FIRST AMENDMENT TO
INDUSTRIAL BUILD TO SUIT LEASE
BETWEEN CHESTNUT BAY LLC AND
HEARTPORT, INC.
THIS FIRST AMENDMENT TO LEASE, dated February 10, 1998, is made by and
between CHESTNUT BAY LLC, a California limited liability company ("Landlord")
and HEARTPORT, INC., a Delaware corporation ("Tenant") with respect to the
following facts:
R E C I T A L S
A. Tenant and Landlord entered into that certain Lease agreement dated
September 19, 1997, and entered into that certain Exhibit Document dated
October 31, 1997 (collectively the "Lease") for premises to be constructed on
real property in the State of California, City of Redwood City, County of San
Mateo, commonly known as ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
B. Tenant and Landlord desire to amend and modify the Lease to include
in the Base Rent the amortized cost for shell upgrades requested by Tenant in
accordance with Section 3(c) of the Lease and Section 5(b) of the Industrial
Build to Suit Lease Work Letter attached as Exhibit C to the Lease.
C. Landlord intends to borrow funds from Mercantile-Safe Deposit and
Trust Company ("Trustee"), in its capacity as trustee of the AFL-CIO Building
Investment Trust ("Trust"), a trust existing under the laws of Maryland, and
not in its corporate capacity pursuant to certain agreements (collectively,
the "Loan Agreements") of even date herewith between Landlord and Trustee
through which Landlord intends to borrow funds from the Trust to refinance the
acquisition of the Real Property and the Adjacent Real Property, to finance
the acquisition of a portion of the Adjacent Real Property, and to finance the
construction of the Project and improvements on the Real Property and the
Adjacent Real Property. The Tenant and Landlord desire to amend and modify
the Lease to accommodate the requirements of the Trust, including expanding
Tenant's protection in the event of casualty, as permitted under Section 44 of
the Lease. Pursuant to Landlord's borrowing of funds from the Trust, Landlord
shall enter into certain agreements with the Trust including a Deed of Trust,
Security Agreement and Fixture Filing with Assignment of Rents of even date
herewith to be recorded against the Property and Adjacent Real Property to
secure funds to be used in part to construct the Shell Improvements (defined
in the Loan Agreements as the "Phase I Loan Indenture") and a Deed of Trust,
Security Agreement and Fixture Filing with Assignment of Rents of even date
herewith to be recorded against the Property and Adjacent Real Property to
secure funds to be used in part to construct Building II and Building III on
the Adjacent Real Property (defined in the Loan Agreements as the "Phase II
Loan Indenture"). The Phase I Loan Indenture and the Phase II Loan Indenture
are collectively defined in the Loan Agreements and are hereinafter
collectively referred to as the "Indentures". The date when the lien of the
Phase I Loan Indenture is reconveyed with respect to the Adjacent Real
Property and the lien of the Phase II Loan Indenture is reconveyed with
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respect to the Real Property is defined in the Loan Agreements as the "Cross
Collateralization Release Date" which Loan Agreements definition shall be
controlling with respect to the parties.
NOW, THEREFORE, for good and valuable consideration the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
1. BASIC LEASE INFORMATION.
(a) INITIAL BASE RENTAL AND ADJUSTMENT TO BASE RENT DURING LEASE
TERM. The Initial Base Rent Per Month set forth in the Basic Lease
Information to the Lease is hereby amended to read in its entirety as follows:
Initial Base Rent Per Month ("Base Rent"): During the initial year of
the Lease Term the Base Rent shall be $1.64 per rentable square foot per
month. On the first Adjustment Date, and on each subsequent Adjustment
Date during the initial term only, the Base Rent shall be adjusted to the
sum of the following amounts: (a) $1.56 per rentable square foot as such
amount shall be adjusted pursuant to Section 3(b); plus (b) $.08 per
rentable square foot, which represents the amortized value of Tenant
requested Shell Upgrade Costs under Section 3(c). Except as provided in
the foregoing sentence no additional adjustment shall be made to the Base
Rent under: Section 3(b); or Section 3(c) except as set forth in Section
40(e) of the Lease with respect to an extension term.
(b) TENANT'S ADDRESS FOR NOTICE. The following language is hereby
added to Tenant's Address for Notice as set forth in the Basic Lease
Information:
Prior to Tenant's occupancy of the Premises for the conduct of Tenant's
business Tenant's address for notice shall be: Heartport, Inc., ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
(c) SECURITY. The Security provision set forth in the Basic Lease
Information to the Lease is hereby amended to read in its entirety as follows:
Security ("Security"): Additional collateral in the form of an
irrevocable letter of credit issued by a bank reasonably acceptable to
Landlord and Landlord's lender and naming Trustee as beneficiary. The
amount of the Security and an agreement for reductions in such amount
upon Tenant's achievement of certain financial milestones, is set forth
in that certain Letter of Credit Agreement ("Letter of Credit Agreement")
executed between Trust, Landlord and Tenant of even date with the First
Amendment to Lease and incorporated into the Lease by this reference.
(d) PERMITTED USE. The following language is hereby added to
Permitted Use as set forth in the Basic Lease Information:
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Tenant acknowledges and agrees that under no circumstances shall the
Premises or Common Areas be used for any use which is prohibited under
Section 8.4 of the Purchase and Sale Agreement attached to the Lease as
Exhibit I-1.
