EX-10.74 9 f67535ex10-74.txt EXHIBIT 10.74 1 EXHIBIT 10.74 LEASE AGREEMENT (PHASE IV - IMPROVEMENTS) BETWEEN BNP LEASING CORPORATION ("BNPLC") AND NETWORK APPLIANCE, INC. ("NAI") OCTOBER 2, 2000 (SUNNYVALE, CALIFORNIA) 2

TABLE OF CONTENTS Page 1. TERM..............................................................................2 (a) Scheduled Term.............................................................2 (b) Automatic Termination as of the Base Rent Commencement Date (All Buildings) Resulting From an Election by NAI to Terminate the Purchase Option and NAI's Initial Remarketing Rights and Obligations................................................................2 (c) Election by BNPLC to Terminate After an Issue 97-10 Election...............2 (d) Election by NAI to Terminate After Accelerating the Designated Sale Date..................................................................3 (e) Extension of the Term......................................................3 2. USE AND CONDITION OF THE PROPERTY.................................................4 (a) Use........................................................................4 (b) Condition of the Property..................................................4 (c) Consideration for and Scope of Waiver......................................5 3. RENT..............................................................................5 (a) Base Rent Generally........................................................5 (b) Impact of Collateral Upon Formulas.........................................5 (c) Calculation of Base Rent...................................................6 (d) Additional Rent............................................................8 (e) Arrangement Fee............................................................8 (f) Commitment Fees............................................................8 (g) Administrative Agency Fees.................................................9 (h) Issue 97-10 Prepayments....................................................9 (i) No Demand or Setoff........................................................9 (j) Default Interest and Order of Application..................................9 4. NATURE OF THIS AGREEMENT.........................................................10 (a) "Net" Lease Generally.....................................................10 (b) No Termination............................................................10 (c) Tax Reporting.............................................................11 (d) Characterization of this Improvements Lease...............................11 5. PAYMENT OF EXECUTORY COSTS AND LOSSES RELATED TO THE PROPERTY....................12 (a) Impositions...............................................................12 (b) Increased Costs; Capital Adequacy Charges.................................12 (c) NAI's Payment of Other Losses; General Indemnification....................13 (d) Exceptions and Qualifications to Indemnities..............................15 6. CONSTRUCTION.....................................................................17 (a) Construction Advances; Outstanding Construction Allowance.................17

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(b) Calculation of Carrying Costs.............................................17 (c) Limits on the Amount of Carrying Costs....................................19 (d) NAI's Right to Control the Construction Project...........................19 (e) Landlord's Election to Continue Construction..............................19 (f) Powers Coupled With an Interest...........................................21 (g) Final Completion Notice...................................................21 7. STATUS OF PROPERTY ACQUIRED WITH FUNDS PROVIDED BY BNPLC.........................21 8. ENVIRONMENTAL....................................................................22 (a) Environmental Covenants by NAI............................................22 (b) Right of BNPLC to do Remedial Work Not Performed by NAI...................23 (c) Environmental Inspections and Reviews.....................................23 (d) Communications Regarding Environmental Matters............................23 9. INSURANCE REQUIRED AND CONDEMNATION..............................................24 (a) Liability Insurance.......................................................24 (b) Property Insurance........................................................25 (c) Failure to Obtain Insurance...............................................26 (d) Condemnation..............................................................26 (e) Waiver of Subrogation.....................................................27 10. APPLICATION OF INSURANCE AND CONDEMNATION PROCEEDS...............................27 (A) Collection and Application of Insurance and Condemnation Proceeds Generally........................................................27 (b) Advances of Escrowed Proceeds to NAI......................................27 (c) Application of Escrowed Proceeds as a Qualified Prepayment................28 (d) Special Provisions Applicable After a CMA Termination Event or an Event of Default.......................................................28 (e) NAI's Obligation to Restore...............................................28 (f) Takings of All or Substantially All of the Property on or after the Base Rent Commencement Date (All Buildings)...........................29 11. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF NAI CONCERNING THE PROPERTY.........................................................................29 (a) Compliance with Covenants and Laws........................................29 (b) Operation of the Property.................................................29 (c) Debts for Construction, Maintenance, Operation or Development.............31 (d) Repair, Maintenance, Alterations and Additions............................31 (e) Permitted Encumbrances and Development Documents..........................32 (f) Books and Records Concerning the Property.................................32 12. FINANCIAL COVENANTS AND OTHER COVENANTS INCORPORATED BY REFERENCE TO SCHEDULE 1..32 13. FINANCIAL STATEMENTS AND OTHER REPORTS...........................................32 (a) Financial Statements; Required Notices; Certificates......................32

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14. ASSIGNMENT AND SUBLETTING BY NAI.................................................34 (a) BNPLC's Consent Required..................................................34 (b) Standard for BNPLC's Consent to Assignments and Certain Other Matters...................................................................34 (c) Consent Not a Waiver......................................................34 15. ASSIGNMENT BY BNPLC..............................................................35 (a) Restrictions on Transfers.................................................35 (b) Effect of Permitted Transfer or other Assignment by BNPLC.................35 16. BNPLC'S RIGHT OF ACCESS..........................................................35 17. EVENTS OF DEFAULT................................................................36 18. REMEDIES.........................................................................38 (a) Basic Remedies............................................................38 (b) Notice Required So Long As the Purchase Option and NAI's Initial Remarketing Rights and Obligations Continue Under the Purchase Agreement........................................................39 (c) Enforceability............................................................40 (d) Remedies Cumulative.......................................................40 19. DEFAULT BY BNPLC.................................................................41 20. QUIET ENJOYMENT..................................................................41 21. SURRENDER UPON TERMINATION.......................................................41 22. HOLDING OVER BY NAI..............................................................41 23. INDEPENDENT OBLIGATIONS EVIDENCED BY THE OTHER OPERATIVE DOCUMENTS...............42 24. AMENDMENT AND RESTATEMENT........................................................42 EXHIBITS AND SCHEDULES Exhibit A...............................................................Legal Description Exhibit B..........................................................Insurance Requirements Schedule 1.....................................Financial Covenants and Other Requirements

