Multi employer plan" as defined in Section 4001 of ERISA. (ii) Prohibited ERISA Transaction. Enter into any transaction which would cause this Lease or the other Operative Documents or any other document executed in connection herewith (or any exercise of BNPLC's rights hereunder or thereunder) to constitute a non-exempt prohibited transaction under ERISA. (b) Financial Statements; Required Notices; Certificates as to Default. To the extent not so delivered by Guarantor, SGC shall deliver to BNPLC and to each Participant of which SGC has been notified: (i) copies of all financial statements, certificates, notices and other information that Guarantor is required to provide by Part 2 of Schedule A attached to the Guaranty prior to the deadlines for delivery established thereunder; (ii) together with the annual and quarterly financial statements furnished in accordance with subparagraph 16.(b)(i), a certificate of a Responsible Financial Officer of Guarantor in the form attached hereto as Exhibit G certifying (a) that no Event of Default or material Default by SGC has occurred and is continuing (or, if an Event of Default or material Default by SGC has occurred, stating the nature thereof and the action which SGC proposes to take with respect thereto), (b) that the representations and warranties by Guarantor and SGC contained in the provisions referenced in Exhibit G from this Lease, the other Operative Documents and the Guaranty are true and correct in all material respects on and as of the date of such certificate as though made on and as of such date, or, if not then true and correct, a brief statement as to why such representations are no longer true and correct, and (c) the accuracy of computations attached thereto demonstrating compliance by Guarantor with the financial covenants established in 31 38 Schedule A attached to the Guaranty; (iii) as soon as possible and in any event within five days after the occurrence of each Event of Default or material Default known to a Responsible Financial Officer of Guarantor, a statement setting forth details of such Event of Default or material Default and the action which SGC has taken and proposes to take with respect thereto; (iv) as soon as practicable and in any event within thirty days after a Responsible Financial Officer of SGC knows or has reason to know that any ERISA Termination Event with respect to any Plan has occurred, a statement of a Responsible Financial Officer of SGC describing such ERISA Termination Event and the action, if any, which SGC proposes to take with respect thereto; (v) upon request by BNPLC, a statement by SGC and Guarantor in writing certifying that this Lease and the Guaranty are unmodified and in full effect (or, if there have been modifications, that this Lease and the Guaranty are in full effect as modified, and setting forth such modifications) and the dates to which the Base Rent, Commitment Fees and Administrative Agency Fees have been paid and either stating that no default exists hereunder or specifying each such default; it being intended that any such statement may be relied upon by any prospective purchaser or mortgagee of the Property or any prospective Participant; (vi) promptly after any change in the rating of the Index Debt of Guarantor by S&P or Moody's, which will result in a change in the Spread (as defined in the List of Defined Terms), a certificate of a Responsible Financial Officer of Guarantor advising BNPLC of the ratings after the change; and (vii) such other information respecting the condition or operations, financial or otherwise, of SGC, of its Affiliates or of the Property as BNPLC or any Participant may from time to time reasonably request. BNPLC is hereby authorized to deliver a copy of any information or certificate delivered to it pursuant to this subparagraph 16.(b) to any Participant and to any regulatory body having jurisdiction over BNPLC, BNPLC's Parent or any other Participant that requires or requests it. (c) No Default or Violation. The execution, delivery and performance by SGC of this Lease do not and will not constitute a breach or default under any other material agreement or contract to which SGC is a party or by which SGC is bound or which affects the Property, and do not violate or contravene any law, order, decree, rule or regulation to which SGC is subject, and such execution, delivery and performance by SGC 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, SGC's property pursuant to the provisions of any of the foregoing. (d) No Suits. Except as disclosed in Schedule 2, there are no judicial or administrative actions, suits, proceedings or investigations pending or, to SGC's knowledge, threatened that will adversely affect the Property or the validity, enforceability or priority of this Lease, and SGC 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 use, occupancy or operation of the Property. No condemnation or other like proceedings are pending or, to SGC's knowledge, threatened against the Property. (e) Enforceability. The execution, delivery and performance by SGC of this Lease and the other Operative Documents are duly authorized and do not require the consent or approval of any governmental 32 39 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 SGC's articles of incorporation or bylaws. This Lease and the Other Operative Documents are valid, binding and legally enforceable obligations of SGC in accordance with its 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. (f) Financial Matters. SGC is not "insolvent" on the date hereof (that is, the sum of SGC's absolute and contingent liabilities, including the obligations of SGC under this Lease, does not exceed the fair market value of SGC's assets) and has no outstanding liens, suits, garnishments or court actions which could render SGC insolvent or bankrupt. SGC's capital is adequate for the businesses in which SGC is engaged and intends to be engaged. SGC has not incurred (whether hereby or otherwise), nor does SGC intend to incur or believe that it will incur, debts which will be beyond its ability to pay as such debts mature. There has not been filed by or, to SGC's knowledge, against SGC 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 SGC or any significant portion of SGC'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 BNPLC relating to SGC are true, correct and complete in all material respects. (g) Organization. SGC is duly incorporated and legally existing under the laws of the State of Georgia. SGC 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 fulfill its obligations under this Lease. SGC has the corporate power and adequate authority, rights and franchises to own SGC's property and to carry on SGC's business as now conducted and is duly qualified and in good standing in each state in which the character of SGC's business makes such qualification necessary or, if it is not so qualified in a state other than Georgia, such failure does not have a material adverse effect on the properties, assets, operations or businesses of SGC and its Subsidiaries, taken as a whole. (h) ERISA. SGC is not and will not become an "employee benefit plan" (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA. The assets of SGC do not and will not in the future constitute "plan assets" of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101. SGC is not and will not become a "governmental plan" within the meaning of Section 3(32) of ERISA. Transactions by or with SGC are not subject to state statutes regulating investments of and fiduciary obligations with respect to governmental plans. No ERISA Termination Event has occurred with respect to any Plan of SGC and SGC and all its Affiliates are in compliance with ERISA. Neither SGC nor any of its Affiliates is required to contribute to, or has any other absolute or contingent liability in respect of, any "Multi employer plan" as defined in Section 4001 of ERISA. As of the Effective Date no "accumulated funding deficiency" (as defined in Section 412(a) of the Code) exists with respect to any Plan of SGC, whether or not waived by the Secretary of the Treasury or his delegate, and the current value of the benefits of each Plan of SGC, if any, equals or is less than the current value of such Plan's assets available for the payment of such benefits. (i) Use of Proceeds. In no event shall the funds from the Initial Funding Advance or any Construction Advance be used (nor have they been used) directly or indirectly for personal, family, household or agricultural purposes or for the purpose, whether immediate, incidental or ultimate, of purchasing, acquiring or carrying any "margin stock" or any "margin securities" (as such terms are defined respectively in Regulation U and Regulation G promulgated by the Board of Governors of the Federal Reserve System) or to extend credit to others directly or indirectly for the purpose of purchasing or carrying any such margin stock or margin securities. SGC represents and warrants that SGC is not engaged principally, or as one of SGC's important activities, in the 33 40 business of extending credit to others for the purpose of purchasing or carrying such margin stock or margin securities. (j) Investment Company Act. SGC is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (k) Omissions. None of SGC's representations or warranties contained in this Lease or in any other document, certificate or written statement furnished to BNPLC by or on behalf of SGC in connection with this Lease 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) Not a Foreign Person. SGC is not a "foreign person" within the meaning of Sections 1445 and 7701 of the Code (i.e. SGC 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). (m) Further Assurances. SGC shall, upon request of BNPLC, (i) promptly correct any 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 any renewals, additions, substitutions, replacements or appurtenances to the Property; (iii) execute, acknowledge, deliver, procure and record or file any document or instrument deemed advisable by BNPLC to protect its rights in and to the 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 BNPLC to enable BNPLC, BNPLC's Parent and any other Participants to comply with the requirements or requests of any agency or authority having jurisdiction over them. 17. EVENTS OF DEFAULT. (a) Definition of Events of Default. Each of the following events shall be deemed to be an "EVENT OF DEFAULT" by SGC under this Lease: (i) SGC shall fail to pay when first due any Base Rent, any Commitment Fees or any Administrative Agency Fees and such failure shall continue for three Business Days after SGC is notified thereof by BNPLC pursuant to a notice that specifically references this Paragraph 17.(a). (ii) SGC shall fail to pay when first due any Rent other than Base Rent, Commitment Fees or Administrative Agency Fees, or SGC shall fail to pay when first due any amount required by the Closing Certificate, and in either case such failure shall continue for thirty days after SGC is notified thereof by BNPLC pursuant to a notice that specifically references this Paragraph 17.(a). (iii) SGC shall fail to comply with any term, provision or covenant of this Lease, the Construction Management Agreement or the Closing Certificate, other than as described in the other clauses of this subparagraph 17.(a), and shall not cure such failure prior to the earlier of (A) thirty days after notice thereof is sent to SGC, or (B) the date any writ or order is issued for the levy or sale of any property owned by BNPLC (including the Property) because of such failure or any criminal action is overtly threatened or instituted against BNPLC or any of its directors, officers or employees because of 34 41 such failure; provided, however, that so long as no such writ or order is issued and no such criminal action is overtly threatened or instituted, the period within which such failure may be cured by SGC shall be extended for a further period (not to exceed an additional one hundred twenty days) as shall be necessary for the curing thereof with diligence, if (but only if) (x) such failure is susceptible of cure but cannot with reasonable diligence be cured within such thirty day period, (y) SGC shall promptly have commenced to cure such failure and shall thereafter continuously prosecute the curing thereof with reasonable diligence and (z) the extension of the period for cure will not, in the case of such a failure that occurs or commences more than thirty-five days prior to the expiration of this Lease, cause the period for cure to extend beyond five days prior to the expiration of this Lease. (iv) SGC shall fail to pay the full amount of any Supplemental Payment on the Designated Sale Date as required by the Purchase Agreement. (v) SGC shall abandon the Property. (vi) Guarantor, SGC or any of Guarantor's other Subsidiaries shall: (1) be in default with respect to any payment (whether of principal or interest and regardless of amount) in respect of any "Material Indebtedness" (which as used in this provision shall mean any Debt of Guarantor or its applicable Subsidiary [as the case may be] that is owed to BNPLC or BNPLC's Affiliates or that is outstanding in a principal amount of at least $10,000,000 in the aggregate), and such default shall continue beyond the applicable grace period, if any, specified in the agreements or instruments relating to such Material Indebtedness; or (2) be in default under any agreement or instrument relating to any Material Indebtedness and as a result of such default, the Material Indebtedness shall be declared to be due and payable prior to the stated maturity thereof. (vii) Guarantor, SGC or any of Guarantor's other 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 Guarantor, SGC or any of Guarantor's other 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 seeking the entry of an order for 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 sixty consecutive days, or any of the actions sought in such proceeding (including 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 Guarantor, SGC or any of Guarantor's other Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this clause 17.(a)(vii). (viii) Any order, judgment or decree is entered in any proceedings against Guarantor, SGC or any of Guarantor's other Subsidiaries decreeing its dissolution and such order, judgment or decree remains unstayed and in effect for more than sixty days. (ix) Any order, judgment or decree is entered in any proceedings against Guarantor decreeing a divestiture of any of its assets that represent a substantial part, or the divestiture of the stock of SGC or any of Guarantor's other Subsidiaries whose assets represent a substantial part, of the total assets of Guarantor and its Subsidiaries (determined on a consolidated basis in accordance with GAAP) or which requires the divestiture of assets, or stock of any of Guarantor's Subsidiaries, which shall have contributed 35 42 a substantial part of the net income of Guarantor and its Subsidiaries (determined on a consolidated basis 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 days. (x) A final judgment or order for the payment of money in an amount (not covered by insurance) which exceeds $10,000,000 shall be rendered against Guarantor, SGC or any of Guarantor's other Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment, or (ii) within sixty days after the entry thereof, such judgment or order is not discharged or execution thereof stayed pending appeal, or within thirty days after the expiration of any such stay, such judgment is not discharged. (xi) Any ERISA Termination Event that BNPLC determines in good faith would constitute grounds for a termination of any Plan of SGC or for the appointment by the appropriate United States district court of a trustee to administer any Plan of SGC shall have occurred and be continuing thirty days after notice to such effect shall have been given to SGC by BNPLC, or any Plan of SGC shall be terminated, or a trustee shall be appointed by an appropriate United States district court to administer any Plan of SGC, or the Pension Benefit Guaranty Corporation shall institute proceedings to terminate any Plan of SGC or to appoint a trustee to administer any Plan of SGC. (xii) SGC or any of its Affiliates shall enter into any transaction which would cause this Lease or any other Operative Document or any other document executed in connection herewith (or any exercise of BNPLC's rights hereunder or thereunder) to constitute a non-exempt prohibited transaction under ERISA. (xiii) Guarantor shall breach or repudiate its guarantee of the obligations of SGC under this Lease, the Construction Management Agreement, the Purchase Agreement or the Closing Certificate or Guarantor shall fail to comply with any other covenants of Guarantor in the Guaranty including the obligations of Guarantor set forth Section 10 of the Guaranty. (xiv) Any breach by SGC of subparagraph 16.(b)(iii) resulting from SGC's failure to notify BNPLC of a material Default known to a Responsible Financial Officer. (xv) Any representation of SGC contained herein or in the other Operative Documents is false or misleading in any material respect, or any certificate delivered to BNPLC by or on behalf of SGC as required by this Lease is false or misleading in any material respect. (xvi) Any representation of Guarantor contained in the Guaranty is false or misleading in any material respect, or any certificate, if any, delivered to BNPLC by or on behalf of Guarantor as may be required by the Guaranty is false or misleading in any material respect. 18. REMEDIES. (a) Basic Remedies. At any time after an Event of Default and after BNPLC has given any notice required by subparagraph 18.(b), BNPLC shall be entitled at BNPLC's option (and without limiting BNPLC in the exercise of any other right or remedy BNPLC may have, and without any further demand or notice except as expressly described in this subparagraph 18.(a)), to exercise any one or more of the following remedies: (i) By notice to SGC, BNPLC may terminate SGC's right to possession of the Property. 36 43 A notice demanding possession given in connection with possessory proceedings specifying a time within which to cure a default shall terminate SGC's right to possession if SGC fails to cure the default within the time specified in the notice. (ii) Upon termination of SGC's right to possession and without further demand or notice, BNPLC may re-enter the Property in any manner not prohibited by Applicable Law and take possession of all improvements, additions, alterations, equipment and fixtures thereon and remove any persons in possession thereof. Any property on the Land or in the Improvements may be removed and stored in a warehouse or elsewhere at the expense and risk of and for the account of SGC. (iii) Upon termination of SGC's right to possession, this Lease shall terminate and BNPLC may recover from SGC: 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 SGC 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 SGC proves could be reasonably avoided; and d) Any other amount necessary to compensate BNPLC for all the detriment proximately caused by SGC's failure to perform SGC'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 Property, removing persons or property therefrom, placing the Property in good order, condition, and repair, preparing and altering the Property for reletting, all other costs and expenses of reletting, and any loss incurred by BNPLC as a result of SGC's failure to perform SGC's obligations under the Other Operative Documents. The "WORTH AT THE TIME OF AWARD" of the amounts referred to in subparagraph 18.(a)(iii)a) and subparagraph 18.(a)(iii)b) shall be computed by allowing interest at ten percent (10%) per annum or such lesser rate as may be the maximum interest rate then permitted to be charged under Georgia law at the time of computation. The "WORTH AT THE TIME OF AWARD" of the amount referred to in subparagraph 18.(a)(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 Georgia law. (iv) Even if SGC breaches this Lease and abandons the Property, this Lease shall continue in effect for so long as BNPLC does not terminate SGC's right to possession, and BNPLC may enforce all of BNPLC's rights and remedies under this Lease, including the right to recover the Rent as it becomes due under this Lease. SGC's right to possession shall not be deemed to have been terminated 37 44 by BNPLC except pursuant to subparagraph 18.(a)(i) hereof. The following shall not constitute a termination of SGC's right to possession: a) Acts of maintenance or preservation or efforts to relet the Property; b) The appointment of a receiver upon the initiative of BNPLC to protect BNPLC's interest under this Lease; or c) Reasonable withholding of consent to an assignment or subletting, or terminating a subletting or assignment by SGC. (b) Notice Required So Long As SGC's Purchase Option and Initial Remarketing Rights and Obligations Continue Under the Purchase Agreement. So long as SGC remains in possession of the Property and there has been no termination of SGC's Purchase Option and SGC's Initial Remarketing Rights and Obligations as provided Paragraph 4 of the Purchase Agreement, BNPLC's right to exercise remedies provided in subparagraph 18.(a) will be subject to the condition precedent that BNPLC shall have notified SGC of BNPLC's intent to exercise remedies provided in subparagraph 18.(a) at least sixty days prior to exercising the remedies. The condition precedent is intended to provide SGC with an opportunity to exercise SGC's Purchase Option or SGC's Initial Remarketing Rights and Obligations before losing possession of the Property pursuant to subparagraph 18.(a). The condition precedent is not, however, intended to extend any period for curing an Event of Default. Accordingly, if an Event of Default has occurred, and regardless of whether any Event of Default is then continuing, BNPLC may proceed immediately to exercise remedies provided in subparagraph 18.(a) at any time after the earlier of (i) sixty days after BNPLC has given such a notice to SGC, (ii) any date upon which SGC relinquishes possession of the Property, or (iii) any termination of SGC's Purchase Option and SGC's Initial Remarketing Rights and Obligations. (c) Enforceability. This Paragraph 18 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 BNPLC 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; however, before exercising any right or remedy available under Applicable Law or in equity to evict SGC from the Property or to terminate SGC's right of occupancy hereunder, BNPLC shall give SGC any sixty days notice required in subparagraph 18.(b). In addition to other remedies provided in this Lease, BNPLC shall be entitled, to the extent permitted by Applicable Law or in equity, 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, or to a decree compelling performance of any of the other covenants, agreements, conditions or provisions of this Lease to be performed by SGC, or to any other remedy allowed to BNPLC at law or in equity. Nothing contained in this Lease shall limit or prejudice the right of BNPLC to prove for and obtain in proceedings for bankruptcy or insolvency of SGC 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 BNPLC under the Purchase Agreement, and BNPLC shall not be required to give the sixty day notice described in subparagraph 18.(a) as a condition to any acceleration of the Designated Sale Date or to taking any action to enforce the Purchase Agreement or the Closing Certificate. 38 45 19. DEFAULT BY BNPLC. If BNPLC should default in the performance of any of its obligations under this Lease, BNPLC shall have the time reasonably required, but in no event less than thirty days, to cure such default after receipt of notice from SGC specifying such default and specifying what action SGC believes is necessary to cure the default. If SGC prevails in any litigation brought against BNPLC because of BNPLC's failure to cure a default within the time required by the preceding sentence, then SGC shall be entitled to an award against BNPLC for the monetary damages proximately caused to SGC by such default. Notwithstanding the foregoing, BNPLC's right to cure as provided in this Paragraph 19 will not in any event extend the time within which BNPLC must remove Liens Removable by BNPLC as required to consummate a conveyance of BNPLC's interest in the Property required by the Purchase Agreement. 20. QUIET ENJOYMENT. Provided SGC pays the Base Rent and all Additional Rent payable hereunder as and when due and payable and keeps and fulfills all of the terms, covenants, agreements and conditions to be performed by SGC hereunder, BNPLC shall not during the Term disturb SGC's peaceable and quiet enjoyment of the Property; however, such enjoyment shall be subject to the terms, provisions, covenants, agreements and conditions of this Lease, to Permitted Encumbrances, to Development Documents and to any other claims not constituting Liens Removable by BNPLC. If any Lien Removable by BNPLC is claimed against the Property, including any judgment lien securing a Deductible Judgment against BNPLC, BNPLC will remove the Lien Removable by BNPLC promptly. However, BNPLC shall not be responsible for any Lien that is expressly excluded from the definition of Liens Removable by BNPLC in the attached List of Defined Terms. Any breach by BNPLC of this Paragraph shall render BNPLC liable to SGC for any monetary damages proximately caused thereby, but as more specifically provided in Paragraph 2 above, no such breach shall entitle SGC to terminate this Lease or excuse SGC from its obligation to pay Base Rent and other amounts hereunder. 21. SURRENDER UPON TERMINATION. Unless SGC or an Applicable Purchaser purchases BNPLC's entire interest in the Property pursuant to the terms of the Purchase Agreement, SGC shall, upon the termination of SGC's right to occupancy, surrender to BNPLC the Property, including any buildings, alterations, improvements, replacements or additions constructed by SGC, with all fixtures and furnishings included in the 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 BNPLC, with all Improvements in substantially the same condition as of the date the same were initially completed, excepting only (i) ordinary wear and tear that occurs between the maintenance, repairs and replacements required by other provisions of this Lease, and (ii) alterations and additions which are expressly permitted by the terms of this Lease and which have been completed by SGC in a good and workmanlike manner in accordance with all Applicable Laws. Any movable furniture or movable personal property belonging to SGC or any party claiming under SGC, if not removed at the time of such termination and if BNPLC shall so elect, shall be deemed abandoned and become the property of BNPLC without any payment or offset therefor. If BNPLC shall not so elect, BNPLC may remove such property from the Property and store it at SGC's risk and expense. SGC shall bear the expense of repairing any damage to the Property caused by such removal by BNPLC or SGC. 22. HOLDING OVER BY SGC. Should SGC not purchase BNPLC's right, title and interest in the Property as provided in the Purchase Agreement, but nonetheless continue to hold the Property after the termination of this Lease without BNPLC's 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) Stipulated Loss Value on the day in question, times (ii) (A) the Prime Rate in effect for such day so long as the holdover period does not extend beyond ninety days and (B) for each such day beginning with the ninety-first day after the holdover commences, two percent (2%) above the Prime Rate; divided by (iii) three hundred and sixty; subject, however, to all of the terms, provisions, covenants and agreements on the part of SGC hereunder. No 39 46 payments of money by SGC to BNPLC 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 BNPLC and SGC. 23. INDEPENDENT OBLIGATIONS EVIDENCED BY THE OTHER OPERATIVE DOCUMENTS. SGC acknowledges and agrees that nothing contained in this Lease shall limit, modify or otherwise affect any of SGC's obligations under the other Operative Documents, which obligations are intended to be separate, independent and in addition to, and not in lieu of, the obligations set forth herein. In the event of any inconsistency between the terms and provisions of the Purchase Agreement and the terms and provisions of this Lease, the terms and provisions of the Purchase Agreement shall control. In the event of any inconsistency between the terms and provisions of the Closing Certificate or Construction Management Agreement and the terms and provisions of this Lease, the terms and provisions of this Lease shall control; provided, nothing in this Lease shall be construed to limit or impair the indemnities provided by SGC in the Closing Certificate, including the indemnity therein provided against Environmental Losses, and nothing herein shall limit the obligations of SGC under the Construction Management Agreement. 24. WAIVER OF JURY TRIAL. BNPLC AND SGC 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 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 contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. SGC 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 Lease and the other documents referred to herein, and that each will continue to rely on the waiver in their related future dealings. SGC and BNPLC 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 PROPERTY. In the event of litigation, this Lease may be filed as a written consent to a trial by the court. 25. 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 demand hereunder or with reference to the making of any payment required hereunder, shall be deemed to be complied with when and if the following steps are taken: (i) All Rent required to be paid by SGC to BNPLC hereunder shall be paid to BNPLC in immediately available funds by wire transfer to: Federal Reserve Bank of New York ABA 026007689 Banque Nationale de Paris /BNP/ BNP San Francisco /AC/ 14334000176 /Ref/ Solectron (Solectron Georgia Synthetic Lease) or at such other place and in such other manner as BNPLC may designate in a notice to SGC. 40 47 (ii) All advances paid to SGC by BNPLC hereunder or in connection herewith shall be paid to SGC in immediately available funds at such place and in such manner as SGC may reasonably designate in a notice signed by SGC's Treasurer or Chief Financial Officer to BNPLC. (iii) All notices, demands, approvals, consents and other communications to be made hereunder to or by the parties hereto must, to be effective for purpose of this Lease, be in writing. Notices, demands and other communications required or permitted hereunder are to be sent to the addresses set forth below (or in the case of communications to Participants, at the addresses set forth in Schedule 1 to 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 BNPLC: BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd G. Cox Telecopy: (214) 969-0060 With a copy to: Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Rafael Lumanlan or Gavin Holles 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 41 48 Address of SGC: Solectron Georgia Corporation 777 Gibraltar Drive, Building #5 Milpitas, CA 95035 Attn: Chief Financial Officer Telecopy: (408) 956-6059 With a copy to: Wilson, Sonsini, Goodrich & Rosati 650 Page Mill Palo Alto, California 94304-1050 Attention: Real Estate Department/DSS Telecopy: (415) 493-6811 (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 created hereby created with any other interest in the Property by reason of the fact that the same person may acquire or hold, directly or indirectly, this Lease or the leasehold estate created hereby and any other interest in the Property, unless all Persons with an interest in the Property that would be adversely affected by any such merger specifically agree in writing that such a merger shall occur. (d) No Implied Waiver. The failure of BNPLC or SGC 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 breach of 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 BNPLC 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 of any provision of this Lease shall be deemed to have been made unless expressed in writing and signed by the waiving party. (e) NO IMPLIED REPRESENTATIONS BY BNPLC. BNPLC AND BNPLC'S AGENTS HAVE MADE NO REPRESENTATIONS OR PROMISES WITH RESPECT TO THE PROPERTY EXCEPT AS EXPRESSLY SET FORTH HEREIN AND IN THE OTHER OPERATIVE DOCUMENTS, AND NO RIGHTS, EASEMENTS OR LICENSES ARE ACQUIRED BY SGC BY IMPLICATION OR OTHERWISE EXCEPT AS EXPRESSLY SET FORTH IN THIS LEASE AND THE OTHER OPERATIVE DOCUMENTS. (f) Entire Agreement. This Lease and the other Operative Documents and the other documents dated as of the Effective Date which are being executed by SGC and executed or accepted by BNPLC contemporaneously with the execution of this Lease supersede any prior negotiations and agreements between BNPLC and SGC concerning the Property, and no amendment or modification of this Lease shall be binding or 42 49 valid unless expressed in a writing executed by both parties hereto. (g) 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. (h) Time is of the Essence. Time is of the essence as to all obligations of SGC and BNPLC and all notices required of SGC and BNPLC under this Lease. (i) Governing Law. This Lease shall be governed by and construed in accordance with the laws of the State of Georgia without regard to conflict or choice of laws. (j) Paragraph Headings. The paragraph headings contained in this Lease are for convenience only and shall in no way enlarge or limit the scope or meaning of the various and several paragraphs hereof. (k) 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 BNPLC is a party or of which BNPLC is an intended beneficiary, without the consent of BNPLC. All accounting terms used but not specifically defined herein shall be construed in accordance with GAAP. The words "this Lease", "herein", "hereof", "hereby", "hereunder" and words of similar import when used in this Lease 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 used herein refer only to the Paragraphs or subparagraphs in which the phrase occurs. As used herein the word "or" is not exclusive. As used herein the words "include", "including" and similar terms shall be construed as if followed by "without limitation to". (l) Not a Partnership, Etc. NOTHING IN THIS LEASE IS INTENDED TO BE OR TO CREATE ANY PARTNERSHIP, JOINT VENTURE, OR OTHER JOINT ENTERPRISE BETWEEN BNPLC AND SGC. NEITHER THE EXECUTION OF THIS LEASE NOR THE ADMINISTRATION OF THIS LEASE OR OTHER DOCUMENTS REFERENCED HEREIN BY BNPLC, NOR ANY OTHER RIGHT, DUTY OR OBLIGATION OF BNPLC UNDER OR PURSUANT TO THIS LEASE OR SUCH DOCUMENTS IS INTENDED TO BE OR TO CREATE ANY FIDUCIARY OBLIGATIONS OF BNPLC TO SGC. 26. INCOME TAX REPORTING. BNPLC and SGC intend this Lease and the Purchase Agreement to have a form for income taxes which is different than the form of this Lease and the Purchase Agreement for other purposes, and thus the parties acknowledge and agree as follows: a) FOR PURPOSES OF DETERMINING THEIR RESPECTIVE FEDERAL, STATE AND LOCAL INCOME TAX OBLIGATIONS, BNPLC and SGC believe and intend that this Lease and the Purchase Agreement constitute a financing arrangement or conditional sale. Both BNPLC and SGC agree to report this Lease and the Purchase Agreement as a financing arrangement or conditional sale on their 43 50 respective income tax returns (the "REQUIRED REPORTING"), unless such Required Reporting is challenged in writing by the Internal Revenue Service or another governmental authority with jurisdiction (a "TAX CHALLENGE"). Consistent with the foregoing, BNPLC and SGC expect that SGC (and not BNPLC) shall be treated as the true owner of the Property for income tax purposes, thereby entitling SGC (and not BNPLC) to take depreciation deductions and other tax benefits available to the owner. SGC shall also report all interest earned on Escrowed Proceeds as SGC's income for federal, state and local income tax purposes. REFERENCES IN THIS LEASE OR IN THE PURCHASE AGREEMENT TO A "LEASE" OR TO "LEASED PROPERTY" ARE NOT INTENDED FOR INCOME TAX PURPOSES TO REFLECT THE INTENT OF BNPLC OR SGC AS TO THE FORM OF THE TRANSACTIONS COVERED BY, OR THE PROPER CHARACTERIZATION OF, THIS LEASE AND THE PURCHASE AGREEMENT. b) FOR ALL OTHER PURPOSES, INCLUDING THE DETERMINATION OF THE APPROPRIATE FINANCIAL ACCOUNTING FOR THIS LEASE AND THE DETERMINATION OF THEIR RESPECTIVE RIGHTS AND REMEDIES UNDER STATE LAW, BNPLC and SGC believe and intend that (i) this Lease constitutes a true Lease, not a mere financing arrangement, enforceable in accordance with its express terms (and neither this subparagraph 26 nor the provisions referencing this subparagraph on the title page of this Lease nor the corresponding provisions in the Purchase Agreement are intended to affect the enforcement of any other provisions of this Lease or the Purchase Agreement) and (ii) the Purchase Agreement shall constitute a separate and independent contract, enforceable in accordance with the express terms and conditions set forth therein. In this regard, SGC acknowledges that SGC asked BNPLC to participate in the transactions evidenced by this Lease and the Purchase Agreement as a landlord and owner of the Property, not as a lender. Although other transactions might have been used to accomplish similar results, SGC expects to receive certain material accounting and other advantages through the use of a lease transaction. Accordingly, and notwithstanding the Required Reporting for income tax purposes, SGC cannot equitably deny that this Lease and the Purchase Agreement should be construed and enforced in accordance with their respective terms, rather than as a mortgage or other security device, in any action brought by BNPLC to enforce this Lease or the Purchase Agreement. In the event of a Tax Challenge, BNPLC and SGC shall each provide to the other copies of all notices from the Internal Revenue Service or any other governmental authority presenting the Tax Challenge. Further, before changing from the Required Reporting because of a Tax Challenge, BNPLC and SGC shall each consider in good faith any reasonable suggestions received from the other party to this Lease about an appropriate response to the Tax Challenge; provided, however, that the suggestions are set forth in a written notice delivered no later than thirty Business Days after the suggesting party is first notified of the Tax Challenge; and, provided further, that when presented with a Tax Challenge, BNPLC and SGC shall each have the right to change from the Required Reporting rather than participate in any litigation or other legal proceeding against the Internal Revenue Service or another governmental authority. In any event, SGC must indemnify and hold harmless BNPLC from and against all liabilities, costs, additional taxes and other expenses that may arise or become due because of any challenge to the Required Reporting or because of any resulting recharacterization of this Lease or the Purchase Agreement required by the Internal Revenue Service or another governmental authority, including any additional taxes that may become due upon any sale under the Purchase Agreement, to the extent (if any) that such liabilities, costs, additional taxes and other expenses are not offset by tax savings resulting from additional depreciation deductions or other tax benefits to BNPLC of the recharacterization. 