2. Section 2 TERM.
(a) Section 2(b)(i) RENTAL COMMENCEMENT DATE. The hand
interlineations of the language of subsection 2(b)(i) are hereby removed such
that 2(b)(i) is revised to read in its entirety as follows:
(i) One Hundred Twenty (120) days following the Commencement Date, plus
any time following the Commencement Date that Tenant's work on the Tenant
Improvements was interrupted or delayed by a Landlord Delay as defined in
Exhibit C (the "Outside Rental Commencement Date");
(b) Section 2(d) DELAYS. Subsection 2(d) of the Lease is hereby
deleted in its entirety and replaced with the following:
(d) Delays. If Shell Substantial Completion has not occurred within
fifteen (15) days following the Estimated Shell Substantial Completion
Date, as it may be extended by any Unavoidable Delays (defined in Exhibit
C) and Tenant Delays, this Lease will not terminate but Tenant shall
receive a Rent credit of one day free rent for each day of delay
commencing on the sixteenth (16th) day following the Estimated Shell
Substantial Completion Date until the earlier to occur of: thirty (45)
days following the Estimated Shell Substantial Completion Date; or the
Shell Substantial Completion Date. If Shell Substantial Completion has
not occurred for forty-five (45) days after the Estimated Shell
Substantial Completion Date, as it may be extended by any Unavoidable
Delays and Tenant Delays, this Lease will not terminate but Tenant shall
receive a Rent credit of two days free rent for each day of delay
following the forty-fifth (45th) day of delay until Shell Substantial
Completion. The Rent credits provided in this Section 2(d) and Tenant's
rights under Section 2(f) shall serve as Tenant's sole and exclusive
remedy for any delay of Shell Substantial Completion. Any free rent
credits will commence on the date Rent would otherwise commence under
Section 3(a) of the Lease.
3. Section 2(f)(i) OUTSIDE SHELL COMPLETION DATE. Subsection 2(f)(i)
of the Lease is hereby deleted in its entirety and replaced with the following:
(i) In the event of a Landlord election to terminate this Lease
pursuant to this subsection 2(f), and provided this Lease has not been
assigned (other than as permitted under Section 15(b) of the Lease) and
Tenant is not in default hereunder beyond any applicable cure periods,
Tenant shall have the right (the "Outside Shell Completion Date Tenant
Purchase Option"), for a period of thirty (30) days following Landlord's
termination notice, to elect to purchase the Adjacent Real Property with
all improvements constructed thereon and appurtenances thereto and the
Real Property with all completed Tenant Improvements,
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Common Area Improvements and Shell Improvements together with all
materials, equipment and other assets purchased with proceeds of the
loans secured by the Indentures whether or not incorporated into the
improvements on the Real Property or Adjacent Real Property and any
insurance proceeds or condemnation award due Landlord with respect to any
such property (collectively the "Option Property") at a purchase price
equal to the greater of: ninety percent (90%) of the Option Property's
then Fair Market Purchase Price (defined herein); or the outstanding
amounts due under the loans secured by the Indentures at the closing of
the purchase under the option, including any amounts due as a result of
Tenant's exercise of this option (the "Indentures Price"). Tenant shall
exercise such right by delivering to Landlord during said thirty day
period Tenant's proposed purchase contract which shall include reasonable
and customary terms for the acquisition of similarly situated real
property and improvements (which at a minimum shall provide for close of
escrow no later than forty-five days following the date of execution of
the agreement and shall relieve Landlord of all liability with respect to
the Option Property following close of escrow) (the "Purchase Agreement")
and shall state Tenant's proposed Fair Market Purchase Price
(collectively, "Tenant's Purchase Notice"). As used in this Section,
"Fair Market Purchase Price" shall be deemed to mean the arm's length
purchase price between parties of equal bargaining position for real
property and improvements of a similar type, design, and quality as the
Option Property, in the same or similar-quality geographic area in the
mid Peninsula, Highway 101 corridor market area in which the Premises are
situated under market conditions existing at that time in the mid
Peninsula, Highway 101 corridor market area. In determining the Fair
Market Purchase Price the parties or their appraiser(s) shall consider
cost replacement analysis, income analysis as well as sales of comparable
real property and improvements analysis for light industrial and office
purposes comparable in size, location, and type of building, age,
quality, layout and condition of the Option Property, with comparable
parking rights and landscaping. Sales of comparable property that are
not arms-length negotiated transactions (as with a tenant that owns
equity in a building) shall not be considered in determining the Fair
Market Purchase Price. The Fair Market Purchase Price shall not include
any amount attributable to Tenant's Tenant Improvements, Tenant's
Alterations (defined herein), or other improvements made or paid for by
Tenant (whether by amortization during the initial Lease Term or
otherwise), and the Fair Market Purchase Price shall take into account
whether there is any brokerage commission payable by Landlord upon sale.