iii 5 LEASE AGREEMENT (PHASE IV - IMPROVEMENTS) This LEASE AGREEMENT (PHASE IV - IMPROVEMENTS) (this "IMPROVEMENTS LEASE"), by and between BNP LEASING CORPORATION, a Delaware corporation ("BNPLC"), and NETWORK APPLIANCE, INC., a California corporation ("NAI"), is made and dated as of October 2, 2000, the Effective Date, ("EFFECTIVE DATE" and other capitalized terms used and not otherwise defined in this Improvements Lease are intended to have the meanings assigned to them in the Common Definitions and Provisions Agreement (Phase IV - Improvements) executed by BNPLC and NAI contemporaneously with this Improvements Lease. By this reference, the Common Definitions and Provisions Agreement (Phase IV - Improvements) is incorporated into and made a part of this Improvements Lease for all purposes.) RECITALS Pursuant to the Existing Contract, which covered the Land described in Exhibit A, BNPLC has acquired the Land and the Improvements and any appurtenances thereto from Seller. NAI and BNPLC have previously executed that Lease Agreement (Phase IV - Improvements) dated as of December 20, 1999 (the "PRIOR LEASE AGREEMENT"). NAI and BNPLC have agreed to amend, restate and replace the Prior Lease Agreement with this Improvements Lease as provided in Paragraph 24 below. BNPLC and NAI have reached agreement as to the terms and conditions upon which BNPLC is willing to lease the Improvements to NAI, and by this Improvements Lease BNPLC and NAI desire to evidence such agreement. GRANTING CLAUSES BNPLC does hereby LEASE, DEMISE and LET unto NAI for the term hereinafter set forth all right, title and interest of BNPLC, now owned or hereafter acquired, in and to: (1) any and all Improvements; and (2) all easements and other rights appurtenant to the Improvements, whether now owned or hereafter acquired by BNPLC. BNPLC's interest in all property described in clauses (1) and (2) above are hereinafter referred to collectively as the "REAL PROPERTY". The Real Property does not include the Land itself, it being understood that the Other Lease Agreement will constitute a separate lease of the Land and the appurtenances thereto, and only the Land and the appurtenances thereto, from BNPLC to NAI. To the extent, but only to the extent, that assignable rights or interests in, to or under the following have been acquired by BNPLC under the Existing Contract or acquired by BNPLC pursuant to Paragraph 7 below, BNPLC also hereby grants and assigns to NAI for the term of 6 this Improvements 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 Land 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 (including the right to receive rents under and to otherwise enforce the Premises Lease) 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 NAI's rights hereunder are expressly made subject and subordinate to the terms and conditions of this Improvements Lease, to the Premises Lease 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 NAI and is accepted and is to be used and possessed by NAI upon and subject to the following terms and conditions: 1. TERM. (a) Scheduled Term. The term of this Improvements Lease (the "TERM") shall commence on and include the Effective Date, and end on the first Business Day of November, 2005, unless sooner terminated as expressly herein provided. (b) Automatic Termination as of the Base Rent Commencement Date (All Buildings) Resulting From an Election by NAI to Terminate the Purchase Option and NAI's Initial Remarketing Rights and Obligations. If NAI terminates the Purchase Option and NAI's Initial Remarketing Rights and Obligations prior to the Base Rent Commencement Date (All Buildings) pursuant to subparagraph 4(B) of the Purchase Agreement, then this Improvements Lease shall terminate automatically on the Base Rent Commencement Date (All Buildings). Just as any such termination of the Purchase Option and NAI's Initial Remarketing Rights and Obligations shall be subject to the condition (set forth in subparagraph 4(B) of the Purchase Agreement) that NAI pay an Issue 97-10 Prepayment to BNPLC, so too will the termination of this Improvements Lease pursuant to this subparagraph be subject the condition that NAI make the Issue 97-10 Prepayment to BNPLC. (c) Election by BNPLC to Terminate After an Issue 97-10 Election. By notice to NAI BNPLC shall be entitled to terminate this Improvements Lease, as BNPLC deems 2 7 appropriate in its sole and absolute discretion, at any time after receiving a notice given by NAI to make any Issue 97-10 Election. Upon any termination of this Improvements Lease by BNPLC pursuant to this subparagraph, NAI shall become obligated to pay to BNPLC an Issue 97-10 Prepayment, which obligation will survive the termination of this Improvements Lease. (d) Election by NAI to Terminate After Accelerating the Designated Sale Date. Provided NAI has not made any Issue 97-10 Election, NAI shall be entitled to accelerate the Designated Sale Date (and thus accelerate the purchase of BNPLC's interest in the Property by NAI 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 Common Definitions and Provisions Agreement (Phase IV - Improvements). In the event, because of NAI'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, NAI may terminate this Improvements Lease on or after the Designated Sale Date; provided, however, as a condition to any such termination by NAI, NAI 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 NAI's other obligations under the Purchase Agreement; (ii) paid to BNPLC all Base Rent, all Commitment 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 NAI for two successive periods of five years each; provided, however, that prior to any such extension the following conditions must have been satisfied: (A) at least 180 days prior to the commencement of any such extension, BNPLC and NAI must have agreed in writing upon, and received the 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 Common Definitions and Provisions Agreement (Phase IV - Improvements), and (2) an adjustment to the Rent that NAI 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 NAI, each in its sole and absolute discretion; (B) no Event of Default shall have occurred and be continuing at the time of NAI's exercise of its option to extend; (C) prior to any such extension, NAI 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 Improvements Lease must remain in effect. With respect to the condition that BNPLC and NAI must have agreed upon the Rent required for any extension of the Term, neither NAI nor BNPLC is willing to submit itself to a risk of liability or loss of rights hereunder for being judged unreasonable. Accordingly, both NAI 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 3 8 the Term as provided in this Paragraph, if NAI exercises its option to extend the Term as provided in this Paragraph, this Improvements Lease shall continue in full force and effect, and the leasehold estate hereby granted to NAI 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 Effective Date and before the extension. 2. USE AND CONDITION OF THE PROPERTY. (a) Use. Subject to the Permitted Encumbrances, the Development Documents and the terms hereof, NAI may use and occupy the Property during the Term, but only for the following purposes and other lawful purposes incidental thereto: (i) construction and development of the Construction Project; (ii) administrative and office space; (iii) activities related to NAI's research and development or production of products that are of substantially the same type and character as those regularly sold by NAI in the ordinary course of its business as of the Effective Date; (iv) cafeteria and other support facilities that NAI may provide to its employees; and (v) other lawful purposes (including NAI's research and development or production of products that are not of substantially the same type and character as those regularly sold by NAI in the ordinary course of its business as of the Effective Date) approved in advance and in writing by BNPLC, which approval will not be unreasonably withheld after completion of the Construction Project (but NAI acknowledges that BNPLC's withholding of such 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, or (2) giving the approval is likely to substantially increase BNPLC's administrative burden of complying with or monitoring NAI's compliance with the requirements of this Improvements Lease or other Operative Documents). Nothing in this subparagraph will prevent a tenant under a Premises Lease executed by NAI, as Landlord, prior to or concurrently with the Effective Date, from using the space covered thereby for purposes expressly authorized by the terms and conditions of such Premises Lease. (b) Condition of the Property. NAI 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. NAI 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 OR IN IMPROVEMENTS, FIXTURES AND PERSONAL PROPERTY FORMING A PART OF THE PROPERTY OR FOR ANY VIOLATIONS WITH RESPECT 4 9 THERETO OF APPLICABLE LAWS. FURTHER, THOUGH NAI MAY OBTAIN FROM THIRD PARTIES ANY FACILITIES OR SERVICES TO WHICH NAI IS ENTITLED BY REASON OF THE ASSIGNMENT AND LEASE OF PERSONAL PROPERTY SET FORTH ON PAGE 2 OF THIS IMPROVEMENTS LEASE, BNPLC SHALL NOT BE REQUIRED TO FURNISH TO NAI 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 2.(b) above have been negotiated by BNPLC and NAI 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 is not intended to impair any representations or warranties made by other parties, the benefit of which may pass to NAI during the Term because of the definition of Personal Property and Property above. 