27. PROPRIETARY INFORMATION AND CONFIDENTIALITY. SGC shall have no obligation to provide 44 51 proprietary information (as defined in the next sentence) to BNPLC, except and to the extent that (1) BNPLC reasonably determines that BNPLC cannot accomplish the purposes of BNPLC's inspection of the Property pursuant to the various provisions hereof without evaluating such information, and (2) before conducting any inspections of the Property permitted hereunder BNPLC shall, if requested by SGC, confirm and ratify the confidentiality agreements covering such proprietary information set forth in subparagraph 7.(f). For purposes of this Lease "PROPRIETARY INFORMATION" means SGC's intellectual property, trade secrets and other confidential information of value to SGC about, among other things, SGC's products, marketing and corporate strategies, but in no event will "proprietary information" include any disclosure of substances and materials (and their chemical composition) which are or previously have been present in, on or under the Property at the time of any inspections by BNPLC, nor will "proprietary information" include any additional disclosures reasonably required to permit BNPLC to determine whether the presence of such substances and materials has constituted a violation of Environmental Laws or this Lease. In addition, under no circumstances shall SGC have any obligation to disclose to BNPLC or any other party any proprietary information of SGC (including, without limitation, any pending applications for patents or trademarks, any research and design and any trade secrets) except if and to the limited extent reasonably necessary to comply with the express provisions of this Lease. 28. USURY SAVINGS CLAUSE. Notwithstanding anything to the contrary contained in this Lease or the other Operative Documents to the contrary, BNPLC does not intend to contract for, charge or collect any amount of money that constitutes interest in excess of the Maximum Rate. As used herein, "MAXIMUM RATE" shall mean, at any time in question, the maximum rate of interest which, under applicable law, may be charged. If, notwithstanding the intention of the parties as explained in Paragraph 26, this Lease and the other Operative Documents should be construed as a financing arrangement under state law, BNPLC and SGC agree that it is their intent in the execution of this Lease and the other Operative Documents to contract in strict compliance with applicable law concerning usury. In furtherance thereof, BNPLC and SGC stipulate and agree that none of the terms and provisions contained in this Lease or in the other Operative Documents shall ever be construed to create a contract to pay for the use, forbearance or detention of money at a rate in excess of the Maximum Rate. Neither SGC nor any other parties now or hereafter becoming liable to BNPLC under the terms of this Lease or the other Operative Documents shall ever be required to pay interest at a rate in excess of the Maximum Rate, and the provisions of this paragraph shall control over all other provisions of this Lease and of the other Operative Documents which may be in apparent conflict herewith. If the Designated Sale Date is accelerated and as a result thereof any amounts payable by SGC to BNPLC under or in connection with this Lease or the other Operative Documents are determined to constitute interest for the actual period of existence of this Lease in excess of the interest that would have accrued at the Maximum Rate for such period, BNPLC shall, at its option, either refund to SGC the amount of such excess or credit such excess as a Qualified Payment (and thus reduce Stipulated Loss Value, the Break Even Price and other amounts, the determination of which depend upon Qualified Payments credited to SGC) and thereby shall render inapplicable any and all penalties of any kind provided by applicable laws as a result of such excess interest. If BNPLC shall receive money (or anything else) which is determined to constitute interest and which would increase the effective interest rate received by BNPLC under or in connection with this Lease or the other Operative Documents to a rate in excess of the Maximum Rate, the amount determined to constitute interest in excess of the Maximum Rate shall, immediately following such determination, at the option of BNPLC, be returned to SGC or credited as a Qualified Payment, in which event any and all penalties of any kind under applicable law as a result of such excess interest shall be inapplicable. If BNPLC shall not actually receive, but shall contract for, request or demand, a payment of money (or anything else) which is determined to constitute interest and which would increase the effective interest rate contracted for or charged to a rate in excess of the Maximum Rate, BNPLC shall be entitled, following such determination, to waive or rescind the contractual claim, request or demand for the amount determined to constitute interest in excess of the lawful rate, in which event any and all penalties of any kind under applicable law as a result of such excess interest shall be inapplicable. By execution of this Lease and the Purchase Documents, SGC agrees that if, at any time, SGC should have reason to 45 52 believe that the transactions evidenced by this Lease or the other Operative Documents are in fact usurious, it will give BNPLC notice of such condition, and SGC agrees that BNPLC shall have ninety days in which to make appropriate refund or other adjustment in order to correct such condition if it in fact exists. The term "applicable law" as used in this subparagraph shall mean the laws of the State of Georgia or the laws of the United States, whichever laws allow the greater rate of interest, as such laws now exist or may be changed or amended or come into effect in the future. [The signature pages follow.] 46 53 IN WITNESS WHEREOF, SGC and BNPLC have caused this Lease Agreement to be executed as of October 20, 1998. "SGC" SOLECTRON GEORGIA CORPORATION By: /s/ G. R. HAWKINS, JR. ------------------------------------ G. R. Hawkins, Jr., President 54 [Continuation of signature pages to Lease Agreement dated to be effective October 20, 1998] "BNPLC" BNP LEASING CORPORATION By: /s/ LLOYD G. COX ------------------------------------ Lloyd G. Cox, Vice President 55 Exhibit A LEGAL DESCRIPTION ALL THAT TRACT OR PARCEL OF LAND lying and being in Land Lots 126, 153 and 154, 7th District of Gwinnett County, Georgia, which is described as follows: TO LOCATE THE POINT OF BEGINNING commence at a point formed by the intersection of the northeastern margin of the right-of-way of Northridge Drive (having an 80-foot right-of-way) and the northwestern margin of the right-of-way of Old Peachtree Road (having an 80-foot right of way), if both of said rights-of-way are extended to form a point; thence North 56 degrees 23 minutes 46 seconds West a distance of 11.43 feet to a point marked by a 1/2-inch rebar pin which is the POINT OF BEGINNING and which is located on the northeastern margin of the right-of-way of Northridge Drive; thence northwesterly along the northeastern margin of the right-of-way of Northridge Drive the following five (5) courses and distances, or curves, as hereinafter described: thence North 56 degrees 23 minutes 46 seconds West a distance of 216.60 feet to a point; thence northwesterly along an arc of a curve to the right a distance of 278.76 feet to a point (said arc being subtended by a chord having a chord bearing of North 44 degrees 21 minutes 15 seconds West, a chord distance of 276.71 feet and a radius of 663.15 feet); thence North 32 degrees 19 minutes 42 seconds West a distance of 225.20 feet to a point; thence northwesterly along an arc of a curve to the left a distance of 312.95 feet to a point (said arc being subtended by a chord having a chord bearing of North 45 degrees 15 minutes 26 seconds West, a chord distance of 310.30 feet and a radius of 692.57 feet); thence North 58 degrees 12 minutes 08 seconds West a distance of 308.00 feet to a point marked by a 1/2-inch rebar pin; thence leaving the northeastern margin of the right-of-way of Northridge Drive and continuing northwesterly, northerly and northeasterly along an arc of a curve to the right a distance of 18.85 feet to a point marked by a 1/2-inch rebar pin (said arc being subtended by a chord having a chord bearing of North 13 degrees 12 minutes 08 seconds West, a chord distance of 16.97 feet and a radius of 12.00 feet) located on the southeasterly margin of the right-of-way of Northbrook Parkway (having a 100-foot right-of-way); thence easterly along the southeasterly margin of the right-of-way of Northbrook Parkway the following four (4) courses and distances, or curves, as hereinafter described: North 31 degrees 47 minutes 52 seconds East a distance of 164.90 feet to point; thence northeasterly along an arc of a curve to the right a distance of 462.34 feet to a point (said arc being subtended by a chord having a chord bearing of North 46 degrees 47 minutes 52 seconds East, a chord distance of 457.08 feet and a radius of 883.01 feet); thence North 61 degrees 47 minutes 52 seconds East a distance of 277.91 feet to a point; thence northeasterly along an arc of a curve to the left distance of 518.27 feet to a point marked by a 1/2-inch rebar pin (said arc being subtended by a chord having a chord bearing of North 45 degrees 13 minutes 11 seconds East, a chord distance of 511.07 feet and a radius of 895.59 feet); leaving said southerly margin of the right-of-way of Northbrook Parkway, thence South 61 degrees 21 minutes 31 seconds East a distance of 1,185.63 feet to a point marked by a 5/8-inch rebar pin which is located on the western margin of the right-of-way of Old Peachtree Road; thence South 03 degrees 13 minutes 18 seconds East along the western margin of the right-of-way of Old Peachtree Road a distance of 199.76 feet to a point; thence southerly and southwesterly along the western and northwestern margin of the right-of-way of Old Peachtree Road and being an arc of a curve to the right a distance of 536.80 feet to a point (said arc being subtended by a chord having a chord bearing of South 26 degrees 52 minutes 52 seconds West, a chord distance of 512.44 feet and a radius of 510.85 feet); thence South 56 degrees 59 minutes 02 seconds West along the northwestern margin of the right-of-way of Old Peachtree Road a distance of 729.16 feet to a point; thence southwesterly along the northwestern margin of the right-of-way of Old Peachtree Road along an arc of a curve to the left a distance of 330.46 feet to a point marked by a 1/2 inch rebar pin (said arc being subtended by a chord having a chord bearing of south 46 degrees 52 minutes 01 seconds West, a chord distance of 328.74 feet and a radius of 935.72 feet); thence southwesterly, westerly and northwesterly along an arc of a curve to the right a distance of 18.19 feet tot he POINT OF BEGINNING (said arc being subtended by a chord having a chord bearing of South 80 degrees 10 minutes 35 seconds West, a chord distance of 16.50 feet and a radius of 12.00 feet), said parcel containing an aggregate of 49.552 acres, depicted as Tract 1 (12.208 acres); 56 Tract 2 (10.000 acres) and Tract 3 (27.334 acres), and being more particularly shown and delineated on that certain survey entitled "As Built Survey for OKI America, Inc.; Solectron Georgia Corporation; BNP Leasing Corporation and Chicago Title Insurance Company:, prepared by Pinion & McGaughery Land Surveyors, Inc, bearing the seal and certification of George H. Pinion, Georgia Registered Land Surveyor Number 1606, dated July 1, 1998 last revised October 7, 1998, which survey is incorporated herein by reference thereto. Exhibit A -- Page 2 57 EXHIBIT B PERMITTED ENCUMBRANCES This conveyance is subject to the following matters, but only to the extent the same are still valid and in full force and effect: 1. Declaration of Protective Covenants for Northbrook, Gwinnett County, Georgia by Weeks NorthBrook MeadowBrook I Partnership, Ltd. and David Roan, dated March 11, 1986, filed for record March 14, 1986 at 3:54 p.m., recorded in Deed Book 3426, Page 118, Records of Gwinnett County, Georgia; as assigned by that certain Assignment of Declaration of Protective Covenants for Northbrook from Weeks Northbrook Meadowbrook I Partnership, Ltd., a Georgia limited partnership to Weeks Development Partnership, a Georgia general partnership, dated August 24, 1994, filed for record September 1, 1994 at 3:31 p.m., recorded in Deed Book 10643, Page 286, aforesaid Record. 2. Those matters as disclosed by that certain survey entitled "As Built Survey for OKI America, Inc.", prepared by Pinion & McGaughey Land Surveyors, Inc., bearing the seal and certification of George H. Pinion, Georgia Registered Land Surveyor Number 1606, dated July 1, 1998, as follows: (i) 15-foot building line along northeasterly line of subject property; (ii) 100-foot building line located along a portion of Old Peachtree Road near easterly corner of subject property; (iii)50-foot building lines along Northridge Drive, Northbrook Parkway and a portion of Old Peachtree Road; (iv) 75-foot natural buffer in east corner of subject property; (v) 10-foot no access buffer in east corner of subject property; (vi) 10-foot, 15-foot and 20-foot drainage easements with 18-inch, 30-inch, 36-inch, 48-inch and 60-inch corrugated metal pipes, swales, flared end sections, manholes, junction boxes and outlet control structure in southerly, westerly and easterly portions of subject property; (vii)20-foot sanitary sewer easements with manholes in southerly, westerly and central portions of subject property; (viii)branches in southwesterly portion of subject property; (ix) two (2) detention ponds with earthen berm, 60-foot corrugated metal pipe and headwall with 10-foot drainage easement surrounding said ponds in westerly portion of subject property; (x) water vaults in easterly and northerly portions of subject property; (xi) liquid oxygen tank located in northerly portion of subject property; (xii)Jackson Electric Membership Corporation cubicle located in easterly corner portion of subject property; 58 (xiii) Southern Bell cabinet located in easterly portion of subject property; (xiv) guy wire crossing easterly line of subject property; (xv) ditch in westerly portion of subject property; (xvi) lights and bollard lights throughout subject property; (xvii) electric box in central portion of subject property; (xviii) fire hydrants throughout subject property; (xix) concrete flumes on northwestern side of building; (xx) two (2) concrete pads with electrical equipment in easterly portion of subject property; (xxi) water meter on southern side of building; and (xxii) concrete vault (electric) in central portion of subject property. 59 Exhibit D NOTICE OF REQUEST FOR ACTION BY BNPLC BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd G. Cox Re: Lease Agreement dated as of October 20, 1998, between Solectron Georgia 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. Pursuant to subparagraph 7.(a) of the Lease, requests the following of BNPLC: [INSERT HERE A SPECIFIC DESCRIPTION OF THE ACTION REQUESTED - E.G., "PLEASE EXECUTE THE ENCLOSED APPLICATION FOR BUILDING PERMIT REQUIRED BY THE CITY IN CONNECTION WITH CONSTRUCTION OF CERTAIN IMPROVEMENTS WHICH ARE PART OF THE CONSTRUCTION PROJECT."] PLEASE NOTE: SUBPARAGRAPH 7.(a) OF THE LEASE OBLIGATES BNPLC NOT TO UNREASONABLY REFUSE TO COMPLY WITH THE FOREGOING REQUEST, SUBJECT TO TERMS AND CONDITIONS SET FORTH IN THAT SUBPARAGRAPH. SGC HEREBY CERTIFIES TO BNPLC THAT AFTER CAREFUL CONSIDERATION SGC BELIEVES THAT ALL SUCH TERMS AND CONDITIONS ARE SATISFIED IN THE CASE OF THE FOREGOING REQUEST, AND SGC HEREBY RATIFIES AND CONFIRMS ITS OBLIGATION TO INDEMNIFY BNPLC AGAINST ANY LOSSES BNPLC MAY INCUR OR SUFFER BECAUSE OF ITS COMPLIANCE WITH SUCH REQUEST AS PROVIDED IN SUBPARAGRAPH 5.(d) OF THE LEASE. SGC respectfully requests that BNPLC respond to this notice as soon as reasonably possible. Executed this _____ day of ______________, 19___. SOLECTRON GEORGIA CORPORATION Name:___________________________________ Title:__________________________________ 60 Exhibit E NOTICE OF REQUEST REQUIRING AN EXPEDITED RESPONSE BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd G. Cox Re: Lease Agreement dated as of October 20, 1998, between Solectron Georgia 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. SGC asks for an EXPEDITED RESPONSE to the following request, which is a request made by SGC pursuant to subparagraph 7.(a) of the Lease: [INSERT HERE A SPECIFIC DESCRIPTION OF THE ACTION REQUESTED - E.G., "PLEASE EXECUTE THE ENCLOSED APPLICATION FOR BUILDING PERMIT REQUIRED BY THE CITY IN CONNECTION WITH CONSTRUCTION OF CERTAIN IMPROVEMENTS WHICH ARE PART OF THE CONSTRUCTION PROJECT."] PLEASE NOTE: SUBPARAGRAPH 7.(a) OF THE LEASE OBLIGATES BNPLC NOT TO UNREASONABLY REFUSE TO COMPLY WITH THE FOREGOING REQUEST, SUBJECT TO TERMS AND CONDITIONS SET FORTH IN THAT SUBPARAGRAPH. SGC HEREBY CERTIFIES TO BNPLC THAT AFTER CAREFUL CONSIDERATION SGC BELIEVES THAT ALL SUCH TERMS AND CONDITIONS ARE SATISFIED IN THE CASE OF THE FOREGOING REQUEST, AND SGC HEREBY RATIFIES AND CONFIRMS ITS OBLIGATION TO INDEMNIFY BNPLC AGAINST ANY LOSSES BNPLC MAY INCUR OR SUFFER BECAUSE OF ITS COMPLIANCE WITH SUCH REQUEST AS PROVIDED IN SUBPARAGRAPH 5.(d) OF THE LEASE. As you consider the foregoing request, please understand that SGC must ask for an expedited request for the following reasons: [INSERT HERE A BRIEF DESCRIPTION OF THE NEED FOR AN EXPEDITED RESPONSE -E.G., "TO AVOID CRITICAL PATH DELAYS IN THE CONSTRUCTION CONTEMPLATED BY THE LEASE, SGC MUST SUBMIT THE ENCLOSED APPLICATION FOR BUILDING PERMIT TO THE CITY OF WITHIN 15 DAYS, AND UNFORTUNATELY THE CITY HAS ONLY RECENTLY INDICATED THAT SGC WILL NEED THE SIGNATURE OF BNPLC ON THE APPLICATION."] For the reasons stated above, SGC respectfully requests that BNPLC respond to this notice as soon as possible. Although SGC would appreciate a sooner response, SGC believes that it would be unreasonable for BNPLC not to respond to this notice on or before: [INSERT HERE A REASONABLE DEADLINE FOR THE RESPONSE - BUT IN NO EVENT PRIOR TO 10 BUSINESS DAYS AFTER THE DATE OF THIS NOTICE - TAKING INTO ACCOUNT THE MATERIALS THAT BNPLC WILL HAVE TO REVIEW TO EVALUATE SGC'S 61 REQUEST AND THE PARTICULAR REASONS FOR SGC'S NEED FOR AN EXPEDITED RESPONSE] Executed this _____ day of ______________, 19___. SOLECTRON GEORGIA CORPORATION Name:___________________________________ Title:__________________________________ Exhibit E -- Page 2 62 Exhibit F INSURANCE REQUIREMENTS I. LIABILITY INSURANCE: A. SGC must maintain commercial general liability ("CGL") insurance on an occurrence basis, affording afford immediate protection to the limit of not less than $20,000,000 combined single limit for bodily and personal injury, death and property damage in respect of any one occurrence. B. Any deductible or self-insured retention applicable to the CGL insurance shall not exceed $1,000 at any time when SGC shall continue to have the right to exercise any Issue 97-10 Election, or shall have previously exercised an Issue 97-10 Election. After the expiration of SGC's right to exercise any Issue 97-10 Election, and provided no Issue 97-10 Election has been exercised by SGC, SGC may increase any deductible or self-insured retention applicable to such insurance, but not to an amount in excess of $3,000,000. C. The forms of insurance policies (including endorsements) used to provide the CGL insurance required by this Lease, and the insurance company or companies providing the CGL insurance, must be acceptable to BNPLC. BNPLC shall have the right from time to time and at any time to review and approve such policy forms (including endorsements) and the insurance company or companies providing the insurance. Without limiting the generality of the foregoing, BNPLC may reasonably require (and unless and until SGC is otherwise notified by BNPLC, BNPLC does require) that such insurance be provided under forms and by companies consistent with the following: (1) Forms: CGL Insurance must be provided on Insurance Services Office ("ISO") forms CG 0001 1093 or CG 0001 0695. (2) Rating Requirements: Insurance must be provided through insurance or reinsurance 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 VI or better. (3) Required Endorsements: CGL Insurance must be endorsed to provide or include: (a) blanket contractual liability coverage which insures contractual liability under the indemnifications set forth in this Lease (though such coverage or the amount thereof shall in no way limit such indemnifications); (c) in any policy containing a general aggregate limit, ISO form amendment "Aggregate Limits of Insurance Per Location" CG 2504 1185; (b) a waiver of subrogation, using ISO form CG 2404 1093 (and under the commercial umbrella, if any), in favor of "BNP Leasing Corporation and other Interested Parties (as defined in the Lease Agreement between SOLECTRON GEORGIA CORPORATION and BNP Leasing Corporation dated October 20, 1998)"; (d) ISO additional insured form CG 2026 1185, without modification (and under the commercial umbrella, if any), designating as additional insureds "BNPLC and other 63 Interested Parties, as defined in the Lease Agreement between SOLECTRON GEORGIA CORPORATION and BNP Leasing Corporation dated October 20, 1998)"; and (e) provisions entitling BNPLC to 30 days' notice from the insurer prior to any cancellation, nonrenewal or material modification to the CGL coverage. (4) Other Insurance: Each policy to contain standard CGL "other insurance" wording, unmodified in any way that would make it excess over or contributory with the additional insured's own commercial general liability coverage. II. PROPERTY INSURANCE: A. SGC must maintain property insurance in "special form" or against "all risks," providing the broadest available coverage for all Improvements and equipment included in the Property, with no exclusions for vandalism, malicious mischief, or sprinkler leakage, and including coverage against earthquake and all coverage perils normally included within the definitions of extended coverage, vandalism, malicious mischief and, if the Property is in a flood zone, flood. During any period of significant construction on any Improvements, the property insurance must include builder's completed value risk insurance for such Improvements. B. The property insurance must provide coverage in the amount no less than replacement value (exclusive of land, foundation, footings, excavations and grading) 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. Subject to the approval of BNPLC, SGC will be responsible for determining the amount of property insurance to be maintained from time to time, but SGC must maintain such coverage on an agreed value basis to eliminate the effects of coinsurance. C. Any deductible or self-insured retention applicable to the property insurance shall not exceed $1,000 at any time when SGC shall continue to have the right to exercise any Issue 97-10 Election, or shall have previously exercised an Issue 97-10 Election. After the expiration of SGC's right to exercise any Issue 97-10 Election, and provided no Issue 97-10 Election has been exercised by SGC, SGC may increase any deductible or self-insured retention applicable to such insurance, but not to an amount in excess of $3,000,000. D. The property insurance shall cover not only the value of SGC's interest in the Improvements, but also the interest of BNPLC, with BNPLC shown as an insured as its interests may appear. E. The forms of insurance policies (including endorsements) used to provide the property insurance required by this Lease, and the insurance company or companies providing the property insurance, must be acceptable to BNPLC. BNPLC shall have the right from time to time and at any time to review and approve such policy forms (including endorsements) and the insurance company or companies providing such insurance. Without limiting the generality of the foregoing, BNPLC may reasonably require (and unless and until SGC is otherwise notified by BNPLC, BNPLC does require) that such insurance be provided under forms and by companies consistent with the following: (1) Rating Requirements: Insurance to be provided through insurance or reinsurance companies rated by the A.M. Best Company of Oldwick, New Jersey as having (a) a policyholder's rating of A- or better, (b) a reported financial information rating of no less than VI, Exhibit F -- Page 2 64 and (c) in the case of each insurance or reinsurance company, a reported financial information rating which indicates an adjusted policyholders' surplus equal to or greater than the underwriting exposure that such company has under the insurance or reinsurance it is providing for the Property. (2) Required Endorsements: SGC's property Insurance must be endorsed to provide or include: (a) a waiver of subrogation in favor of "BNPLC and other Interested Parties, as defined in the Lease Agreement between SOLECTRON GEORGIA CORPORATION and BNP Leasing Corporation dated October 20, 1998)"; (b) that SGC's insurance is primary, with any policies of BNPLC or other Interested Parties being excess, secondary and noncontributing; (c) that the protection afforded to BNPLC by such insurance shall not be reduced or impaired by acts or omissions of SGC or any other beneficiary or insured; and (d) that BNPLC must be notified at least thirty days prior to any cancellation, nonrenewal or reduction of insurance coverage. III. OTHER INSURANCE RELATED REQUIREMENTS: A. BNPLC must be notified in writing immediately by SGC of claims against SGC that might cause a reduction below seventy-five percent (75%) of any aggregate limit of any policy. B. SGC's Property insurance must be evidenced by ACORD form 27 "Evidence of Property Insurance" completed and interlineated in a manner satisfactory to BNPLC to show compliance with the requirements of this Exhibit. B. SGC's CGL insurance must be evidenced by ACORD form 25 "Certificate of Insurance" completed and interlineated in a manner satisfactory to BNPLC to show compliance with the requirements of this Exhibit. C. Such evidence of required insurance must be delivered upon execution of this Lease and new certificate or evidence of insurance must be delivered no later than 30 days prior to expiration of existing policy. D. Copies of endorsements must be attached to ACORD forms 25 and 27 delivered to BNPLC. Exhibit F -- Page 3 65 Exhibit G COMPLIANCE CERTIFICATE BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd G. Cox Gentlemen: The undersigned, as _____________________________ of Solectron Corporation ("Guarantor"), does hereby certify on behalf of Guarantor and Solectron Georgia Corporation ("SGC") that the following are true: 1. This Certificate is furnished pursuant to subparagraph 16.(b)(ii) of that certain Lease Agreement dated as of October 20, 1998 (the "LEASE"; the terms defined therein being used herein as therein defined) between SGC and you. 2. No Event of Default or material Default by SGC under the Lease has occurred and is continuing. 3. The representations and warranties of SGC in the Operative Documents are true and correct in all material respects as of the date hereof as though made on and as of the date hereof. 4. The representations and warranties of Guarantor in Section 9 of the Guaranty are true and correct in all material respects as of the date hereof as though made on and as of the date hereof. 5. Annex 1 attached hereto sets forth financial data and computations evidencing Guarantor's compliance with certain covenants established in Schedule A attached to the Guaranty, all of which data and computations are complete, true and correct. Executed this _____ day of ______________, 19___. Solectron Corporation Name:_________________________ Title:________________________ 66 Annex 1 To Compliance Certificate For the _________________ Ended ________________, 19___ NOTE: References to Sections below are intended to refer to the Sections in Part 3 of Schedule A to the Guaranty.
Actual Required/Permitted ------ ------------------ 1. Section 3.09 - Adjusted Leverage Ratio As of the last day of each fiscal quarter, the amount which is not greater than (a) 1.75 to 1.00 from the Effective Date through and including February 28, 1998, (b) 1.50 to 1.00 from May 31, 1998 through and including February 28, 1999, (c) 1.25 to 1.00 from May 31, 1999 through and including February 28, 2000, and (d) 1.00 to 1.00 thereafter. Adjusted Leverage Ratio calculation (A) Consolidated Funded Debt $_______ plus Guarantee obligations ________ plus Indebtedness with respect to ________ synthetic leases and securitized assets plus Indebtedness with respect to ________ letters of credit (including the Letters of Credit) minus Permitted Subordinated ________ Indebtedness TOTAL $_______
Exhibit G -- Page 2 67 (B) operating income $_______ plus depreciation and ________ amortization charges TOTAL $_______ RATIO OF (A) TO (B) ________ 2. Section 3.10 - Minimum Consolidated Tangible Net Worth As of the last day of each fiscal quarter following April 30, 1997, the amount that is not less than the sum of (without duplication) 80% of Consolidated Tangible Net Worth measured as of the end of the fiscal quarter ended February 28, 1997, plus 50% of consolidated net income (without subtracting losses or acquisition-related charges) for each fiscal quarter ended after the fiscal quarter ended February 28, 1997, minus 100% of all acquisition-related charges if such charges are recorded in the same fiscal quarter in which the applicable acquisition is consummated. (A) Consolidated Tangible Net Worth calculation: total shareholders' equity $_______ minus intangible assets ________
Exhibit G -- Page 3 68 Consolidated Tangible Net Worth $_______ (B) Minimum Consolidated Tangible Net Worth calculation: Beginning minimum amount $_______ plus 50% of quarterly net income _______ for each fiscal quarter subsequent to the quarter ended February 28, 1997, with no reduction for losses or acquisition-related charges minus 100% of all acquisition- related charges if such charges are recorded in the same fiscal quarter in which the applicable acquisition is consummated Minimum Consolidated Tangible Net $_______ Worth (A) MINUS (B) $_______ 3. Section 3.11 - Modified Quick Ratio At the end of any fiscal quarter of Guarantor when (1) the rating the rating established by Moody's for the Index Debt of Guarantor is below Ba2 or (2) the rating established by S&P for the Index Debt of Guarantor is below BB, or (3) neither Moody's nor S&P maintains a rating for the Index Debt of Guarantor, the Modified Quick Ratio is to be not less than 1.0 to 1.0. (A) Quick Assets calculation: unencumbered cash $_______ plus unencumbered short term cash ________ investments
Exhibit G -- Page 4 69 plus unencumbered marketable ________ securities which are classified as short term investments according to GAAP plus unencumbered net accounts ________ receivable plus fair market value of the following to the extent not otherwise already included in Quick Assets and to the extent having maturities of not longer than two years: securities issued or fully ________ guaranteed by the United States government or any agency thereof and backed by the full faith and credit of the United States certificates of deposit, ________ time deposits, Eurodollar time deposits, repurchase agreements, or banker's acceptances that are (A) 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 (B) rated not less than A- by Standard & Poor's Corporation or less than A by Moody's Investors Service, Inc. corporate or municipal ________ bonds rated not less than A- by Standard & Poor's Corporation or less than A by Moody's Investors Service, Inc. TOTAL $_______
Exhibit G -- Page 5 70 (B) Current Liabilities according to $_______ GAAP (C) Payments not included in Current $_______ Liabilities maturing within 12 months on Indebtedness or which are the subject of any Guarantee RATIO OF (A) TO [(B) +(C)] ________
Exhibit G -- Page 6 71 Exhibit H NOTICE OF LIBOR PERIOD ELECTION BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd G. Cox Re: Lease Agreement dated as of October 20, 1998, between Solectron Georgia 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___. SOLECTRON GEORGIA CORPORATION Name:___________________________________ Title:__________________________________ [cc all Participants] 72 Schedule 1 LIST OF DEVELOPMENT DOCUMENTS -- NONE - 73 Schedule 2 LIST OF CLAIMS PENDING OR THREATENED AGAINST THE PROPERTY -- NONE - 74 LIST OF DEFINED TERMS FOR AGREEMENTS BETWEEN BNP LEASING CORPORATION AND SOLECTRON GEORGIA CORPORATION DATED AS OF OCTOBER 20, 1998 69 75 TABLE OF CONTENTS
PAGE DEFINED TERM NUMBER - ------------------------------------------------------------------------ ABSOLUTE SGC CONSTRUCTION OBLIGATIONS..................................1 ACTIVE NEGLIGENCE......................................................1 ADDITIONAL RENT........................................................1 ADMINISTRATIVE AGENCY FEES.............................................1 ADVANCE DATE...........................................................1 AFFILIATE..............................................................2 APPLICABLE LAWS........................................................2 APPLICABLE PURCHASER...................................................2 ATTORNEYS' FEES........................................................2 BALANCE OF UNPAID CONSTRUCTION-PERIOD INDEMNITY PAYMENTS...............2 BANKING RULES CHANGE...................................................2 BASE RENT..............................................................2 BASE RENT COMMENCEMENT DATE............................................2 BASE RENT DATE.........................................................3 BASE RENT PERIOD.......................................................3 BNPLC..................................................................4 BNPLC'S PARENT.........................................................4 BREAKAGE COSTS.........................................................4 BREAK EVEN PRICE.......................................................4 BUSINESS DAY...........................................................4 CAPITAL ADEQUACY CHARGES...............................................5 CARRYING COSTS.........................................................5 CLOSING CERTIFICATE....................................................5 CMA SUSPENSION EVENT...................................................5 CMA SUSPENSION NOTICE..................................................5 CMA SUSPENSION PERIOD..................................................5 CMA TERMINATION EVENT..................................................5 CODE...................................................................5 COMMITMENT FEE.........................................................5 COMPLETION NOTICE......................................................5 CONSTRUCTION ADVANCES..................................................5 CONSTRUCTION ADVANCE REQUEST...........................................5 CONSTRUCTION ALLOWANCE.................................................5 CONSTRUCTION MILESTONE.................................................6 CONSTRUCTION PERIOD....................................................6 CONSTRUCTION-PERIOD INDEMNITY PAYMENTS.................................6 CONSTRUCTION PROJECT...................................................6 DEBT...................................................................6 DEDUCTIBLE JUDGMENT....................................................6 DEFAULT................................................................6 DEFAULT RATE...........................................................6 DEFECTIVE WORK.........................................................7 DESIGNATED SALE DATE...................................................7 DEVELOPMENT DOCUMENTS..................................................7 EFFECTIVE DATE.........................................................8 EFFECTIVE RATE.........................................................8 ENVIRONMENTAL CONSULTANT...............................................8