It is the intention of the parties that the provisions of this Option
shall be construed so that Tenant does not pay twice for the Tenant
Improvements or Tenant Alterations paid for by Tenant. If the parties
cannot agree on the Fair Market Purchase Price of the Option Property
within thirty (30) days of Tenant's purchase notice, each party, at its
cost and by giving notice to the other party, shall, within ten (10) days
thereafter, appoint a real estate appraiser with at least five (5) years'
full-time commercial appraisal experience in the geographic area in which
the Option Property is located, to appraise and determine the then Fair
Market Purchase Price and the Fair Market Purchase Price shall be
conclusively determined as follows:
4. Section 2(g) OUTSIDE SHELL COMPLETION DATE. The first sentence of
Subsection 2(g)
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of the Lease is hereby deleted and replaced with the following:
(g) After the Fair Market Purchase Price is determined, Landlord and
Tenant shall execute a Purchase Agreement with a purchase price of the
greater of: ninety percent (90%) of the Option Property's then Fair
Market Purchase Price as determined by the parties as set forth above; or
the Indentures Price. If the parties cannot agree on reasonable and
customary terms for the remaining provisions of the Purchase Agreement
within one hundred thirty (130) days of Tenant's Purchase Notice despite
diligent good faith efforts at negotiating such contract and the
determination of a Fair Market Purchase Price, each party, at its cost
and by giving notice to the other party, shall, within ten (10) days
thereafter, appoint a licensed real estate broker with at least five (5)
years' full-time commercial lease brokerage experience in the geographic
area in which the Option Property is located, who shall jointly determine
the reasonable and customary terms for remaining provisions of the
Purchase Agreement. If Landlord's appointed broker and Tenant's
appointed broker are unable to agree on the reasonable and customary
terms for remaining provisions of the Purchase Agreement within one
hundred sixty (160) days of Tenant's Purchase Notice, they shall select a
third licensed real estate broker with equivalent experience and the
three brokers shall establish the "reasonable and customary terms for
remaining provisions of the Purchase Agreement" using the same process
required of the appraisers to establish the "Fair Market Purchase Price"
under Sections 2(f)(iii) and (iv) of the Lease.
5. Section 2(h) TENANT'S CONTINUING OPTION RIGHTS. A new Section
2(h) TENANT'S PRE- CROSS COLLATERALIZATION RELEASE DATE OPTION and a new
Section 2(i) TENANT'S POST CROSS COLLATERALIZATION RELEASE DATE OPTION are
hereby added to the Lease to read in their entirety as follows:
2(h) Tenant's Pre- Cross Collateralization Release Date Option. In the
event that Landlord terminates the Lease pursuant to Section 12 or 13
herein prior to the date that the Cross Collateralization Release Date
and the contemplated reconveyances of the Indentures associated therewith
have occurred, and provided this Lease has not been assigned (other than
as permitted under Section 15(b) of the Lease) and Tenant is not in
default hereunder beyond any applicable cure periods, Tenant shall have
the right, for a period of thirty (30) days following Landlord's
termination notice, to elect to purchase the Option Property at a price
equal to the greater of: ninety percent (90%) of the Option Property Fair
Market Purchase Price determined for the date immediately preceding the
date of damage or destruction less Estimated Reconstruction Costs; or the
Indentures Price (the "Pre- Cross Collateralization Release Date
Option"). For purposes of this provision, "Estimated Reconstruction
Costs" shall be the amount reasonably estimated by Landlord's Contractor
and Tenant's Contractor to restore the completed Shell Improvements,
Tenant Improvements, Common Area Improvements, and any improvements
completed on the Adjacent Real Property, to their condition immediately
prior to the damage or destruction. If Landlord's Contractor and
Tenant's Contractor are unable to agree on the Estimated Reconstruction
Costs within thirty (30) days of Tenant's exercise of its Pre-Cross
Collateral
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Release Date Option Right, they shall select a third licensed contractor
with equivalent experience to Tenant's Contractor and the three
contractors shall establish the Estimated Reconstruction Costs using the
same process required of the appraisers to establish the Fair Market
Purchase Price under Sections 2(f)(iii) and (iv) of the Lease. The
purchase of the Option Property pursuant to this Pre-Cross
Collateralization Release Date Option shall be concluded in accordance
with Section 2(g) above; provided, however, that Tenant shall receive a
credit toward the purchase price for any outstanding monetary obligations
due Tenant from Landlord under the Lease (reduced by any monetary
obligations due Landlord from Tenant under the Lease), but only to the
extent the purchase price exceeds the Indentures Price (it being
understood between the parties that the minimum price for the Option
Property in all circumstances under this Pre-Cross Collateral Release
Date option right shall be the outstanding amounts due the Trust under
the Indentures including any amounts due as a result of Tenant's exercise
of this option).
2(i) Tenant's Post Cross Collateralization Release Date Option. In the
event that Landlord terminates the Lease pursuant to Section 12 or 13
herein at any time following the date that the Cross Collateralization
Release Date and the contemplated reconveyances of the Indentures
associated therewith have occurred, and provided this Lease has not been
assigned (other than as permitted under Section 15(b) of the Lease) and
Tenant is not in default hereunder beyond any applicable cure periods,
Tenant shall have the right (the "Post Cross Collateralization Release
Date Option"), for a period of thirty (30) days following Landlord's
termination notice, to elect to purchase the Real Property with all
remaining Tenant Improvements, Common Area Improvements and Shell
Improvements together and with all materials, equipment and other assets
purchased with proceeds of the $16,000,000 loan secured by the Phase I
Indenture whether or not incorporated into the improvements on the Real
Property or Adjacent Real Property and any insurance proceeds or
condemnation award due Landlord with respect to any such property ("Phase
I Option Property") at the greater of: ninety percent (90%) of the Phase
I Option Property Fair Market Purchase Price determined for the date
immediately preceding the date of damage or destruction less Estimated
Reconstruction Costs; or the outstanding amounts due under the
$16,000,000 loan secured by the Phase I Indenture at the closing of the
purchase under this option including any amounts due as a result of
Tenant's exercise of the option (the "Phase I Indenture Price").