3. RENT. (a) Base Rent Generally. On each Base Rent Date through the end of the Term, NAI shall pay BNPLC rent ("BASE RENT") for the Base Rent Period that ends on such date. Each payment of Base Rent must be received by BNPLC no later than 10:00 a.m. (Pacific time) on the date it becomes due; if received after 10:00 a.m. (Pacific time) it will be considered for purposes of this Improvements Lease as received on the next following Business Day. At least five days prior to any Base Rent Date upon which an installment of Base Rent shall become due, BNPLC shall notify NAI in writing of the amount of each installment, calculated as provided below. Any failure by BNPLC to so notify NAI, however, shall not constitute a waiver of BNPLC's right to payment, but absent such notice NAI shall not be in default hereunder for any underpayment resulting therefrom if NAI, 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) Impact of Collateral Upon Formulas. To ease the administrative burden of this Improvements Lease and the Pledge Agreement, the formulas for calculating Base Rent accruing during Base Rent Periods after the Base Rent Commencement Date (All Buildings), as set out below in subparagraph 3.(c), reflect a reduction in the Base Rent equal to the interest that would accrue during such periods on Collateral if the Accounts (as defined in the Pledge Agreement) bore interest during such periods at the Effective Rate. BNPLC has agreed to such reduction to provide NAI with the economic equivalent of interest on Collateral after the Base Rent Commencement Date (All Buildings), and in return NAI has agreed to the provisions of the Pledge Agreement that excuse the actual payment of interest on the Accounts for periods after the Base Rent Commencement Date (All Buildings). By incorporating such reduction of Base Rent into the formulas below, and by providing in the Pledge Agreement for noninterest bearing Accounts after the Base Rent Commencement Date (All Buildings), the parties will avoid an unnecessary and cumbersome periodic exchange of equal payments. It is not, however, the intent of BNPLC or NAI to understate Base Rent or interest for financial reporting purposes. Accordingly, for purposes of any financial reports that this Improvements Lease requires of NAI 5 10 from time to time, NAI may report Base Rent as if there had been no such reduction and as if the Collateral provided in accordance with the Pledge Agreement had been maintained, after the Base Rent Commencement Date (All Buildings), in Accounts that bore interest at the Effective Rate. (c) Calculation of Base Rent. Payments of Base Rent shall be calculated as follows: (i) Amount Payable for Base Rent Periods BEFORE the Base Rent Commencement Date (All Buildings). The Base Rent for any Base Rent Period that ends on or prior to the Base Rent Commencement Date (All Buildings) shall equal the sum of (1) the Base Rent (Existing Buildings) accruing for such period, (2) any Base Rent (Building 6) accruing for such period, (3) any Base Rent (Building 7) accruing for such period, (4) any Base Rent (Building 8) accruing for such period, and (5) any additional Base Rent required by subparagraph 3.(c)(ii). For any Base Rent Period ending on or before the Base Rent Commencement Date (All Buildings) the Base Rent (Existing Buildings) shall equal: - the Stipulated Loss Value (Existing Buildings) on the first day of such Base Rent Period, times - a rate equal to the Secured Spread, plus the Effective Rate for such Base Rent Period, times - a fraction, the numerator of which is the number of days in such Base Rent Period and the denominator of which is three hundred sixty. No Base Rent (Building 6) will accrue for any Base Rent Period that ends on or prior to the Base Rent Commencement Date (Building 6), but thereafter for any Base Rent Period ending on or before the Base Rent Commencement Date (All Buildings) the Base Rent (Building 6) shall equal: - the Stipulated Loss Value (Building 6) on the first day of such Base Rent Period, times - a rate equal to the Secured Spread, plus the Effective Rate for such Base Rent Period, times - a fraction, the numerator of which is the number of days in such Base Rent Period and the denominator of which is three hundred sixty. No Base Rent (Building 7) will accrue for any Base Rent Period that ends on or prior to the Base Rent Commencement Date (Building 7), but thereafter for any Base Rent Period ending on or before the Base Rent Commencement Date (All Buildings) the Base Rent (Building 7) shall equal: 6 11 - the Stipulated Loss Value (Building 7) on the first day of such Base Rent Period, times - a rate equal to the Secured Spread, plus the Effective Rate for such Base Rent Period, times - a fraction, the numerator of which is the number of days in such Base Rent Period and the denominator of which is three hundred sixty. No Base Rent (Building 8) will accrue for any Base Rent Period that ends on or prior to the Base Rent Commencement Date (Building 8), but thereafter for any Base Rent Period ending on or before the Base Rent Commencement Date (All Buildings) the Base Rent (Building 8) shall equal: - the Stipulated Loss Value (Building 8) on the first day of such Base Rent Period, times - a rate equal to the Secured Spread, plus the Effective Rate for such Base Rent Period, times - a fraction, the numerator of which is the number of days in such Base Rent Period and the denominator of which is three hundred sixty. (ii) Additional Amount Payable On the Base Rent Commencement Date (All Buildings). In addition to any Base Rent (Building 6), any Base Rent (Building 7) and any Base Rent (Building 8) payable as provided in subparagraph 3.(c)(i), Base Rent shall be payable on the Base Rent Commencement Date (All Buildings) equal to 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. (iii) Base Rent Formula for Periods After the Base Rent Commencement Date (All Buildings). Each payment of Base Rent for any Base Rent Period that commences on or after the Base Rent Commencement Date (All Buildings) shall equal: - Stipulated Loss Value on the first day of such Base Rent Period, times - the Secured Spread, times - a fraction, the numerator of which is the number of days in such Base Rent Period and the denominator of which is three hundred sixty. (iv) Payment Required Upon Sale under the Purchase Agreement. Notwithstanding the foregoing, if NAI or any Applicable Purchaser purchases BNPLC's interest in the Property pursuant to the Purchase Agreement, any accrued unpaid Base 7 12 Rent (or component thereof) 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. (d) Additional Rent. All amounts which NAI is required to pay to or on behalf of BNPLC pursuant to this Improvements 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"). (e) Arrangement Fee. On the first Advance Date, an Arrangement Fee (the "ARRANGEMENT FEE") will be paid to BNPLC from the Construction Advance made on that date (and thus be included in Stipulated Loss Value) in the amount provided in the letter dated as of August 21, 2000 from BNPLC to NAI. (f) Commitment Fees. For each Construction Period NAI shall pay BNPLC a fee (a "COMMITMENT FEE") from Construction Advances made pursuant to the Construction Management Agreement For each Construction Period NAI shall pay BNPLC a fee (a "COMMITMENT FEE"), calculated as follows: (i) For each Construction Period ending before the first anniversary of the Effective Date, Commitment Fees shall equal: - the sum of: (A) thirty basis points (30/100 of 1%), times an amount (not less than zero) equal to: (1) the First Year Commitment, less (2) the Funded Construction Allowance on the first day of such Construction Period; plus (B) thirty basis points (30/100 of 1%), times an amount equal to: (1) the Maximum Construction Allowance, less (2) the greater of (I) the First Year Commitment, or (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. (ii) For each Construction Period ending on or after the first anniversary of the Effective Date, Commitment Fees shall equal: 8 13 - thirty basis points (30/100 of 1%), times an amount equal to: (A) the Maximum Construction Allowance (as reduced on the day prior to the first anniversary of the Effective Date, to the extent required by the proviso in the definition thereof in the Common Definitions and Provisions Agreement), less (B) the Funded Construction Advances on the first day of such Construction Period; times - the number of days in such Construction Period, divided by - three hundred sixty. NAI shall pay Commitment Fees in arrears on the first Business Day of November, February, May, and August of each calendar year, beginning with the first Business Day of November 2000 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. (g) Administrative Agency Fees. On the first Advance Date, an administrative agency fee (an "ADMINISTRATIVE AGENCY FEE") will be paid to BNPLC from the Construction Advance made on that date (and thus be included in Stipulated Loss Value) in the amount provided in the letter dated as of August 21, 2000 from BNPLC to NAI. Also, on each anniversary of the Effective Date, NAI shall pay to BNPLC an administrative agency fee (also, an "ADMINISTRATIVE AGENCY FEE") in the amount set forth in the letter agreement dated as of August 21, 2000 from BNPLC to NAI. (h) Issue 97-10 Prepayments. Following any Issue 97-10 Election or any CMA Termination Event under (and as defined in) the Construction Management Agreement, NAI 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 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. (i) No Demand or Setoff. Except as expressly provided herein, NAI shall pay all Rent without notice or demand and without counterclaim, deduction, setoff or defense. (j) 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 NAI against any Rent then past due in the order the same became due or in such other order as BNPLC may elect. 