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PAGE DEFINED TERM NUMBER - ------------------------------------------------------------------------ ENVIRONMENTAL LAWS.....................................................8 ENVIRONMENTAL LOSSES...................................................8 ENVIRONMENTAL REPORT...................................................9 ERISA..................................................................9 ERISA AFFILIATE........................................................9 ERISA TERMINATION EVENT................................................9 ESCROWED PROCEEDS......................................................9 ESTABLISHED MISCONDUCT................................................10 EUROCURRENCY LIABILITIES..............................................10 EURODOLLAR RATE RESERVE PERCENTAGE....................................10 EVENT OF DEFAULT......................................................10 EXCESS FUNDING COMMITMENT.............................................10 EXCLUDED TAXES........................................................10 EXISTING CONTRACT.....................................................11 FAIR MARKET VALUE.....................................................11 FED FUNDS RATE........................................................11 FOCB NOTICE...........................................................12 FUNDED CONSTRUCTION ALLOWANCE.........................................12 FUNDING ADVANCES......................................................12 FUTURE WORK...........................................................12 GAAP..................................................................12 GUARANTOR.............................................................12 GROUND LEASE..........................................................12 GUARANTY..............................................................12 HAZARDOUS SUBSTANCE...................................................12 HAZARDOUS SUBSTANCE ACTIVITY..........................................13 IMPOSITIONS...........................................................13 IMPROVEMENTS..........................................................13 INDEX DEBT............................................................13 INDUSTRIAL HYGIENIST..................................................13 INITIAL FUNDING ADVANCE...............................................13 INTERESTED PARTY......................................................14 ISSUE 97-1 NON-PERFORMANCE-RELATED SUBJECTIVE EVENT OF DEFAULT........14 ISSUE 97-10 ELECTION..................................................14 ISSUE 97-10 PREPAYMENT................................................14 LAND..................................................................14 LANDLORD'S ELECTION TO CONTINUE CONSTRUCTION..........................15 LEASE.................................................................15 LIBOR.................................................................15 LIBOR PERIOD ELECTION.................................................15 LIEN..................................................................16 LIENS REMOVABLE BY BNPLC..............................................16 LIST OF DEFINED TERMS.................................................16 LOSS CUTOFF DATE......................................................16 LOSSES................................................................16 MATERIAL ENVIRONMENTAL COMMUNICATION..................................17 MAXIMUM CONSTRUCTION ALLOWANCE........................................17
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PAGE DEFINED TERM NUMBER - ------------------------------------------------------------------------ MAXIMUM PERMITTED PREPAYMENT..........................................17 MAXIMUM REMARKETING OBLIGATION........................................17 MINIMUM EXTENDED REMARKETING PRICE....................................17 MOODY'S...............................................................17 NORMAL TENANT IMPROVEMENTS............................................17 NOTICE OF SGC'S INTENT TO TERMINATE...................................17 OPERATIVE DOCUMENTS...................................................17 OUTSTANDING CONSTRUCTION ALLOWANCE....................................17 PARTICIPANT...........................................................18 PARTICIPATION AGREEMENT...............................................18 PERMITTED ENCUMBRANCES................................................18 PERMITTED HAZARDOUS SUBSTANCE USE.....................................18 PERMITTED HAZARDOUS SUBSTANCES........................................18 PERMITTED TRANSFER....................................................19 PERSON................................................................19 PERSONAL PROPERTY.....................................................19 PLAN..................................................................19 POTENTIAL LIEN CLAIMANTS..............................................19 PRIME RATE............................................................19 PRIOR WORK............................................................20 PROJECT COSTS.........................................................20 PROJECTED COST OVERRUNS...............................................20 PROPERTY..............................................................21 PURCHASE AGREEMENT....................................................21 PURCHASE OPTION.......................................................21 QUALIFIED PAYMENTS....................................................21 REAL PROPERTY.........................................................21 REIMBURSABLE CONSTRUCTION-PERIOD COSTS................................21 REMEDIAL WORK.........................................................21 RENT..................................................................22 RESIDUAL RISK PERCENTAGE..............................................22 RESPONSIBLE FINANCIAL OFFICER.........................................22 S&P...................................................................22 SCOPE CHANGE..........................................................22 SELLER................................................................22 SGC...................................................................22 SGC'S EXTENDED REMARKETING PERIOD.....................................22 SGC'S EXTENDED REMARKETING RIGHT......................................22 SGC'S INITIAL REMARKETING RIGHTS AND OBLIGATIONS......................22 SPREAD................................................................22 STIPULATED LOSS VALUE.................................................23 SUBSIDIARY............................................................23 SUPPLEMENTAL PAYMENT..................................................23 TERM..................................................................23 THIRD PARTY CONTRACT..................................................23 THIRD PARTY SALE NOTICE...............................................23 THIRD PARTY SALE PROPOSAL.............................................23
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PAGE DEFINED TERM NUMBER - ------------------------------------------------------------------------ THIRD PARTY TARGET PRICE..............................................24 TRANSACTION EXPENSES..................................................24 UNFUNDED BENEFIT LIABILITIES..........................................24 VOLUNTARY SGC CONSTRUCTION CONTRIBUTIONS..............................24 VOLUNTARY RETENTION OF THE PROPERTY...................................24 WORK..................................................................24
-iv- 79 LIST OF DEFINED TERMS As used in the Lease to which this List of Defined Terms is attached and in the other Operative Documents (as defined below) into which this List of Defined Terms is incorporated by reference: "ABSOLUTE SGC CONSTRUCTION OBLIGATIONS" means the following: (1) Construction-Period Indemnity Payments required because of or in connection with or arising out of Environmental Losses incurred or suffered by any Interested Party; (2) Construction-Period Indemnity Payments required because of or in connection with or arising out of Losses incurred or suffered by BNPLC, when such Losses would not have been incurred or suffered but for any act or any omission of SGC or of any SGC's contractors or subcontractors during the period that the Construction Management Agreement remains in force or during any other period that SGC remains in possession or control of the Construction Project; (3) Construction-Period Indemnity Payments required because of or in connection with or arising out of Losses incurred or suffered by BNPLC that would not have been incurred but for any fraud, misapplication of funds (including Construction Advances), illegal acts, or willful misconduct on the part of the SGC or its employees or agents or any other party for whom SGC is responsible; and (4) Construction-Period Indemnity Payments required because of or in connection with or arising out of Losses incurred or suffered by BNPLC that would not have been incurred but for any bankruptcy proceeding involving SGC. For purposes of this definition, "acts and omissions of SGC" shall include (i) any decision by SGC to make any Scope Change, (ii) any failure of SGC to maintain insurance required by the Lease or the Construction Management Agreement, (iii) any decision not to continue or complete Work under the Construction Management Agreement because of a change in SGC's facility needs or in SGC's plans to meet its facility needs (such as, for example, a decision by SGC to lease or acquire another less expensive facility as an alternative to the Improvements), (iv) any failure of SGC to correct Defective Work performed prior to a termination of the Construction Management Agreement as provided in subparagraphs 5(D) or 5(E) thereof, and (v) any other breach by SGC of the Construction Management Agreement. "ACTIVE NEGLIGENCE" of any Person (including BNPLC) means, and is limited to, the negligent conduct on the Property (and not mere omissions) by such Person or by others acting and authorized to act on such Person's behalf in a manner that proximately causes actual bodily injury or property damage for which SGC does not carry (and is not obligated by the Lease to carry) insurance. "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 Property or as a party to the transactions described in the Lease, (2) any negligent failure of any other Interested 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 transactions described in the Lease, or (3) the exercise in a lawful manner by BNPLC (or any party lawfully claiming through or under BNPLC) of any right or remedy provided in or under the Lease or any other Operative Document. "ADDITIONAL RENT" shall have the meaning assigned to it in subparagraph 4.(c) of the Lease. "ADMINISTRATIVE AGENCY FEES" shall have the meaning assigned to it in subparagraph 4.(e) of the Lease. "ADVANCE DATE" means, regardless of whether any Construction Advance shall actually be made thereon, 80 the first Business Day of every calendar month, beginning with October 20, 1998 and continuing regularly thereafter to and including the Base Rent Commencement Date. "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. Notwithstanding the foregoing, for purposes of the Lease and the Purchase Agreement, SGC's "Affiliates" will not include any Person domiciled outside the United States. "APPLICABLE LAWS" means any or all of the following, to the extent applicable to SGC or the Property or the Lease or the other Operative Documents: restrictive covenants; zoning ordinances and building codes; flood disaster laws; health, safety and environmental laws and regulations; the Americans with Disabilities Act and other laws pertaining to disabled persons; and other laws, statutes, ordinances, rules, permits, regulations, orders, determinations and court decisions. "APPLICABLE PURCHASER" means any third party designated by SGC to purchase BNPLC's interest in the Property and in any Escrowed Proceeds as provided in the Purchase Agreement. "ATTORNEYS' FEES" means the reasonable fees and expenses of counsel to the parties incurring the same, excluding costs or expenses of in-house counsel (whether or not accounted for as general overhead or administrative expenses), but otherwise including 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 all such reasonable fees and expenses incurred with respect to appeals, arbitrations and bankruptcy proceedings, and whether or not any manner of proceeding is brought with respect to the matter for which such fees and expenses were incurred. "BALANCE OF UNPAID CONSTRUCTION-PERIOD INDEMNITY PAYMENTS" shall have the meaning assigned to it in subparagraph 1(A)(1) of the Purchase Agreement. "BANKING RULES CHANGE" means either: (1) the introduction of or any change after the Effective Date (other than any change by way of imposition or increase of reserve requirements included in the Eurodollar Rate Reserve Percentage) in any law or regulation applicable to BNPLC, BNPLC's Parent or any other Participant, or in the generally accepted interpretation by the institutional lending community of any such law or regulation, or in the interpretation of any such law or regulation asserted by any regulator, court or other governmental authority or (2) the compliance by BNPLC, BNPLC's Parent or any other Participant with any new guideline or new request after the Effective Date from any central bank or other governmental authority (whether or not having the force of law). "BASE RENT" means the rent payable by SGC pursuant to subparagraph 4.(a) of the Lease. "BASE RENT COMMENCEMENT DATE" means the earlier of (1) the last day that constitutes first business day of a calendar month and that is no more than 364 days after the Effective Date, (2) the first Business Day of the first calendar month to follow by twenty days or more the date upon which any Completion Notice is given as provided in the Construction Management Agreement or in the Lease, (3) the first Business Day of the first calendar month to follow by twenty days or more BNPLC's receipt of a notice from SGC, given before SGC has exercised any Issue 97-10 Election and setting forth SGC's express, unconditional, unequivocal and irrevocable List of Defined Terms -- Page 2 81 (A) waiver of any right to make any Issue 97-10 Election, and (B) election to accelerate the Base Rent Commencement Date by delivery such notice, notwithstanding that after the Base Rent Commencement Date, SGC shall have no further right to Construction Advances under the Construction Management Agreement or the Lease, or (4) the first Business Day of the first calendar month upon which the Funded Construction Allowance shall equal or exceed the Maximum Construction Allowance. Notwithstanding the forgoing, if for any reason (including a termination of the Construction Management Agreement) SGC has not completed the Construction Project thirty days in advance of the scheduled Base Rent Commencement Date determined pursuant to the first sentence of this definition, BNPLC shall be entitled (but not obligated) to extend the Base Rent Commencement Date one or more times and at any time before the Construction Project actually is complete and ready for occupancy. To so extend the Base Rent Commencement Date, BNPLC shall notify SGC thereof and of the date to which the Base Rent Commencement Date is extended, which may be the first Business Day of any calendar month designated by BNPLC in the notice of extension, provided that BNPLC will not so designate any date more than sixty days after the date upon which the Construction Project is expected by BNPLC (at the time of the designation) to be complete. "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 Base Rent Commencement Date, then the first Business Day of the first calendar month following the Base Rent Commencement Date shall be the first Base Rent Date. b) If the LIBOR Period Election in effect on the Base Rent Commencement Date is three months or six months, then the first Business Day of the third calendar month following the Base Rent Commencement 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 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 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 Base Rent Commencement Date falls on the first Business Day of June, 1999 and a LIBOR Period Election of six months commences on the Base Rent Commencement 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 Base Rent Commencement 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: List of Defined Terms -- Page 3 82 (1) If the LIBOR Period Election for a Base Rent Period is one month 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 SGC 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, SGC 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. "BNPLC" means BNP Leasing Corporation, a Delaware corporation. "BNPLC'S PARENT" means BNPLC's Affiliate, Banque Nationale de Paris, a bank organized and existing under the laws of France and any successors of such bank. "BREAKAGE COSTS" means any and all costs, losses or expenses incurred or sustained by BNPLC's Parent (as a Participant or otherwise) or any other Participant, for which BNPLC's Parent or the Participant shall request reimbursement from BNPLC, because of the resulting liquidation or redeployment of deposits or other funds: (1) used to make or maintain Funding Advances upon application of a Qualified Payment or upon any sale of the Property pursuant to the Purchase Agreement, if such application or sale occurs on any day other than the last day of a Construction Period or Base Rent Period; or (2) reserved to provide a Construction Advance that SGC requests, but thereafter declines to take for any reason, or that SGC requests but is not permitted to take because of its failure to satisfy any of the conditions specified in the Construction Management Agreement. Breakage Costs will include, for example, losses attributable to any decline in LIBOR as of the effective date of any application described in the clause (1) preceding, as compared to LIBOR used to determine the Effective Rate then in effect. Each determination by BNPLC's Parent or the applicable Participant of Breakage Costs shall, in the absence of clear and demonstrable error, be conclusive and binding upon SGC. "BREAK EVEN PRICE" shall have the meaning assigned to it in subparagraph 1(A)(1) of the Purchase Agreement. "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 List of Defined Terms -- Page 4 83 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). "CAPITAL ADEQUACY CHARGES" means any additional amounts BNPLC's Parent or any other Participant requests BNPLC to pay as compensation for an increase in required capital as provided in subparagraph 5.(c)(ii) of the Lease. "CARRYING COSTS" means the charges added to and made a part of the Outstanding Construction Allowance (and thus also added to and made a part of the Funded Construction Allowance) from time to time on and before the Base Rent Commencement Date pursuant to and as more particularly described in subparagraph 6.(a) of the Lease. "CLOSING CERTIFICATE" means the Closing Certificate and Agreement dated as of October 20, 1998 executed by SGC in favor of BNPLC, as such Closing Certificate may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. "CMA SUSPENSION EVENT" shall have the meaning assigned to it in subparagraph 5(A) of the Construction Management Agreement. "CMA SUSPENSION NOTICE" shall have the meaning assigned to it in subparagraph 5(B)(1) of the Construction Management Agreement. "CMA SUSPENSION PERIOD" shall have the meaning assigned to it in subparagraph 5(C) of the Construction Management Agreement. "CMA TERMINATION EVENT" shall have the meaning assigned to it in subparagraph 5(B) of the Construction Management Agreement. "CODE" means the Internal Revenue Code of 1986, as amended. "COMMITMENT FEE" shall have the meaning assigned to it in subparagraph 4.(d) of the Lease. "COMPLETION NOTICE" means (1) a notice required by subparagraph 1(B) of the Construction Management Agreement from SGC to BNPLC, advising BNPLC when construction of the Construction Project is substantially complete, or (2) a notice permitted by subparagraph 6.(f) of the Lease from BNPLC to SGC, advising SGC after any Landlord's Election to Complete Construction when construction of the Construction Project is substantially complete or that BNPLC no longer intends to continue such construction. "CONSTRUCTION ADVANCES" means (1) actual advances of funds made by or on behalf of BNPLC to or on behalf of SGC pursuant to Paragraph 2 of the Construction Management Agreement, and (2) amounts considered as Construction Advances pursuant to subparagraph 6.(d) of the Lease. "CONSTRUCTION ADVANCE REQUEST" shall have the meaning assigned to it in subparagraph 2(C)(1) of the Construction Management Agreement. "CONSTRUCTION ALLOWANCE" means the allowance, consisting of Construction Advances and Carrying Costs, which is to be provided for the Construction Project as more particularly described in the Construction Management List of Defined Terms -- Page 5 84 Agreement and Paragraph 6 of the Lease. "CONSTRUCTION MILESTONE" shall have the meaning assigned to it in subparagraph 5(B)(2) of the Construction Management Agreement. "CONSTRUCTION PERIOD" means each successive period of approximately one month, with the first Construction Period beginning on and including the Effective Date and ending on but not including the first Advance Date. Each successive Construction Period after the first Construction Period 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, until the last Construction Period, which shall end on but not include the earlier of the Base Rent Commencement Date or any Designated Sale Date upon which SGC or any Applicable Purchaser shall purchase BNPLC's interest in the Property pursuant to the Purchase Agreement. "CONSTRUCTION-PERIOD INDEMNITY PAYMENTS" shall have the meaning assigned to it in subparagraph 5.(e)(ii) of the Lease. "CONSTRUCTION PROJECT" means the new buildings or other substantial Improvements to be constructed, or the alteration of existing Improvements, as described generally in Exhibit B attached to the Construction Management Agreement. "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 another Person against loss in respect of, indebtedness or obligations of others of the kinds referred to in the preceding clauses (i) through (v); (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. "DEDUCTIBLE JUDGMENT" means a final, liquidated judgment against BNPLC, the execution of which has not been and will not be stayed pending appeal by BNPLC, secured by a judgment lien filed against the Property which constitutes a Lien Removable by BNPLC. "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. "DEFAULT RATE" means, for any period prior to the Designated Sale Date, a floating per annum rate equal to two percent (2%) above the Prime Rate, and for any period commencing on or after the Designated Sale Date, Default Rate shall mean a floating per annum rate equal to five percent (5%) above the Prime Rate. However, in no event will the "Default Rate" at any time exceed the maximum interest rate permitted by law. List of Defined Terms -- Page 6 85 "DEFECTIVE WORK" shall have the meaning assigned to it in subparagraph 1(A)(2)(e) of the Construction Management Agreement. "DESIGNATED SALE DATE" means the earlier of: (1) the first Business Day of October, 2003; or (2) any Business Day designated as such in an irrevocable, unconditional notice given by SGC to BNPLC before SGC has made an Issue 97-10 Election; provided, that if the Business Day so designated by SGC is earlier than sixty days after the date of such notice, then the notice will be of no effect for purposes of this definition; and provided, further, to be effective for purposes of this definition, the notice must include an express, unconditional, unequivocal and irrevocable (A) waiver by SGC of any remaining right SGC may have under any of the Operative Documents to make any Issue 97-10 Election, and (B) acknowledgment by SGC that because of SGC's election to accelerate the Designated Sale Date, the Maximum Remarketing Obligation will equal the Break Even Price under the Purchase Agreement; or (3) any Business Day designated as such in an irrevocable, unconditional notice given by SGC to BNPLC after SGC has made an Issue 97-10 Election (a notice which SGC might give, for example, to force the commencement of SGC's Extended Remarketing Period); provided, that if the Business Day so designated by SGC is earlier than sixty days after the date of such notice or is earlier than the Base Rent Commencement Date, then the notice will be of no effect for purposes of this Definition; and provided, further, to be effective for purposes of this definition, the notice must include an express, unconditional, unequivocal and irrevocable acknowledgment by SGC that (A) because SGC has previously made an Issue 97-10 Election, BNPLC has the right to collect Issue 97-10 Prepayments under the Operative Documents and such right will continue unaffected by the notice, and (B) because of SGC's election to accelerate the Designated Sale Date, the Maximum Remarketing Obligation will equal the Break Even Price under the Purchase Agreement; or (4) any Business Day designated as such in a notice given by BNPLC to SGC after the effective date of any termination of the Construction Management Agreement as provided in subparagraphs 5(D) or 5(E) thereof; provided, that if the Business Day so designated by BNPLC is earlier than thirty days after the date of such notice, then the notice will be of no effect for purposes of this definition; or (5) any Business Day designated as such in a notice given by BNPLC to SGC after BNPLC's receipt of a notice from SGC setting forth SGC's election to terminate the Purchase Option and SGC's Initial Remarketing Rights and Obligations as provided in subparagraph 4(B) thereof; provided, that if the Business Day so designated by BNPLC is earlier than thirty days after the date of such notice, then the notice will be of no effect for purposes of this definition; or (6) any Business Day designated as such in a notice given by BNPLC to SGC when any Event of Default has occurred and is continuing; provided, that if the Business Day so designated by BNPLC is earlier than thirty days after the date of such notice, then the notice will be of no effect for purposes of this definition. "DEVELOPMENT DOCUMENTS" means the contracts, ordinances and other documents described in Schedule 1 attached to the Lease, if any, as the same may be modified from time to time in accordance with the Lease and the List of Defined Terms -- Page 7 86 Closing Certificate (including modifications authorized pursuant to subparagraphs 7.(a) and 7.(b) of the Lease), and any applications, permits or certificates concerning or affecting the use or development of the Property that may be submitted, issued or executed from time to time as contemplated in such contracts, ordinances and other documents or that BNPLC may hereafter execute, approve or consent to at the request of SGC. "EFFECTIVE DATE" means October 20, 1998. "EFFECTIVE RATE" means for each Construction Period and for each Base Rent Period, the per annum rate determined by dividing (A) LIBOR for such Construction Period or Base Rent Period, as the case may be, by (B) one hundred percent (100%) minus the Eurodollar Rate Reserve Percentage for such Construction Period or Base Rent Period. If LIBOR or the Eurodollar Rate Reserve Percentage changes from Construction Period to Construction Period or from Base Rent Period to Base Rent Period, then the Effective Rate shall be automatically increased or decreased as of the date of such change, as the case may be, without prior notice to SGC. If for any reason BNPLC determines that it is impossible or unreasonably difficult to determine the Effective Rate with respect to a given Construction Period or Base Rent Period in accordance with the foregoing, then the "EFFECTIVE RATE" for that Construction Period or Base Rent Period shall equal any published index or per annum interest rate determined in good faith by BNPLC's Parent to be comparable to LIBOR 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 BNPLC's Parent's comparison of past eurodollar market rates to past yields on such Treasury obligations. Any determination by BNPLC of the Effective Rate under this definition shall, in the absence of clear and demonstrable error, be conclusive and binding upon SGC. "ENVIRONMENTAL CONSULTANT" means a qualified individual employed by a qualified firm. Individuals shall be deemed qualified if they (i) possess at least five years of experience in performing environmental, engineering and consulting services; (ii) have performed or supervised at least five projects involving remediation of soil contaminated with hazardous substances, including at least one project similar to the Remedial Work; (iii) have all licenses required under applicable law for the Remedial Work; and (iv) have at least a bachelor's degree in the physical sciences or a related field from an accredited college or university. A firm shall be deemed qualified if it is: (i) a nationally recognized, reputable environmental and/or engineering firm in the business of providing professional environmental engineering and consulting services; (ii) has experience and expertise in projects involving the Remedial Work; (iii) maintains policies of insurance which are approved by BNPLC in its reasonable discretion. "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 the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 (as amended, "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, "RCRA"). "ENVIRONMENTAL LOSSES" means Losses suffered or incurred by any Interested Party relating to or arising out of, based on or as a result of: (i) any Hazardous Substance Activity that occurs or is alleged to have occurred on or prior to the Loss Cutoff Date; (ii) any violation on or prior to the Loss Cutoff Date of Environmental Laws relating to the 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 List of Defined Terms -- Page 8 87 authority in connection with any Hazardous Substance Activity that occurs or is alleged to have occurred in whole or in part on or prior to the Loss Cutoff Date; 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 Interested Party which relates to, arises from, is based on, or results from any of the matters described in clauses (i), (ii) or (iii) of this definition, or any allegation of any such matters. For purposes of determining whether Losses constitute "Environmental Losses," any actual or alleged Hazardous Substance Activity or violation of Environmental Laws relating to the Property will be presumed to have occurred prior to the Loss Cutoff Date unless SGC establishes by clear and convincing evidence to the contrary that the relevant Hazardous Substance Activity or violation of Environmental Laws did not occur or commence prior to the Loss Cutoff Date. Even if after the Loss Cutoff Date Losses are incurred by or asserted against a particular Interested Party that would not have been incurred or asserted, but for any matter described in clauses (i), (ii) or (iii) of this definition, or an allegation of any such matter, then such Losses will constitute Environmental Losses. "ENVIRONMENTAL REPORT" means collectively the Phase II Sampling Report and other written reports of SGC's independent environmental consultant (Parsons Engineering Science, Inc.) that SGC provided to BNPLC or to BNPLC's environmental consultant (Elizabeth Ward of Washington Advisors) prior to the execution of the Lease, which reports may be more specifically identified and listed in a separate letter executed by SGC and BNPLC and dated as of the Effective Date. "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. "ERISA AFFILIATE" means any Person who for purposes of Title IV of ERISA is a member of SGC's controlled group, or under common control with SGC, within the meaning of Section 414 of the Internal Revenue Code, and the regulations promulgated and rulings issued thereunder. "ERISA TERMINATION EVENT" means (i) the occurrence with respect to any Plan of a reportable event described in Section 4043(c) of ERISA for which any penalty or notice thereof has not been waived pursuant to regulations, rulings, or notices issued by the Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation under Section 4043(a) of ERISA, or (ii) 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 (other than in connection with a standard termination of a fully funded Plan pursuant to Section 4041 of ERISA), or (iii) the institution of proceedings to terminate any Plan by the Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or (iv) any other event or condition which would constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. "ESCROWED PROCEEDS" means, subject to the exclusions specified in the next sentence, any money that is received by BNPLC from time to time during the Term (and any interest earned thereon) from any party (1) under any property insurance policy as a result of damage to the Property, (2) as compensation for any restriction imposed by any governmental authority upon the use or development of the Property or for the condemnation of the Property or any portion thereof, (3) because of any judgment, decree or award for injury or damage to the 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 Property; provided, however, in determining the amount of "Escrowed Proceeds" there shall be deducted all expenses and costs of every type, kind and nature (including Attorneys' Fees) incurred by BNPLC to collect such proceeds. Notwithstanding the foregoing, "Escrowed Proceeds" will not include (A) any payment to BNPLC by a Participant or an Affiliate of BNPLC that is made to compensate BNPLC for the Participant's or Affiliate's share of any Losses BNPLC may incur as a result of any of the events described in the preceding clauses (1) List of Defined Terms -- Page 9 88 through (4), (B) any money or proceeds that have been applied as a Qualified Payment or to pay any Breakage Costs or other costs incurred in connection with a Qualified Payment, (C) any money or proceeds that, after no less than ten days notice to SGC, BNPLC returns or pays to a third party because of BNPLC's good faith belief that such return or payment is required by law, (D) any money or proceeds paid by BNPLC to SGC or offset against any amount owed by SGC, or (E) any money or proceeds used by BNPLC in accordance with the Lease for repairs or the restoration of the Property or to obtain development rights or the release of restrictions that will inure to the benefit of future owners or occupants of the Property. Until Escrowed Proceeds are paid to SGC pursuant to Paragraph 11 of the Lease, transferred to a purchaser under the Purchase Agreement as therein provided or applied as a Qualified Payment or as otherwise described in the preceding sentence, BNPLC 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. "ESTABLISHED MISCONDUCT" of a Person means, and is limited to: (1) if the Person is bound by the Lease or the Purchase Agreement, a breach by such Person of the express provisions of the Lease or the Purchase Agreement that continues beyond any period for cure provided therein, and (2) conduct of such Person or its Affiliates that has been determined to constitute wilful misconduct or Active Negligence in or as a necessary element of a final judgment rendered against such Person by a court with jurisdiction to make such determination. Established Misconduct of one Interested Party shall not be attributed to a second Interested Party unless the second Interested Party is an Affiliate of the first. Negligence which does not constitute Active Negligence shall not in any event constitute Established Misconduct. For purposes of this definition, "conduct of a Person" will include (1) the conduct of an employee of that Person, but only to the extent that the employee is acting within the scope of his employment by that Person, as determined in or as a necessary element of a final judgment rendered against such Person by a court with jurisdiction to make such determination, and (2) the conduct of an agent of that Person (such as an independent environmental consultant engaged by that Person), but only to the extent that the agent is, as determined in or as a necessary element of a final judgment rendered against such Person by a court with jurisdiction to make such determination, (x) acting within the scope of the authority granted to him by such Person, (y) not acting with the consent or approval of or under the direction of SGC or SGC's Affiliates, employees or agents, and (z) not acting in good faith to mitigate Losses that such Person may suffer because of a breach or repudiation by SGC of the Closing Certificate or Lease or the Purchase Agreement. "EUROCURRENCY LIABILITIES" shall have the meaning assigned to it in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "EURODOLLAR RATE RESERVE PERCENTAGE" means, for purposes of determining the Effective Rate for any Construction Period or Base Rent 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 any emergency, supplemental or other marginal reserve requirement) for BNPLC's Parent 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. "EVENT OF DEFAULT" shall have the meaning assigned to it in subparagraph 17.(a) of the Lease. "EXCESS FUNDING COMMITMENT" shall have the meaning assigned to it in subparagraph 2(C)(2)(b) of the Construction Management Agreement. "EXCLUDED TAXES" means (1) all federal, state and local income taxes upon Base Rent, Commitment Fees, List of Defined Terms -- Page 10 89 Administrative Agency Fees, any interest paid to BNPLC or any Participant pursuant to subparagraph 4.(h) of the Lease and any additional compensation claimed by BNPLC pursuant to subparagraph 5.