Reconstruction Costs and the Fair Market Purchase Price for the Phase I
Option Property shall be determined as set forth in Section 2(h) above
but only with respect to the Phase I Option Property. The purchase of
the Phase I Option Property pursuant to this Post Cross Collateralization
Release Date Option shall be concluded in accordance with Section 2(g)
above; provided, however, that Tenant shall receive a credit toward the
purchase price for any outstanding monetary obligations due Tenant from
Landlord under the Lease (reduced by any monetary obligations due
Landlord from Tenant under the Lease), but only to the extent the
purchase price exceeds the Phase I Indenture Price (it being understood
between the parties that the minimum price for the Phase I Option
Property in all circumstances under this Post Cross Collateral Release
Date option right shall be the outstanding amounts due the Trust under
the Phase I Indenture including any amounts due under the Phase I
Indenture as
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a result of Tenant's exercise of the Pre- Cross Collateralization Release
Date Option).
6. Section 3(c) SHELL UPGRADE COSTS. Section 3(c) to the Lease is
hereby deleted in its entirety and replaced with the following language:
(c) Shell Upgrade Costs. Landlord shall provide Tenant with ten dollars
($10.00) ("Shell Upgrade Allowance") per rentable square foot toward
Shell Upgrade Costs which shall be amortized and included in Base Rent by
amendment to this Lease pursuant to Section 5(b) of Exhibit C hereto.
Any portion of the Shell Upgrade Allowance which is not used by Tenant to
pay for actual Shell Upgrade Costs may be used by Tenant to pay the cost
for Tenant Improvements installed in the Premises. Following the Rental
Commencement Date, Landlord shall pay Tenant, within thirty (30) days
from Tenant's request, an amount equal to any unused Shell Upgrade
Allowance (not used to pay for Shell Upgrade Costs) to reimburse Tenant
for amounts expended for Tenant Improvements as reflected in paid
invoices and lien waivers presented to Tenant for completed Tenant
Improvement work installed in the Premises.
7. Section 7(b) SHELL IMPROVEMENTS, TENANT IMPROVEMENTS, COMMON AREA
IMPROVEMENTS, ALTERATIONS AND ADDITIONAL RISK. The first sentence of
subsection 7(c)(v) is hereby revised to read as follows:
Landlord shall maintain fire and extended coverage (including "all risk",
expediting expense coverage and law and ordinance coverage), and at
Landlord's or Tenant's option earthquake insurance, throughout the Term
in an amount equal to the full replacement cost of the Shell
Improvements, Tenant Improvements, Common Area Improvements and
Alterations (new without deduction for depreciation), rental interruption
or equivalent loss of use insurance against loss of Rent in an amount
equal to the amount of Rent for a period of twelve (12) months (or at
Landlord's or Tenant's option up to twenty-four (24) months) commencing
on the date of loss, together with other insurance as may be required by
Landlord's lender, in its reasonable discretion, or by any governmental
agency.
8. Section 7(c)(v) WAIVER OF SUBROGATION. The first sentence of
subsection 7(c)(v) is hereby revised to read as follows:
Tenant waives any right of recovery from the Landlord, Landlord's
officers and employees, and Landlord waives any right of recovery from
Tenant, Tenant's officers or employees, for any loss or damage (including
consequential loss) resulting from any of the perils insured against
under insurance either: (i) required to be carried by the party required
to waive its right of recovery under this provision; or (ii) actually
carried by either party under this Lease.
9. Section 9(d) DAMAGE AND REMOVAL. The following language is hereby
added to the end of Section 9(d) of the Lease:
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Tenant shall not remove as Tenant's equipment any equipment, whether
installed by Tenant as part of the Tenant Improvements or otherwise,
which includes any integral portion of the Building mechanical,
electrical or plumbing systems excluding Tenant's trade fixtures.
10. Section 11(h) REMEDIATION DUE TO TENANT'S ACTIVITIES. A new
subsection 11(h)(iii) is hereby added to the Lease to read in its entirety as
follows:
Tenant's obligations under this Section 11(h) shall survive the
expiration or earlier termination of the Term of this Lease.
11. Section 11(l) LANDLORD REPRESENTATION WITH RESPECT TO R&H
AGREEMENTS. A new subsection 11(l) is added to the Lease to read in its
entirety as follows:
11(l) R&H Agreements.
Landlord represents and warrants to Tenant as of the date hereof that the
following constitute all of the agreements between Landlord and R&H
pertaining to the Real Property or the Adjacent Real Property under which
Landlord has any continuing obligation to R&H: The Access Agreement, the
Purchase and Sale Agreement, and all Exhibits thereto, Addendum, First
Amendment, Second Amendment, Third Amendment, the Deed of Trust described
in Exhibit B, and the Note secured by such Deed of Trust and letter
agreement relating to reinstallation of monitoring ▇▇▇▇▇ and monitoring
points following grading and/or construction. Landlord represents and
warrants to Tenant that, as of the date hereof, Landlord is not under any
continuing obligation to R&H under any other agreement, written or oral,
pertaining to the Real Property or the Adjacent Real Property.