9 14 4. NATURE OF THIS AGREEMENT. (a) "Net" Lease Generally. Subject only to the exceptions listed in subparagraph 5.(d) below, it is the intention of BNPLC and NAI that Base Rent, the Arrangement Fees, the Upfront Syndication Fees, Administrative Agency Fees, Commitment Fees and other payments herein specified shall be absolutely net to BNPLC and that NAI shall pay all costs, expenses and obligations of every kind relating to the Property or this Improvements 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 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 Improvements Lease or the transactions contemplated herein. However, neither this subparagraph 4.(a) nor the indemnity in this subparagraph 5.(c)(i) shall be construed to make NAI liable for (I) an allocation of general overhead or internal administrative expenses of BNPLC or any other Interested Party or (II) any duplicate payment of the same Loss to both BNPLC and another Interested Party. (If, for example, BNPLC were required to make a $10 fine because of a failure of the Property to comply with Applicable Laws, and a Participant were required by the Participation Agreement to reimburse BNPLC for 20% of the $10, NAI would not be required by this subparagraph 4.(a) or by subparagraph 5.(c)(i) to pay both $10 to BNPLC and $2 to the Participant on account of the fine.) (b) No Termination. Except as expressly provided in this Improvements Lease itself, this Improvements Lease shall not terminate, nor shall NAI have any right to terminate this Improvements Lease, nor shall NAI be entitled to any abatement of the Rent, nor shall the obligations of NAI under this Improvements 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 NAI's use or development of all or any portion of the Property or any interference with such use by governmental action or otherwise, (iv) any eviction of NAI or of anyone claiming through or under NAI, (v) any default on the part of BNPLC under this Improvements Lease or under any other agreement to which BNPLC and NAI 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 of the Premises Lease by the lessee thereunder or (ix) any other cause whether similar or dissimilar to the foregoing. It is the intention of the parties hereto that the obligations of NAI hereunder shall be separate and independent of the covenants and agreements of BNPLC, that Base Rent and all other sums payable by NAI hereunder shall continue to be payable in all events and that the obligations of NAI 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 Improvements Lease. Without limiting the foregoing, NAI waives to the extent permitted by Applicable Laws, except as otherwise expressly provided herein, all 10 15 rights to which NAI 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 Improvements Lease or the Property or any part thereof or (ii) to any abatement, suspension, deferment or reduction of the Rent. However, nothing in this subparagraph 4.(b) shall be construed as a waiver by NAI of any right NAI 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 Improvements 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 Improvements Lease which are binding upon BNPLC (including the confidentiality provisions set forth in subparagraph 16.(c) below), or (iii) a decree compelling performance by BNPLC of any of the express covenants, agreements, conditions or provisions of this Improvements Lease which are binding upon BNPLC. (c) Tax Reporting. BNPLC and NAI shall report this Improvements Lease and the Purchase Agreement for federal income tax purposes as a conditional sale unless prohibited from doing so by the Internal Revenue Service. If the Internal Revenue Service shall challenge BNPLC's characterization of this Improvements Lease and the Purchase Agreement as a conditional sale for federal income tax reporting purposes, BNPLC shall notify NAI in writing of such challenge and consider in good faith any reasonable suggestions by NAI about an appropriate response. In any event, NAI shall (subject only to the limitations set forth in this subparagraph) indemnify and hold harmless BNPLC from and against all liabilities, costs, additional taxes (other than Excluded Taxes) and other expenses that may arise or become due because of such challenge or because of any resulting recharacterization required by the Internal Revenue Service, including any additional taxes that may become due upon any sale under the Purchase Agreement to the extent (if any) that such additional taxes are not offset by tax savings resulting from additional depreciation deductions or other tax benefits to BNPLC of the recharacterization. If BNPLC receives a written notice of any challenge by the Internal Revenue Service that BNPLC believes will be covered by this Paragraph, then BNPLC shall promptly furnish a copy of such notice to NAI. The failure to so provide a copy of the notice to NAI shall not excuse NAI from its obligations under this Paragraph; provided, that if none of the officers of NAI and none of the employees of NAI responsible for tax matters are aware of the challenge described in the notice and such failure by BNPLC renders unavailable defenses that NAI might otherwise assert, or precludes actions that NAI might otherwise take, to minimize its obligations hereunder, then NAI shall be excused from its obligation to indemnify BNPLC against liabilities, costs, additional taxes and other expenses, if any, which would not have been incurred but for such failure. For example, if BNPLC fails to provide NAI with a copy of a notice of a challenge by the Internal Revenue Service covered by the indemnities set out in this Improvements Lease and NAI is not otherwise already aware of such challenge, and if as a result of such failure BNPLC becomes liable for penalties and interest covered by the indemnities in excess of the penalties and interest that would have accrued if NAI had been promptly provided with a copy of the notice, then NAI will be excused from any obligation to BNPLC to pay the excess. (d) Characterization of this Improvements Lease. For purposes of determining the appropriate financial accounting for this Improvements Lease and for purposes of 11 16 determining their respective rights and remedies under state law, BNPLC and NAI believe and intend that (i) this Improvements Lease constitutes a true lease, not a mere financing arrangement, enforceable in accordance with its express terms, and the preceding subparagraph is not intended to affect the enforcement of any other provisions of this Improvements 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, NAI acknowledges that NAI asked BNPLC to participate in the transactions evidenced by this Improvements 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, NAI expects to receive certain material accounting and other advantages through the use of a lease transaction. Accordingly, and notwithstanding the reporting for income tax purposes described in the preceding subparagraph, NAI cannot equitably deny that this Improvements 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 Improvements Lease or the Purchase Agreement. 5. PAYMENT OF EXECUTORY COSTS AND LOSSES RELATED TO THE PROPERTY. (a) Impositions. Subject only to the exceptions listed in subparagraph 5.(d) below, NAI 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, NAI shall furnish BNPLC with receipts showing payment of all Impositions prior to the applicable delinquency date therefor. Notwithstanding the foregoing, NAI may in good faith, by appropriate proceedings, contest the validity, applicability or amount of any asserted Imposition, and pending such contest NAI shall not be deemed in default under any of the provisions of this Improvements Lease because of the Imposition if (1) NAI diligently prosecutes such contest to completion in a manner reasonably satisfactory to BNPLC, and (2) NAI 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 NAI prior to the earlier of (i) the date that any criminal prosecution is instituted or overtly threatened 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 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, NAI or an Affiliate of NAI or any Applicable Purchaser shall not purchase BNPLC's interest in the Property pursuant to the Purchase Agreement for a price to BNPLC (when taken together with any additional payments made by NAI pursuant to Paragraph 1(A)(2) of the Purchase Agreement, in the case of a purchase by an Applicable Purchaser) equal to the Break Even Price. (b) Increased Costs; Capital Adequacy Charges. Subject only to the exceptions listed in subparagraph 5.