(c)(ii) of the Lease; (2) all federal, state and local income taxes upon any amounts paid as reimbursement for or to satisfy Losses incurred by BNPLC or any Participant to the extent such taxes are offset by a corresponding reduction of BNPLC's or the applicable Participant's income taxes because of BNPLC's or such Participant's deduction of the reimbursed Losses from its taxable income or because of any tax credits attributable thereto; (3) taxes imposed by any governmental authority outside the United States of America; and (4) any transfer or change of ownership taxes assessed because of BNPLC's transfer or conveyance to any third party of BNPLC's rights or interests in the Lease or the Purchase Agreement or the Property, but excluding any such taxes assessed because of any transfer described in clauses (4) or (6) of the definition of Permitted Transfer below. For purposes of this definition, income taxes shall include any state or local taxes on the net income of BNPLC or a Participant, as the case may be, whether or not designated as an "income tax" or "franchise tax" and regardless of any future increase in tax rates used to compute such taxes. If, however, a change in Applicable Laws after the Effective Date results in an increase in such taxes for any reason other than an increase in the applicable tax rates (e.g., a disallowance of deductions that would otherwise be available against payments described in clause (1) of this definition), then for purposes of computing the taxes that constitute "Excluded Taxes," the change in law will not be considered. "EXISTING CONTRACT" means the Amended Purchase and Sale Agreement dated as of October 9, 1998, originally between OKI America, Inc. as Seller and SGC as Purchaser, covering the Land described in Exhibit A of the Lease. "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 SGC has fulfilled and can be expected to continue to fulfill its obligations under the Lease and other Operative Documents; that SGC has maintained the Property in compliance with all Applicable Laws [including Environmental Laws]; that any construction commenced on the Land but not completed prior to the Designated Sale Date shall not reduce the value of the Property; that all Improvements are self-sufficient in the sense that any easements or offsite facilities needed under the Development Documents or otherwise for the use of the Improvements will be available at no additional cost to the owner of the Improvements; that SGC has repaired and restored the Property after any damage following fire or other casualty; that SGC has restored the remainder of the Property after any partial taking by eminent domain; that SGC 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, including any assessment liens, but not including Liens Removable by BNPLC; that no conditions or circumstances on or about the Property [such as the presence of an endangered species] is discovered that will impede development of the Property; that development of the Property will not be hindered or delayed because of the limited availability of utilities or water; that any purchaser paying fair market value for the Property will receive copies of all of SGC's books and records which are necessary or useful to a future owner's or occupant's use of the Property in the manner permitted by the Lease, including books and records evidencing the testing and validation of the Property for the uses permitted by the Lease; that without undue cost or delay any such purchaser can obtain any necessary permits or licenses needed to use the Property for the purposes permitted by the Lease; and that SGC has cured any title defects affecting the Property other than Liens Removable by BNPLC, all in accordance with the standards and requirements of the Lease [as though the Lease were continuing in force], and the Closing Certificate) as determined by an independent MAI Certified General Real Estate Appraiser reasonably satisfactory to BNPLC who has five years or more experience appraising similar properties in and around Gwinnett County, Georgia. "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 List of Defined Terms -- Page 11 90 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 BNPLC's Parent from three Federal funds brokers of recognized standing selected by BNPLC's Parent. All determinations of the Fed Funds Rate by BNPLC's Parent shall, in the absence of clear and demonstrable error, be binding and conclusive upon SGC. "FOCB NOTICE" shall have the meaning assigned to it in subparagraph 5(E) of the Construction Management Agreement. "FUNDED CONSTRUCTION ALLOWANCE" means on any day the Outstanding Construction Allowance on that day, including all Construction Advances and Carrying Costs added to the Outstanding Construction Allowance on or prior to that day, plus the amount of any Qualified Payments deducted on or prior to that day in the calculation of such Outstanding Construction Allowance, less any Voluntary SGC Construction Contributions added on or prior to that day in the calculation of such Qualified Payments. "FUNDING ADVANCES" means (1) the Initial Funding Advance and (2) all future advances made by BNPLC's Parent or any other Participant to or on behalf of BNPLC to allow BNPLC to provide the Construction Allowance under the Lease. "FUTURE WORK" shall have the meaning assigned to it in subparagraph 2(C)(2)(b) of the Construction Management Agreement. "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 16.(b) of the Lease (except for changes concurred in by SGC's independent public accountants). "GUARANTOR" means Solectron Corporation, a Delaware corporation. "GROUND LEASE" means the Ground Lease dated on or about the Effective Date between BNPLC and Seller, whereby pursuant to the Existing Contract BNPLC leased back a portion of the Land upon which Improvements existing at the time of BNPLC's acquisition of the Land. "GUARANTY" means the Guaranty dated as of October 20, 1998 given by Guarantor to BNPLC, guaranteeing the obligations of SGC under the Lease, Purchase Agreement and Closing Certificate, as such Guaranty may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. "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 or substance," "infectious waste," "toxic substance," "toxic pollutant," or any other formulation intended to define, list or classify substances by reason of deleterious properties, including 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 List of Defined Terms -- Page 12 91 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. "HAZARDOUS SUBSTANCE ACTIVITY" means any actual, proposed or threatened use, storage, holding, release (including 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 Property, including 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 Property and any resulting residual Hazardous Substance contamination in, on or under the Property. "HAZARDOUS SUBSTANCE ACTIVITY" also means any existence of Hazardous Substances on the Property that would cause the Property or the owner or operator thereof to be in violation of, or that would subject the Property to any remedial obligations under, any Environmental Laws, including CERCLA and RCRA, assuming disclosure to the applicable governmental authorities of all relevant facts, conditions and circumstances pertaining to the Property. "HAZARDOUS SUBSTANCE ACTIVITY" does not, however, include events or circumstances that do not affect the Property on or about other properties owned or operated by SGC. "IMPOSITIONS" means 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 the Lease or which are imposed upon BNPLC or the Property because of the ownership, leasing, occupancy, sale or operation of the Property, or any part thereof or interest therein, or relating to or required to be paid by any of the Permitted Encumbrances or the Development Documents, excluding only Excluded Taxes. "IMPOSITIONS" shall include real estate taxes imposed because of a change of use or ownership of the Property on or prior to the date of any sale by BNPLC pursuant to the Purchase Agreement. "IMPROVEMENTS" means any and all (1) buildings and other real property improvements now or hereafter erected on the Land, and (2) equipment (e.g., HVAC systems, elevators and plumbing fixtures) attached to the buildings or other real property improvements, the removal of which would cause structural or other material damage to the buildings or other real property improvements or would materially and adversely affect the value or use of the buildings or other real property improvements. "INDEX DEBT" means senior, unsecured, long-term indebtedness for borrowed money of Guarantor that is not guaranteed by any other Person or subject to any other credit enhancement. "INDUSTRIAL HYGIENIST" means an industrial hygienist certified by the American Board of Industrial Hygiene who is experienced with required and appropriate health and safety standards and good industrial hygiene practice related to operations at hazardous waste sites. "INITIAL FUNDING ADVANCE" means, collectively, the advances of made by BNPLC's Parent (directly or through one or more of its Affiliates) to or on behalf of BNPLC on or prior to the effective date of the Lease to cover the cost of BNPLC's acquisition of the Property and certain Transaction Expenses and other amounts described in this definition. The amount of the Initial Funding Advance may be confirmed by a separate closing certificate executed by SGC as of the Effective Date. To the extent that BNPLC does not itself use the entire Initial Funding Advance to pay Transaction Expenses incurred by BNPLC or for other purposes described in the List of Defined Terms -- Page 13 92 preceding sentence, the remainder thereof is being advanced to SGC, with the understanding that SGC will use any such amount advanced for one or more of the following purposes: (1) the payment or reimbursement of Transaction Expenses incurred by SGC; (2) the payment or reimbursement of expenses incurred by SGC in connection with the Construction Project, including the planning, design, engineering, construction and permitting of thereof; (3) the maintenance of the Property; or (4) the payment of Rents next due. "INTERESTED PARTY" means each of (1) BNPLC, its Affiliates and its successors and assigns as to the Property or any part thereof or any interest therein, (2) BNPLC's Parent, and (3) any other Participants and their permitted successors and assigns under the Participation Agreement; provided, however, none of the following shall constitute an Interested Party: (a) any Person to whom BNPLC may transfer an interest in the Property by a conveyance that is not a Permitted Transfer and others that cannot lawfully claim an interest in the Property except through or under such a transfer by BNPLC, (b) SGC or any Person that cannot lawfully claim an interest in the Property except through or under a conveyance from SGC, or (c) any Applicable Purchaser under the Purchase Agreement and any Person that cannot lawfully claim an interest in the Property except through or under a conveyance from such Applicable Purchaser. "ISSUE 97-1 NON-PERFORMANCE-RELATED SUBJECTIVE EVENT OF DEFAULT" means an Event of Default that is unrelated to the Property or the use or maintenance thereof and that results solely from (A) a breach by SGC or Guarantor of a provision in any Operative Document or the Guaranty, the occurrence of which breach cannot be objectively determined, or (B) any other event described in clauses (vi), (vii), (viii), (ix), (x), (xi), (xii), (xiv) or (xvi) of subparagraph 17(a) of the Lease, the occurrence of which event cannot be objectively determined. For example, an Event of Default under subparagraph 17.(a)(vii) of the Lease resulting solely from a failure of SGC to "generally" pay its debts as such debts become due (in contrast to a failure of SGC to pay Rent to BNPLC as it becomes due under the Lease) would constitute an Issue 97-1 Non-performance-related Subjective Event of Default. In no event, however, will the term "Issue 97-1 Non-performance-related Subjective Event of Default" include an Event of Default resulting from (1) a failure of SGC to make any payment required to BNPLC under the Operative Documents, (2) a breach by Guarantor of any of sections 3.09, 3.10 or 3.11 of PART 3 of Schedule A attached to the Guaranty (which set forth financial ratio covenants), (3) any failure of SGC to use, maintain and insure the Property in accordance with the requirements of the Lease, or (4) any failure of SGC to pay the full amount of any Supplemental Payment on the Designated Sale Date as required by the Purchase Agreement. Except as provided in subparagraph 1(A)(2)(c)(i) of the Purchase Agreement, the characterization of any Event of Default as an Issue 97-1 Non-performance-related Subjective Event of Default will not affect the rights or remedies available to BNPLC because of the Event of Default. "ISSUE 97-10 ELECTION" means any of the following elections by SGC: (1) an election to terminate the Construction Management Agreement as provided in subparagraph 5(D) thereof; and (2) an election to terminate SGC's Initial Remarketing Rights and Obligations as provided in subparagraph 4(B) of the Purchase Agreement. "ISSUE 97-10 PREPAYMENT" means a payment to BNPLC, required by subparagraph 4.(f) of the Lease or by subparagraphs 4(B) or 4(C) of the Purchase Agreement, equal in each case to (A) the Maximum Permitted Prepayment, computed as of the date on which the payment becomes due, less (B) the accreted value of any prior payments actually received by BNPLC from SGC constituting Issue 97-10 Prepayments or Voluntary SGC Construction Contributions. For purposes of the preceding sentence, "accreted value" of a payment shall mean the amount of the payment plus an amount equal to the interest that would have accrued on the payment if it bore interest at the Effective Rate. "LAND" means the land as described in Exhibit A attached to the Lease, Closing Certificate and Purchase List of Defined Terms -- Page 14 93 Agreement. However, upon any amendment to the Lease which modifies the land covered thereby, the land covered by the Closing Certificate and Purchase Agreement shall automatically be so modified. "LANDLORD'S ELECTION TO CONTINUE CONSTRUCTION" shall have the meaning assigned to it in subparagraph 6.(d) of the Lease. "LEASE" means the Lease Agreement dated as of October 20, 1998 between BNPLC, as landlord, and SGC, as tenant, pursuant to which SGC has agreed to lease BNPLC's interest in the Property, as such Lease Agreement may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. "LIBOR" means, for purposes of determining the Effective Rate for each Construction Period or Base Rent Period, the rate determined by BNPLC'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 BNPLC'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. BNPLC shall instruct BNPLC'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 Construction Period or Base Rent Period, as the case may be, (ii) in an amount equal or comparable to the total (projected on the applicable date of determination by BNPLC's Parent) Stipulated Loss Value on the first day of such period, and (iii) for a time equal or comparable to the length of such period. If BNPLC'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. If for any reason BNPLC's Parent determines that it is impossible or unreasonably difficult to determine LIBOR with respect to a given Construction Period or Base Rent Period in accordance with the foregoing, or if BNPLC's Parent shall determine that it is unlawful (or any central bank or governmental authority shall assert that it is unlawful) for BNPLC, BNPLC's Parent or any Participant to provide or maintain Funding Advances during any Construction Period or Base Rent Period for which Carrying Costs or 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 BNPLC's Parent shall, in the absence of clear and demonstrable error, be binding and conclusive upon SGC. "LIBOR PERIOD ELECTION" for the first Base Rent Period means one month and for any subsequent Base Rent Period means a period of one month, three months or six months as designated by SGC at least ten Business Days prior to the commencement of such Base Rent Period by a notice given to BNPLC in the form of Exhibit H attached to the Lease. (For purposes of the Lease a LIBOR Period Election for any Base Rent Period shall also be considered the LIBOR Period Election in effect on (1) the Base Rent Commencement Date or 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 so designated by SGC shall remain in effect for the entire Base Rent Period specified in SGC's notice to BNPLC (provided such Base Rent Period commences at least ten Business Days after BNPLC's receipt of the notice) and for all subsequent Base Rent Periods until a new designation becomes effective in accordance with the provisions set forth in this definition. Notwithstanding the foregoing, however: (1) SGC shall not be entitled to designate a LIBOR Period Election that would cause a Base Rent Period to extend beyond the end of the scheduled Term; (2) changes in the LIBOR Period Election shall become effective only upon the commencement of a new Base Rent Period; and (3) if SGC fails to make a LIBOR Period Election consistent with the foregoing requirements for any Base Rent Period, or 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 deemed to be one month. List of Defined Terms -- Page 15 94 "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 lease in the nature thereof, any agreement to sell receivables with recourse, 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 the Lease. "LIENS REMOVABLE BY BNPLC" means, and is limited to, Liens encumbering the Property that are asserted (1) other than as contemplated by the Lease or the Purchase Agreement, by BNPLC itself, (2) by third parties lawfully claiming through or under BNPLC (which for purposes of the Lease shall include any judgment liens established against the Property because of a judgment rendered against BNPLC and shall also include any liens established against the Property to secure past due Excluded Taxes), or (3) by third parties lawfully claiming under a deed or other instrument duly executed by BNPLC; provided, however, Liens Removable by BNPLC shall not include (A) any Permitted Encumbrances or Development Documents (regardless of whether claimed through or under BNPLC), (B) any of the Operative Documents or any other document executed by BNPLC with the knowledge of (and without objection by) SGC's counsel contemporaneously with the execution and delivery of the Operative Documents, (C) Liens which are neither lawfully claimed through or under BNPLC (as described above) nor claimed under a deed or other instrument duly executed by BNPLC, (D) Liens claimed by SGC or claimed through or under a conveyance made by SGC, (E) Liens arising because of BNPLC's compliance with Applicable Law, the Lease, Permitted Encumbrances, the Development Documents or any written request made by SGC, (F) Liens securing the payment of property taxes or other amounts assessed against the Property by any governmental authority, other than to secure the payment of past due Excluded Taxes or to secure damages caused by (and attributed by any applicable principles of comparative fault to) BNPLC's own Established Misconduct or the Established Misconduct of BNPLC's Parent or BNPLC's other Affiliates, (G) Liens resulting from or arising in connection with any breach by SGC of the Closing Certificate, the Lease or the Purchase Agreement; or (H) Liens resulting from or arising in connection with any Permitted Transfer that occurs after any Designated Sale Date upon which, for any reason, SGC or an Affiliate of SGC or any Applicable Purchaser shall not purchase BNPLC's interest in the Property pursuant to the Purchase Agreement for a net price to BNPLC (when taken together with any additional payments made by SGC pursuant to Paragraph 1(A)(2) of the Purchase Agreement, in the case of a purchase by an Applicable Purchaser) equal to Stipulated Loss Value. "LIST OF DEFINED TERMS" means this List of Defined Terms, which is attached to the Lease and incorporated by reference into the other Operative Documents. "LOSS CUTOFF DATE" means the later of the dates upon which (i) the Lease terminates, (ii) SGC surrenders possession of the Property or (iii) SGC ceases to have any leasehold or other interest in the Property under the Lease or otherwise. "LOSSES" means the following, to the extent (but only to the extent) resulting from, arising out of or in connection with events or circumstances (including the condition of the Property) that actually or allegedly occurred or existed or may hereafter occur or exist on or before the Loss Cutoff Date: any and all losses, liabilities, damages (whether actual, consequential, punitive or otherwise denominated), demands, claims, administrative or legal proceedings, actions, judgments, causes of action, assessments, fines, penalties, costs and expenses (including 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. For purposes of List of Defined Terms -- Page 16 95 determining whether any loss, liability, damage, demand, claim, administrative or legal proceeding, action, judgment, cause of action, assessment, fine, penalty, cost or expense constitutes a "Loss," the events or circumstances relating thereto will be presumed to have occurred prior to the Loss Cutoff Date unless SGC establishes by clear and convincing evidence to the contrary that the relevant events or circumstances did not occur or exist prior to the Loss Cutoff Date. "MATERIAL ENVIRONMENTAL COMMUNICATION" means a communication between SGC or its agents and a regulatory agency or third party, which causes, or potentially could cause (whether by implementation of or response to said communication), a material change in the scope, duration, or nature of any Remedial Work. "MAXIMUM CONSTRUCTION ALLOWANCE" means an amount equal to $50,000,000, less the Initial Funding Advance. "MAXIMUM PERMITTED PREPAYMENT" as of any date means the amount equal to the lesser of the following: (1) the sum of: (A) eighty-nine and nine-tenths of one percent (89.9%) of the aggregate of (i) all Project Costs paid or incurred on or prior to such date, plus (ii) ninety-seven percent (97%) of Carrying Costs added to the Outstanding Construction Allowance on or prior to such date; plus (B) any amount by which the value of BNPLC's interest in the Land and its appurtenances are less than the price paid by BNPLC for the same as determined reasonably and in good faith by BNPLC after consulting with an independent appraiser; or (2) eighty-nine and nine-tenths of one percent (89.9%) of Stipulated Loss Value on such date. "MAXIMUM REMARKETING OBLIGATION" shall have the meaning indicated in subparagraph 1(A)(2)(c) of the Purchase Agreement. "MINIMUM EXTENDED REMARKETING PRICE" shall have the meaning assigned to it in subparagraph 2(B) of the Purchase Agreement. "MOODY'S" means Moody's Investor Service, Inc. "NORMAL TENANT IMPROVEMENTS" shall have the meaning assigned to it in subparagraph 3(A) of the Construction Management Agreement. "NOTICE OF SGC'S INTENT TO TERMINATE" shall have the meaning assigned to it in subparagraph 5(D) of the Construction Management Agreement. "OPERATIVE DOCUMENTS" means the Closing Certificate, the Lease, the Construction Management Agreement and the Purchase Agreement. "OUTSTANDING CONSTRUCTION ALLOWANCE" shall have the meaning assigned to it in subparagraph 6.(a) of List of Defined Terms -- Page 17 96 the Lease. "PARTICIPANT" means BNPLC's Parent and any other Person that, upon becoming a party to the Participation Agreement by executing a supplement thereto as contemplated therein, agrees from time to time to participate in all or some of the risks and rewards to BNPLC of the Lease or other Operative Documents. As of the Effective Date, the only Participant is BNPLC's Parent, but BNPLC may agree after the Effective Date to share in risks and rewards of the Lease or other Operative Documents with other Participants. However, no Person other than BNPLC's Parent and its Affiliates shall qualify as a Participant for purposes of the Lease or the other Operative Documents or other agreements concerning the Property to which SGC is a party unless such Person, with SGC's prior written approval (which approval will not be unreasonably withheld), became a party to the Participation Agreement by executing a supplement to that agreement as contemplated therein. "PARTICIPATION AGREEMENT" means the Participation Agreement dated as of the Effective Date, between BNPLC and BNPLC's Parent and any other Participants that may become parties thereto as contemplated therein, pursuant to which BNPLC's Parent has agreed to participate in the risks and rewards to BNPLC of the 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. "PERMITTED ENCUMBRANCES" means (i) the encumbrances and other matters affecting the Property that are set forth in Exhibit B attached to the Lease, (ii) any easement agreement or other document affecting title to the Property executed by BNPLC at the request of or with the consent of SGC, (iii) any liens from time to time imposed to secure only ad valorem taxes on the Property which, at the time in question, are not delinquent, and (iv) the Ground Lease and the terms and conditions of the Existing Contract that survived the conveyance of the Land from Seller to BNPLC. "PERMITTED HAZARDOUS SUBSTANCE USE" means the use, generation, 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, generation, storage and disposal shall not: (1) exceed that reasonably required for the construction of the Construction Project in accordance with the Lease and the Construction Management Agreement or for the operation of the Property for the purposes expressly permitted under subparagraph 3.(a) of the Lease; or (2) include any disposal, discharge or other release of Hazardous Substances from the 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 SGC 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 Property in a manner that requires a RCRA treatment, storage or disposal permit, including a landfill, incinerator or other waste disposal facility. "PERMITTED HAZARDOUS SUBSTANCES" means Hazardous Substances used and reasonably required for the construction of the Construction Project or for the use of the Property by SGC and its permitted subtenants and List of Defined Terms -- Page 18 97 assigns for the purposes expressly permitted by subparagraph 3.(a) of the Lease, in either case 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 usual and customary office, laboratory and janitorial products. "PERMITTED TRANSFER" means any one or more of the following: (1) the creation or conveyance of rights and interests in favor of the BNPLC's Parent or other Participants pursuant to the terms and conditions of the Participation Agreement, provided that in any case where rights or interests in the Property are so created or conveyed, the rights or interests are made expressly subject to the rights of SGC under the Lease and the Purchase Agreement; (2) any assignment or conveyance by BNPLC to any present or future Participant of any lien or security interest against the Property (in contrast to a conveyance of BNPLC's fee estate) or of any interest in Rent, payments required by or under the Purchase Agreement or payments to be generated from the Property after the Term, provided that such assignment or conveyance is made expressly subject to the rights of SGC under the Lease and the Purchase Agreement; (3) any agreement to exercise or refrain from exercising rights or remedies under the Lease or the Purchase Agreement made by BNPLC with any present or future Participant; (4) any assignment or conveyance by BNPLC requested by SGC or required by any Permitted Encumbrance, by Development Documents, by the Purchase Agreement or by Applicable Laws; (5) conveyances or transfers by BNPLC or its Affiliates to BNPLC or its Affiliates, provided that in the case of any such conveyance or transfer that covers any interest in the Property, the conveyance or transfer is made expressly subject to the rights of SGC under the Lease and the Purchase Agreement; or (6) any other assignment or conveyance by BNPLC when an Event of Default shall have occurred and be continuing or after a Landlord's Election to Continue Construction or after the Designated Sale Date (provided, that if the assignment or conveyance constitutes a sale of BNPLC's fee estate in the Property, and if at the time of the sale SGC's Extended Remarketing Right under Paragraph 2 of the Purchase Agreement has not expired or been terminated as provided in the Purchase Agreement, then the sale will be subject to SGC's Extended Remarketing Right.) "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. "PERSONAL PROPERTY" shall have the meaning assigned to it on page 2 of the Lease. "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 Internal Revenue Code and is either (i) maintained by SGC, Guarantor or any Subsidiary of SGC or Guarantor for employees of SGC, Guarantor or any Subsidiary of SGC or Guarantor or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which SGC, Guarantor or any Subsidiary of SGC or Guarantor is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions. "POTENTIAL LIEN CLAIMANTS" means (1) general contractors, or (2) other parties who have filed any required statutory notices, or who have actually notified BNPLC or SGC of claims, in order to preserve or establish their right to a mechanic's or materialman's lien against the Property in connection with any Construction Project. "PRIME RATE" means the prime interest rate or equivalent charged by BNPLC's Parent in the United States of America as announced or published by BNPLC's Parent from time to time, which need not be the lowest interest rate charged by BNPLC's Parent. If for any reason BNPLC's Parent does not announce or publish a prime rate List of Defined Terms -- Page 19 98 or equivalent, the prime rate or equivalent announced or published by either Citibank, N.A. or any New York branch or office of Credit Commercial de France as selected by BNPLC shall be used to compute the rate describe in the preceding sentence. 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 Effective Date without notice to SGC as of the effective time of each change in rates described in this definition. "PRIOR WORK" shall have the meaning assigned to it in subparagraph 2(C)(2)(b) of the Construction Management Agreement. "PROJECT COSTS" means the following: (1) costs incurred for the Work (as defined in the Construction Management Agreement), including not only hard costs incurred for the new Improvements described in Exhibit B attached to the Construction Management Agreement, but also the following costs to the extent reasonably incurred in connection with the Construction Project: o soft costs, such as architectural fees, engineering fees and fees and costs paid in connection with obtaining project permits and approvals required by governmental authorities or the Development Documents, o site preparation costs, and o costs of offsite and other public improvements required as conditions of governmental approvals for the Construction Project; (2) costs incurred to maintain insurance required by (and consistent with the requirements of) the Lease prior to the Base Rent Commencement Date; (3) a fraction of the cost of title insurance incurred to satisfy the condition set forth in subparagraph 5(B)(3)(a) of the Construction Management Agreement, the numerator of which fraction is the difference computed by subtracting the price paid by BNPLC for the Land from the maximum dollar amount of coverage provided by the title insurance, and the denominator of which fraction is equal to such maximum dollar amount of coverage; (4) Impositions that have accrued or become due under the Lease prior to the Base Rent Commencement Date; and (5) cancellation or termination fees or other compensation payable by SGC or BNPLC pursuant to any contract concerning the Construction Project made by SGC or BNPLC with any general contractor, architect, engineer or other third party because of any election by SGC or BNPLC to cancel or terminate such contract. Project Costs will include costs incurred by BNPLC to continue or complete the Construction Project after any Landlord's Election to Continue Construction as provided in subparagraph 6(d) of the Lease; provided, however, such costs will constitute Project Costs only to the extent BNPLC capitalizes such costs in accordance with GAAP. "PROJECTED COST OVERRUNS" shall have the meaning assigned to it in subparagraph 4(A) of the Construction List of Defined Terms -- Page 20 99 Management Agreement. "PROPERTY" means the Personal Property and the Real Property, collectively. "PURCHASE AGREEMENT" means the Purchase Agreement dated as of October 20, 1998 between BNPLC and SGC pursuant to which SGC has agreed to purchase or to arrange for the purchase by a third party of BNPLC's interest in the Property, as such Purchase Agreement may be extended, supplemented, amended, restated or otherwise modified from time to time in accordance with its terms. "PURCHASE OPTION" shall have the meaning assigned to it in subparagraph 1(A)(1) of the Purchase Agreement. "QUALIFIED PAYMENTS" means (A) any Issue 97-10 Prepayments received by BNPLC, (B) any Voluntary SGC Construction Contributions received by BNPLC pursuant to subparagraph 4(C) of the Construction Management Agreement, and (C) any payments received by BNPLC from time to time during the Term (1) under any property insurance policy as a result of damage to the Property, (2) as compensation for any restriction placed upon the use or development of the Property or for the condemnation of the Property or any portion thereof, (3) because of any judgment, decree or award for injury or damage to the 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 Property; provided, however, that (x) in determining the amount of "Qualified Payments", there shall be deducted all expenses and costs of every kind, type and nature (including taxes, Breakage Costs and Attorneys' Fees) incurred by BNPLC with respect to the collection or application of such payments, (y) "Qualified Payments" shall not include any payment to BNPLC by a Participant or an Affiliate of BNPLC that is made to compensate BNPLC for the Participant's or Affiliate's share of any Losses BNPLC 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 BNPLC that BNPLC has paid or is obligated to pay to SGC for the restoration or repair of the Property or that BNPLC is holding as Escrowed Proceeds pursuant to Paragraph 11 of the Lease or any other provision of the Lease. 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 BNPLC 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 BNPLC as provided in subparagraph 11.(c) of the Lease. "REAL PROPERTY" shall have the meaning assigned to it on page 1 of the Lease. "REIMBURSABLE CONSTRUCTION-PERIOD COSTS" shall have the meaning assigned to it in Paragraph 2 of the Construction Management Agreement. "REMEDIAL WORK" means any investigation, monitoring, clean-up, containment, remediation, removal, payment of response costs, or restoration work and the preparation and implementation of any closure or other required remedial plans that any governmental agency or political subdivision requires or approves (or could reasonably be expected to require if it was aware of all relevant circumstances concerning the Property), whether by judicial order or otherwise, because of the presence of or suspected presence of Hazardous Substances in, on, under or about the Property or because of any prior Hazardous Substance Activity. Without limiting the generality of the foregoing, Remedial Work also means any obligations imposed upon or undertaken by SGC pursuant to Development Documents or any recommendations or proposals made therein. List of Defined Terms -- Page 21 100 "RENT" means the Base Rent and all Additional Rent. "RESIDUAL RISK PERCENTAGE" means fifteen percent (15%) or such greater percentage, but in no event greater than eighteen percent (18%), as is necessary to cause the Lease to satisfy the FAS 13 "90% test" for an operating lease under GAAP. At any time after the Base Rent Commencement Date, upon request of either BNPLC or SGC, the parties will execute a written acknowledgment of the amount of the Residual Risk Percentage (not less than 15% and not more than 18%) calculated in accordance with this definition. "RESPONSIBLE FINANCIAL OFFICER" means the chief financial officer, the controller, the treasurer or the assistant treasurer of either SGC or Guarantor, as the case may be. "S&P" means Standard and Poor's Corporation. "SCOPE CHANGE" shall have the meaning assigned to it in subparagraph 1(A)(1)(b) of the Construction Management Agreement. "SELLER" means OKI America, Inc., a Delaware corporation. "SGC" means Solectron Georgia Corporation, a Georgia corporation. "SGC'S EXTENDED REMARKETING PERIOD" shall have the meaning assigned to it in subparagraph 2(A) of the Purchase Agreement. "SGC'S EXTENDED REMARKETING RIGHT" shall have the meaning assigned to it in subparagraph 2(A) of the Purchase Agreement. "SGC'S INITIAL REMARKETING RIGHTS AND OBLIGATIONS" shall have the meaning assigned to it in subparagraph 1(A)(2) of the Purchase Agreement. "SPREAD" means, for each Construction Period or period beginning on and including a Base Rent Date and ending on but not including the next Base Rent Date, the amount established as described below in this definition on the date that is two Business Days prior to such period by reference to the stated (or published, implied) rating by S&P or by Moody's applicable to the Index Debt on that date. The Spread shall be established at the Level in the pricing grid below which corresponds to the rating of S&P and Moody's, respectively, applicable to the Index Debt; provided that (a) if one, but not both, of Moody's or S&P shall not have in effect a rating (stated or published, implied) for the Index Debt, then the Spread shall be determined solely with reference to the available rating by the rating agency that still rates the Index Debt; (b) if the ratings established by Moody's and S&P for the Index Debt shall indicate two different but consecutive Levels, the Spread shall be based on the more favorable to Guarantor of the two Levels; (c) if the ratings established by Moody's and S&P for the Index Debt shall indicate two different but nonconsecutive Levels, the Spread shall be the average of the Spreads corresponding to such Levels; (d) if the rating 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 on the date on which it is first announced by the applicable rating agency; (e) notwithstanding anything to the contrary in (a) through (d) above, but subject to (f) and (g) below, if either the rating established by Moody's for the Index Debt of Guarantor is below Ba2 or the rating established by S&P for the Index Debt of Guarantor is below BB, the Spread shall be 80.0 basis points; (f) notwithstanding anything to the contrary in (a) through (e) above, but subject to (g) below, if Moody's does not establish a rating for the Index Debt of Ba2 or higher (including if Moody's has ceased to List of Defined Terms -- Page 22 101 establish any rating for the Index Debt) and S&P does not establish a rating for the Index Debt of BB or higher (including if S&P has ceased to establish any rating of the Index Debt), the Spread sall be the difference computed by subtracting the Effective Rate from the rate that is 50.0 basis points above the Prime Rate; and (g) notwithstanding anything to the contrary in (a) through (f) above, on any date where an Event of Default has occurred and is continuing, the Spread shall equal the Default Rate less the Effective Rate.