12. Section 12(a) CASUALTY.
(a) The first sentence of subsection 12(a)(ii)(bb) is hereby revised
to read in its entirety as follows:
(bb) If Landlord elects to terminate this Lease pursuant to this
subsection 12(a)(ii) of the Lease, the Rent shall be abated from the date
Tenant vacates the Premises, and Landlord shall provide Tenant with any
insurance proceeds actually received by Landlord allocable to the damaged
Tenant Improvements, provided however, that if Tenant is not otherwise in
default under the terms of this Lease Tenant shall have the additional
right upon written notice to Landlord given with thirty (30) days
following Landlord's notice of termination, to elect to repair the
Premises at Tenant's expense, provided that if the date of such damage or
destruction is after the expiration of the fifth Lease Year, Tenant's
right to make such election shall be conditioned upon Tenant's
simultaneous election to renew the Lease Term for a minimum of ten (10)
years from the date of the damage and destruction under the same terms
and conditions as an extension of the Term under Section 40 of this Lease.
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(b) The following language is hereby added to the end of subsection
12(a)(iv) Total Destruction:
Any property insurance proceeds actually received by Landlord or the
Trust (or any other Landlord lender with senior lien rights to this
Lease) under insurance policies carried by Landlord pursuant to Section
7(b) of the Lease allocable to damaged Tenant Improvements and which
Landlord is required to reimburse to Tenant pursuant to Sections
12(a)(iv) TOTAL DESTRUCTION, and (ii) any condemnation award actually
received by Landlord or the Trust to which Tenant is entitled under
Section 13(c) AWARD or Section 13(d) TEMPORARY CONDEMNATION of the Lease,
shall be collectively referred to herein as the "TI Proceeds". As a
pre-condition of the effectiveness of any termination notice given by
Landlord under this subsection 12(a)(iv), Landlord shall pay to Tenant an
amount equal to the TI Proceeds, such payment to be made no later than
the later of ninety (90) days after the date of destruction or ten (10)
business days after the TI Proceeds are paid by the insurer or to the
party entitled thereto (the "TI Proceeds Payment Date"). If Landlord is
unable to pay the TI Proceeds to Tenant on or before the TI Proceeds
Payment Date, Tenant shall thereupon have the right, upon written notice
to Landlord given with thirty (30) days after the TI Proceeds Payment
Date, to elect to cause Landlord to repair the Premises, provided that if
the date of such damage or destruction is after the expiration of the
fifth Lease Year, Tenant's right to make such election shall be
conditioned upon Tenant's simultaneous election to renew the Lease Term
for a minimum of ten (10) years from the date of the damage and
destruction under the same terms and conditions as an extension of the
Term under Section 40 of this Lease.
13. Section 15(a) ASSIGNMENT AND SUBLETTING The first two sentences of
Section 15(a) to the Lease are hereby deleted in their entirety and replaced
with the following language:
(a) Tenant will not assign the Lease or sublet, whether voluntarily or
involuntarily or by operation of law, the Premises or any part of the
Premises without Landlord's prior written approval, which will not be
unreasonably withheld, delayed or conditioned. If Tenant desires to
assign this Lease or sublet any or all of the Premises, Tenant must, as
soon as reasonably possible, and in any event no less than twenty (20)
days prior to the anticipated effective date transfer, give Landlord
written notice of the anticipated effective date of the assignment or
sublease. Landlord will have a period of fifteen (15) business days
following receipt of notice from Tenant requesting Landlord's approval
(and providing to Landlord copies) of all related documents and
agreements associated with the assignment or sublease received by
Landlord or reasonably requested by Landlord, including, without
limitation, the financial statements of any proposed assignee or
subtenant, to notify Tenant in writing that Landlord elects (a) to permit
Tenant to assign this Lease or sublet space; or (b) to disapprove the
proposed assignment or subletting. If Tenant's notice requesting approval
of such documents contains a prominent statement in solid capital letters
stating, in substance, "WARNING: FAILURE TO RESPOND TO THIS NOTICE WITHIN
FIFTEEN (15) BUSINESS DAYS OF RECEIPT SHALL RESULT IN DEEMED APPROVAL OF
ASSIGNMENT OR SUBLETTING", a courtesy copy of such notice is delivered to
GE Capital Investment
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Advisors, Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
("GECIA") (such notice to be provided for notice purposes only and not
for purposes of consent) and Tenant has written evidence of receipt of
such notice by the acting President or agent for service of process of
Landlord, and a Senior Vice President of GECIA, and Landlord fails to
notify Tenant in writing of a disapproval within fifteen (15) business
days of such receipted notice, Landlord will be deemed to have elected
option (a); if such notice contained no such statement Landlord will be
deemed to have elected option (b).
14. Section 18 SUBORDINATION. The last sentence of Section 18
regarding the delivery of the R&H SAND to Tenant is hereby deleted in its
entirety.
15. Section 21(a) SECURITY DEPOSIT. The following language is
hereby added to the end of Section 21(a).
Landlord shall make the Security Deposit available to the Trust if and
when required to cure a Tenant Event of Default. Landlord shall transfer
the Security Deposit to the Trust at such time that the Trust succeeds to
the rights of Landlord under the Lease upon exercise by the Trust of its
rights under the Indentures.
16. Section 21(b) SECURITY. The first sentence of Section 21(b)
Security, is hereby deleted and replaced with the following sentence:
Tenant shall provide Landlord with the Security concurrent with the
execution of the R&H Estoppel in favor of Tenant in the form attached
hereto as Exhibit A.