(d) below: 12 17 (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 NAI 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. An increase in costs resulting from any imposition or increase of reserve requirements applicable to Collateral held from time to time by BNPLC's Parent or other Participants pursuant to the Pledge Agreement would be an increase covered by the preceding sentence. A certificate as to the amount of such increased cost, submitted to BNPLC and NAI by BNPLC's Parent or the other Participant, shall be conclusive and binding upon NAI, 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, NAI shall pay to BNPLC for the account of BNPLC's Parent or the other Participant, as the case may be, the amount so demanded. Without limiting the foregoing, BNPLC and NAI hereby acknowledge and agree that the provisions for calculating Base Rent set forth herein reflect the assumption that the Pledge Agreement will cause a zero percent (0%) risk weight to be assigned to a percentage (equal to the Collateral Percentage) of the collective investment of BNPLC and the Participants in the Property pursuant to 12 Code of Federal Regulations, part 225, as from time to time supplemented or amended, or pursuant to any other similar or successor statute or regulation applicable to BNPLC and the Participants. If and so long as such risk weight is increased the assumed amount of zero percent (0%) because of a Banking Rules Change, Capital Adequacy Charges may be collected to yield the same rate of return to BNPLC, BNPLC's Parent and any other Participants (net of their costs of maintaining required capital) that they would have enjoyed from this Improvements Lease absent such increase. (iii) Any amount required to be paid by NAI under this subparagraph 5.(b) shall be due ten days after a demand for such payment is received by NAI. (c) NAI's Payment of Other Losses; General Indemnification. Subject only to the exceptions listed in subparagraph 5.(d) 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 13 18 Rents, (B) the use and operation of the Property, (C) the negotiation, administration or enforcement of the Operative Documents, (D) the making of Funding Advances, (E) the Construction Project or the Premises Lease; (F) the breach by NAI of this Improvements Lease or any other document executed by NAI in connection herewith, (G) any failure of the Property or NAI itself to comply with Applicable Laws, (H) Permitted Encumbrances, (I) Hazardous Substance Activities, including those occurring prior to Effective Date, (J) any obligations under the Existing Contract that survive the closing thereunder, or (K) 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 NAI, and NAI shall indemnify and defend BNPLC and other Interested Parties from and against all such Losses. (ii) 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.(c)(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 NAI OR REQUIRED OF NAI BY THIS IMPROVEMENTS LEASE OR OTHER OPERATIVE DOCUMENTS IS NOT ADEQUATE TO COVER LOSSES AGAINST OR FOR WHICH THE INDEMNITIES AND RELEASES ARE PROVIDED. NAI'S LIABILITY, HOWEVER, FOR ANY FAILURE TO OBTAIN INSURANCE REQUIRED BY THIS IMPROVEMENTS 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 IMPROVEMENTS LEASE. (iii) Costs and expenses for which NAI shall be responsible pursuant to this subparagraph 5.(c) 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 Improvements Lease or at any time during the Term. Such costs and expenses will also include Attorneys' Fees or other costs 14 19 incurred to evaluate lien releases and other information submitted by NAI with requests for Construction Advances. (iv) NAI's obligations under this subparagraph 5.(c) shall survive the termination or expiration of this Improvements Lease. Any amount to be paid by NAI under this subparagraph 5.(c) shall be due ten days after a demand for such payment is received by NAI. (v) If an Interested Party notifies NAI of any claim or proceeding included in, or any investigation or allegation concerning, Losses for which NAI is responsible pursuant to this subparagraph 5.(c), NAI 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 NAI, but 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 NAI and the Interested Party and the Interested Party shall have reasonably concluded that there are legal defenses available to it which are inconsistent with or in addition to those available to NAI, 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 NAI 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 NAI 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 consent of NAI, which consent will not be unreasonably withheld) the claim, proceeding, investigation or allegation at NAI's expense using counsel selected by the Interested Party. Moreover, if any such failure by NAI continues for forty-five days or more after NAI 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, in accordance with the written advice of counsel, settle (or pay in full) all claims related thereto without NAI's consent and without releasing NAI from any obligations to the Interested Party under this subparagraph 5.(c). (d) Exceptions and Qualifications to Indemnities. (i) BNPLC acknowledges and agrees that nothing in subparagraph 4.(a) or the preceding subparagraphs of this Paragraph 5 shall be construed to require NAI to pay or reimburse an Interested Party for (w) any costs or expenses incurred by BNPLC or any transferee to accomplish any Permitted Transfers described in clauses (2), (3), (4), (6) or (7) of the definition thereof in the Common Definitions and Provisions Agreement (Phase IV - Improvements), (x) Excluded Taxes, (y) Losses 15 20 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, or (z) Losses incurred or suffered by Participants in connection with their negotiation or execution of the Participation Agreement or Pledge Agreement (or supplements making them parties thereto) or in connection with any due diligence they may undertake before entering into the Participation Agreement or Pledge Agreement. Further, without limiting BNPLC's rights (as provided in other provisions of this Improvements 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 4.(a) or the preceding subparagraphs of this Paragraph 5 shall be construed to require NAI to pay or reimburse an Interested Party for a) costs previously paid by BNPLC with the proceeds of the Prior Funding Advances, 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.(e). Further, if an Interested Party receives a written notice of Losses that such Interested Party believes are covered by the indemnity in subparagraph 5.(c)(i), then such Interested Party will be expected to promptly furnish a copy of such notice to NAI. The failure to so provide a copy of the notice to NAI shall not excuse NAI from its obligations under subparagraph 5.(c)(i); provided, that if NAI is unaware of the matters described in the notice and such failure renders unavailable defenses that NAI might otherwise assert, or precludes actions that NAI might otherwise take, to minimize its obligations, then NAI 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 NAI with a copy of a notice of an obligation covered by the indemnity set out in subparagraph 5.(c)(i) and NAI 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 NAI had been promptly provided with a copy of the notice, then NAI will be excused from any obligation to BNPLC (or any Affiliate of BNPLC) to pay the excess. (ii) Notwithstanding anything to the contrary in subparagraph 4.(a) or the preceding subparagraphs of this Paragraph 5, NAI's liability for payments required by the preceding subparagraphs of this Paragraph 5, and not excused by the preceding subparagraph 5.(d)(i), prior to substantial completion of the Construction Project ("CONSTRUCTION-PERIOD INDEMNITY PAYMENTS") shall be subject to the following provisions: 16 21 a) NAI may decline to pay any Construction-Period Indemnity Payments other than the following (it being understood that NAI'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.(d)(ii)): (1) Construction-Period Indemnity Payments eligible for reimbursement to NAI under the terms and conditions of the Construction Management Agreement; and (2) Construction-Period Indemnity Payments that constitute Absolute NAI Construction Obligations. b) Any Construction-Period Indemnity Payment NAI is excused from paying by this subparagraph 5.(d)(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. 6. CONSTRUCTION. (a) Construction Advances; Outstanding Construction Allowance. The Construction Management Agreement entitles NAI 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 NAI for the costs of the Construction Project and 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.(e). 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. Subject to the limitation set forth in subparagraph 6.(c), the total Carrying Costs for any Construction Period shall equal the sum of any Carrying Costs (Building 6) accruing for such period, any Carrying Costs (Building 7) accruing for such period and any Carrying Costs (Building 8) accruing for such period. 