=============================================================================================== LEVELS S & P RATING MOODY'S RATING MARGIN - ----------------------------------------------------------------------------------------------- Level I BBB+ (or better) Baa1 (or better) 40 basis points - ----------------------------------------------------------------------------------------------- Level II BBB Baa2 50 basis points - ----------------------------------------------------------------------------------------------- Level III BBB- Baa3 60 basis points - ----------------------------------------------------------------------------------------------- Level IV BB+ Ba1 75 basis points - ----------------------------------------------------------------------------------------------- Level V BB Ba2 95 basis points ===============================================================================================
All determinations of the Spread by BNPLC shall, in the absence of clear and demonstrable error, be binding and conclusive for purposes of the Lease. Further BNPLC may, but shall not be required, to rely on the determination of the Spread set forth in any certificate delivered by Guarantor pursuant to subparagraph 16.(b)(ii) of the Lease, and no reduction in the Spread will be effective because of an improvement in the S&P Rating or the Moody's Rating before the date that Guarantor has notified BNPLC thereof by delivery of such a certificate. "STIPULATED LOSS VALUE" as of any date means the amount equal to the sum of the Initial Funding Advance, plus the sum of all Construction Advances and Carrying Costs added to the Outstanding Construction Allowance on or prior to such date, minus all funds received by BNPLC and applied as Qualified Payments on or prior to such date. Under no circumstances will any payment of Base Rent, Commitment Fees or Administrative Agency Fees reduce Stipulated Loss Value. "SUBSIDIARY" means any corporation of which another corporation owns, directly or indirectly, such number of outstanding shares as have more than fifty percent (50%) of the ordinary voting power for the election of directors. "SUPPLEMENTAL PAYMENT" shall have the meaning assigned to it in subparagraph 1(A)(2)(c) of the Purchase Agreement. "TERM" shall have the meaning assigned to it in Paragraph 1.(a) of the Lease. "THIRD PARTY CONTRACT" shall have the meaning assigned to it in subparagraph 1(A)(2)(b) of the Construction Management Agreement. "THIRD PARTY SALE NOTICE" shall have the meaning assigned to it in subparagraph 2(C) of the Purchase Agreement. "THIRD PARTY SALE PROPOSAL" shall have the meaning assigned to it in subparagraph 2(C) of the Purchase Agreement. List of Defined TErms -- Page 23 102 "THIRD PARTY TARGET PRICE" shall have the meaning assigned to it in subparagraph 2(C) of the Purchase Agreement. "TRANSACTION EXPENSES" means costs incurred in connection with the preparation and negotiation of the Operative Documents and related documents and the consummation of the transactions contemplated therein. "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 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 SGC or Guarantor or any ERISA Affiliate of SGC or Guarantor under Title IV of ERISA. "VOLUNTARY SGC CONSTRUCTION CONTRIBUTIONS" shall have the meaning assigned to it in subparagraph 4(C) of the Construction Management Agreement. "VOLUNTARY RETENTION OF THE PROPERTY" means an affirmative election made by BNPLC to keep the Property pursuant to, and under the circumstances described in subparagraph 1(A)(2)(a) of the Purchase Agreement. "WORK" shall have the meaning assigned to it in subparagraph 1(A)(2)(a) of the Construction Management Agreement. List of Defined terms -- Page 24 EX-10.8 11 PURCHASE AGREEMENT DATED 10/20/98 1 EXHIBIT 10.8 ================================================================================ $50,000,000 PURCHASE AGREEMENT BETWEEN BNP LEASING CORPORATION ("BNPLC") AND SOLECTRON GEORGIA CORPORATION ("SGC") OCTOBER 20, 1998 (GWINNETT COUNTY, GEORGIA) ================================================================================ PURSUANT TO AND AS MORE PARTICULARLY PROVIDED IN PARAGRAPH 15 OF THIS AGREEMENT, THE LEASE REFERENCED HEREIN AND THIS PURCHASE AGREEMENT ARE TO CONSTITUTE, FOR INCOME TAX PURPOSES ONLY, A FINANCING ARRANGEMENT OR CONDITIONAL SALE. AS PROVIDED IN PARAGRAPH 15 OF THIS AGREEMENT, BNPLC AND SGC EXPECT THAT SGC (AND NOT BNPLC) SHALL BE TREATED AS THE TRUE OWNER OF THE PROPERTY FOR INCOME TAX PURPOSES, THEREBY ENTITLING SGC (AND NOT BNPLC) TO TAKE DEPRECIATION DEDUCTIONS AND OTHER TAX BENEFITS AVAILABLE TO THE OWNER. 34084.1 2 TABLE OF CONTENTS
Page ---- 1 SGC'S OPTIONS AND OBLIGATIONS ON THE DESIGNATED SALE DATE............................1 (A) Right to Purchase; Right and Obligation to Remarket...........................1 (B) Determination of Fair Market Value............................................3 (C) Designation of the Purchaser..................................................3 2 SGC'S RIGHTS AND OPTIONS AFTER THE DESIGNATED SALE DATE..............................3 (A) SGC's Extended Right to Remarket..............................................3 (B) Definition of Minimum Extended Remarketing Price..............................4 (C) BNPLC's Right to Sell.........................................................5 (D) SGC's Right to Excess Sales Proceeds..........................................5 3 TERMS OF CONVEYANCE UPON PURCHASE....................................................6 4 SURVIVAL AND TERMINATION OF THE RIGHTS AND OBLIGATIONS OF SGC AND BNPLC..............6 (A) Status of this Agreement Generally............................................6 (B) Election by SGC to Terminate the Purchase Option and SGC's Initial Remarketing Rights and Obligations Prior to the Base Rent Commencement Date...............7 (C) Election by BNPLC to Terminate the Purchase Option and SGC's Initial Remarketing Rights and Obligations............................................7 (D) Automatic Termination of Certain Rights of SGC................................7 (E) Termination of SGC's Extended Remarketing Rights to Permit a Sale by BNPLC....8 (F) Payment Only to BNPLC.........................................................8 (G) Remedies Under the Other Operative Documents..................................8 5 EFFECT OF SALE UPON INTERVENING ENCUMBRANCES.........................................8 6. OTHER REPRESENTATIONS, WARRANTIES AND COVENANTS OF SGC...............................9 (A) No Default or Violation.......................................................9 (B) No Suits......................................................................9 (C) Enforceability................................................................9 (D) Organization..................................................................9 (E) Omissions.....................................................................9 7 CERTAIN REMEDIES CUMULATIVE..........................................................9 8. ATTORNEYS' FEES AND LEGAL EXPENSES..................................................10 9. ESTOPPEL CERTIFICATE................................................................10 10. SUCCESSORS AND ASSIGNS..............................................................10 11. MISCELLANEOUS.......................................................................10
3 (A) Notices......................................................................10 (B) Severability.................................................................12 (C) No Implied Waiver............................................................12 (D) NO IMPLIED REPRESENTATIONS BY BNPLC..........................................12 (E) Entire Agreement.............................................................12 (F) Time is of the Essence.......................................................13 (G) Governing Law................................................................13 (H) Paragraph Headings...........................................................13 (I) Other Terms and References...................................................13 (1) Not a Partnership, Etc.......................................................13 12. WAIVER OF JURY TRIAL................................................................13 13. ADDITIONAL RIGHTS OF BNPLC RELATING TO ESCROWED PROCEEDS............................14 14. SECURITY FOR BNPLC'S OBLIGATIONS....................................................14 15. INCOME TAX REPORTING................................................................14 Exhibits and Schedules Exhibit A....................................................................Legal Description Exhibit B................................................................Limited Warranty Deed Exhibit C................................................................Intentionally Deleted Exhibit D..........................................................Bill of Sale and Assignment Exhibit E........................................................Acknowledgment and Disclaimer Exhibit F................................................................Intentionally Deleted Exhibit G..............................................................Secretary's Certificate Exhibit H..................................................Instruction Letter to Title Insurer Exhibit I...................................................................FIRPTA Certificate Exhibit J...............................................Indemnity for Liens Removable by BNPLC Exhibit K...............................................Notice by SGC of Election to Terminate List of Defined Terms.......................................................Shared Definitions
(ii) 4 PURCHASE AGREEMENT This PURCHASE AGREEMENT (this "AGREEMENT"), by and between BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"), and SOLECTRON GEORGIA CORPORATION, a Georgia corporation ("SGC"), is dated as of October 20, 1998, the Effective Date. ("EFFECTIVE DATE" and other capitalized terms used and not otherwise defined in this Agreement are intended to have the meanings assigned to them in the List of Defined Terms attached to and made a part of the Lease Agreement dated of even date herewith between BNPLC, as landlord, and SGC, as tenant. By this reference, such List of Defined Terms is incorporated into and made a part of this Agreement for all purposes.) RECITALS Pursuant to the Existing Contract, which covers the Land described in Exhibit A, BNPLC is acquiring the Land and any appurtenances thereto from Seller contemporaneously with the execution of this Agreement. Pursuant to the Lease and the Construction Management Agreement, BNPLC will lease the Land to SGC and is agreeing to provide funding for the acquisition and construction of Improvements to be owned by BNPLC. (BNPLC's interests in the Land, the Improvements and in all other real and personal property from time to time covered by the Lease and included within the "Property" as defined therein are hereinafter collectively referred to as the "PROPERTY".) SGC and BNPLC have reached agreement upon the terms and conditions upon which SGC will purchase or arrange for the purchase of the Property, and by this Agreement they desire to evidence such agreement AGREEMENTS 1. SGC'S OPTIONS AND OBLIGATIONS ON THE DESIGNATED SALE DATE. (A) Right to Purchase; Right and Obligation to Remarket. Whether or not an Event of Default shall have occurred and be continuing or the Lease shall have been terminated, but subject to Paragraph 4 below: (1) SGC shall have the right (the "PURCHASE OPTION") to purchase or cause an Affiliate of SGC to purchase BNPLC's interest in the Property and in Escrowed Proceeds, if any, on the Designated Sale Date for a cash price equal to the Break Even Price. As used herein, "BREAK EVEN PRICE" means an amount equal, on the Designated Sale Date, to Stipulated Loss Value, plus all costs and expenses (including appraisal costs, withholding taxes (if any) other than Excluded Taxes, and Attorneys' Fees) incurred in connection with any sale of BNPLC's interests in the Property under this Agreement or in connection with collecting payments due hereunder, and plus an amount equal to the Balance of Unpaid Construction-Period Indemnity Payments, but less the amount of any Deductible Judgment that SGC may elect to pay on or before the Designated Sale Date in order to remove the Deductible Judgment as a Lien against the Property. As used herein, the "BALANCE OF UNPAID CONSTRUCTION-PERIOD INDEMNITY PAYMENTS" means an amount equal to the sum of Construction-Period Indemnity Payments, if any, that SGC elected not to pay pursuant to subparagraph 5(e)(ii) of the Lease, plus interest accruing at the Default Rate, compounded annually, on each such payment from the date such payment would have become but for SGC's election not to pay it as permitted by subparagraph 5(e)(ii) of the Lease. 5 15 (2) If for any reason whatsoever (including any termination of SGC's Purchase Option as described in subparagraph 4(D) below), neither SGC nor an Affiliate of SGC purchases BNPLC's interest in the Property and in any Escrowed Proceeds on the Designated Sale Date as provided in the preceding subparagraph 1(A)(1), then SGC shall have the following rights and obligations (collectively, "SGC'S INITIAL REMARKETING RIGHTS AND OBLIGATIONS"): (a) First, SGC shall have the right (but not the obligation) to cause an Applicable Purchaser who is not an Affiliate of SGC to purchase BNPLC's interest in the Property and any Escrowed Proceeds on the Designated Sale Date for a net cash purchase price not below the lesser of (I) Fair Market Value, or (II) the Break Even Price. If, however, a net cash price actually tendered or to be tendered to BNPLC by an Applicable Purchaser identified by SGC in accordance with the preceding sentence is below the amount equal to the Break Even Price less any Supplemental Payment tendered by SGC as described below, then BNPLC may affirmatively elect to decline such tender and to keep the Property and any Escrowed Proceeds rather than sell to the Applicable Purchaser (a "VOLUNTARY RETENTION OF THE PROPERTY"). (b) Second, if the cash price actually paid by an Applicable Purchaser to BNPLC on the Designated Sale Date exceeds the Break Even Price, SGC shall be entitled to such excess, subject, however, to BNPLC's right to offset against such excess any and all sums that are then due from SGC to BNPLC under the other Operative Documents. (c) Third, if for any reason whatsoever (including any failure of SGC to cause an Applicable Purchaser to tender a purchase price to BNPLC or any Voluntary Retention of the Property) the amount of the Break Even Price exceeds any cash sales proceeds actually received by BNPLC on the Designated Sale Date in connection with a sale of BNPLC's interest in the Property and any Escrowed Proceeds pursuant to this Agreement (such excess being hereinafter called a "DEFICIENCY"), then SGC shall have the obligation to pay to BNPLC on the Designated Sale Date a supplemental payment (the "SUPPLEMENTAL PAYMENT") equal to the lesser of the (1) the Deficiency or (2) Maximum Remarketing Obligation. As used herein, "MAXIMUM REMARKETING OBLIGATION" means a dollar amount determined in accordance with the following provisions: 1) "MAXIMUM REMARKETING OBLIGATION" will equal the product of (i) Stipulated Loss Value on the Designated Sale Date, times (ii) 100% minus the Residual Risk Percentage, provided that both of the following conditions are satisfied: (x) SGC shall not have elected to accelerate the Designated Sale Date as provided in clause (2) of the definition of Designated Sale Date in the List of Defined Terms attached to the Lease; and (y) No Event of Default, other than an Issue 97-1 Non-performance-related Subjective Event of Default, shall occur on or be continuing on the Designated Sale Date. 2) If either of the conditions listed in subparagraph 1) preceding are not satisfied, "MAXIMUM REMARKETING OBLIGATION" will equal the Break Even Price. 2 6 Notwithstanding the foregoing, in the event of any Voluntary Retention of the Property, the amount of the Supplemental Payment calculated as provided in this subparagraph (c) will be reduced (but not below zero) by the amount of any Escrowed Proceeds held by and that will be retained by BNPLC after the Designated Sale Date. If any Supplemental Payment or other amount payable to BNPLC pursuant to this subparagraph 1(A) is not actually paid to BNPLC on the Designated Sale Date, SGC shall pay interest on the past due amount computed at the Default Rate from the Designated Sale Date. However, SGC shall be entitled to a credit against the interest required by the preceding sentence equal to the Base Rent, if any, actually paid by SGC pursuant to the Lease for any period after the Designated Sale Date. (B) Determination of Fair Market Value. To give BNPLC the opportunity before the Designated Sale Date to have Fair Market Value determined by an appraiser (as provided in the definition of Fair Market Value), SGC must, unless SGC concedes that Fair Market Value will be no less than the Break Even Price on the Designated Sale Date, provide BNPLC with a Remarketing Notice. As used in this Agreement, "REMARKETING NOTICE" means a notice given by SGC to BNPLC (and to each of the Participants) no earlier than two hundred seventy days before the Designated Sale Date and no later than one hundred and eighty days before the Designated Sale Date, specifying that SGC does not concede that Fair Market Value will be greater than the Break Even Price. No Remarketing Notice will be required if SGC does concede that Fair Market Value will equal or exceed the Break Even Price on the Designated Sale Date. But if for any reason (including any acceleration of the Designated Sale Date as provided in the definition thereof in the List of Defined Terms attached to the Lease) SGC 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 determining any Supplemental Payment required by this Agreement, be deemed to be no less than the Residual Risk Percentage of Stipulated Loss Value on the Designated Sale Date. (C) Designation of the Purchaser. To give BNPLC the opportunity before the Designated Sale Date to prepare the deed and other documents that BNPLC must tender pursuant to Paragraph 3 (collectively, the "SALE CLOSING DOCUMENTS"), SGC must, by a notice to BNPLC given at least twenty days prior to the Designated Sale Date, specify irrevocably, unequivocally and with particularity any party who will purchase BNPLC's interest in the Property as provided in subparagraph 1(A). If for any reason SGC fails to so specify a party who will in accordance with the terms and conditions set forth herein purchase BNPLC's interest in the Property (be it SGC itself, an Affiliate of SGC or another Applicable Purchaser), BNPLC shall be entitled to postpone the tender of the Sale Closing Documents until a date after the Designated Sale Date and not more than twenty days after SGC finally does so specify a party, but such postponement will not relieve or postpone the obligation of SGC to make a Supplemental Payment on the Designated Sale Date as provided in Paragraph 1(A)(2)(c). 2. SGC'S RIGHTS AND OPTIONS AFTER THE DESIGNATED SALE DATE. (A) SGC's Extended Right to Remarket. During the period commencing on the Designated Sale Date and ending on the second anniversary of the Designated Sale Date ("SGC'S EXTENDED REMARKETING PERIOD"), SGC shall have the right ("SGC'S EXTENDED REMARKETING RIGHT") to cause an Applicable Purchaser who is not an Affiliate of SGC to purchase BNPLC's interest in the Property for a cash purchase price not below the lesser of (I) the Minimum Extended Remarketing Price (as defined below), or (II) the Third Party Target Price (as defined below) specified in any Third Party Sale Notice (as defined below) given by BNPLC pursuant to subparagraph 2(C)(2) within the ninety days prior to the date (the "FINAL SALE DATE") upon which 3 7 BNPLC receives such purchase price from the Applicable Purchaser. SGC's Extended Remarketing Right shall, however, be subject to all of the following conditions: (1) No Event of Default, other than an Issue 97-1 Non-performance-related Subjective Event of Default, shall occur on or be continuing on the Designated Sale Date. (2) BNPLC's interest in the Property and in Escrowed Proceeds, if any, shall not have been sold on the Designated Sale Date as provided in Paragraph 1, and on the Designated Sale Date SGC shall have paid the full amount of any Supplemental Payment to BNPLC required by subparagraph 1(A)(2)(c). (If, however, as provided in subparagraph 4(B) SGC shall have properly exercised its right to terminate SGC's Initial Remarketing Rights and Obligations and paid an Issue 97-10 Prepayment to BNPLC, then payment of the Supplemental Payment shall not be a condition to SGC's Extended Remarketing Right.) (3) No Voluntary Retention of the Property shall have occurred as described in subparagraph 1(A)(2)(a). (4) SGC's Extended Remarketing Right shall not have been terminated by BNPLC pursuant to subparagraph 4(E) below. (5) At least thirty days prior to the Final Sale Date, SGC shall have notified BNPLC of (x) the date proposed by SGC as the Final Sale Date (which must be a Business Day), (y) the full legal name of the Applicable Purchaser and such other information as will be required to prepare the Sale Closing Documents, and (z) the amount of the purchase price that the Applicable Purchaser will pay (consistent with the minimum required pursuant to this subparagraph 2(A)) for BNPLC's interest in the Property. (6) If any Balance of Unpaid Construction-Period Indemnity Payments remains after SGC shall have properly exercised its right to terminate SGC's Initial Remarketing Rights and Obligations and paid an Issue 97-10 Prepayment to BNPLC as provided in subparagraph 4(B), then BNPLC will not be required by this subparagraph 2(A) to sell to an Applicable Purchaser at a price below the lesser of (A) the fair market value of the Property, or (B) the minimum price which would allow BNPLC to recover the Balance of Unpaid Construction-Period Indemnity Payments upon the distribution of sales proceeds in accordance with subparagraph 2(D) below. (B) Definition of Minimum Extended Remarketing Price. As used herein, "MINIMUM EXTENDED REMARKETING PRICE" means an amount equal to the sum of the following: (1) the amount by which the Stipulated Loss Value computed on the Designated Sale Date exceeds any Supplemental Payment actually paid to BNPLC on the Designated Sale Date, together with interest on such excess computed at the Default Rate from the period commencing on the Designated Sale Date and ending on the Final Sale Date, plus (2) all costs and expenses (including withholding taxes [if any] other than Excluded Taxes and Attorneys' Fees) incurred in connection with the sale of BNPLC's interest in the Property to the Applicable Purchaser, and plus 4 8 (3) the sum of all Impositions, insurance premiums and other Losses of every kind suffered or incurred by BNPLC or any other Interest Party with respect to the ownership, operation or maintenance of the Property on or after the Designated Sale Date, together with interest on such Impositions, insurance premiums and other Losses computed at the Default Rate from the date the paid or incurred to the Final Sale Date. (C) BNPLC's Right to Sell. After the Designated Sale Date, if the interest of BNPLC in the Property has not already been sold pursuant to Paragraph 1 of this Agreement, BNPLC shall have the right to sell the Property or offer the Property for sale on any terms believed to be appropriate by BNPLC in its sole good faith business judgment; provided, however, that so long as the conditions to SGC's Extended Remarketing Rights specified in subparagraph 2(A) continue to be satisfied: (1) BNPLC shall not sell the Property to an Affiliate of BNPLC on terms less favorable than those which BNPLC would require from a prospective purchaser not an Affiliate of BNPLC; (2) If BNPLC receives a written proposal (including any "letter of intent" or other nonbinding expression of interest) outlining the purchase price and general business terms upon which a prospective purchaser is interested in a possible purchase of the Property, and if on the basis of such proposal (the "THIRD PARTY SALE PROPOSAL") BNPLC intends and desires to enter into further negotiations for a more definitive purchase and sale agreement with the prospective purchaser, then BNPLC shall, prior to entering into negotiations for a more definitive purchase and sale agreement, submit the Third Party Sale Proposal to SGC with a notice (the "THIRD PARTY SALE NOTICE") explaining that (A) BNPLC is then prepared to accept a price not below an amount specified in such Third Party Sale Notice (the "THIRD PARTY TARGET PRICE") from the prospective purchaser if BNPLC and the prospective purchaser reach agreement on other terms and conditions to be incorporated into the more definitive purchase and sale agreement, and (B) SGC's Extended Remarketing Right may be terminated pursuant to subparagraph 4(E) of this Agreement unless SGC causes an Applicable Purchaser to consummate a purchase of BNPLC's interest in the Property pursuant to this Paragraph 2 within ninety days after the date of such Third Party Sale Notice. (D) SGC's Right to Excess Sales Proceeds. If the cash price actually paid by any third party purchasing the Property from BNPLC prior to the second anniversary of the Designated Sale Date, including any Applicable Purchaser purchasing from BNPLC pursuant to this Paragraph 2, exceeds the Minimum Extended Remarketing Price, then such excess will be paid and applied as follows: (1) first, to pay to BNPLC any and all sums that are then due and unpaid from SGC to BNPLC under the other Operative Documents; (2) second, to repay to SGC the aggregate amount of any and all Issue 97-10 Prepayments made to BNPLC; (3) third, to compensate BNPLC for any Balance of Unpaid Construction-Period Indemnity Payments; and (4) fourth, any balance of the excess remaining after payments as described in clauses (1) through (3) preceding shall be paid over to SGC. 5 9 3. TERMS OF CONVEYANCE UPON PURCHASE. Subject to any postponement permitted by subparagraph 1(C), and provided BNPLC has not affirmatively elected a Voluntary Retention of the Property as permitted by subparagraph 1(A)(2)(a), promptly after the tender of the purchase price and any other payments to BNPLC required by and pursuant to the Paragraph 1 or Paragraph 2, as applicable, BNPLC must convey all of BNPLC's right, title and interest in the Land, Improvements and other Property by BNPLC's execution, acknowledgment (where appropriate) and delivery of the Sale Closing Documents to SGC or the Applicable Purchaser, as the case may be, subject only to the Permitted Encumbrances and any other encumbrances that do not constitute Liens Removable by BNPLC. However, such conveyance shall not include the right to receive any payment under the indemnities under the Operative Documents 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 or alleged to have occurred 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. The Sale Closing Documents used to accomplish such conveyance shall consist of the following: (1) a Deed in the form attached as Exhibit B, (2) a Bill of Sale and Assignment of Lease 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 SGC or the Applicable Purchaser must execute and return to BNPLC, (4) a Secretary's Certificate in the form attached as Exhibit G, (5) a letter to the title insurance company insuring title to the Property in the form attached as Exhibit H, (6) a FIRPTA certificate in the form attached hereto as Exhibit I, and (7) if applicable, an Indemnity for Liens Removable by BNPLC in the form attached hereto as Exhibit J. The Indemnity for Liens Removable by BNPLC described in the preceding sentence shall be required if, but only if, before the other Sale Closing Documents are tendered by BNPLC in accordance with this Agreement, SGC shall have identified, provided a written list to BNPLC of, and been unable to obtain a commitment for title insurance against, any title encumbrances that SGC believes in good faith may constitute Liens Removable by BNPLC and that, if valid, would constitute Liens Removable by BNPLC. Any such Indemnity will be completed by attaching a list of such identified encumbrances as Annex B thereto. If for any reason BNPLC fails to tender the Sale Closing Documents as required by this Paragraph 3, BNPLC may cure such refusal at any time before thirty days after receipt of a demand for such cure from SGC. 4. SURVIVAL AND TERMINATION OF THE RIGHTS AND OBLIGATIONS OF SGC AND BNPLC. (A) Status of this Agreement Generally. Except as expressly provided herein, this Agreement shall not terminate, nor shall SGC have any right to terminate this Agreement, nor shall SGC be entitled to any reduction of the Break Even Price, Deficiency, Maximum Remarketing Obligation or Supplemental Payment hereunder, nor shall the obligations of SGC to BNPLC under Paragraph 1 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 by eminent domain or otherwise for any reason, (iii) the prohibition, limitation or restriction of SGC'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 SGC or any party claiming under SGC by paramount title or otherwise, (v) SGC'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 SGC to make payment to and, if applicable, to cause the Applicable Purchaser to make payment to BNPLC under Paragraph 1 shall be separate and independent covenants and agreements from BNPLC's obligations under this Agreement or any other agreement between BNPLC and SGC. 6 10 (B) Election by SGC to Terminate the Purchase Option and SGC's Initial Remarketing Rights and Obligations Prior to the Base Rent Commencement Date. At any time prior to the Base Rent Commencement Date, SGC may elect to terminate both the Purchase Option and SGC's Initial Remarketing Rights and Obligations, subject to the following conditions: (1) To be effective, any such election to terminate must be made after SGC shall have given Notice of SGC's Election to Terminate pursuant to Paragraph 5(D) of the Construction Management Agreement, or after BNPLC shall have given any FOCB Notice as provided in Paragraph 5(E) of the Construction Management Agreement, and any such election to terminate must be made prior to the Base Rent Commencement Date. (2) To be effective, any such election to terminate must be made by giving BNPLC and the Participants a notice thereof in the form attached as Exhibit K prior to the Base Rent Commencement Date. (3) No termination pursuant to this subparagraph 4(B) shall be effective, notwithstanding any notice SGC may have given as described in the preceding clause (2), unless contemporaneously with the giving of the notice (and in any event prior to the Base Rent Commencement Date) SGC shall deliver to BNPLC an Issue 97-10 Prepayment. (4) If for any reason whatsoever, including any bona fide dispute over the amount of any required Issue 97-10 Prepayment, BNPLC does not receive both the notice described in the preceding clause (2) and a full Issue 97-10 Prepayment as described in the preceding clause (3) prior to the Base Rent Commencement Date, then without any notice or other action by the parties to this Agreement SGC shall cease to have any option to terminate pursuant to this subparagraph 4(B). (C) Election by BNPLC to Terminate the Purchase Option and SGC's Initial Remarketing Rights and Obligations. BNPLC shall be entitled to terminate both the Purchase Option and SGC's Initial Remarketing Rights and Obligations, as BNPLC deems appropriate in its sole and absolute discretion, at any time after receiving a notice given by SGC to make or attempt to make any Issue 97-10 Election. Upon any such termination by BNPLC, SGC shall be required to pay BNPLC an Issue 97-10 Prepayment. (D) Automatic Termination of Certain Rights of SGC. Without limiting BNPLC's right to enforce SGC's obligation to make a Supplemental Payment and other amounts required by this Purchase Agreement, SGC's Purchase Option and all rights included in SGC's Initial Remarketing Rights and Obligations hereunder (to be distinguished from SGC's Extended Remarketing Right) shall terminate automatically if: (1) BNPLC shall have elected to keep the Property in accordance with subparagraph 1(A)(2)(a); or (2) SGC shall have failed on the Designated Sale Date to make or cause to be made all payments to BNPLC required by this Agreement or by the other Operative Documents (including the payment on the Designated Sale Date of the purchase price required from an Applicable Purchaser if an Applicable Purchaser is to purchase from BNPLC as provided in subparagraph 1(A)(2)(a)). Notwithstanding the foregoing, if BNPLC does not receive all payments due under this Agreement or other Operative Documents on the Designated Sale Date, SGC may nonetheless tender to BNPLC the full Break 7 11 Even Price and all amounts then due under the Operative Documents, together with interest on the total Break Even 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 days after the Designated Sale Date, BNPLC must accept it and promptly thereafter deliver any Escrowed Proceeds and the Sale Closing Documents listed in Paragraph 3 to SGC. (E) Termination of SGC's Extended Remarketing Rights to Permit a Sale by BNPLC. At any time more than ninety days after BNPLC has delivered a Third Party Sale Notice to SGC as described in subparagraph 2(C)(2), BNPLC may terminate SGC's Extended Remarketing Rights contemporaneously with the consummation of a sale of the Property by BNPLC to any third party (be it the prospective purchaser named in the Third Party Sale Notice or another third party) at a price equal to or in excess of the Third Party Target Price specified in the Third Party Sale Notice, so as to permit the sale of the Property unencumbered by SGC's Extended Remarketing Rights. (F) Payment Only to BNPLC. All amounts payable under this Agreement by SGC and, if applicable, by an 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 subparagraph 1(A), on the Designated Sale Date SGC must pay all amounts then due to BNPLC under the Lease. BNPLC will remit any excess amounts due SGC pursuant to the last sentence of subparagraph 1(A)(2) or pursuant to subparagraph 2(D) promptly after BNPLC's receipt of the same. To the extent, if any, that SGC claims and is entitled to claim a reduction in the Break Even Price because of any Deductible Judgment, as provided in the definition of Break Even Price above, SGC must pay such Deductible Judgment for the account of BNPLC contemporaneously with the payment of the other amounts required by subparagraph 1(A). (G) Remedies Under the Other Operative Documents. No repossession of or re-entering upon the Property or exercise of any other remedies available to BNPLC under the Lease or other Operative Documents shall terminate SGC's rights or obligations hereunder, all of which shall survive BNPLC's exercise of remedies under the other Operative Documents. SGC acknowledges that the consideration for this Agreement is separate and independent of the consideration for the Lease, the Construction Management Agreement and the Closing Certificate, and SGC's obligations hereunder shall not be affected or impaired by any event or circumstance that would excuse SGC from performance of its obligations under such other Operative Documents. 5. EFFECT OF SALE UPON INTERVENING ENCUMBRANCES. Any conveyance of the Property to SGC or any Applicable Purchaser pursuant to this Agreement shall cut off and terminate any interest in the Land, Improvements or other Property claimed by, through or under BNPLC, including any interest claimed by the Participants and including any Liens Removable by BNPLC (such as, but not limited to, any judgment liens established against the Property because of a judgment rendered against BNPLC and any leasehold or other interests conveyed by BNPLC in the ordinary course of BNPLC's business), but not obligations of SGC to BNPLC under the indemnities in the Lease or other Operative Documents then due 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. 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 SGC hereby. Further, SGC 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 SGC nor any Applicable Purchaser shall be responsible for the proper distribution or application of any such payments by BNPLC; and any such payment to BNPLC shall discharge the obligation of SGC to cause such payment to all Persons claiming an interest in such payment. The parties shall record a 8 12 memorandum of this Agreement for purposes of effecting constructive notice to all Persons of SGC's rights under this Agreement, including its rights under this subparagraph. 6. OTHER REPRESENTATIONS, WARRANTIES AND COVENANTS OF SGC. SGC represents, warrants and covenants as follows: (A) No Default or Violation. The execution, delivery and performance by SGC of this Agreement does not and will not constitute a breach or default under any other material agreement or contract to which SGC is a party or by which SGC is bound or which affects the Property, and does not violate or contravene any law, order, decree, rule or regulation to which SGC is subject, and such execution, delivery and performance by SGC 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, SGC's property pursuant to the provisions of any of the foregoing. (B) No Suits. Other than matters, if any, disclosed in Schedule 2 attached to the Lease, there are no judicial or administrative actions, suits, proceedings or investigations pending or, to SGC's knowledge, threatened that will adversely affect the Property or the validity, enforceability or priority of this Agreement, and SGC 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 use, occupancy or operation of the Property. (C) Enforceability. The execution, delivery and performance by SGC of this Agreement is duly authorized and does not require the consent or approval of any governmental body or other regulatory authority that has not heretofore been obtained and is not in contravention of or conflict with any applicable laws or any term or provision of SGC's articles of incorporation or bylaws. This Agreement is a valid, binding and legally enforceable obligation of SGC, in accordance with its 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. (D) Organization. SGC is duly incorporated and legally existing under the laws of the State of Georgia. SGC 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 fulfill its obligations under this Agreement. (E) Omissions. None of SGC's representations or warranties contained in this Agreement or in any other document, certificate or written statement furnished to BNPLC by or on behalf of SGC in connection with this Agreement 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. 7. CERTAIN 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. 9 13 8. 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. 9. ESTOPPEL CERTIFICATE. Either party to this Agreement will, upon not less than twenty days' prior request by the other party hereto, 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 responding party has knowledge. Any such statement may be relied upon by any Participant or prospective purchaser or permitted assignee of BNPLC or SGC with respect to the Property. 10. SUCCESSORS AND ASSIGNS. The terms, provisions, covenants and conditions hereof shall be binding upon SGC and BNPLC and their respective permitted successors and assigns and shall inure to the benefit of SGC and BNPLC and all permitted transferees, mortgagees, successors and assignees of SGC and BNPLC with respect to the Property; provided, that the rights of BNPLC hereunder shall not pass to SGC or any Applicable Purchaser or any subsequent owner claiming through SGC or an Applicable Purchaser. 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 other Operative Documents pursuant to a Permitted Transfer, and if BNPLC's successor in interest assumes in writing for the benefit of SGC liability for the obligations imposed upon BNPLC by this Agreement and the other Operative Documents on and subject to the express terms set out herein and therein, then BNPLC shall thereby be released from any further obligations arising under this Agreement or other Operative Documents after the date of such assumption, and SGC agrees to look solely to each successor in interest of BNPLC for performance of such obligations. 