17. Section 22 ENTIRE AGREEMENT. Section 22 of the Lease is hereby
deleted in its entirety and replaced with the following language:
Section 22. Entire Agreement. This Lease, all Exhibits hereto contained
in the Exhibit Document, this First Amendment to Lease, as well as the
Letter of Credit Agreement and the Subordination Attornment and
Non-Disturbance Agreement as executed between Trust, Landlord and Tenant
of even date herewith, set forth all the agreements between Landlord and
Tenant concerning the Premises, and there are no other agreements (or
side letters), either oral or written, other than as set forth in this
Section 22 to this Lease.
18. Section 42 TENANT RIGHT TO TERMINATE. Section 42 of the Lease
is hereby deleted in its entirety and replaced with the following language:
Section 42. Tenant Right to Terminate. Tenant shall have the right to
terminate this Lease in the event the construction loan (or adequate
alternate financing or equity) (together the "Loan"), for construction of
the Shell Improvements is not funded or available on or before February
14, 1998. Landlord covenants: (i) to advise Tenant of any notice from
Landlord's lender which may prevent the loan from funding; (ii) to
continue the progress of construction
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without delay due to any delay in construction financing; and (iii) in
the event Tenant elects to terminate the Lease pursuant to this paragraph
42, to pay to Tenant actual architectural fees for the Tenant
Improvements, invoiced to Tenant by Tenant's Architect for services
provided after December 15, 1997 through the date of Tenant's notice, not
to exceed One Hundred Thousand Dollars ($100,000).
19. ADDITIONAL PROVISIONS. The following new provisions are hereby
added to the end of the Lease.
Section 48. REPRESENTATIONS REGARDING FINANCING FROM TRUST. Landlord
makes the following representations and warranties regarding the terms of
the Loan Agreements:
(a) The Loan Agreements provide for advances of principal in an
aggregate maximum amount of $31,000,000 of which $16,000,000 is allocated
to the Real Property ("Phase I Project") and $15,000,000 is allocated to
the Adjacent Real Property ("Phase II Project") (each, a "Loan" and
together, the "Loans"). There is no provision in the Loan Agreements for
advances to or for the benefit of Landlord, or any designee or member of
Landlord, in excess of these amounts other than, at Trustee's option,
advancing sums to complete the Phase I Project and/or the Phase II
Project or otherwise in connection with a default by Landlord under the
terms of the Loan Agreements. Landlord may incur additional liability
under the Loan Agreements as a result of its obligations (i) to reimburse
Trustee expenses and (ii) to indemnify and defend Trustee under certain
circumstances connected with a default by Landlord.
(b) The Loan Agreements impose a prepayment penalty ("Prepayment
Penalty") equal to $160,000 in the case of the Phase I Project loan and
$150,000 in the case of the Phase II Project loan, for any payment of the
principal sum prior to maturity, by acceleration or otherwise. In the
case of the Phase I Project Loan, the prepayment penalty drops to zero
eight years after the date on which the Loan converts to permanent
status. The Phase II Project Loan contains a similar provision whose
effective date varies depending on the term selected for the permanent
phase of the Phase II Project Loan. The Loan Agreements do not contain
any provision that affords Landlord better treatment than Tenant with
respect to the Prepayment Penalty or any other right or obligation
respecting the Loans.
The Loan Agreements permit prepayment of the Loans in connection with
Tenant's exercise of its option to purchase the Real Property (and, prior
to the Cross Collateralization Release Date, the Adjacent Real Property)
pursuant to Sections 2(h) and (i) of the Lease (as amended herein) and
Tenant's exercise of the option to purchase the Real Property and the
Adjacent Real Property pursuant to Section 2(f) of the Lease (as amended
herein). The Loan Agreements exempt from the application of the
Prepayment Penalty (i) any prepayment resulting from Trustee's election
to apply condemnation awards or casualty proceeds to reduce the
outstanding principal balance of the Loans, provided that Landlord is not
in default under the associated Loan Agreement, and (ii) any prepayment
of all or any portion
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of the principal balance of the Loans remaining outstanding after any
such application pursuant to Tenant's exercise of its option to purchase
the Real Property (and, prior to the Cross Collateralization Release
Date, the Adjacent Real Property) pursuant to Sections 2(h) and (i) of
the Lease (as amended herein). Tenant's exercise of the option to
purchase the Real Property and the Adjacent Real Property pursuant to
Section 2(f) of the Lease (as amended herein) would be subject to the
Prepayment Penalty, and the amount outstanding under the Loan Agreements
would include any applicable Prepayment Penalty in the event that Trustee
elected to apply any condemnation award or casualty proceeds to reduce
the outstanding principal balance of the loans while Landlord was in
default under the associated Loan Agreement.
(c) The project budgets approved in the Loan Agreements allocate the
entire loan proceeds to hard and soft costs associated with the Phase I
Project and the Phase II Project, with a reserve for contingencies in the
amount of $444,000 for the Phase I Project Loan and $400,000 for the
Phase II Project Loan. These hard and soft costs include certain costs
already incurred by Landlord which will be reimbursed to Landlord,
including Landlord's obligation to reimburse ▇▇▇▇▇ ▇▇▇▇▇▇▇ for the
assignment of the Rohm and ▇▇▇▇ Purchase Agreement. Disbursements will
be made under the Loan Agreements only for approved budget items, and any
cost savings will be allocated to the associated contingency reserve.