17 22 No Carrying Costs (Building 6) will accrue for any Construction Period that commences on or after the Base Rent Commencement Date (Building 6), but for any earlier Construction Period the Carrying Costs (Building 6) shall equal: - the sum on the first day of such Construction Period of (i) Stipulated Loss Value (Building 6) under (and as defined in) the Common Definitions and Provisions Agreement (Phase IV - Improvements) and (ii) the Building 6 Land Percentage of Stipulated Loss Value under (and as defined in) the Other Common Definitions and Provisions Agreement, times - the sum of (a) the Effective Rate with respect to such Construction Period, plus (b) the Secured Spread, times - a fraction, the numerator of which is the number of days in such Construction Period and the denominator of which is three hundred sixty. No Carrying Costs (Building 7) will accrue for any Construction Period that commences on or after the Base Rent Commencement Date (Building 7), but for any earlier Construction Period the Carrying Costs (Building 7) shall equal: - the sum on the first day of such Construction Period of (i) Stipulated Loss Value (Building 7) under (and as defined in) the Common Definitions and Provisions Agreement (Phase IV - Improvements) and (ii) the Building 7 Land Percentage of Stipulated Loss Value under (and as defined in) the Other Common Definitions and Provisions Agreement, times - the sum of (a) the Effective Rate with respect to such Construction Period, plus (b) the Secured Spread, times - a fraction, the numerator of which is the number of days in such Construction Period and the denominator of which is three hundred sixty. No Carrying Costs (Building 8) will accrue for any Construction Period that commences on or after the Base Rent Commencement Date (Building 8), but for any earlier Construction Period the Carrying Costs (Building 8) shall equal: - the sum on the first day of such Construction Period of (i) Stipulated Loss Value (Building 8) under (and as defined in) the Common Definitions and Provisions Agreement (Phase IV - Improvements) and (ii) the Building 8 Land Percentage of Stipulated Loss Value under (and as defined in) the Other Common Definitions and Provisions Agreement, times - the sum of (a) the Effective Rate with respect to such Construction Period, plus (b) the Secured Spread, times - a fraction, the numerator of which is the number of days in such Construction Period and the denominator of which is three hundred sixty. 18 23 (c) Limits on the Amount of Carrying Costs. Notwithstanding the foregoing, because the Construction Allowance available to NAI 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 (All Buildings) 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 Deadline by BNPLC (as described in the definition thereof in the Common Definitions and Provisions Agreement (Phase IV - Improvements)) or because of any Landlord's Election to Continue Construction, the Funded Construction Allowance already exceeds the Maximum Construction Allowance on the Base Rent Commencement Date (All Buildings), then no Carrying Costs will be added to the Outstanding Construction Allowance on the Base Rent Commencement Date (All Buildings). (d) NAI's Right to Control the Construction Project. Subject to BNPLC's rights under subparagraph 6.(e) of this Improvements Lease, the Construction Management Agreement grants to NAI 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 7), 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 Improvements Lease or of the Construction Management Agreement or otherwise. (e) Landlord's Election to Continue Construction. Without limiting BNPLC's other rights and remedies under this Improvements Lease, and without terminating this Improvements Lease or NAI'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 2.(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 NAI 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 19 24 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 2.(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 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 NAI; 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 NAI itself might have done if NAI 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. 20 25 (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 NAI. For purposes of this Improvements 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 NAI'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 NAI's payment of an Issue 97-10 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 NAI of this Improvements 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. (f) Powers Coupled With an Interest. BNPLC's rights under subparagraph 6.(e) are intended to constitute powers coupled with an interest which cannot be revoked. (g) Final Completion Notice. After any Landlord's Election to Continue Construction, BNPLC may provide a notice (a "COMPLETION NOTICE (FINAL)") to NAI, advising NAI that construction of the Construction Project is substantially complete or that BNPLC no longer intends to continue such construction at that time. 7. STATUS OF PROPERTY ACQUIRED WITH FUNDS PROVIDED BY BNPLC. All Improvements constructed during the term of this Improvements Lease shall be owned by BNPLC and shall constitute "Property" covered by this Improvements Lease. Further, 21 26 to the extent heretofore or hereafter acquired (in whole or in part) with any portion of the Prior Funding Advances, with any Construction Advances or with other funds for which NAI has received or hereafter receives reimbursement from the Prior Funding Advances or Construction Advances, all furnishings, furniture, chattels, permits, licenses, franchises, certificates and other personal property of whatever nature shall have been acquired on behalf of BNPLC by NAI, shall be owned by BNPLC and shall constitute "Property" covered by this Improvements Lease, as shall all renewals or replacements of or substitutions for any such Property. NAI shall not authorize or permit the transfer of title to the Improvements or to any other such Property to pass through NAI or NAI's Affiliates before it is transferred to BNPLC from contractors, suppliers, vendors or other third Persons. Nothing herein shall constitute authorization of NAI 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 NAI 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, but not more often than once in any period of twelve consecutive months, NAI 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 NAI that such inventory is true and complete and that all items specified in the inventory are covered by this Improvements Lease free and clear of any Lien other than the Permitted Encumbrances or Liens Removable by BNPLC. 8. ENVIRONMENTAL. (a) Environmental Covenants by NAI. NAI covenants that: (i) NAI shall not conduct or permit others to conduct Hazardous Substance Activities, except Permitted Hazardous Substance Use and Remedial Work. (ii) NAI 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 believed by BNPLC to be reasonably required, and to the extent not inconsistent with the other provisions of this Improvements Lease, NAI 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 Remedial Work required by this subparagraph, NAI shall retain independent environmental consultants acceptable to BNPLC to evaluate any significant new information generated during NAI's implementation of the Remedial Work and to discuss with NAI whether such new information indicates the need for any additional measures that NAI should take to protect the health and safety of persons (including employees, contractors and 22 27 subcontractors and their employees) or to protect the environment. NAI shall implement any such additional measures to the extent required with respect to the Property by Environmental Laws or otherwise believed by BNPLC to be reasonably required and to the extent not inconsistent with the other provisions of this Improvements Lease. (b) Right of BNPLC to do Remedial Work Not Performed by NAI. If NAI's failure to cure any breach of the covenants set forth in subparagraph 8.