11. MISCELLANEOUS (A) Notices. Each provision of this Agreement, or of any Applicable Laws with reference to the sending, mailing or delivery of any notice or demand hereunder, or with reference to the making of any payment required hereunder, shall be deemed to be complied with when and if the following steps are taken: (1) All payments required to be paid by SGC or any Applicable Purchaser to BNPLC hereunder shall be paid to BNPLC in immediately available funds by wire transfer to: Federal Reserve Bank of New York ABA 026007689 Banque Nationale de Paris /BNP/ BNP San Francisco /AC/ 14334000176 /Ref/ Solectron (Georgia Synthetic Lease) 10 14 or at such other place and in such other manner as BNPLC may designate in a notice to SGC. Time is of the essence as to all payments of SGC under this Agreement. (2) All payments required to be made by BNPLC to SGC pursuant to the last sentence of subparagraph 1(A)(2) or pursuant to subparagraph 2(D) shall be paid to SGC in immediately available funds at the address of SGC set forth below or as SGC may otherwise direct by notice sent in accordance herewith. (3) All notices, demands, approvals, consents and other communications to be made hereunder to or by the parties hereto must, to be effective for purpose of this Agreement, be in writing. Notices, demands and other communications required or permitted hereunder are to be sent to the addresses set forth below (or in the case of communications to Participants, at the addresses set forth in Schedule 1 attached to 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 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 G. Cox Telecopy: (214) 969-0060 With a copy to: Banque Nationale de Paris, San Francisco 180 Montgomery Street San Francisco, California 94104 Attention: Rafael Lumanlan or Gavin Holles 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 SGC: 11 15 Solectron Georgia Corporation 777 Gibraltar Drive, Building #5 Milpitas, CA 95035 Attn: Chief Financial Officer Telecopy: (408) 956-6059 With a copy to: Wilson, Sonsini, Goodrich & Rosati 650 Page Mill Palo Alto, California 94304-1050 Attention: Real Estate Department/DSS Telecopy: (415) 493-6811 (B) Severability. If any term or provision of this Agreement 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 Agreement, 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. Further, the obligations of SGC hereunder, to the maximum extent possible, shall be deemed to be separate, independent and in addition to, not in lieu of, the obligations of SGC under the other Operative Documents. In the event of any inconsistency between the terms of this Agreement and the terms and provisions of the other Operative Documents, the terms and provisions of this Agreement shall control. (C) No Implied Waiver. The failure of BNPLC or SGC 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 Agreement shall not be construed as a waiver or a relinquishment thereof for the future. The waiver of or redress for any breach of this Agreement 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 BNPLC of any payment hereunder with knowledge of the breach of any covenant or agreement contained in this Agreement shall not be deemed a waiver of such breach, and no waiver of any provision of this Agreement shall be deemed to have been made unless expressed in writing and signed by the waiving party. (D) NO IMPLIED REPRESENTATIONS BY BNPLC. BNPLC AND BNPLC'S AGENTS HAVE MADE NO REPRESENTATIONS OR PROMISES WITH RESPECT TO THE PROPERTY EXCEPT AS EXPRESSLY SET FORTH HEREIN AND IN THE OTHER OPERATIVE DOCUMENTS SIGNED BY BNPLC, AND NO RIGHTS, EASEMENTS OR LICENSES ARE ACQUIRED BY SGC BY IMPLICATION OR OTHERWISE EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE OTHER OPERATIVE DOCUMENTS. (E) Entire Agreement. This Agreement, the other Operative Documents and the other documents dated as of October 20, 1998, which are being executed by SGC and executed or accepted by BNPLC contemporaneously with the execution of this Agreement supersede any prior negotiations and agreements between BNPLC and SGC concerning the Property, and no amendment or modification of this Agreement shall be binding or valid unless expressed in a writing executed by both parties hereto. 12 16 (F) Time is of the Essence. Time is of the essence as to all obligations of SGC and BNPLC and all notices required of SGC and BNPLC under this Agreement. (G) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia without regard to conflict or choice of laws. (H) 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. (I) Other Terms and References. Words of any gender used in this Agreement 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 Agreement, 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 Agreement 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 BNPLC is a party or of which BNPLC is an intended beneficiary, without the consent of BNPLC. All accounting terms used but not specifically defined herein shall be construed in accordance with GAAP. The words "this Agreement", "herein", "hereof", "hereby", "hereunder" and words of similar import when used in this Agreement refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The phrases "this Paragraph" and "this subparagraph" and similar phrases used herein refer only to the Paragraphs or subparagraphs in which the phrase occurs. As used herein the word "or" is not exclusive. As used herein the words "include", "including" and similar terms shall be construed as if followed by "without limitation to". (1) Not a Partnership, Etc. NOTHING IN THIS AGREEMENT IS INTENDED TO BE OR TO CREATE ANY PARTNERSHIP, JOINT VENTURE, OR OTHER JOINT ENTERPRISE BETWEEN BNPLC AND SGC. NEITHER THE EXECUTION OF THIS AGREEMENT NOR THE ADMINISTRATION OF THIS AGREEMENT OR OTHER DOCUMENTS REFERENCED HEREIN BY BNPLC, NOR ANY OTHER RIGHT, DUTY OR OBLIGATION OF BNPLC UNDER OR PURSUANT TO THIS AGREEMENT OR SUCH DOCUMENTS IS INTENDED TO BE OR TO CREATE ANY FIDUCIARY OBLIGATIONS OF BNPLC TO SGC. 12. WAIVER OF JURY TRIAL. BNPLC AND SGC EACH HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER DOCUMENT OR DEALINGS BETWEEN THEM RELATING TO THIS AGREEMENT OR THE 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 contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. SGC 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. SGC and BNPLC 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 13 17 SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS AGREEMENT OR THE PROPERTY. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. 13. ADDITIONAL RIGHTS OF BNPLC RELATING TO ESCROWED PROCEEDS. BNPLC shall be entitled to deliver any Escrowed Proceeds it holds on the Designated Sale Date directly to SGC or to any Applicable Purchaser purchasing BNPLC's interest in the Property and the Escrowed Proceeds pursuant to this Agreement notwithstanding any prior actual or attempted conveyance or assignment by SGC, voluntary or otherwise, of any right to receive the same; BNPLC shall not be responsible for the proper distribution or application by SGC or any Applicable Purchaser of any such Escrowed Proceeds paid over to SGC or the Applicable Purchaser; and any such payment of Escrowed Proceeds to SGC or an Applicable Purchaser shall discharge any obligation of BNPLC to deliver the same to all Persons claiming an interest therein. 14. SECURITY FOR BNPLC'S OBLIGATIONS. To secure SGC's right to purchase the Property pursuant to this Agreement and 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 SGC a lien and security interest against all rights, title and interests of BNPLC from time to time in and to the Land, Improvements and other Property. SGC may enforce such lien and security interest judicially after any such breach by BNPLC, but not otherwise. SGC 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, subject to the condition that BNPLC unequivocally and effectively waive, following any such judicial foreclosure of the lien and security interest granted in this Paragraph, BNPLC's right of redemption. Contemporaneously with the execution of this Agreement, SGC 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 SGC shall be entitled to record such memorandum at any time prior to the Designated Sale Date. 15. INCOME TAX REPORTING. BNPLC and SGC intend this Agreement and the Lease to have a form for income taxes which is different than the form of this Agreement and the Lease for other purposes, and thus the parties acknowledge and agree as follows: (1) FOR PURPOSES OF DETERMINING THEIR RESPECTIVE FEDERAL, STATE AND LOCAL INCOME TAX OBLIGATIONS, BNPLC and SGC believe and intend that this Agreement and the Lease constitute a financing arrangement or conditional sale. Both BNPLC and SGC agree to report this Agreement and the Lease as a financing arrangement or conditional sale on their respective income tax returns (the "REQUIRED REPORTING"), unless such Required Reporting is challenged in writing by the Internal Revenue Service or another governmental authority with jurisdiction (a "TAX CHALLENGE"). Consistent with the foregoing, BNPLC and SGC expect that SGC (and not BNPLC) shall be treated as the true owner of the Property for income tax purposes, thereby entitling SGC (and not BNPLC) to take depreciation deductions and other tax benefits available to the owner. SGC shall also report all interest earned on Escrowed Proceeds as SGC's income for federal, state and local income tax purposes. REFERENCES IN THIS AGREEMENT OR IN THE LEASE TO A "LEASE" OR THE "LEASED PROPERTY" ARE NOT INTENDED FOR INCOME TAX PURPOSES TO REFLECT THE INTENT OF BNPLC OR SGC AS TO THE FORM OF THE TRANSACTIONS COVERED BY, OR THE PROPER CHARACTERIZATION OF, THIS AGREEMENT AND THE LEASE. 14 18 (2) FOR ALL OTHER PURPOSES, INCLUDING THE DETERMINATION OF THE APPROPRIATE FINANCIAL ACCOUNTING FOR THIS AGREEMENT AND THE DETERMINATION OF THEIR RESPECTIVE RIGHTS AND REMEDIES UNDER STATE LAW, BNPLC and SGC believe and intend that (i) the Lease constitutes a true Lease, not a mere financing arrangement, enforceable in accordance with its express terms (and neither this Paragraph 15 nor the provisions referencing this Paragraph on the title page of this Agreement nor the corresponding provisions in the Lease are intended to affect the enforcement of any other provisions of this Agreement or the Lease) and (ii) this Agreement shall constitute a separate and independent contract, enforceable in accordance with the express terms and conditions set forth herein. In this regard, SGC acknowledges that SGC asked BNPLC to participate in the transactions evidenced by this Agreement and the Lease as a landlord and owner of the Property, not as a lender. Although other transactions might have been used to accomplish similar results, SGC expects to receive certain material accounting and other advantages through the use of a lease transaction. Accordingly, and notwithstanding the Required Reporting for income tax purposes, SGC cannot equitably deny that this Agreement and the Lease should be construed and enforced in accordance with their respective terms, rather than as a mortgage or other security device, in any action brought by BNPLC to enforce this Agreement or the Lease. In the event of a Tax Challenge, BNPLC and SGC shall each provide to the other copies of all notices from the Internal Revenue Service or any other governmental authority presenting the Tax Challenge. Further, before changing from the Required Reporting because of a Tax Challenge, BNPLC and SGC shall each consider in good faith any reasonable suggestions received from the other party to this Agreement about an appropriate response to the Tax Challenge; provided, however, that the suggestions are set forth in a notice delivered no later than thirty Business Days after the suggesting party is first notified of the Tax Challenge; and, provided further, that when presented with a Tax Challenge, BNPLC shall have the right to change from the Required Reporting rather than participate in any litigation or other legal proceeding against the Internal Revenue Service or another governmental authority. In any event, SGC shall indemnify BNPLC and defend and hold BNPLC harmless from and against all Losses imposed on or asserted against or incurred by BNPLC by reason of, in connection with or arising out of any such challenge or any resulting recharacterization of this Agreement or the Lease required by the Internal Revenue Service or another governmental authority, including any additional taxes that may become due upon any sale under this Agreement, to the extent (if any) that such Losses are not offset by tax savings to BNPLC resulting from additional depreciation deductions or other tax benefits of the recharacterization. [The signature pages follow.] 15 19 IN WITNESS WHEREOF, SGC and BNPLC have caused this Purchase Agreement to be executed as of October 20, 1998. "SGC" SOLECTRON GEORGIA CORPORATION By: /s/ G. R. HAWKINS, JR. ----------------------------------- G. R. Hawkins, Jr., President 20 [Continuation of signature pages to Purchase Agreement dated to be effective October 20, 1998] "BNPLC" BNP LEASING CORPORATION By: /s/ LLOYD G. COX ----------------------------------- Lloyd G. Cox, Vice President 21 EXHIBIT A LEGAL DESCRIPTION ALL THAT TRACT OR PARCEL OF LAND lying and being in Land Lots 126, 153 and 154, 7th District of Gwinnett County, Georgia, which is described as follows: TO LOCATE THE POINT OF BEGINNING commence at a point formed by the intersection of the northeastern margin of the right-of-way of Northridge Drive (having an 80-foot right-of-way) and the northwestern margin of the right-of-way of Old Peachtree Road (having an 80-foot right of way), if both of said rights-of-way are extended to form a point; thence North 56 degrees 23 minutes 46 seconds West a distance of 11.43 feet to a point marked by a 1/2-inch rebar pin which is the POINT OF BEGINNING and which is located on the northeastern margin of the right-of-way of Northridge Drive; thence northwesterly along the northeastern margin of the right-of-way of Northridge Drive the following five (5) courses and distances, or curves, as hereinafter described: thence North 56 degrees 23 minutes 46 seconds West a distance of 216.60 feet to a point; thence northwesterly along an arc of a curve to the right a distance of 278.76 feet to a point (said arc being subtended by a chord having a chord bearing of North 44 degrees 21 minutes 15 seconds West, a chord distance of 276.71 feet and a radius of 663.15 feet); thence North 32 degrees 19 minutes 42 seconds West a distance of 225.20 feet to a point; thence northwesterly along an arc of a curve to the left a distance of 312.95 feet to a point (said arc being subtended by a chord having a chord bearing of North 45 degrees 15 minutes 26 seconds West, a chord distance of 310.30 feet and a radius of 692.57 feet); thence North 58 degrees 12 minutes 08 seconds West a distance of 308.00 feet to a point marked by a 1/2-inch rebar pin; thence leaving the northeastern margin of the right-of-way of Northridge Drive and continuing northwesterly, northerly and northeasterly along an arc of a curve to the right a distance of 18.85 feet to a point marked by a 1/2-inch rebar pin (said arc being subtended by a chord having a chord bearing of North 13 degrees 12 minutes 08 seconds West, a chord distance of 16.97 feet and a radius of 12.00 feet) located on the southeasterly margin of the right-of-way of Northbrook Parkway (having a 100-foot right-of-way); thence easterly along the southeasterly margin of the right-of-way of Northbrook Parkway the following four (4) courses and distances, or curves, as hereinafter described: North 31 degrees 47 minutes 52 seconds East a distance of 164.90 feet to point; thence northeasterly along an arc of a curve to the right a distance of 462.34 feet to a point (said arc being subtended by a chord having a chord bearing of North 46 degrees 47 minutes 52 seconds East, a chord distance of 457.08 feet and a radius of 883.01 feet); thence North 61 degrees 47 minutes 52 seconds East a distance of 277.91 feet to a point; thence northeasterly along an arc of a curve to the left distance of 518.27 feet to a point marked by a 1/2-inch rebar pin (said arc being subtended by a chord having a chord bearing of North 45 degrees 13 minutes 11 seconds East, a chord distance of 511.07 feet and a radius of 895.59 feet); leaving said southerly margin of the right-of-way of Northbrook Parkway, thence South 61 degrees 21 minutes 31 seconds East a distance of 1,185.63 feet to a point marked by a 5/8-inch rebar pin which is located on the western margin of the right-of-way of Old Peachtree Road; thence South 03 degrees 13 minutes 18 seconds East along the western margin of the right-of-way of Old Peachtree Road a distance of 199.76 feet to a point; thence southerly and southwesterly along the western and northwestern margin of the right-of-way of Old Peachtree Road and being an arc of a curve to the right a distance of 536.80 feet to a point (said arc being subtended by a chord having a chord bearing of South 26 degrees 52 minutes 52 seconds West, a chord distance of 512.44 feet and a radius of 510.85 feet); thence South 56 degrees 59 minutes 02 seconds West along the northwestern margin of the right-of-way of Old Peachtree Road a distance of 729.16 feet to a point; thence southwesterly along the northwestern margin of the right-of-way of Old Peachtree Road along an arc of a curve to the left a distance of 330.46 feet to a point marked by a 1/2 inch rebar pin (said arc being subtended by a chord having a chord bearing of south 46 degrees 52 minutes 01 seconds West, a chord distance of 328.74 feet and a radius of 935.72 feet); thence southwesterly, westerly and northwesterly along an arc of a curve to the right a distance of 18.19 feet tot he POINT OF BEGINNING (said arc being subtended by a chord having a chord bearing of South 80 degrees 10 minutes 35 seconds West, a chord distance of 16.50 feet and a radius of 12.00 feet), said parcel containing an aggregate of 49.552 acres, depicted as Tract 1 (12.208 acres); 22 Tract 2 (10.000 acres) and Tract 3 (27.334 acres), and being more particularly shown and delineated on that certain survey entitled "As Built Survey for OKI America, Inc.; Solectron Georgia Corporation; BNP Leasing Corporation and Chicago Title Insurance Company:, prepared by Pinion & McGaughery Land Surveyors, Inc, bearing the seal and certification of George H. Pinion, Georgia Registered Land Surveyor Number 1606, dated July 1, 1998 last revised October 7, 1998, which survey is incorporated herein by reference thereto. Exhibit A - Page 2 23 EXHIBIT B LIMITED WARRANTY DEED RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: NAME: [SGC or the Applicable Purchaser] ADDRESS: ___________________ ATTN: ___________________ CITY: ___________________ STATE: ___________________ Zip: ___________________ BNP LEASING CORPORATION, a Delaware corporation (hereinafter called "Grantor"), for and in consideration of the sum of Ten Dollars ($10.00) and other valuable consideration paid to Grantor by [SGC or the Applicable Purchaser] (hereinafter called "Grantee"), the receipt and sufficiency of which are hereby acknowledged, does hereby GRANT, SELL, CONVEY, ASSIGN and DELIVER to Grantee the real property described in Annex A attached hereto and hereby made a part hereof, 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 (collectively, the "Property"); provided, however, this conveyance is made by Grantor and accepted by Grantee subject to all zoning and other ordinances affecting the Property, current year ad valorem taxes and any general or special assessments due and payable after the date hereof, all encroachments, variations in area or in measurements, boundary line disputes, roadways and other matters not of record which would be disclosed by a current survey and inspection of the Property, and the encumbrances listed in Annex B attached hereto and made a part hereof (collectively, the "Permitted Encumbrances"). TO HAVE AND TO HOLD the Property, together with all and singular the rights and appurtenances thereto in any wise belonging unto Grantee, its successors and assigns, forever, and Grantor does hereby bind Grantor and Grantor's successors 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. 24 IN WITNESS WHEREOF, this Deed is executed by Grantor on this ___ day of ____________, _______. The address of Grantee is: ________________ ________________ BNP LEASING CORPORATION Date: As of ____________ By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- [SEAL] Signed, sealed and delivered this ____ day of _________, _____, in the presence of: - ------------------------- Unofficial Witness - ------------------------- Notary Public [Notary Seal] Exhibit B - Page 2 25 ANNEX A LEGAL DESCRIPTION [DRAFTING NOTE: TO THE EXTENT THAT THE "LAND" COVERED BY THE LEASE CHANGES FROM TIME TO TIME BECAUSE OF ADJUSTMENTS FOR WHICH SGC REQUESTS BNPLC'S CONSENT OR APPROVAL AS PROVIDED IN THE LEASE, SO TOO WILL THE DESCRIPTION OF THE LAND BELOW CHANGE. ANY SUCH CHANGES WILL BE INCORPORATED INTO THE DESCRIPTION BELOW AND THIS "DRAFTING NOTE" WILL BE DELETED BEFORE THE DEED TO WHICH THIS DESCRIPTION IS ATTACHED IS ACTUALLY EXECUTED AND DELIVERED.] ALL THAT TRACT OR PARCEL OF LAND lying and being in Land Lots 126, 153 and 154, 7th District of Gwinnett County, Georgia, which is described as follows: TO LOCATE THE POINT OF BEGINNING commence at a point formed by the intersection of the northeastern margin of the right-of-way of Northridge Drive (having an 80-foot right-of-way) and the northwestern margin of the right-of-way of Old Peachtree Road (having an 80-foot right of way), if both of said rights-of-way are extended to form a point; thence North 56 degrees 23 minutes 46 seconds West a distance of 11.43 feet to a point marked by a 1/2-inch rebar pin which is the POINT OF BEGINNING and which is located on the northeastern margin of the right-of-way of Northridge Drive; thence northwesterly along the northeastern margin of the right-of-way of Northridge Drive the following five (5) courses and distances, or curves, as hereinafter described: thence North 56 degrees 23 minutes 46 seconds West a distance of 216.60 feet to a point; thence northwesterly along an arc of a curve to the right a distance of 278.76 feet to a point (said arc being subtended by a chord having a chord bearing of North 44 degrees 21 minutes 15 seconds West, a chord distance of 276.71 feet and a radius of 663.15 feet); thence North 32 degrees 19 minutes 42 seconds West a distance of 225.20 feet to a point; thence northwesterly along an arc of a curve to the left a distance of 312.95 feet to a point (said arc being subtended by a chord having a chord bearing of North 45 degrees 15 minutes 26 seconds West, a chord distance of 310.30 feet and a radius of 692.57 feet); thence North 58 degrees 12 minutes 08 seconds West a distance of 308.00 feet to a point marked by a 1/2-inch rebar pin; thence leaving the northeastern margin of the right-of-way of Northridge Drive and continuing northwesterly, northerly and northeasterly along an arc of a curve to the right a distance of 18.85 feet to a point marked by a 1/2-inch rebar pin (said arc being subtended by a chord having a chord bearing of North 13 degrees 12 minutes 08 seconds West, a chord distance of 16.97 feet and a radius of 12.00 feet) located on the southeasterly margin of the right-of-way of Northbrook Parkway (having a 100-foot right-of-way); thence easterly along the southeasterly margin of the right-of-way of Northbrook Parkway the following four (4) courses and distances, or curves, as hereinafter described: North 31 degrees 47 minutes 52 seconds East a distance of 164.90 feet to point; thence northeasterly along an arc of a curve to the right a distance of 462.34 feet to a point (said arc being subtended by a chord having a chord bearing of North 46 degrees 47 minutes 52 seconds East, a chord distance of 457.08 feet and a radius of 883.01 feet); thence North 61 degrees 47 minutes 52 seconds East a distance of 277.91 feet to a point; thence northeasterly along an arc of a curve to the left distance of 518.27 feet to a point marked by a 1/2-inch rebar pin (said arc being subtended by a chord having a chord bearing of North 45 degrees 13 minutes 11 seconds East, a chord distance of 511.07 feet and a radius of 895.59 feet); leaving said southerly margin of the right-of-way of Northbrook Parkway, thence South 61 degrees 21 minutes 31 seconds East a distance of 1,185.63 feet to a point marked by a 5/8-inch rebar pin which is located on the western margin of the right-of-way of Old Peachtree Road; thence South 03 degrees 13 minutes 18 seconds East along the western margin of the right-of-way of Old Peachtree Road a distance of 199.76 feet to a point; thence southerly and southwesterly along the western and northwestern margin of the right-of-way of Old Peachtree Road and being an arc of a curve to the right a distance of 536.80 feet to a point (said arc being subtended by a chord having a chord bearing of South 26 degrees 52 minutes 52 seconds West, a chord distance of 512.44 feet and a radius of 510.85 feet); thence South 56 degrees 59 minutes 02 seconds West along the northwestern margin of the right-of-way of Old Peachtree Road Exhibit B - Page 3 26 a distance of 729.16 feet to a point; thence southwesterly along the northwestern margin of the right-of-way of Old Peachtree Road along an arc of a curve to the left a distance of 330.46 feet to a point marked by a 1/2 inch rebar pin (said arc being subtended by a chord having a chord bearing of south 46 degrees 52 minutes 01 seconds West, a chord distance of 328.74 feet and a radius of 935.72 feet); thence southwesterly, westerly and northwesterly along an arc of a curve to the right a distance of 18.19 feet tot he POINT OF BEGINNING (said arc being subtended by a chord having a chord bearing of South 80 degrees 10 minutes 35 seconds West, a chord distance of 16.50 feet and a radius of 12.00 feet), said parcel containing an aggregate of 49.552 acres, depicted as Tract 1 (12.208 acres); Tract 2 (10.000 acres) and Tract 3 (27.334 acres), and being more particularly shown and delineated on that certain survey entitled "As Built Survey for OKI America, Inc.; Solectron Georgia Corporation; BNP Leasing Corporation and Chicago Title Insurance Company:, prepared by Pinion & McGaughery Land Surveyors, Inc, bearing the seal and certification of George H. Pinion, Georgia Registered Land Surveyor Number 1606, dated July 1, 1998 last revised October 7, 1998, which survey is incorporated herein by reference thereto. Exhibit B - Page 4 27 ANNEX B PERMITTED ENCUMBRANCES [DRAFTING NOTE: TO THE EXTENT THAT ENCUMBRANCES (OTHER THAN "LIENS REMOVABLE BY BNPLC") ARE IDENTIFIED IN ADDITION TO THOSE DESCRIBED BELOW, SUCH ADDITIONAL ENCUMBRANCES WILL BE ADDED TO THE LIST BELOW AND THIS "DRAFTING 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" UNDER THE LEASE FROM TIME TO TIME OR BECAUSE OF SGC'S REQUEST FOR BNPLC'S CONSENT OR APPROVAL TO AN ADJUSTMENT AS PROVIDED IN THE LEASE.] This conveyance is subject to all encumbrances not constituting a "Lien Removable by BNPLC" (as defined in the List of Defined Terms attached to the Lease Agreement referenced in item #1 of the list below), including the following matters to the extent the same are still valid and in force: 1. Lease Agreement dated as of October 20, 1998, by and between BNP Leasing Corporation, as lessor, and Solectron Georgia Corporation, as lessee. 2. Declaration of Protective Covenants for Northbrook, Gwinnett County, Georgia by Weeks NorthBrook MeadowBrook I Partnership, Ltd. and David Roan, dated March 11, 1986, filed for record March 14, 1986 at 3:54 p.m., recorded in Deed Book 3426, Page 118, Records of Gwinnett County, Georgia; as assigned by that certain Assignment of Declaration of Protective Covenants for Northbrook from Weeks Northbrook Meadowbrook I Partnership, Ltd., a Georgia limited partnership to Weeks Development Partnership, a Georgia general partnership, dated August 24, 1994, filed for record September 1, 1994 at 3:31 p.m., recorded in Deed Book 10643, Page 286, aforesaid Record. 3. Those matters as disclosed by that certain survey entitled "As Built Survey for OKI America, Inc.", prepared by Pinion & McGaughey Land Surveyors, Inc., bearing the seal and certification of George H. Pinion, Georgia Registered Land Surveyor Number 1606, dated July 1, 1998, as follows: (i) 15-foot building line along northeasterly line of subject property; (ii) 100-foot building line located along a portion of Old Peachtree Road near easterly corner of subject property; (iii) 50-foot building lines along Northridge Drive, Northbrook Parkway and a portion of Old Peachtree Road; (iv) 75-foot natural buffer in east corner of subject property; (v) 10-foot no access buffer in east corner of subject property; (vi) 10-foot, 15-foot and 20-foot drainage easements with 18-inch, 30-inch, 36-inch, 48-inch and 60-inch corrugated metal pipes, swales, flared end sections, manholes, junction boxes and outlet control structure in southerly, westerly and easterly portions of subject property; Exhibit B - Page 5 28 (vii) 20-foot sanitary sewer easements with manholes in southerly, westerly and central portions of subject property; (viii) branches in southwesterly portion of subject property; (ix) two (2) detention ponds with earthen berm, 60-foot corrugated metal pipe and headwall with 10-foot drainage easement surrounding said ponds in westerly portion of subject property; (x) water vaults in easterly and northerly portions of subject property; (xi) liquid oxygen tank located in northerly portion of subject property; (xii) Jackson Electric Membership Corporation cubicle located in easterly corner portion of subject property; (xiii) Southern Bell cabinet located in easterly portion of subject property; (xiv) guy wire crossing easterly line of subject property; (xv) ditch in westerly portion of subject property; (xvi) lights and bollard lights throughout subject property; (xvii) electric box in central portion of subject property; (xviii) fire hydrants throughout subject property; (xix) concrete flumes on northwestern side of building; (xx) two (2) concrete pads with electrical equipment in easterly portion of subject property; (xxi) water meter on southern side of building; and (xxii) concrete vault (electric) in central portion of subject property. Exhibit B - Page 6 29 EXHIBIT C INTENTIONALLY DELETED. 30 EXHIBIT D BILL OF SALE AND ASSIGNMENT OF LEASE AND INTANGIBLE ASSETS Reference is made to: (1) that certain Purchase Agreement between BNP Leasing Corporation ("ASSIGNOR") and Solectron Georgia Corporation, dated as of October 20, 1998 (the "PURCHASE AGREEMENT"); (2) that certain Lease Agreement between Assignor, as landlord, and Solectron Georgia Corporation, as tenant, dated as of October 20, 1998 (the "LEASE"); and (3) that certain Closing Certificate and Agreement by Solectron Georgia Corporation in favor of Assignor, dated as of October 20, 1998 (the "CLOSING CERTIFICATE"). (Capitalized terms used and not otherwise defined in this document are intended to have the meanings assigned to them in the List of Defined Terms attached to and made a part of the Lease.) As contemplated by the Purchase Agreement, Assignor hereby sells, transfers and assigns unto [SGC 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) the Lease; (b) 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; and (c) all other property included within the definition of "Property" as set forth in the Purchase Agreement, including but not limited to any of the following transferred to Assignor by the tenant pursuant to Paragraph 8 of the Lease or otherwise acquired by Assignor, at the time of the execution and delivery of the Lease and Purchase Agreement or thereafter, by reason of Assignor's status as the owner of any interest in the Property: (1) any goods, equipment, furnishings, furniture, chattels and tangible personal property of whatever nature that are located on the Property and all renewals or replacements of or substitutions for any of the foregoing; (ii) the rights of Assignor, existing at the time of the execution of the Lease and Purchase Agreement or thereafter arising, under Permitted Encumbrances or Development Documents (both as defined in the Lease); and (iii) any other permits, licenses, franchises, certificates, and other rights and privileges related to the Property that Assignee would have acquired if Assignee had itself purchased the land included in the Property. Provided, however, excluded from this conveyance and reserved to Assignor are any rights or privileges of Assignor under the following ("EXCLUDED RIGHTS"): (1) the indemnities set forth in the Lease and the Closing Certificate, whether such rights are presently known or unknown, including rights of the Assignor to be indemnified against environmental claims of third parties as provided in the Closing Certificate which may not presently be known, (2) provisions in the Lease that establish the right of Assignor to recover any accrued unpaid rent under the Lease which may be outstanding as of the date hereof, (3) agreements between Assignor and "BNPLC's Parent" or any "Participant," both as defined in the Lease, or any modification or extension thereof, or (4) any other instrument being delivered to Assignor contemporaneously herewith pursuant to the Purchase Agreement. To the extent that this conveyance does include any rights to receive future payments under the Lease, such rights ("INCLUDED RIGHTS") shall be subordinate to Assignor's Excluded Rights, and Assignee hereby waives any rights to enforce Included Rights until such time as Assignor has received all payments to which it remains entitled by reason of Excluded Rights. If any amount shall be paid to Assignee 31 on account of any Included Rights at any time before Assignor has received all payments to which it is entitled because of Excluded Rights, such amount shall be held in trust by Assignee for the benefit of Assignor, shall be segregated from the other funds of Assignee and shall forthwith be paid over to Assignor to be held by Assignor as collateral for, or then or at any time thereafter applied in whole or in part by Assignor against, the payments due to Assignor because of Excluded Rights, whether matured or unmatured, in such order as Assignor shall elect. Assignor does for itself and its successors 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 a Lien Removable by BNPLC, but not otherwise. 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. IN WITNESS WHEREOF, the parties have executed this instrument as of _______________, _____. ASSIGNOR: BNP LEASING CORPORATION a Delaware corporation By:______________________________________________ Its:_____________________________________________ ASSIGNEE: [SGC OR THE APPLICABLE PURCHASER], a ____________ corporation By: _____________________________________________ Its:_____________________________________________ Exhibit D - Page 2 32 STATE OF ____________ ) ) SS COUNTY OF ___________ ) 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 _____________________ STATE OF ____________ ) ) SS COUNTY OF ___________ ) 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_____________________________ Exhibit D - Page 3 33 ANNEX A LEGAL DESCRIPTION [DRAFTING NOTE: TO THE EXTENT THAT THE "LAND" COVERED BY THE LEASE CHANGES FROM TIME TO TIME BECAUSE OF ADJUSTMENTS FOR WHICH SGC REQUESTS BNPLC'S CONSENT OR APPROVAL AS PROVIDED IN THE LEASE, SO TOO WILL THE DESCRIPTION OF THE LAND BELOW CHANGE. ANY SUCH CHANGES WILL BE INCORPORATED INTO THE DESCRIPTION BELOW AND THIS "DRAFTING NOTE" WILL BE DELETED BEFORE THE DOCUMENT TO WHICH THIS DESCRIPTION IS ATTACHED IS ACTUALLY EXECUTED AND DELIVERED.] ALL THAT TRACT OR PARCEL OF LAND lying and being in Land Lots 126, 153 and 154, 7th District of Gwinnett County, Georgia, which is described as follows: TO LOCATE THE POINT OF BEGINNING commence at a point formed by the intersection of the northeastern margin of the right-of-way of Northridge Drive (having an 80-foot right-of-way) and the northwestern margin of the right-of-way of Old Peachtree Road (having an 80-foot right of way), if both of said rights-of-way are extended to form a point; thence North 56 degrees 23 minutes 46 seconds West a distance of 11.43 feet to a point marked by a 1/2-inch rebar pin which is the POINT OF BEGINNING and which is located on the northeastern margin of the right-of-way of Northridge Drive; thence northwesterly along the northeastern margin of the right-of-way of Northridge Drive the following five (5) courses and distances, or curves, as hereinafter described: thence North 56 degrees 23 minutes 46 seconds West a distance of 216.60 feet to a point; thence northwesterly along an arc of a curve to the right a distance of 278.76 feet to a point (said arc being subtended by a chord having a chord bearing of North 44 degrees 21 minutes 15 seconds West, a chord distance of 276.71 feet and a radius of 663.15 feet); thence North 32 degrees 19 minutes 42 seconds West a distance of 225.20 feet to a point; thence northwesterly along an arc of a curve to the left a distance of 312.95 feet to a point (said arc being subtended by a chord having a chord bearing of North 45 degrees 15 minutes 26 seconds West, a chord distance of 310.30 feet and a radius of 692.57 feet); thence North 58 degrees 12 minutes 08 seconds West a distance of 308.00 feet to a point marked by a 1/2-inch rebar pin; thence leaving the northeastern margin of the right-of-way of Northridge Drive and continuing northwesterly, northerly and northeasterly along an arc of a curve to the right a distance of 18.85 feet to a point marked by a 1/2-inch rebar pin (said arc being subtended by a chord having a chord bearing of North 13 degrees 12 minutes 08 seconds West, a chord distance of 16.97 feet and a radius of 12.00 feet) located on the southeasterly margin of the right-of-way of Northbrook Parkway (having a 100-foot right-of-way); thence easterly along the southeasterly margin of the right-of-way of Northbrook Parkway the following four (4) courses and distances, or curves, as hereinafter described: North 31 degrees 47 minutes 52 seconds East a distance of 164.90 feet to point; thence northeasterly along an arc of a curve to the right a distance of 462.34 feet to a point (said arc being subtended by a chord having a chord bearing of North 46 degrees 47 minutes 52 seconds East, a chord distance of 457.08 feet and a radius of 883.01 feet); thence North 61 degrees 47 minutes 52 seconds East a distance of 277.91 feet to a point; thence northeasterly along an arc of a curve to the left distance of 518.27 feet to a point marked by a 1/2-inch rebar pin (said arc being subtended by a chord having a chord bearing of North 45 degrees 13 minutes 11 seconds East, a chord distance of 511.07 feet and a radius of 895.59 feet); leaving said southerly margin of the right-of-way of Northbrook Parkway, thence South 61 degrees 21 minutes 31 seconds East a distance of 1,185.63 feet to a point marked by a 5/8-inch rebar pin which is located on the western margin of the right-of-way of Old Peachtree Road; thence South 03 degrees 13 minutes 18 seconds East along the western margin of the right-of-way of Old Peachtree Road a distance of 199.76 feet to a point; thence southerly and southwesterly along the western and northwestern margin of the right-of-way of Old Peachtree Road and being an arc of a curve to the right a distance of 536.80 feet to a point (said arc being subtended by a chord having a chord bearing of South 26 degrees 52 minutes 52 seconds West, a chord distance of 512.44 feet and a radius of 510.85 feet); thence South 56 degrees 59 minutes 02 seconds West along the northwestern margin of the right-of-way of Old Peachtree Road a distance of 729.16 feet to a point; thence southwesterly along the northwestern Exhibit D - Page 4 34 margin of the right-of-way of Old Peachtree Road along an arc of a curve to the left a distance of 330.46 feet to a point marked by a 1/2 inch rebar pin (said arc being subtended by a chord having a chord bearing of south 46 degrees 52 minutes 01 seconds West, a chord distance of 328.74 feet and a radius of 935.72 feet); thence southwesterly, westerly and northwesterly along an arc of a curve to the right a distance of 18.19 feet tot he POINT OF BEGINNING (said arc being subtended by a chord having a chord bearing of South 80 degrees 10 minutes 35 seconds West, a chord distance of 16.50 feet and a radius of 12.00 feet), said parcel containing an aggregate of 49.552 acres, depicted as Tract 1 (12.208 acres); Tract 2 (10.000 acres) and Tract 3 (27.334 acres), and being more particularly shown and delineated on that certain survey entitled "As Built Survey for OKI America, Inc.; Solectron Georgia Corporation; BNP Leasing Corporation and Chicago Title Insurance Company:, prepared by Pinion & McGaughery Land Surveyors, Inc, bearing the seal and certification of George H. Pinion, Georgia Registered Land Surveyor Number 1606, dated July 1, 1998 last revised October 7, 1998, which survey is incorporated herein by reference thereto. Exhibit D - Page 5 35 EXHIBIT E ACKNOWLEDGMENT OF DISCLAIMER OF REPRESENTATIONS AND WARRANTIES THIS ACKNOWLEDGMENT OF DISCLAIMER OF REPRESENTATIONS AND WARRANTIES (this "CERTIFICATE") is made as of ___________________, ____, by [SGC 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 deed and (2) a Bill of Sale and Assignment of Lease 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 Established Misconduct of BNPLC. As used in the preceding sentence, "ESTABLISHED MISCONDUCT" is intended to have, and be limited to, the meaning given to it in the List of Defined Terms attached to the Purchase Agreement between BNPLC and Solectron Georgia Corporation dated as of October 20, 1998, pursuant to which BNPLC is delivering the Conveyancing Documents. 