Following Completion of the associated Project and satisfaction of
certain conditions, Landlord may make a final draw of the unadvanced
portion of the maximum amount of the Loan. In the case of the Phase I
Project Loan, this draw will be applied to reduce Landlord's indebtedness
with respect to the Phase II Project Loan.
(d) The Loan Agreements specifically authorize Tenant's prepayment of
the Loans in connection with Tenant's exercise of its purchase options
pursuant to the Lease, and there is no provision of the Loan Agreements
that would (i) materially interfere with or delay Tenant's exercise of
the options, or the prepayment of the Loans in connection therewith (ii)
impose any obligation or liability upon Tenant or otherwise require
Tenant to make any payment on account of the Phase II Loan after the
Cross Collateralization Release Date, or (iii) make Tenant liable to
Trustee for any other amount in connection with the exercise of any of
the foregoing options of Tenant, other than the Prepayment Penalty (to
the extent described in these representations) and any Trustee's fees or
expenses for which Borrower is liable, including Trustee's fees and
expenses incidental to Tenant's exercise of the option, including but not
limited to attorney's fees incurred by Trustee in connection with the
proposed repayment of the Loan.
(e) Landlord agrees that within two (2) business days after the
initial funding under the Loan Agreements, Landlord will provide Tenant
with a true and complete copy of the Loan Agreements provided Tenant
covenants to and agrees with Trustee, in writing, not to disclose to any
third parties or to the public the terms of the Loan or the Loan
Agreement without Trustee's and Landlord's prior written consent.
Landlord shall be liable to Tenant for all damages incurred by Tenant
resulting from the material inaccuracy or incompleteness
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of any of the foregoing representations.
(f) Landlord represents that the definition of the Cross
Collateralization Release Date in the Loan Documents occurs at Landlord's
request to Trustee following the satisfaction of certain conditions
including: (i) Tenant has completed construction of the Tenant
Improvements to be installed in sixty-five percent (65%) of the net
Building Rentable Area in accordance with the Final Tenant Improvement
Working Drawings and has occupied the Premises for substantial business
operations and has commenced payment in full of rent for the entire
rentable square footage of the Premises; and (ii) Landlord has completed
construction of Building II and Building III and seventy-five percent
(75%) of the combined net Rentable Area is fully occupied on a full rent
paying basis by third party tenants under leases approved by Trustee.
The definition of the Cross Collateralization Date in the Loan Documents
is controlling and the Trustee will not be bound by the provisions of
this paragraph.
Section 49. ADJACENT REAL PROPERTY LEASING INFORMATION.
(a) LEASING INFORMATION. Landlord agrees to advise Tenant in writing
of the date, lease term, square footage, proposed Building and general
tenant credit worthiness of any initial offer received from a prospective
tenant by Landlord for the initial lease of shell space in Building II or
III as well as Landlord's then asking rent for Buildings II and III and
whether the offered rent is above or below Landlord's then asking rent.
Landlord's notice shall be timely provided to Tenant and in any case no
later than five (5) business days prior to Landlord's first written
counter offer to the prospective tenant which is the subject of the
notice. Landlord's failure to provide such information to Tenant shall
not be a default under this Lease nor shall such obligation limit
Landlord's right in any way to conclude any lease, sale, exchange,
license or any other agreement with respect to Building II or III.
Landlord's obligation to pay the liquidated damages under Section 49(b)
(but not Landlord's obligation to provide leasing information pursuant to
this Section 49(a)) shall expire upon the sale, exchange or transfer of:
solely the Adjacent Real Property; collectively the Real Property and
Adjacent Real Property; or upon the sale, exchange or transfer of all of
the membership interests in Landlord. Landlord's obligation for the
liquidated damages with respect to Section 49(b) shall continue in the
event that Landlord shall sell the Real Property for so long as Landlord
retains title to the Adjacent Real Property.
(b) LIQUIDATED DAMAGES. LANDLORD SHALL BE OBLIGATED TO PAY TENANT AS
LIQUIDATED DAMAGES THE SUM OF FIFTY THOUSAND DOLLARS ($50,000) PER
BUILDING ON THE FIRST OCCASION FOR EACH OF BUILDING II AND BUILDING III
(FOR A MAXIMUM $50,000 PER BUILDING) THAT LANDLORD SHALL EXECUTE AN
INITIAL LEASE OF SHELL SPACE FOR ALL OR ANY TENANTABLE PORTION OF EITHER
BUILDING WITHOUT TIMELY PROVIDING THE INFORMATION REGARDING THE INITIAL
OFFER FROM THE PROSPECTIVE TENANT TO TENANT AS REQUIRED UNDER THIS
SECTION 49. SUCH AMOUNT
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SHALL BE ACCEPTED BY TENANT AS LIQUIDATED DAMAGES AND NOT AS A PENALTY
AND AS TENANT'S SOLE AND EXCLUSIVE REMEDY. IT IS AGREED THAT SAID AMOUNT
CONSTITUTES A REASONABLE ESTIMATE OF THE DAMAGES TO TENANT FROM
LANDLORD'S FAILURE. LANDLORD AND TENANT AGREE THAT IT WOULD BE
IMPRACTICAL OR IMPOSSIBLE TO PRESENTLY PREDICT WHAT MONETARY DAMAGES
TENANT WOULD SUFFER UPON LANDLORD'S FAILURE TO PROVIDE THE NOTICE
REQUIRED BY THIS SECTION 49. LANDLORD DESIRES TO LIMIT THE MONETARY
DAMAGES FOR WHICH IT MIGHT BE LIABLE HEREUNDER AND TENANT AND LANDLORD
DESIRE TO AVOID THE COSTS AND DELAYS THEY WOULD INCUR IF A LAWSUIT WERE
COMMENCED TO RECOVER DAMAGES OR OTHERWISE ENFORCE TENANT'S RIGHTS. THE
PARTIES ACKNOWLEDGE THIS PROVISION BY PLACING THEIR INITIALS BELOW:
LANDLORD: _________________ TENANT: ________________
20. WORK LETTER. Exhibit C to the Lease is hereby modified as
follows:
(a) Section 1. DEFINED TERMS; LANDLORD DELAY. The first phrase of
the definition of Landlord Delay which reads, "(a) any actual delay in the
Shell Substantial Completion or Final Substantial Completion ,, that is caused
by:" is hereby replaced with the phrase, "(a) any actual delay in the Rental
Commencement Date beyond the Outside Rental Commencement Date (computed
without regard to Landlord Delays) that is caused by:".