(a) continues beyond the Environmental Cure Period (as defined below), BNPLC may, in addition to any other remedies available to it, conduct all or any part of the Remedial Work. To the extent that Remedial Work is done by BNPLC pursuant to the preceding sentence (including any removal of Hazardous Substances), the cost thereof shall be a demand obligation owing by NAI to BNPLC. As used in this subparagraph, "ENVIRONMENTAL CURE PERIOD" means the period ending on the earlier of: (1) one hundred eighty days after NAI 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 instituted or overtly threatened 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, NAI or an Affiliate of NAI 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 Supplemental Payment made by NAI 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. (c) Environmental Inspections and Reviews. BNPLC reserves the right to retain environmental consultants to review any report prepared by NAI or to conduct BNPLC's own investigation to confirm whether NAI is complying with the requirements of this Paragraph 8. NAI grants to BNPLC and to BNPLC's agents, employees, consultants and contractors the right to enter upon the Property at any time 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. NAI shall promptly reimburse BNPLC for the fees of its environmental consultants and the costs of any such inspections and tests. (d) Communications Regarding Environmental Matters. (i) NAI shall immediately advise BNPLC of (1) any discovery of any event or circumstance which would render any of the representations of NAI herein or in the Closing Certificate concerning environmental matters materially inaccurate or misleading if made at the time of such discovery and assuming that NAI was aware of all relevant facts, (2) any Remedial Work (or change in Remedial Work) required or undertaken by NAI 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) NAI's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property which could 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 NAI to comply with 23 28 Environmental Laws affecting the Property by any governmental authority responsible for enforcing Environmental Laws. In such event, NAI shall deliver to BNPLC within thirty days after BNPLC's request, a preliminary written environmental plan setting forth a general description of the action that NAI proposes to take with respect thereto, if any, to bring the Property into compliance with Environmental Laws or to correct any breach by NAI of this Paragraph 8, 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 request. (ii) NAI shall provide BNPLC 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). NAI shall also provide BNPLC with copies of any correspondence from third Persons which threaten litigation over any significant failure or alleged significant failure of NAI to maintain or operate the Property in accordance with Environmental Laws. (iii) Prior to NAI's submission of a Material Environmental Communication to any governmental or regulatory agency or third party, NAI shall, to the extent practicable, deliver to BNPLC 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, NAI shall meet with BNPLC to discuss the submission, shall provide any additional information 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 NAI not to modify the submission in accordance with comments of BNPLC. 9. INSURANCE REQUIRED AND CONDEMNATION. (a) Liability Insurance. (i) Prior to the Base Rent Commencement Date (All Buildings), NAI 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 B. Without limiting the generality of the foregoing, NAI certifies to BNPLC that NAI is, contemporaneously with the execution of this Lease and the other Operative Documents, obtaining such insurance. (ii) On and after the Base Rent Commencement Date (All Buildings), NAI will continue to maintain, or cause to be maintained, 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, but in such amounts, with such insurance companies and upon such terms and conditions (including self-insurance, whether by deductible, retention, or otherwise) as are consistent with NAI's normal insurance practices for other similar properties. In any event, policies 24 29 under which NAI maintains such insurance will provide, by endorsement or otherwise, that BNPLC and other Interested Parties are also insured thereunder against such claims with coverage that is not limited by any negligence or allegation of negligence on their part and with coverage that is primary, not merely excess over or contributory with the other commercial general liability coverage they may themselves maintain. (iii) NAI 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. With respect to insurance maintained prior to the Base Rent Commencement Date (All Buildings), such confirmation must also be in form consistent with the requirements set forth in Exhibit B. (b) Property Insurance. (i) Prior to the Base Rent Commencement Date (All Buildings), NAI will keep the Property insured against fire and other casualty under one or more property insurance policies that satisfy the requirements set forth in Exhibit B. Without limiting the generality of the foregoing, NAI certifies to BNPLC that NAI is, contemporaneously with the execution of this Lease and the other Operative Documents, obtaining such insurance. (ii) On and after the Base Rent Commencement Date (All Buildings), NAI will continue to keep, or cause to be kept, all Improvements and Tangible Personal Property insured against fire and other casualty, but in such amounts, with such insurance companies and upon such terms and conditions (including self-insurance, whether by deductible, retention, or otherwise) as are consistent with NAI's normal insurance practices for other similar properties. In any event, policies under which NAI maintains such insurance will show BNPLC as an insured as its interest may appear and will provide that the protection afforded to BNPLC thereunder is primary (such that any policies maintained by BNPLC itself will be excess, secondary and noncontributing) and is not to be reduced or impaired by acts or omissions of NAI or any other beneficiary or insured. (iii) NAI 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. With respect to insurance maintained prior to the Base Rent Commencement Date (All Buildings), such confirmation must also be in form consistent with the requirements set forth in Exhibit B. (iv) If any of the Property is destroyed or damaged by fire or any other casualty against which insurance shall have been required hereunder, (A) BNPLC may, but shall not be obligated to, make proof of loss if not made promptly by NAI after notice from BNPLC, (B) each insurance company concerned is hereby authorized and directed to make payment for such loss directly to BNPLC (or, if so instructed by BNPLC, to NAI) for application as required by Paragraph 10, and (C) BNPLC shall be entitled, in its 25 30 own name or in the name of NAI or in the name of both, at any time after a CMA Termination Event or when an Event of Default shall have occurred and be continuing, but not otherwise without NAI's prior consent, to settle, adjust or compromise any and all claims for loss, damage or destruction under any policy or policies of insurance. If any such claim is for less than $500,000, if no CMA Termination Event shall have occurred and if no Event of Default shall have occurred and be continuing, NAI shall have the right to settle, adjust or compromise the claim as NAI deems appropriate so long, although even then NAI must apply any proceeds of the claim received by it as required by Paragraph 10. (v) 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 insurance proceeds. (vi) If any casualty shall result in damage to or loss or destruction of the Property, NAI shall give prompt notice thereof to BNPLC and Paragraph 10 shall apply. (c) Failure to Obtain Insurance. If NAI fails to obtain any insurance or to provide confirmation of any such insurance as required by this Improvements Lease, BNPLC shall be entitled (but not required) to obtain the insurance that NAI has failed to obtain or for which NAI has not provided the required confirmation and, without limiting BNPLC's other remedies under the circumstances, BNPLC may require NAI 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 NAI (provided, however, that any such insurance cost paid by BNPLC prior to the Base Rent Commencement Date (All Buildings) will be charged against the Construction Allowance under the Construction Management Agreement as if it had been paid by NAI). (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. NAI shall, at its expense, diligently prosecute any such proceedings and shall consult with BNPLC, its attorneys and experts and cooperate with them as 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, and all such proceeds will be applied as provided in Paragraph 10. BNPLC is hereby authorized, in the name of NAI, at any time after a CMA Termination Event or when an Event of Default shall have occurred and be continuing, or otherwise with NAI'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. 26 31 (e) Waiver of Subrogation. NAI, for itself and for any Person claiming through it (including any insurance company claiming by way of subrogation), waives any and every claim which arises or may arise in its favor against BNPLC or any other Interested Party and the officers, directors, and employees of the Interested Parties for any and all Losses, to the extent that NAI is compensated by insurance or would be compensated by the insurance policies contemplated in this Improvements Lease, but for any deductible or self-insured retention maintained under such insurance or but for a failure of NAI to maintain the insurance as required by this Improvements Lease. NAI agrees to have such insurance policies properly endorsed so as to make them valid notwithstanding this waiver, if such endorsement is required to prevent a loss of insurance. 