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 ________________, ____. [SGC OR THE APPLICABLE PURCHASER] By:__________________________________________ Name:_____________________________________ Title:____________________________________ 36 EXHIBIT F INTENTIONALLY DELETED 37 EXHIBIT G SECRETARY'S CERTIFICATE The undersigned, [Secretary or Assistant 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 SALE CLOSING 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 and title] 38 CORPORATE RESOLUTIONS OF BNP LEASING CORPORATION WHEREAS, pursuant to that certain Purchase Agreement (herein called the "Purchase Agreement") dated as of October 20, 1998, by and between BNP Leasing Corporation (the "Corporation") and Solectron Georgia Corporation ("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 __________, Georgia 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 G - Page 2 39 EXHIBIT H BNP LEASING CORPORATION 717 N. HARWOOD SUITE 2630 DALLAS, TEXAS 75201 ___________________ , ________ [Title Insurance Company] - ----------------- - ----------------- - ----------------- Re: Recording of (1) Deed and (2) Bill of Sale and Assignment of Lease and Intangible Assets to [SGC OR THE APPLICABLE PURCHASER] ("Purchaser") Ladies and Gentlemen: BNP Leasing Corporation has executed and delivered to Purchaser (1) a Deed and (2) Bill of Sale and Assignment of Lease and Intangible Assets, each in the form attached to this letter. You are hereby authorized and directed to record such documents at the request of Purchaser. Sincerely, 40 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 [SGC 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 75-2252918; 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: ___________, ____. BNP LEASING CORPORATION, a Delaware corporation By: ________________________________________ Name:____________________________________ Title:___________________________________ 41 EXHIBIT J INDEMNITY FOR LIENS REMOVABLE BY BNPLC THIS INDEMNITY AGREEMENT (this "AGREEMENT") is made as of _________________, _____, by SOLECTRON GEORGIA CORPORATION, a Georgia corporation ("PURCHASER") [OR THE APPLICABLE PURCHASER] and BNP LEASING CORPORATION, a Delaware corporation ("SELLER") and ___________________________ ("TITLE COMPANY"). R E C I T A L S A. Purchaser is acquiring the land described in Annex A attached hereto and any improvements located thereon (the "PROPERTY") pursuant to the terms and conditions of that certain Purchase Agreement dated as of October 20, 1998 by between Seller and Purchaser [or SGC] (the "PURCHASE AGREEMENT"). B. In connection with its acquisition of the Property, Seller has been notified as contemplated by the Purchase Agreement that the matters described in Annex B attached hereto (the "RELEVANT ENCUMBRANCES") have been identified as encumbrances upon title to the Property and that such matters, to the extent valid, constitute Liens Removable by BNPLC (as defined below). C. Because of such notice to Seller, Seller is required by the Purchase Agreement to tender this Indemnity Agreement to Purchaser. 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: Seller must promptly remove any of the Relevant Encumbrances that constitute "LIENS REMOVABLE BY BNPLC" (which for purposes of this Indemnity Agreement shall have the meaning assigned to it in the List of Defined Terms attached to the Purchase Agreement). Seller must also pay, indemnify and hold harmless Purchaser, the Title Company, the Purchaser's successors and assigns as to the Property and the Title Company's successors and assigns as to any title insurance policy issued to Purchaser by the Title Company covering the Property from and against any and all liabilities, damages, claims, actions, judgments, costs and expenses (including, without limitation, reasonable attorneys' fees) caused by Seller's failure to promptly remove any of the Relevant Encumbrances that constitute Liens Removable by BNPLC. Nothing herein shall be construed as an admission by Seller that any of the Relevant Encumbrances do constitute Liens Removable by BNPLC or as imposing a duty upon Seller to remove or defend against claims arising out of any Relevant Encumbrances that do not constitute Liens Removable by BNPLC. Nothing herein contained shall limit Purchaser's rights or remedies under the Purchase Agreement because of any failure by BNPLC to remove all Liens Removable by BNPLC before conveying the Property. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. SELLER, PURCHASER AND THE TITLE COMPANY EACH HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER DOCUMENT, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE 42 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. Purchaser, Seller and the Title Company 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. Purchaser, Seller and the Title Company 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 OR THIS AGREEMENT. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] Exhibit J - Page 2 43 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. "Seller" BNP LEASING CORPORATION, a Delaware corporation By: ________________________________________ Name: ________________________ Title: ________________________ "Purchaser" SOLECTRON GEORGIA CORPORATION, a Georgia corporation By: _________________________________________ Name: ________________________ Title: ________________________ "Title Company" _________________________________, a __________________________ By: _________________________________________ Name: ________________________ Title: ________________________ Exhibit J - Page 3 44 ANNEX A LEGAL DESCRIPTION [DRAFTING NOTE: TO THE EXTENT THAT THE "LAND" COVERED BY THE LEASE CHANGES FROM TIME TO TIME BECAUSE OF ADJUSTMENTS FOR WHICH SGC REQUESTS BNPLC'S CONSENT OR APPROVAL AS PROVIDED IN THE LEASE, SO TOO WILL THE DESCRIPTION OF THE LAND BELOW CHANGE. ANY SUCH CHANGES WILL BE INCORPORATED INTO THE DESCRIPTION BELOW AND THIS "DRAFTING NOTE" WILL BE DELETED BEFORE THE DOCUMENT TO WHICH THIS DESCRIPTION IS ATTACHED IS ACTUALLY EXECUTED AND DELIVERED.] ALL THAT TRACT OR PARCEL OF LAND lying and being in Land Lots 126, 153 and 154, 7th District of Gwinnett County, Georgia, which is described as follows: TO LOCATE THE POINT OF BEGINNING commence at a point formed by the intersection of the northeastern margin of the right-of-way of Northridge Drive (having an 80-foot right-of-way) and the northwestern margin of the right-of-way of Old Peachtree Road (having an 80-foot right of way), if both of said rights-of-way are extended to form a point; thence North 56 degrees 23 minutes 46 seconds West a distance of 11.43 feet to a point marked by a 1/2-inch rebar pin which is the POINT OF BEGINNING and which is located on the northeastern margin of the right-of-way of Northridge Drive; thence northwesterly along the northeastern margin of the right-of-way of Northridge Drive the following five (5) courses and distances, or curves, as hereinafter described: thence North 56 degrees 23 minutes 46 seconds West a distance of 216.60 feet to a point; thence northwesterly along an arc of a curve to the right a distance of 278.76 feet to a point (said arc being subtended by a chord having a chord bearing of North 44 degrees 21 minutes 15 seconds West, a chord distance of 276.71 feet and a radius of 663.15 feet); thence North 32 degrees 19 minutes 42 seconds West a distance of 225.20 feet to a point; thence northwesterly along an arc of a curve to the left a distance of 312.95 feet to a point (said arc being subtended by a chord having a chord bearing of North 45 degrees 15 minutes 26 seconds West, a chord distance of 310.30 feet and a radius of 692.57 feet); thence North 58 degrees 12 minutes 08 seconds West a distance of 308.00 feet to a point marked by a 1/2-inch rebar pin; thence leaving the northeastern margin of the right-of-way of Northridge Drive and continuing northwesterly, northerly and northeasterly along an arc of a curve to the right a distance of 18.85 feet to a point marked by a 1/2-inch rebar pin (said arc being subtended by a chord having a chord bearing of North 13 degrees 12 minutes 08 seconds West, a chord distance of 16.97 feet and a radius of 12.00 feet) located on the southeasterly margin of the right-of-way of Northbrook Parkway (having a 100-foot right-of-way); thence easterly along the southeasterly margin of the right-of-way of Northbrook Parkway the following four (4) courses and distances, or curves, as hereinafter described: North 31 degrees 47 minutes 52 seconds East a distance of 164.90 feet to point; thence northeasterly along an arc of a curve to the right a distance of 462.34 feet to a point (said arc being subtended by a chord having a chord bearing of North 46 degrees 47 minutes 52 seconds East, a chord distance of 457.08 feet and a radius of 883.01 feet); thence North 61 degrees 47 minutes 52 seconds East a distance of 277.91 feet to a point; thence northeasterly along an arc of a curve to the left distance of 518.27 feet to a point marked by a 1/2-inch rebar pin (said arc being subtended by a chord having a chord bearing of North 45 degrees 13 minutes 11 seconds East, a chord distance of 511.07 feet and a radius of 895.59 feet); leaving said southerly margin of the right-of-way of Northbrook Parkway, thence South 61 degrees 21 minutes 31 seconds East a distance of 1,185.63 feet to a point marked by a 5/8-inch rebar pin which is located on the western margin of the right-of-way of Old Peachtree Road; thence South 03 degrees 13 minutes 18 seconds East along the western margin of the right-of-way of Old Peachtree Road a distance of 199.76 feet to a point; thence southerly and southwesterly along the western and northwestern margin of the right-of-way of Old Peachtree Road and being an arc of a curve to the right a distance of 536.80 feet to a point (said arc being subtended by a chord having a chord bearing of South 26 degrees 52 minutes 52 seconds West, a chord distance of 512.44 feet and a radius of Exhibit J - Page 5 45 510.85 feet); thence South 56 degrees 59 minutes 02 seconds West along the northwestern margin of the right-of-way of Old Peachtree Road a distance of 729.16 feet to a point; thence southwesterly along the northwestern margin of the right-of-way of Old Peachtree Road along an arc of a curve to the left a distance of 330.46 feet to a point marked by a 1/2 inch rebar pin (said arc being subtended by a chord having a chord bearing of south 46 degrees 52 minutes 01 seconds West, a chord distance of 328.74 feet and a radius of 935.72 feet); thence southwesterly, westerly and northwesterly along an arc of a curve to the right a distance of 18.19 feet tot he POINT OF BEGINNING (said arc being subtended by a chord having a chord bearing of South 80 degrees 10 minutes 35 seconds West, a chord distance of 16.50 feet and a radius of 12.00 feet), said parcel containing an aggregate of 49.552 acres, depicted as Tract 1 (12.208 acres); Tract 2 (10.000 acres) and Tract 3 (27.334 acres), and being more particularly shown and delineated on that certain survey entitled "As Built Survey for OKI America, Inc.; Solectron Georgia Corporation; BNP Leasing Corporation and Chicago Title Insurance Company:, prepared by Pinion & McGaughery Land Surveyors, Inc, bearing the seal and certification of George H. Pinion, Georgia Registered Land Surveyor Number 1606, dated July 1, 1998 last revised October 7, 1998, which survey is incorporated herein by reference thereto. Exhibit J - Page 5 46 ANNEX B Relevant Encumbrances [THIS ANNEX IS TO BE COMPLETED BY A LIST OF POSSIBLE LIENS REMOVABLE BY BNPLC IDENTIFIED BY SGC AND AGAINST WHICH SGC HAS NOT BEEN ABLE TO OBTAIN TITLE INSURANCE.] Exhibit J - Page 6 47 Exhibit K NOTICE OF ELECTION TO TERMINATE THE PURCHASE OPTION AND SGC'S INITIAL REMARKETING RIGHTS AND OBLIGATIONS BNP Leasing Corporation 717 North Harwood Street Suite 2630 Dallas, Texas 75201 Attention: Lloyd G. Cox Re: Purchase Agreement dated as of October 20, 1998 (the "PURCHASE AGREEMENT"), between SOLECTRON GEORGIA CORPORATION ("SGC") and BNP Leasing Corporation ("BNPLC") Gentlemen: Capitalized terms used in this letter are intended to have the meanings assigned to them in the Purchase Agreement referenced above. This letter shall constitute a notice, given before the Base Rent Commencement Date pursuant to subparagraph 4(B) of the Purchase Agreement, of SGC's election to terminate the Purchase Option and SGC's Initial Remarketing Rights and Obligations. SGC irrevocably elects to terminate the Purchase Option and SGC's Initial Remarketing Rights and Obligations effective immediately, subject only to the conditions described below. SGC ACKNOWLEDGES THAT THE ELECTION MADE BY SGC DESCRIBED ABOVE CONSTITUTES AN ISSUE 97-10 ELECTION UNDER AND AS DEFINED IN THE OPERATIVE DOCUMENTS. SGC also acknowledges that its right to terminate the Purchase Option and SGC's Initial Remarketing Rights and Obligations is subject to the condition precedent that SGC shall have delivered a Notice of SGC's Intent to Terminate, as necessary to terminate the Construction Management Agreement pursuant to Paragraph 5(D) thereof, or BNPLC shall have delivered an FOCB Notice as provided in Paragraph 5(E) of the Construction Management Agreement. Accordingly, if for any reason SGC has not already sent a Notice of SGC's Intent to Terminate, and BNPLC has not sent an FOCB Notice, the Purchase Option and SGC's Initial Remarketing Rights and Obligations shall not terminate by reason of this notice. SGC further acknowledges that no termination of the Purchase Option and SGC's Initial Remarketing Rights and Obligations by SGC pursuant to this notice shall be effective, unless contemporaneously with the giving of this notice SGC shall deliver to BNPLC a full Issue 97-10 Prepayment. SGC hereby covenants to pay, if SGC has not already done so, a full Issue 97-10 Prepayment to BNPLC. Finally, SGC acknowledges that a termination of the Purchase Option and SGC's Initial Remarketing Rights and Obligations pursuant to this notice shall cause the Lease to terminate as of the Base Rent Commencement Date pursuant to subparagraph 1(b) of the Lease. 48 Executed this _____ day of ______________, 19___. SOLECTRON GEORGIA CORPORATION Name:__________________________________________________ Title:_________________________________________________ [cc all Participants] Exhibit K - Page 2 EX-10.9 12 GUARANTY FROM SOLECTRON CORPORATION 1 ================================================================================ EXHIBIT 10.9 GUARANTY FROM SOLECTRON CORPORATION, ("GUARANTOR") IN FAVOR OF BNP LEASING CORPORATION, ("BNPLC") EFFECTIVE AS OF OCTOBER 20, 1998 ================================================================================ 2 GUARANTY THIS GUARANTY is made as of October 20, 1998, by SOLECTRON CORPORATION, a Delaware corporation ("GUARANTOR"), in favor of BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"). RECITALS 1 Guarantor owns directly one hundred percent (100%) of the outstanding shares of capital stock of Solectron Georgia Corporation, a Georgia corporation ("SGC"). 2 Contemporaneously herewith SGC and BNPLC are executing a Lease Agreement dated the date hereof (as from time to time supplemented, amended or restated, the "LEASE"), pursuant to which BNPLC has agreed to lease to SGC certain land and improvements thereon which are described in the Lease. 3 Contemporaneously herewith SGC and BNPLC are executing a Construction Management Agreement dated the date hereof (as from time to time supplemented, amended or restated, the "CONSTRUCTION MANAGEMENT AGREEMENT"), pursuant to which BNPLC has authorized SGC to construct certain improvements on the land covered by the Lease and agreed to provide a construction allowance for such construction on and subject to the terms and conditions described therein. 4 Contemporaneously herewith SGC and BNPLC are executing a Purchase Agreement dated the date hereof (as from time to time supplemented, amended or restated, the "PURCHASE AGREEMENT"), pursuant to which SGC has agreed to purchase or arrange for the purchase of the Property as more particularly provided therein. 5 Contemporaneously herewith SGC is executing a Closing Certificate and Agreement dated the date hereof (as from time to time supplemented, amended or restated, the "CLOSING CERTIFICATE"), pursuant to which SGC has made certain representations to BNPLC concerning the Property and has agreed to indemnify BNPLC for certain matters relating to the Property. 6 As a condition precedent to BNPLC's execution of the Lease, the Construction Management Agreement and Purchase Agreement, BNPLC requires that Guarantor execute and deliver to BNPLC this Guaranty of SGC's obligations under the Lease, the Construction Management Agreement, the Purchase Agreement and the Closing Certificate. 7 The board of directors of Guarantor has determined that Guarantor's execution, delivery and performance of this Guaranty may reasonably be expected to benefit Guarantor, directly or indirectly, and are in the best interests of Guarantor. NOW, THEREFORE, in consideration of the premises, of the benefits which will inure to Guarantor from the transactions contemplated by the Lease, the Construction Management Agreement, the Purchase Agreement and the Closing Certificate and of Ten Dollars and other good and valuable consideration, the receipt and sufficiency of all of which are hereby acknowledged, and in order to induce BNPLC to enter into the Lease and Purchase Agreement, Guarantor hereby agrees with BNPLC as follows: AGREEMENTS 3 Section 1 Definitions. Reference is hereby made to the Lease, the Construction Management Agreement, Purchase Agreement and the Closing Certificate for all purposes. All capitalized terms used in this Guaranty which are defined in the Lease and the List of Defined Terms attached to the Lease and not otherwise defined herein shall have the same meanings when used herein. All references herein to any Obligation Document or other document or instrument refer to the same as from time to time amended, supplemented or restated. As used herein the following terms shall have the following meanings: "Designated Covenants" means, collectively, all of the covenants and agreements of SGC contained in the Lease, the Construction Management Agreement, the Purchase Agreement and the Closing Certificate. "Designated Representations" means, collectively, all of the representations and warranties of SGC contained in the Lease, the Construction Management Agreement, the Purchase Agreement and the Closing Certificate. "Obligations" means collectively all of the indebtedness, obligations, and undertakings which are guaranteed by Guarantor, as described in subsections (a) and (b) of Section 2. "Obligation Documents" means the Lease, the Management Agreement, the Purchase Agreement, the Closing Certificate and all other documents and instruments (other than this Guaranty) under, by reason of which, or pursuant to which any or all of the Obligations are evidenced, governed, secured, or otherwise dealt with, and all other documents, instruments and agreements hereafter delivered in connection herewith or therewith. "Obligors" means SGC and any other guarantors or obligors, primary or secondary, of any or all of the Obligations, excluding Guarantor. "Security" means any rights, properties, or interests of BNPLC, under the Obligation Documents or otherwise, which provide recourse or other benefits to BNPLC in connection with the Obligations or the non-payment or non-performance thereof. Section 2 Guaranty. Subject only to Section 3 below: (a) Guarantor hereby irrevocably, absolutely, and unconditionally guarantees to BNPLC the prompt, complete, and full payment when due, and no matter how the same shall become due, of all sums payable under the Lease, the Construction Management Agreement, the Purchase Agreement and the Closing Certificate. Without limiting the generality of the foregoing, Guarantor's liability hereunder shall extend to and include all post-petition interest, expenses, and other duties and liabilities of SGC described above in this subsection (a), or below in the following subsections (b) and (c), which would be owed by SGC but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization, or similar proceeding involving SGC. (b) The Guarantor hereby irrevocably, absolutely, and unconditionally guarantees to BNPLC (i) that each Designated Representation is true and correct and (ii) that each Designated Covenant will be performed promptly and completely when due, no matter how the same shall become due. (c) Without limiting the foregoing, BNPLC shall be entitled to recover from Guarantor any expenses, losses and damages which BNPLC may incur or suffer (including but not limited to any loss, reduction or delay in amounts paid to BNPLC) as a result of the failure of any Designated Representation to be true and correct or as a result of the failure of Guarantor to cause any Designated Covenant to be performed (without regard to any event or circumstance which may be asserted by Guarantor as having 2 4 excused, prevented or limited such performance by Guarantor). All rights, powers and remedies of BNPLC for such failure to cause any such covenant or undertaking to be performed are cumulative. (d) If either SGC or the Guarantor fails to pay or perform any Obligation as described in the immediately preceding subsections (a), (b) or (c), the Guarantor will incur the additional obligation to pay to BNPLC, and the Guarantor will forthwith upon demand by BNPLC, the amount of any and all reasonable expenses, including fees and disbursements of BNPLC's counsel, and of any experts or agents retained by BNPLC, which BNPLC may incur as a result of such failure. (e) As between Guarantor and BNPLC, this Guaranty shall be considered a primary liability of Guarantor. Section 3 Express Grace and Cure Periods. This Guaranty is not intended to nullify any grace or cure period expressly provided for the benefit of SGC in the Lease, the Construction Management Agreement, the Purchase Agreement or the Closing Certificate. Accordingly, any payment required of SGC by the Lease, the Construction Management Agreement, the Purchase Agreement or the Closing Certificate, for which a grace or cure period is expressly provided therein, will not be considered due for purposes of this Guaranty until such grace or cure period expires. Similarly, any performance obligation imposed upon SGC by the Lease, the Construction Management Agreement, the Purchase Agreement or the Closing Certificate, for which a grace or cure period is expressly provided therein, will not be considered to have been breached unless SGC's failure to perform such obligation continues upon the expiration of such grace or cure period. Section 4 Unconditional Guaranty. (a) No action which BNPLC may take or omit to take in connection with any of the Obligation Documents, any of the Obligations (or any other indebtedness owing by SGC to BNPLC), or any Security, and no course of dealing of BNPLC with any Obligor or any other Person, shall release or diminish Guarantor's obligations, liabilities, agreements or duties hereunder, affect this Guaranty in any way, or afford Guarantor any recourse against BNPLC, regardless of whether any such action or inaction may increase any risks to or liabilities of BNPLC or any Obligor or increase any risk to or diminish any safeguard of any Security. Without limiting the foregoing, Guarantor hereby expressly agrees that BNPLC may, from time to time, without notice to or the consent of Guarantor, do any or all of the following: (i) Amend, change or modify, in whole or in part, any one or more of the Obligation Documents and give or refuse to give any waivers or other indulgences with respect thereto. (ii) Neglect, delay, fail, or refuse to take or prosecute any action for the collection or enforcement of any of the Obligations, to foreclose or take or prosecute any action in connection with any Security or Obligation Document, to bring suit against any Obligor or any other Person, or to take any other action concerning the Obligations or the Obligation Documents. (iii) Change, rearrange, extend, or renew the time, rate, terms, or manner for payment or performance of any one or more of the Obligations (whether for principal, interest, fees, expenses, indemnifications, affirmative or negative covenants, or otherwise). (iv) Compromise or settle any unpaid or unperformed Obligation or any other obligation or amount due or owing, or claimed to be due or owing, under any Obligation Document. 3 5 (v) Take, exchange, amend, eliminate, surrender, release, or subordinate any or all Security for any or all of the Obligations, accept additional or substituted Security therefor, and perfect or fail to perfect BNPLC's rights in any or all Security. (vi) Discharge, release, substitute or add Obligors. (vii) Apply all monies received from Obligors or others, or from any Security for any of the Obligations, as BNPLC may determine to be in its best interest, without in any way being required to marshall Security or assets or to apply all or any part of such monies upon any particular Obligations. (b) No action or inaction of any Obligor or any other Person, and no change of law or circumstances, shall release or diminish Guarantor's obligations, liabilities, agreements, or duties hereunder, affect this Guaranty in any way, or afford Guarantor any recourse against BNPLC. Without limiting the foregoing, the obligations, liabilities, agreements, and duties of Guarantor under this Guaranty shall not be released, diminished, impaired, reduced, or affected by the occurrence of any or all of the following from time to time, even if occurring without notice to or without the consent of Guarantor: (i) Any voluntary or involuntary liquidation, dissolution, sale of all or substantially all assets, marshalling of assets or liabilities, receivership, conservatorship, assignment for the benefit of creditors, insolvency, bankruptcy, reorganization, arrangement, or composition of any Obligor or any other proceedings involving any Obligor or any of the assets of any Obligor under laws for the protection of debtors, or any discharge, impairment, modification, release, or limitation of the liability of, or stay of actions or lien enforcement proceedings against, any Obligor, any properties of any Obligor, or the estate in bankruptcy of any Obligor in the course of or resulting from any such proceedings. (ii) The failure by BNPLC to file or enforce a claim in any proceeding described in the immediately preceding subsection (i) or to take any other action in any proceeding to which any Obligor is a party. (iii) The release by operation of law of any Obligor from any of the Obligations or any other obligations to BNPLC. (iv) The invalidity, deficiency, illegality, or unenforceability of any of the Obligations or the Obligation Documents, in whole or in part, any bar by any statute of limitations or other law of recovery on any of the Obligations, or any defense or excuse for failure to perform on account of force majeure, act of God, casualty, impossibility, impracticability, or other defense or excuse whatsoever. (v) The failure of any Obligor or any other Person to sign any guaranty or other instrument or agreement within the contemplation of any Obligor or BNPLC. (vi) The fact that Guarantor may have incurred directly part of the Obligations or is otherwise primarily liable therefor. (vii) Without limiting any of the foregoing, any fact or event (whether or not similar to any of the foregoing) which in the absence of this provision would or might constitute or afford a legal or equitable discharge or release of or defense to a guarantor or surety other than the actual payment and performance by Guarantor under this Guaranty. 4 6 (c) BNPLC may invoke the benefits of this Guaranty before pursuing any remedies against any Obligor or any other Person and before proceeding against any Security now or hereafter existing for the payment or performance of any of the Obligations. BNPLC may maintain an action against Guarantor on this Guaranty without joining any Obligor therein and without bringing a separate action against any Obligor. (d) If any payment to BNPLC by any Obligor is held to constitute a preference or a voidable transfer under applicable state or federal laws, or if for any other reason BNPLC is required to refund such payment to the payor thereof or to pay the amount thereof to any other Person, such payment to BNPLC shall not constitute a release of Guarantor from any liability hereunder, and Guarantor agrees to pay such amount to BNPLC on demand and agrees and acknowledges that this Guaranty shall continue to be effective or shall be reinstated, as the case may be, to the extent of any such payment or payments. (e) This is a continuing guaranty and shall apply to and cover all Obligations and renewals and extensions thereof and substitutions therefor from time to time. Section 5 Waiver. Guarantor waives all notices of the creation, renewal, extension or accrual of any of the Obligations and notice or proof of reliance by BNPLC on this Guaranty or acceptance of this Guaranty. The Obligations shall conclusively be considered to have been created, contracted or incurred in reliance on this Guaranty, and all dealings between BNPLC and SGC shall likewise be conclusively presumed to have been had or consummated in reliance on this Guaranty. Guarantor also waives (to the extent permitted by applicable law) all requirements of notice, presentment, protest or demand on it, SGC or any other Person, all other notices and demands whatsoever relating to the Obligations and any requirement that BNPLC file a claim with a court in any bankruptcy or similar proceedings of SGC or first proceed against SGC or any other Person or first realize on any collateral security held by it or otherwise exhaust any right, power or remedy under any document or against BNPLC or any other Person before proceeding against Guarantor under this Guaranty. BNPLC shall have no responsibility to notify Guarantor of SGC's financial condition or SGC's incurrence or performance of the Obligations. WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER PROVISION SET FORTH IN THIS GUARANTY, GUARANTOR HEREBY WAIVES, TO THE MAXIMUM EXTENT SUCH WAIVER IS PERMITTED BY LAW, ANY AND ALL DEFENSES ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF (A) CALIFORNIA CIVIL CODE SECTIONS 2808, 2809, 2810, 2815, 2819, 2820, 2821, 2838, 2839, 2845, 2848, 2849, AND 2850, (B) TO THE EXTENT APPLICABLE, CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 580a, 580b, 580c, 580d AND 726, AND (C) TO THE EXTENT APPLICABLE, CHAPTER 2 OF TITLE 14 OF THE CALIFORNIA CIVIL CODE. Guarantor warrants and agrees that each of the waivers set for in this Guaranty is made with full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any of such waivers are determined to be contrary to any applicable law or public policy, such waivers shall be effective only to the maximum extent permitted by law. Section 6 Exercise of Remedies. BNPLC shall have the right to enforce, from time to time, in any order and at BNPLC's sole discretion, any rights, powers and remedies which BNPLC may have under the Obligation Documents, this Guaranty or otherwise. No failure on the part of BNPLC to exercise, and no delay in exercising, any right hereunder or under any Obligation Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right preclude any other or further exercise thereof or the exercise of any other right. The rights, powers and remedies of BNPLC provided herein and in the Obligation Documents are cumulative and are in addition to, and not exclusive of, any other rights, powers or remedies provided by law or in equity. The rights of BNPLC hereunder are not conditional or contingent on any attempt by BNPLC to exercise any of its rights under any Obligation Document against any Obligor or any other Person. 5 7 Section 7 Limited Subrogation. Until all of the Obligations have been paid and performed in full Guarantor shall have no right, by reason of or in connection with this Guaranty, to exercise any right of subrogation, reimbursement, indemnity, exoneration, contribution or any other claim which it may now or hereafter have against or to any Obligor or any Security, and Guarantor hereby waives any rights to enforce any such remedy which Guarantor may have against SGC and any right to participate in any Security until such time. If any amount shall be paid to Guarantor on account of any such subrogation or other rights, any such other remedy, or any Security at any time when all of the Obligations and all other expenses guaranteed pursuant hereto shall not have been paid in full, such amount shall be held in trust for the benefit of BNPLC, shall be segregated from the other funds of Guarantor and shall forthwith be paid over to BNPLC to be held by BNPLC as collateral for, or then or at any time thereafter applied in whole or in part by BNPLC against, all or any portion of the Obligations, whether matured or unmatured, in such order as BNPLC shall elect. Section 8 Successors and Assigns. Guarantor's rights or obligations hereunder may not be assigned or delegated, but this Guaranty and such obligations shall pass to and be fully binding upon the successors of Guarantor, as well as Guarantor. This Guaranty shall apply to and inure to the benefit of BNPLC and its successors or assigns. Without limiting the generality of the immediately preceding sentence, BNPLC may assign, grant a participation in, or otherwise transfer any Obligation held by it or any portion thereof, and BNPLC may assign or otherwise transfer its rights or any portion thereof under any Obligation Document, to any other Person, and such other Person shall thereupon become vested with all of the benefits in respect thereof granted to BNPLC hereunder unless otherwise expressly provided by BNPLC in connection with such assignment or transfer. Section 9 Representations, Warranties and Covenants of Guarantor. Guarantor hereby represents, warrants and covenants to BNPLC as follows: (a) The Recitals at the beginning of this Guaranty are true and correct in all material respects. (b) The direct or indirect value of the consideration received and to be received by Guarantor in connection herewith is reasonably worth at least as much as the liability and obligations of Guarantor hereunder, and the incurrence of such liability and obligations in return for such consideration may reasonably be expected to benefit Guarantor, directly or indirectly. (c) The execution, delivery and performance by Guarantor of this Guaranty do not and will not constitute a breach or default under any other material agreement or contract to which Guarantor is a party or by which Guarantor is bound or which affects the Property, and do not violate or contravene any law, order, decree, rule or regulation to which Guarantor is subject, and such execution, delivery and performance by Guarantor 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, Guarantor's property pursuant to the provisions of any of the foregoing. (d) There are no judicial or administrative actions, suits, proceedings or investigations pending or, to Guarantor's knowledge, threatened that will adversely affect the Property or the validity, enforceability or priority of this Guaranty, and Guarantor 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 use, occupancy or operation of the Property. No condemnation or other like proceedings are pending or, to Guarantor's knowledge, threatened against the Property. (e) The execution, delivery and performance by Guarantor of this Guaranty are duly authorized and does not require the consent or approval of any governmental body or other regulatory 6 8 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 Guarantor's articles of incorporation or bylaws. This Guaranty is a valid, binding and legally enforceable obligation of Guarantor, in accordance with its 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. (f) Guarantor is not "insolvent" on the date hereof (that is, the sum of Guarantor's absolute and contingent liabilities, including the Obligations, does not exceed the fair market value of Guarantor's assets) and has no outstanding liens, suits, garnishments or court actions which could render Guarantor insolvent or bankrupt. Guarantor's capital is adequate for the businesses in which Guarantor is engaged and intends to be engaged. Guarantor has not incurred (whether hereby or otherwise), nor does Guarantor intend to incur or believe that it will incur, debts which will be beyond its ability to pay as such debts mature. There has not been filed by or, to Guarantor's knowledge, against Guarantor 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 Guarantor or any significant portion of Guarantor'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 BNPLC relating to Guarantor are true, correct and complete in all material respects. No material adverse change has occurred in the financial position of Guarantor and its Subsidiaries as reflected in Guarantor's financial statements covering the fiscal period ended December 31, 1997. (g) Guarantor is duly incorporated and legally existing under the laws of the State of Delaware. Guarantor 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 fulfill its obligations under this Guaranty. Guarantor has the corporate power and adequate authority, rights and franchises to own Guarantor's property and to carry on Guarantor's business as now conducted and is duly qualified and in good standing in each state in which the character of Guarantor's business makes such qualification necessary (including 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 Guarantor and its Subsidiaries, taken as a whole. (h) Guarantor is not and will not become an "employee benefit plan" (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA. The assets of Guarantor do not and will not in the future constitute "plan assets" of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101. Guarantor is not and will not become a "governmental plan" within the meaning of Section 3(32) of ERISA. Transactions by or with Guarantor are not subject to state statutes regulating investments of and fiduciary obligations with respect to governmental plans. No ERISA Termination Event has occurred with respect to any Plan of Guarantor and Guarantor and all its Subsidiaries are in compliance with ERISA. Neither Guarantor nor any of its Subsidiaries is required to contribute to, or has any other absolute or contingent liability in respect of, any "multi employer plan" as defined in Section 4001 of ERISA. As of the Effective Date no "accumulated funding deficiency" (as defined in Section 412(a) of the Code) exists with respect to any Plan of Guarantor, whether or not waived by the Secretary of the Treasury or his delegate, and the current value of the benefits of each Plan of Guarantor, if any, equals or is less than the current value of such Plan's assets available for the payment of such benefits. (i) None of the representations or warranties of Guarantor or SGC contained in this Guaranty or the Obligation Documents or any other document, certificate or written statement furnished to BNPLC by or on behalf of Guarantor or SGC 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. 7 9 (j) Guarantor shall, upon request of BNPLC, (i) promptly correct any error or omission which may be discovered in the contents of this Guaranty 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 Guaranty and to subject to this Guaranty any property intended by the terms hereof to be covered hereby, including any renewals, additions, substitutions, replacements or appurtenances to the Property; (iii) execute, acknowledge, deliver, procure and record or file any document or instrument deemed advisable by BNPLC to protect its rights in and to the 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 BNPLC to enable BNPLC, BNPLC's Parent and any other Participants to comply with the requirements or requests of any agency or authority having jurisdiction over them. Section 10 Covenants Incorporated by Reference to Schedule A. So long as Guarantor shall continue to have any obligations under this Guaranty, Guarantor shall comply with each and every requirement set forth in Schedule A attached hereto and made a part hereof; provided, however, to the extent that any of the Obligations or requirements set forth in other provisions of this Guaranty are more stringent than the requirements set forth in Schedule A, the more stringent Obligations or requirements set forth herein shall control. Section 11 Ownership of SGC. So long as Guarantor shall continue to have any obligations under this Guaranty, Guarantor shall continue to own directly one hundred percent (100%) of the outstanding shares of capital stock of SGC. Section 12 No Oral Change. No amendment of any provision of this Guaranty shall be effective unless it is in writing and signed by Guarantor and BNPLC, and no waiver of any provision of this Guaranty, and no consent to any departure by Guarantor therefrom, shall be effective unless it is in writing and signed by BNPLC, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Section 13 Invalidity of Particular Provisions. If any term or provision of this Guaranty shall be determined to be illegal or unenforceable all other terms and provisions hereof shall nevertheless remain effective and shall be enforced to the fullest extent permitted by applicable law. Section 14 Headings and References. The headings used herein are for purposes of convenience only and shall not be used in construing the provisions hereof. The words "this Guaranty," "this instrument," "herein," "hereof," "hereby" and words of similar import refer to this Guaranty as a whole and not to any particular subdivision unless expressly so limited. The phrases "this section" and "this subsection" and similar phrases refer only to the subdivisions hereof in which such phrases occur. The word "or" is not exclusive, and the word "including" (in its various forms) means "including without limitation". Pronouns in masculine, feminine and neuter genders shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. Section 15 Term. This Guaranty shall be irrevocable until all of the Obligations have been completely and finally paid and performed, Guarantor shall have paid all amounts that may be required hereunder, the Obligation Documents have been terminated, and all obligations and undertakings of SGC under, by reason of, or pursuant to the Obligation Documents have been completely performed, and this Guaranty is thereafter subject to reinstatement as provided in Section 3(d). All extensions of credit and 8 10 financial accommodations heretofore or hereafter made by BNPLC to SGC shall be conclusively presumed to have been made in acceptance hereof and in reliance hereon. Section 16 Notices. Any notice or communication required or permitted hereunder shall be given as provided in the Lease and if to Guarantor at its address set forth below: TO GUARANTOR: Solectron Corporation 777 Gibraltar Drive, Building #5 Milpitas, California 95035 Attn: Chief Financial Officer Telecopy: (408) 956-6059 or to such other address or to the attention of such other individual as hereafter shall be designated in writing by Guarantor to BNPLC sent in accordance herewith. Section 17 Counterparts. This Guaranty may be executed in any number of counterparts, each of which when so executed shall be deemed to constitute one and the same Guaranty. SECTION 18 GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. Section 19 Waiver of a Jury Trial. GUARANTOR AND BNPLC EACH HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY. 