(b) Section 4(d)(ii) LANDLORD DELAY CALCULATIONS. The last sentence
of Section 4(d)(ii) is hereby deleted and replaced with the following language:
Notwithstanding anything to the contrary in the Lease or this Work
Letter, if Final Substantial Completion has not occurred within
Seventy-five (75) days following the Estimated Shell Completion Date, as
it may be extended by any Unavoidable Delays and Tenant Delays, the Rent
credit to which Tenant is entitled under Section 2(d) of the Lease shall
be computed by adding to the number of days of delay in Shell Substantial
Completion (if any) used in the Section 2(d) calculation a number of days
equal to any incremental additional delay in Final Substantial Completion
(so that delays in Shell Substantial Completion and in Final Substantial
Completion are aggregated, but not double counted).
(c) Section 6. TENANT'S IMPROVEMENTS. A new Section 6(j) is hereby
added to the Work Letter as follows:
(j) TENANT IMPROVEMENT COMPLETION SCHEDULE. Provided Landlord has
achieved Substantial Shell Completion on or before the Estimated Shell
Completion Date, then, subject to Landlord Delays and Unavoidable Delays,
on or before January 30, 1999, Tenant shall: (i) complete construction of
the Tenant Improvements to be installed in sixty-five percent (65%)
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of the net Building Rentable Area in accordance with the Final Tenant
Improvement Working Drawings; and (ii) occupy the Premises for
substantial business operations.
21. CONDITIONAL PROVISIONS.
(a) Trust Loan Not Consummated or Funded. The following provisions of
this First Amendment to Lease, and only the listed provisions, shall be of no
force and effect if the loan from the Trust to Landlord is not consummated and
the first draw is not funded on or before February 14, 1998: Sections 1(c),
13 (with respect to notice to GECIA only), 14, 17 and 19 (with respect to
Section 48 only). In addition, if the loan from the Trust to Landlord is not
consummated Tenant shall not be obligated to post the Security until the date
that a replacement loan or adequate alternate financing or equity for the
construction of the Shell Improvements is funded. Sections 3, 4 and 5 shall
survive (should the loan from the Trust to Landlord not be consummated and the
first draw not funded on or before February 14, 1998), only in the event and
to the extent that any new loan documentation preempts Tenant's rights to TI
Proceeds in the manner of the loans secured by the Indentures; and, in
addition with respect to Section 4 where the Real Property and the Adjacent
Real Property are cross collateralized. The provisions of Section 42 of the
Lease as modified by Section 19 of this First Amendment to Lease shall prevail
over any provision the Lease.
(b) Indentures Reconveyed. The following provisions of this First
Amendment to Lease, and only the listed provisions shall be of no further
force and effect upon Landlord's repayment of all amounts due and the
reconveyance of: (i) the Indentures prior to the Cross Collateralization
Release Date; or (ii) the Phase I Indenture following the Cross
Collateralization Release Date: Sections 1(c)(provided in no event shall
Tenant be obligated to increase the Security amount or further defer reduction
of the Security amount but that the parties shall otherwise not be bound by
the terms of the Letter of Credit Agreement), 13 (with respect to notice to
GECIA only), 14, 17 (except with respect to any side letter referenced in the
Lease which predates this First Amendment to Lease which shall be of no
further force and effect between the parties), and 19 (with respect to Section
48 only). Sections 3, 4 and 5 shall survive (should the Indentures be
reconveyed), only in the event and to the extent that any new loan
documentation preempts Tenant's rights to TI Proceeds in the manner of the
loans secured by the Indentures; and, in addition with respect to Section 4
where the Real Property and the Adjacent Real Property are cross
collateralized.
22. NO FURTHER MODIFICATIONS. Except as specifically modified
herein, the Lease and all Exhibits thereto remain unmodified and in full force
and effect.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment to Lease as of the date and year first set forth above.
Landlord: CHESTNUT BAY LLC, a
California limited liability company
___________________________
▇▇▇▇ ▇▇▇▇▇▇, President
___________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Member
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Tenant: HEARTPORT, INC., a Delaware
corporation
_________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President of
Manufacturing
By: ____________________________
Its: ____________________________
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