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. Guarantor and BNPLC each acknowledge that this waiver is a material inducement to enter into a business relationship, that BNPLC has already relied on the waiver in entering into the Lease, the Construction Management Agreement, the Purchase Agreement and the Closing Certificate and the other documents referred to herein, and that each will continue to rely on the waiver in their related future dealings. BNPLC and Guarantor 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 GUARANTY OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS GUARANTY. In the event of litigation, this Guaranty may be filed as a written consent to a trial by the court. 9 11 IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty as of the date first written above. SOLECTRON CORPORATION By: /s/ SUSAN WANG --------------------------------- Name (print): Susan Wang ------------------------ Title: Sr. Vice President and CFO ------------------------------- 10 12 Schedule A FINANCIAL AND OTHER COVENANTS OF GUARANTOR PART 1 ADDITIONAL DEFINITIONS 1.01 Definitions Applicable in this Schedule. For purposes of this Schedule A, the following capitalized terms will have the following respective meanings: "Adjusted Leverage Ratio" means with respect to Guarantor and its Subsidiaries on a consolidated basis at the end of any fiscal quarter, the ratio of (a) (without duplication) (i) Consolidated Funded Debt plus (ii) Guarantee obligations plus (iii) Indebtedness with respect to synthetic leases and securitized assets plus (iv) Indebtedness in respect to letters of credit minus (v) Permitted Subordinated Indebtedness, to (b) (i) operating income plus (ii) depreciation and amortization charges, in each case, for the period of the four fiscal quarters ended on the applicable date of determination. "Capital Lease Obligations" means the obligations of any Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Consolidated Funded Debt" means, as of the last day of any fiscal quarter, the sum for Guarantor and its Subsidiaries as of such day, of, without duplication, (a) the aggregate outstanding principal amount of Indebtedness for borrowed money and (b) the aggregate outstanding capitalized amount of Capital Lease Obligations, all as determined on a consolidated basis in accordance with GAAP. "Consolidated Tangible Assets" means, as of the last day of any fiscal quarter of Guarantor, all tangible assets on the consolidated balance sheet of Guarantor and its Subsidiaries, as determined on a consolidated basis in accordance with GAAP. "Consolidated Tangible Net Worth" means as of the last day of any fiscal quarter of Guarantor, (a) total shareholders' equity of Guarantor and its Subsidiaries minus (b) the aggregate amount of all intangible assets on the consolidated balance sheet of Guarantor and its Subsidiaries, all as determined on a consolidated basis in accordance with GAAP. "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. "Existing Credit Agreement" means the Credit Agreement dated as of April 29, 1997, among Guarantor as Borrower, Bank of America National Trust and Savings Association, as Agent and Issuing Bank, and other financial institutions named therein. "Guarantee" of or by any Person (the "guarantor") means, for the purposes of this Schedule only and not for the purposes of the Obligation Documents, any obligation, contingent or otherwise of the 13 guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor") in any matter, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. "Indebtedness" of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid (excluding deferred compensation obligations owed to current and former directors, officers and employees), (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable, measured in accordance with GAAP, incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty supporting Indebtedness, (j) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances, and (k) all obligations, contingent or otherwise, with respect to synthetic leases or securitized assets. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. "Lien" means, for the purpose of this Schedule only and not for the purposes of the Obligation Documents, with respect to any asset (a) a mortgage, deed of trust, lien, pledge, hypothecation, encumbrance or security interest in, on or of such asset, and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement relating to such asset. "Material Adverse Effect" means a material adverse effect on (a) the business, assets, operations, prospects or condition, financial or otherwise, of Guarantor and its Subsidiaries taken as a whole, (b) the ability of Guarantor to perform its obligations under this Guaranty if called upon to do so, or (c) the ability of SGC to perform its Obligations under the Obligation Documents; or (d) the rights of or benefits available to BNPLC or the Participants under the Obligation Documents. "Modified Quick Ratio" means, as computed with respect to Guarantor and its Subsidiaries on a consolidated basis, the ratio of (1) their Quick Assets to (2) the sum (without duplication of any item) of their Current Liabilities and any payments maturing within 12 months on any Indebtedness of Guarantor or its Subsidiaries or on Indebtedness of any other Person which is the subject of any Guarantee made by Guarantor or its Subsidiaries. Schedule A - Page 2 14 "Permitted Contest" means a contest of the validity or amount of any payment claimed to be due from Guarantor or a Subsidiary where (a) the contest is undertaken by Guarantor or such Subsidiary in good faith by appropriate proceedings, (b) Guarantor or such Subsidiary shall have set aside on its books adequate reserves with respect thereto in accordance with GAAP, and (c) the failure to make such payment pending such contest could not reasonably be expected to result in a Material Adverse Effect. "Permitted Encumbrances" means, for the purposes of this Guaranty only and not for the purposes of the Obligation Documents: (a) Liens imposed by law by any governmental authority for taxes that are not yet due or are the subject of a Permitted Contest. (b) Carriers' warehousemen's, mechanics', material men's, repairmen's and other like Liens imposed by law, and any other involuntary, statutory or common law Lien arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are the subject of a Permitted Contest. (c) Pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations. (d) Deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business. (e) Easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of Guarantor or any Subsidiary. (f) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under the Lease. (g) Liens which constitute rights of set-off of a customary nature or banker's Liens with respect to amounts on deposit arising by operation of law in connection with arrangements entered into with banks in the ordinary course of business. (h) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods. (i) Leases or subleases and licenses and sublicenses granted to others in the ordinary course of business not interfering in any material respect with the business of Guarantor or its Subsidiaries taken as a whole, and any interest or title of any lessor or licensor under any lease or license. The term "Permitted Encumbrances" shall not include any Lien securing Indebtedness. "Permitted Subordinated Indebtedness" means Indebtedness of Guarantor, the payment of which is expressly subordinated (on terms satisfactory to BNPLC) to the Obligations. "Quick Assets" means the sum (without duplication of any item) of unencumbered cash, plus Schedule A - Page 3 15 unencumbered short term cash investments, plus other unencumbered marketable securities which are classified as short term investments according to GAAP, plus unencumbered current net accounts receivable, plus the fair market value of certain long-term investments hereinafter described. 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 determination of Quick Assets, the owner of the assets (be it Guarantor or one of its Subsidiaries) 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 the owner's control. The following assets (and only the following assets) will qualify as "long-term investments" to be included in Quick Assets to the extent (and only to the extent) that, at the time of the determination of Quick Assets, they shall not be classified as short term investments in accordance with GAAP and shall have maturities of not longer than two years: (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 (A) 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 (B) rated not less than A- by Standard & Poor's Corporation or less than A by Moody's Investors Service, Inc.; and (3) corporate or municipal bonds rated not less than A- by Standard & Poor's Corporation or less than A by Moody's Investors Service, Inc. "Special Purpose Subsidiary" means any bankruptcy remote special purpose subsidiary of Guarantor formed for the purpose of selling undivided interests in accounts receivable and/or other assets transferred by Guarantor and/or any of its Subsidiaries to such subsidiary for financing purposes, including Solectron Funding Corporation, a corporation organized or to be organized under the laws of the state of Delaware. "Subsidiary" means, for purposes of this Schedule only and not for the purposes of the Obligation Documents, with respect to Guarantor or any Special Purpose Subsidiary (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date. Schedule A - Page 4 16 PART 2 DELIVERY OF INFORMATION 2.01. Financial Statements and Other Information. Guarantor will furnish to BNPLC and to each Participant of which Guarantor has been notified: (a) within 90 day's after the end of each fiscal year of Guarantor, its audited consolidated balance sheet and related statements of operations, changes in shareholders' equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by KPMG Peat Marwick or other independent public accountants of recognized national standing (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of Guarantor and consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; (b) within 60 days after the end of each of the first three fiscal quarters of each fiscal year of Guarantor, its consolidated balance sheet and related statements of operations and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its senior or executive financial officers as presenting fairly in all material respects the financial condition and results of operations of Guarantor and consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; (c) concurrently with any delivery of financial statements under clauses (a) or (b) above, a completed compliance certificate of a senior or executive financial officer of Guarantor in form and content reasonably acceptable to BNPLC; (d) concurrently with any delivery of consolidated financial statements under clause (a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their audit of such consolidated financial statements of any Event of Default or a Default under the Obligation Documents insofar as it relates to accounting matters (which certificate may be limited to the extent required by accounting rules or guidelines); (e) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by Guarantor or any Subsidiary with the Securities and Exchange Commission, or any governmental authority succeeding to any or all of the functions of said commission, or with any national securities exchange, or distributed by Guarantor to its shareholders generally, as the case may be; (f) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of Guarantor or any Subsidiary, or compliance with the terms of the Obligation Documents, as the BNPLC or any Participant may reasonably request; and Schedule A - Page 5 17 (g) promptly upon becoming aware thereof, notice of the effectiveness of any rating of any Index Debt by S&P or Moody's and notice of the effectiveness of any change in any rating of any Index Debt by S&P or Moody's. 2.02. Notices of Material Events. Guarantor will furnish to BNPLC and each Participant prompt written notice of the following: (a) The filing or commencement of any action, suit or proceeding by or before any arbitrator or governmental authority against or affecting Guarantor or any Subsidiary thereof that could reasonably be expected to result in a Material Adverse Effect. (b) The occurrence of any ERISA Termination Event that, alone or together with any other ERISA Termination Events that have occurred, could reasonably be expected to result in liability of Guarantor and its Subsidiaries in an aggregate amount exceeding $5,000,000. (c) Any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Paragraph 2.02 shall be accompanied by a statement of a senior or executive financial officer or other executive officer of Guarantor setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. PART 3 NEGATIVE COVENANTS 3.01. Subsidiary Indebtedness. No Subsidiary will create, incur, assume or permit to exist any Indebtedness, except: (a) Indebtedness existing on the Effective Date and set forth in schedule 6.01 attached to the Existing Credit Agreement (a copy of which schedule is also attached hereto for convenience) and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof. (b) Indebtedness of any Subsidiary to Guarantor or any other Subsidiary. (c) Guarantees by any Subsidiary of Indebtedness of Guarantor or of any other Subsidiary to the extent such Indebtedness is permitted under the Obligation Documents and other material agreements governing the Indebtedness of Guarantor. (d) Indebtedness of any Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; provided that (i) such Indebtedness is incurred prior to or within 120 days after such acquisition or the completion of such construction or improvement, and (ii) the aggregate principal amount of Indebtedness permitted by this clause (d) when aggregated (without duplication) with all Indebtedness incurred under clause (g) below, with the aggregate amount of all claims and obligations secured by Liens permitted pursuant to clauses (d) and (f) of Paragraph 3.02 and with the aggregate book value or sale price of the assets sold in sale and leaseback transactions Schedule A - Page 6 18 permitted pursuant to Paragraph 3.03 does not exceed 30% of Consolidated Tangible Assets as of the last day of the most recent fiscal period in respect of which financial statements shall have been delivered pursuant to Paragraph 2.01 of this Schedule. (e) Indebtedness of any Person that becomes a Subsidiary after April 30, 1997; provided that such Indebtedness exists at the time such Person becomes a Subsidiary and is not created in contemplation of or in connection with such Person becoming a Subsidiary. (f) Indebtedness of any Subsidiary as an account party in respect of trade letters of credit. (g) Other unsecured Indebtedness of the Subsidiaries in an aggregate principal amount outstanding at any time that, when aggregated (without duplication) with all Indebtedness incurred under clause (d) above, with the aggregate amount of all claims and obligations secured by Liens permitted pursuant to clauses (d) and (f) of Paragraph 3.02 and with the aggregate book value or sale price of the assets sold in sale and leaseback transactions permitted pursuant to Paragraph 3.03 does not exceed 30% of Consolidated Tangible Assets as of the last day of the most recent fiscal period in respect of which financial statements shall have been delivered pursuant to Paragraph 2.01 of this Schedule. (h) (i) Indebtedness of any Special Purpose Subsidiary; or (ii) Indebtedness of any other Subsidiary incurred by such Subsidiary in connection with the incurrence of Indebtedness by any Special Purpose Subsidiary. 3.02. Liens. Guarantor will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except: (a) Permitted Encumbrances and Liens securing Capital Lease Obligations permitted under subparagraph 3.01(d), and any renewal or extension of any such Permitted Encumbrance or Lien so long as the principal amount of the obligations secured thereby is not increased; (b) any Lien on any property or asset of Guarantor or any Subsidiary existing on April 30, 1997 and set forth in schedule 6.02 attached to the Existing Credit Agreement (a copy of which schedule is also attached hereto for convenience); provided that (i) such Lien shall not apply to any other property or asset of Guarantor or any Subsidiary and (ii) such Lien shall secure only those obligations which it secures on the date hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (c) any Lien existing on any property or asset prior to the acquisition thereof by Guarantor or any Subsidiary or existing on any property or asset (including attachments, accessions, replacements or proceeds thereof) of any Person that becomes a Subsidiary after April 30, 1997 prior to the time such Person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition of such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property or assets of Guarantor or any Subsidiary, and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be, and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; Schedule A - Page 7 19 (d) Liens on fixed or capital assets acquired, constructed or improved by Guarantor or any Subsidiary (including replacements or proceeds of such assets and including any Capital Lease Obligations); provided that (i) in the case of any Subsidiary, such security interest secure Indebtedness permitted by clause (d) of Paragraph 3.01, (ii) such security interests and the Indebtedness secured thereby are incurred prior to or within 120 days after such acquisition or the completion of such construction or improvement, (iii) the Indebtedness secured thereby does not exceed 100% of the cost of acquiring, constructing or improving such fixed or capital assets, (iv) such security interest shall not apply to any other property or assets of Guarantor or any Subsidiary, and (v) the aggregate amount of such Indebtedness when aggregated (without duplication) with all Indebtedness incurred under clauses (d) and (g) of Paragraph 3.01, with the aggregate amount of all claims secured by Liens permitted pursuant to clause (f) below and with the aggregate book value or sale price of the assets sold in sale and leaseback transactions permitted pursuant to Paragraph 3.03 does not exceed 30% of Consolidated Tangible Assets as of the last day of the most recent fiscal period in respect of which financial statements shall have been delivered pursuant to Paragraph 2.01; (e) Liens securing claims of any Special Purpose Subsidiary against any other Subsidiary and sales or assignments of accounts receivable (or interests therein) by any Subsidiary to a Special Purpose Subsidiary and by any Special Purpose Subsidiary; and (f) other Liens securing claims in an aggregate amount at any time outstanding that when aggregated (without duplication) with (i) all obligations of any Special Purpose Subsidiary secured by liens, (ii) all Indebtedness incurred under clauses (d) and (g) of Paragraph 3.01, (iii) the aggregate amount of all obligations secured by Liens permitted pursuant to clause (d) above and (iv) the aggregate book value or sale price of the assets sold in sale and leaseback transactions permitted pursuant to Paragraph 6.03, does not exceed 30% of Consolidated Tangible Assets as of the last day of the most recent fiscal period of Guarantor in respect of which financial statements shall have been delivered pursuant to Paragraph 2.01, provided that the dollar amount of claims and other obligations (other than claims or other obligations of any Subsidiary in favor of any Special Purpose Subsidiary which is directly or indirectly wholly owned by Guarantor and inchoate indemnity obligations) secured by accounts receivable does not exceed the greater of $130,000,000 or 35% of Guarantor's aggregate accounts receivable (including such accounts receivable sold to any Special Purpose Subsidiary) calculated on a consolidated basis. 3.03. Sale and Leaseback Transactions. Guarantor will not, and will not permit any Subsidiary to, enter into any arrangement, directly or indirectly, with any Person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred; provided, however, that notwithstanding the above, Guarantor or any Subsidiary may engage in any sale and leaseback transaction if, immediately after the consummation of such transaction, the aggregate book value or sale price of the assets sold in sale and leaseback transactions referred to in this Paragraph 3.03, when aggregated (without duplication) with all Indebtedness incurred under clauses (d) and (g) of Paragraph 3.01 and with the aggregate amount of all claims and obligations secured by Liens permitted pursuant to clauses (d) and (f) of Paragraph 3.02, does not exceed 30% of Consolidated Tangible Assets as of the last day of the most recent fiscal period in respect of which financial statements shall have been delivered pursuant to Paragraph 2.01. Schedule A - Page 8 20 3.04. Fundamental Changes. (a) Guarantor will not, and will not permit any Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or any substantial portion of its assets, or all or substantially all of the capital stock of any of the Subsidiaries (in each case, whether now owned or hereafter acquired), or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Event of Default or default under the Obligation Documents shall have occurred and be continuing (i) any Person may merge into or consolidate with Guarantor in a transaction in which Guarantor is the surviving corporation, (ii) any Person may merge into any Subsidiary in a transaction in which the surviving entity is a Subsidiary, (iii) any Subsidiary may sell, transfer, lease or otherwise dispose of its assets to Guarantor or to another Subsidiary, (iv) any Subsidiary may liquidate or dissolve if Guarantor determines in good faith that such liquidation or dissolution is in the best interests of Guarantor and is not materially disadvantageous to BNPLC or the Participants and any distribution or other transfer of assets in connection with such liquidation or dissolution is made to Guarantor or another Subsidiary in an amount consistent with such person's ownership percentage of the Subsidiary being dissolved or liquidated, (v) Guarantor and the Subsidiaries may sell, lease or otherwise dispose of property in any individual transaction not related to any other such transaction if the aggregate fair market value of the assets sold, leased or otherwise disposed of in such transaction is less than $2,000,000, (vi) Guarantor and/or any of the Subsidiaries may sell or otherwise transfer their accounts receivable and other assets to any Special Purpose Subsidiary and/or any Special Purpose Subsidiary may sell or otherwise transfer such accounts receivable or other property (or interests therein) if otherwise permitted under Paragraph 3.02(f), and (vii) Guarantor and the Subsidiaries may sell, lease or otherwise dispose of property in any other transaction in the ordinary course of business, provided that, with respect to transactions outside of the ordinary course of business, the aggregate fair market value of all assets sold, leased or otherwise disposed of in transactions under this clause (vii) shall not when taken together at the time of each such sale, lease or other disposition exceed 25% of Consolidated Tangible Assets as of the last day of the most recent fiscal period in respect of which financial statements shall have been delivered pursuant to Paragraph 2.01 at such time. (b) Guarantor will not, and will not permit any of its Subsidiaries to, engage to any material extent in any line of business material to Guarantor and the Subsidiaries, taken as a whole, other than businesses currently conducted by Guarantor and the Subsidiaries and businesses reasonably related thereto. 3.05 Intentionally Omitted. 3.06. Fiscal Year. Guarantor will not change its fiscal year end from August 31. 3.07. Restrictive Agreements. Guarantor will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of Guarantor or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to Guarantor or any other Subsidiary or to Guarantee Indebtedness of Guarantor or any other Subsidiary if any such prohibition, restriction or condition is more burdensome than any similar prohibition, restriction or condition contained in this Schedule; provided that (i) the foregoing shall not apply to restrictions and conditions imposed by law or by any the Existing Credit Agreement, (ii) the Schedule A - Page 9 21 foregoing shall not apply to restrictions and conditions existing prior to and identified in the schedule 6.07 attached to the Existing Credit Agreement (a copy of which schedule is also attached hereto for convenience), but shall apply to any amendment or modification expanding the scope of any such restriction or condition unless otherwise permitted under this Paragraph 3.07, (iii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Schedule if such restrictions or conditions apply only to the property or assets securing such Indebtedness, (v) clause (a) of the foregoing shall not apply to customary provisions in leases and other contracts restricting the assignment thereof, (vi) the foregoing shall not apply to such restrictions and conditions applicable to any Subsidiary acquired after April 30, 1997 if such restrictions and conditions existed at the time such Subsidiary was acquired and were not created in anticipation of such acquisition, (vii) the foregoing shall not apply to one or more Subsidiaries having any such restriction or condition so long as any such Subsidiary individually shall not account for more than 5% of the gross revenues for the most recently ended fiscal year of Guarantor and the Subsidiaries, taken as a whole, and each such Subsidiary together with all other such Subsidiaries in the aggregate shall not account for more than 10% of the gross revenues for the most recently ended fiscal year of Guarantor and the Subsidiaries, taken as a whole, (viii) the foregoing shall not apply to any working capital facility entered into by a Subsidiary organized under the laws of any foreign country, and (ix) the foregoing shall not apply to any Special Purpose Subsidiary or to any agreement or other arrangement entered into by Guarantor or any of the Subsidiaries incidental to a transaction involving a Special Purpose Subsidiary, which transaction is otherwise permitted under the terms of this Schedule and the Obligations Documents. 3.08. Distributions. Guarantor shall not declare or make, and shall not suffer or permit any of its Subsidiaries to declare or make, any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any shares of any class of its capital stock, or purchase, redeem or otherwise acquire for value any shares of its capital stock or any warrants, rights or options to acquire such shares, now or hereafter outstanding, if any Event of Default or default under the Existing Credit Agreement then exists or would result therefrom. 3.09. Adjusted Leverage Ratio. Guarantor will not permit its Adjusted Leverage Ratio, as calculated as of the last day of each fiscal quarter of Guarantor, to be greater than (a) 1.50 to 1.00 from the Effective Date through and including February 28, 1999, (b) 1.25 to 1.00 from May 31, 1999 through and including February 28, 2000, and (c) 1.00 to 1.00 thereafter. 3.10. Consolidated Tangible Net Worth. Guarantor will not permit its Consolidated Tangible Net Worth as of the last day of each fiscal quarter of Guarantor following April 30, 1997 to be less than the sum of (without duplication) 80% of Consolidated Tangible Net Worth measured as of the end of the fiscal quarter ended February 28, 1997, plus 50% of consolidated net income (without subtracting losses or acquisition related charges) for each fiscal quarter ended after the fiscal quarter ended February 28, 1997, minus 100% of all acquisition-related charges if such charges are recorded in the same fiscal quarter in which the applicable acquisition is consummated. 3.11. Modified Quick Ratio. At the end of any fiscal quarter of Guarantor when (1) the rating established by Moody's for the Index Debt of Guarantor is below Ba2 or (2) the rating established by S&P for the Index Debt of Guarantor is below BB, or (3) neither Moody's nor S&P maintains a rating for the Index Debt of Guarantor, Guarantor shall not permit the Modified Quick Ratio to be less than 1.0 to 1.0. Schedule A - Page 10 22 Schedule 3.13: Copyrights, Patents, Trademarks and Licenses Infringement Claims None. Schedule 6.01: Subsidiary Indebtedness
Name of Subsidiary Agreement ------------------ ---------------------------------------------- Solectron Scotland Limited $4.918 million Credit Facility with Royal Bank of Scotland Solectron Technology, Inc. $30.488 million Credit Agreement with Standard SDN BHD Chartered Bank and DCB Bank Solectron GmbH $5,000 Credit Agreement with Commerzebank $7 million L-T note from Landersgirekasse Oeffentliche Bank $2 million Credit Agreement with Hewlett Packard Company for purchase of inventory at acquisition Solectron Japan, Inc. $22.425 million Credit Agreement with Bank of Tokyo Mitsubishi Ltd. Fine Pitch Technology, Inc. $89,000 Equipment Loan from San Jose National Bank Force Computers, Inc. $1.038 million Credit Facility with Dresdner Bank Tokyo $8.876 million Credit Facility with Stadtoparkasse Munich $5.917 million Credit Facility with Hypobanck Munich $5.917 million Credit Facility with Reuschelbank $655,000 Credit Facility with Barclays Bank $500,000 Credit Facility with Bank Leumi $7.5 million Credit Facility with Comerica Bank
Schedule 6.02: Liens 1. Solectron Corporation
Secretary of State - California ------------------------------- Secured Party Description of Collateral Filing Date File Number - ---------------------------------- ------------------------------- ----------- ----------- Equitable Life Leasing Corporation Specific Equipment and Proceeds 1-26-93 88020525 Xerox Corporation Office Equipment and Proceeds 6-22-92 92137563
-2- 23
Secured Party Description of Collateral Filing Date File Number - ---------------------------------- -------------------------------- ----------- ----------- Taylor Made Office Systems, Inc. Specific Equipment and Proceeds 4-15-94 94074579 Hewlett Packard Company Specific Equipment and Proceeds 5-11-94 94093984 Hewlett Packard Company Specific Equipment and Proceeds 3-2-95 9506661264 Hewlett Packard Company Specific Equipment and Proceeds 8-28-95 9524460015 Taylor Made Office Systems, Inc. Specific Equipment and Proceeds 12-19-95 9535560504 Taylor Made Office Systems, Inc. Specific Equipment and Proceeds 3-1-96 9606760948 Taylor Made Office Systems, Inc. Specific Equipment and Proceeds 7-24-96 9620860481 Associates Leasing, Inc. Computer Equipment and Proceeds 1-10-97 9701360025 Security Pacific Equipment Leasing, Inc. Specific Equipment and Proceeds 5-1-95 85169376 Security Pacific Equipment Leasing, Inc. Computer Equipment and Proceeds 8-21-95 85270060 MNLC/BALTC Leasing Partners Specific Equipment and Proceeds 4-2-92 87117094 Security Pacific Equipment Leasing, Inc. Computer Equipment and Proceeds 5-6-92 87217647 Equitable Life Leasing Corporation Computer Equipment and Proceeds 10-20-92 87314510 G.E. Capital Corporation Specific Equipment and Proceeds 2-18-93 88046793 NEMLC Leasing Associates No. 3 Specific Equipment and Proceeds 1-11-93 88063091 Security Pacific Equipment Leasing Specific Equipment and Proceeds 12-27-94 90067753 Deutsch Credit Corporation Specific Equipment and Proceeds 4-3-95 90101368 Security Pacific Equipment Leasing, Inc. Specific Equipment and Proceeds 5-1-95 90172604 Hewlett Packard Company Computer Equipment and Proceeds 5-4-92 92099518 Lease Plan USA, Inc. Specific Equipment and Proceeds 5-12-92 92107399 Hewlett Packard Company Specific Equipment and Proceeds 7-13-92 92153799 Hewlett Packard Company Specific Equipment and Proceeds 10-6-92 92216939 Hewlett Packard Company Specific Equipment and Proceeds 10-16-92 92223550 Hewlett Packard Company Specific Equipment and Proceeds 10-27-92 92231425 Hewlett Packard Company Specific Equipment and Proceeds 4-1-93 92241883 Equitable Life Leasing Corporation Specific Equipment and Proceeds 1-28-94 93018954 Hewlett Packard Company Specific Equipment and Proceeds 4-22-93 9308147 Hewlett Packard Company Specific Equipment and Proceeds 5-12-93 93096482 MetLife Capital, L.P. Computer Equipment and Proceeds 1-28-94 93113136 Hewlett Packard Company Specific Equipment and Proceeds 6-4-93 93114108 Hewlett Packard Company Specific Equipment and Proceeds 6-16-93 93122297 United States Leasing International, Inc. Computer Equipment and Proceeds 11-5-93 93223327 Capital Preferred Yield Fund - II, L.P. Specific Equipment and Proceeds 4-7-94 93234553 Avnet Computer Technologies, Inc. Specific Equipment and Proceeds 2-4-94 94021647 Hewlett Packard Company Specific Equipment and Proceeds 4-25-94 94081377 Hewlett Packard Company Specific Equipment and Proceeds 5-4-94 94088238 Hewlett Packard Company Specific Equipment and Proceeds 5-20-94 94101661 Hewlett Packard Company Specific Equipment and Proceeds 7-18-94 94145012
-3- 24
Secured Party Description of Collateral Filing Date File Number - -------------------------------- ------------------------------- ----------- ----------- Hewlett Packard Company Specific Equipment and Proceeds 8-30-94 94178790 BNP Leasing Corporation Specific Equipment and Proceeds 9-8-94 94185412 Hewlett Packard Company Specific Equipment and Proceeds 9-21-94 9428560112 BNP Leasing Corporation Specific Equipment and Proceeds 9-27-94 9429360076 Hewlett Packard Company Specific Equipment and Proceeds 11-28-94 9434761275 Comdisco, Inc. Specific Equipment and Proceeds 12-8-94 9434960578 Hewlett Packard Company Specific Equipment and Proceeds 12-14-94 9500361142 Hewlett Packard Company Specific Equipment and Proceeds 1-26-95 9503360328 Hewlett Packard Company Specific Equipment and Proceeds 2-10-95 9504860699 Hewlett Packard Company Specific Equipment and Proceeds 2-10-95 9504860715 Hewlett Packard Company Specific Equipment and Proceeds 2-21-95 9505960514 Hewlett Packard Company Specific Equipment and Proceeds 3-6-95 9506860234 Hewlett Packard Company Specific Equipment and Proceeds 4-28-95 9512160498 Hewlett Packard Company Specific Equipment and Proceeds 4-28-95 9512160513 Hewlett Packard Company Specific Equipment and Proceeds 6-5-95 9515960516 Hewlett Packard Company Specific Equipment and Proceeds 6-5-95 9515960526 Hewlett Packard Company Specific Equipment and Proceeds 9-5-95 9525560208 Hewlett Packard Company Specific Equipment and Proceeds 9-5-95 9525560219 Hewlett Packard Company Specific Equipment and Proceeds 9-26-95 9527260307 Pitney Bowes Credit Corporation Specific Equipment and Proceeds 1-22-96 9602360211 Hewlett Packard Company Specific Equipment and Proceeds 1-29-96 9603060985 Copelco Capital, Inc. Specific Equipment and Proceeds 4-25-96 9608261042 Copelco Capital, Inc. Specific Equipment and Proceeds 6-19-96 9617660616 Copelco Capital, Inc. Specific Equipment and Proceeds 7-30-96 9621460705 Hewlett Packard Company Specific Equipment and Proceeds 8-9-96 9622661204 Copelco Capital, Inc. Specific Equipment and Proceeds 11-26-96 9633161377 Comdisco, Inc. Specific Equipment and Proceeds 2-10-97 9704260387 Comdisco, Inc. Specific Equipment and Proceeds 2-24-97 9705660119 Hewlett Packard Company Specific Equipment and Proceeds 7-7-93 93138136 Taylor Made Office Systems, Inc. Specific Equipment and Proceeds 8-21-95 9523560031
Liens of the Company pursuant to that Lease Agreement, dated as of September 6, 1994 (as amended from time to time) between BNP Leasing Company and Solectron Corporation. 2. Solectron Washington, Inc. Department of Licensing-Washington -4- 25
Secured Party Description of Collateral Filing Date File Number - ------------------------------------ ------------------------- ----------- ----------- GTE Northwest Specific Equipment 9-20-93 93-263-0729 AT&T Capital Services, Inc. Specific Equipment 11-3-95 95-307-0414 3. Solectron Texas, Inc.
Secretary of State - Texas Secured Party Description of Collateral Filing Date File Number - ------------------------------------ ------------------------- ----------- ----------- General Electric Capital Corporation Electronic Equipment 8-26-96 96704367 4. Fine Pitch Technology
Secretary of State - California Secured Party Description of Collateral Filing Date File Number - ------------------------------------ ------------------------- ----------- ----------- San Jose National Bank Specific Equipment 2-29-95 9504660745 San Jose National Bank Specific Equipment 4-3-95 9509560531 San Jose National Bank Specific Equipment 12-13-95 9534860123 5. Force Computers, Inc.
Secretary of State - California Secured Party Description of Collateral Filing Date File Number - ------------------------------------ ------------------------- ----------- ----------- Taylor Made Office Systems, Inc. Specific Equipment 10-11-94 9430660823 Taylor Made Office Systems, Inc. Specific Equipment 8-21-95 9523460666 Taylor Made Office Systems, Inc. Specific Equipment 6-13-94 94119361 6. Solectron Technology, Inc. (Charlotte)
Secretary of State - North Carolina Secured Party Description of Collateral Filing Date File Number - ------------------------------------ ------------------------- ----------- ----------- Hewlett Packard Company Specific Equipment 2-22-93 0000970502
Schedule 6.07; Restrictive Agreements Indenture dated as of February 15, 1996 governing the terms of issuance of 7 3/8% Senior Notes due 2006. Contains a covenant restricting the Company's ability to encumber certain items of its property. -5- 26 Lease Agreement dated as of September 6, 1994 (as amended from time to time) between BNP Leasing Company and Solectron Corporation. Includes all covenants by cross reference in Article VI of this Credit Agreement. The Force Computers, Inc. credit facilities contains (1) restrictions on its ability to pay dividends to Solectron and (2) its ability to encumber any of its assets except for ordinary course involuntary liens and equipment finance and purchase money security interests. -6- EX-27.1 13 FINANCIAL DATA SCHEDULE-SIX MONTHS ENDED 2/26/99
5 1,000 6-MOS AUG-27-1999 FEB-26-1999 463,596 272,974 882,452 4,508 929,413 2,679,694 1,028,662 469,451 3,383,528 946,395 1,140,017 0 0 119 1,289,767 3,383,528 3,853,781 3,853,781 3,499,504 3,499,504 157,683 850 14,939 190,355 60,913 129,442 0 0 0 129,442 0.55 0.52 REFLECTED FOR THE TWO-FOR-ONE STOCK SPLIT EFFECTIVE FEBRUARY 24, 1999.
EX-27.2 14 AMENDED FINANCIAL DATA SCHEDULE ENDED 8/28/98
5 1,000 YEAR AUG-28-1998 AUG-28-1998 225,228 83,576 674,193 3,999 788,519 1,887,558 859,831 411,792 2,410,568 840,834 385,519 0 0 117 1,181,209 2,410,568 5,288,294 5,288,294 4,749,988 4,749,988 237,063 2,254 24,759 298,983 100,159 198,159 0 0 0 198,159 1.72 1.65
EX-27.3 15 AMENDED FINANCIAL DATA SCHEDULE ENDED 08/29/97
5 1,000 YEAR AUG-29-1997 AUG-29-1997 225,073 257,829 422,731 4,049 494,622 1,499,632 648,777 322,416 1,876,419 567,942 385,850 0 0 115 918,954 1,876,419 3,694,385 3,694,385 3,266,106 3,266,106 189,538 2,319 26,551 238,407 80,348 158,059 0 0 0 158,059 1.42 1.37
EX-27.4 16 AMENDED FINANCIAL DATA SCHEDULE ENDED 08/30/96
5 Amended Financial Data Schedule -- 8/30/96 1,000 YEAR AUG-30-1996 AUG-30-1996 228,830 181,520 344,192 2,992 368,862 1,144,724 466,797 217,227 1,452,198 358,369 386,927 0 0 105 700,464 1,452,198 2,817,191 2,817,191 2,534,813 2,534,813 105,302 1,651 15,650 173,077 58,845 114,232 0 0 0 114,232 1.12 1.08
EX-27.5 17 AMENDED FINANCIAL DATA SCHEDULE ENDED 2/27/98
5 1,000 6-MOS AUG-28-1998 AUG-30-1997 FEB-27-1998 143,374 282,747 484,231 3,913 582,728 1,575,922 756,165 368,141 2,016,655 597,118 386,343 0 0 115 1,030,300 2,016,655 2,323,651 2,323,651 2,073,730 2,073,730 109,200 51 12,839 140,950 47,219 93,731 0 0 0 93,731 0.81 0.78
EX-27.6 18 AMENDED FINANCIAL DATA SCHEDULE ENDED 2/28/97
5 1,000 6-MOS AUG-29-1997 AUG-31-1996 FEB-28-1997 233,423 277,918 374,457 3,973 445,424 1,365,363 528,219 279,060 1,674,713 479,059 389,015 0 0 112 804,740 1,674,713 1,666,423 1,666,423 1,478,077 1,478,077 84,142 355 12,994 104,604 35,564 69,040 0 0 0 69,040 0.63 0.61
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