10. APPLICATION OF INSURANCE AND CONDEMNATION PROCEEDS. (a) Collection and Application of Insurance and Condemnation Proceeds Generally. This Paragraph 10 shall govern the application of proceeds received by BNPLC or NAI during the Term from any third party (1) under any property insurance policy as a result of damage to the Property (including proceeds payable under any insurance policy covering the Property which is maintained by NAI), (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, or (3) because of any judgment, decree or award for injury or damage to the Property; excluding, however, any funds paid to BNPLC by BNPLC's Parent, by an Affiliate of BNPLC or by any Participant that is made to compensate BNPLC for any Losses BNPLC may suffer or incur in connection with this Improvements Lease or the Property. NAI will promptly pay over to BNPLC any insurance, condemnation or other proceeds covered by this Paragraph 10 which NAI may receive from any insurer, condemning authority or other third party. All proceeds covered by this Paragraph 10, including those received by BNPLC from NAI or third parties, shall be applied as follows: (i) First, proceeds covered by this Paragraph 10 will be used to reimburse BNPLC for any costs and expenses, including Attorneys' Fees, that BNPLC incurred to collect the proceeds. (ii) Second, the proceeds remaining after such reimbursement to BNPLC (hereinafter, the "REMAINING PROCEEDS") will be applied, as hereinafter more particularly provided, either as a Qualified Prepayment or to reimburse NAI or BNPLC for the actual out-of-pocket costs of repairing or restoring the Property. Until, however, any Remaining Proceeds received by BNPLC are applied by BNPLC as a Qualified Prepayment or applied by BNPLC to reimburse costs of repairs to or restoration of the Property pursuant to this Paragraph 10, BNPLC shall hold and maintain such Remaining Proceeds as Escrowed Proceeds in an interest bearing account, and all interest earned on such account shall be added to and made a part of such Escrowed Proceeds. (b) Advances of Escrowed Proceeds to NAI. Except as otherwise provided below in this Paragraph 10, BNPLC shall advance all Remaining Proceeds held by it as Escrowed Proceeds to reimburse NAI for the actual out-of-pocket cost to NAI of repairing or restoring the Property in accordance with the requirements of this Improvements Lease and the other Operative Documents as the applicable repair or restoration progresses and upon 27 32 compliance by NAI with such terms, conditions and requirements as may be reasonably imposed by BNPLC. In no event, however, shall BNPLC be required to pay Escrowed Proceeds to NAI in excess of the actual out-of-pocket cost to NAI of the applicable repair or restoration, as evidenced by invoices or other documentation satisfactory to BNPLC, it being understood that BNPLC may retain and apply any such excess as a Qualified Prepayment. (c) Application of Escrowed Proceeds as a Qualified Prepayment. Provided NAI has completed the Construction Project pursuant to the Construction Management Agreement 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 Prepayment) as a Qualified Prepayment on any date that BNPLC is directed to do so by a notice from NAI; however, if such a notice from NAI specifies an effective date for a Qualified Prepayment that is less than five Business Days after BNPLC's actual receipt of the notice, BNPLC may postpone the date of the Qualified Prepayment 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 Prepayment on an Advance Date or a Base Rent Date, BNPLC may deduct Breakage Costs incurred in connection with any Qualified Prepayment from the Remaining Proceeds or other amounts available for application as the Qualified Prepayment, and NAI will reimburse BNPLC upon request for any such Breakage Costs that BNPLC incurs but does not deduct. (d) Special Provisions Applicable After a CMA Termination Event or an Event of Default. Notwithstanding the foregoing, after any CMA Termination Event, and when any Event of Default shall have occurred and be continuing, BNPLC shall be entitled to receive and collect all insurance, condemnation or other proceeds governed by this Paragraph 10 and to apply all Remaining Proceeds, when and to the extent deemed appropriate by BNPLC in its sole discretion, either (A) to the reimbursement of NAI or BNPLC for the out-of-pocket cost of repairing or restoring the Property, or (B) as Qualified Prepayments. (e) NAI's Obligation to Restore. Regardless of the adequacy of any Remaining Proceeds available to NAI hereunder, and notwithstanding other provisions of this Improvements Lease to the contrary: (1) If, prior to the Base Rent Commencement Date (All Buildings), the Property is damaged by fire or other casualty or any part of the Property is taken by condemnation, NAI shall to the maximum extent possible, as part of the Work contemplated in the Construction Management Agreement, restore the Property or the remainder thereof and continue construction of the Construction Project on and subject to the terms and conditions set forth in the Construction Management Agreement. However, any additional costs required to complete the Construction Project resulting from such a casualty or taking prior to the Base Rent Commencement Date (All Buildings) shall, to the extent not covered by Remaining Proceeds paid to NAI as provided in this Improvements Lease, be subject to reimbursement by BNPLC under the Construction Management Agreement on the same terms and conditions that apply to reimbursements of other costs of the Work thereunder. 28 33 (2) If, on or after the Base Rent Commencement Date (All Buildings), the Property is damaged by fire or other casualty or less than all or substantially all of the Property is taken by condemnation, NAI must: A) increase the value of the Property or the remainder thereof by restoring or improving the same (in a manner consistent with the requirements and limitations imposed by this Improvements Lease and the other Operative Documents or otherwise acceptable to BNPLC), or decrease Stipulated Loss Value by tendering a payment to BNPLC for application as a Qualified Prepayment, as necessary to cause Current AS IS Market Value to be not less than sixty percent (60%) of Stipulated Loss Value; and B) restore the Property or the remainder thereof to a reasonably safe and sightly condition. (f) Takings of All or Substantially All of the Property on or after the Base Rent Commencement Date (All Buildings). In the event of any taking of all or substantially all of the Property on or after the Base Rent Commencement Date (All Buildings), BNPLC shall be entitled to apply all Remaining Proceeds as a Qualified Prepayment. In addition, if Stipulated Loss Value immediately prior to any such taking exceeds the sum of the Remaining Proceeds resulting from such condemnation, then BNPLC shall be entitled to recover the excess from NAI upon demand as an additional Qualified Prepayment, whereupon this Improvements 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 (2) of the preceding subparagraph shall be considered a taking of substantially all the Property for purposes of this Paragraph 10. 11. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF NAI CONCERNING THE PROPERTY. NAI represents, warrants and covenants as follows: (a) Compliance with Covenants and Laws. The use of the Property permitted by this Improvements Lease complies, or will comply after NAI obtains available permits as the tenant under this Improvements Lease, in all material respects with all Applicable Laws. NAI 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 Improvements Lease. (b) Operation of the Property. During the Term, NAI shall operate the Property in a good and workmanlike manner and substantially in compliance with all Applicable Laws and will pay or cause to be paid all fees or charges of any kind in connection therewith. (If NAI does not promptly correct any failure of the Property to comply with Applicable Laws that is the subject of a written notice given to NAI or BNPLC by any governmental authority, then for purposes of the preceding sentence, NAI shall be considered not to have maintained the Property "substantially in accordance with Applicable Laws" whether or not the noncompliance would be substantial in the absence of the notice.) During the Term, NAI shall not use or occupy, or allow the use or occupancy of, the Property in any manner which violates any 29 34 Applicable Law or which constitutes a public or private nuisance or which makes void, voidable or cancelable any insurance then in force with respect thereto. During the Term, to the extent that any of the following would, individually or in the aggregate, increase the likelihood of a CMA Termination Event under the Construction Management Agreement or materially and adversely affect the value of the Property or NAI's use, occupancy or operations on the Property, NAI shall not, without BNPLC's prior consent: (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) a change in the zoning or other Applicable Laws affecting the permitted use or development of the Property shall occur after the Base Rent Commencement Date (All Buildings) that reduces the value of the Property, or (B) conditions or circumstances on or about the Property are discovered after the Base Rent Commencement Date (All Buildings) (such as the presence of an endangered species) which substantially impede development and thereby reduce the value of the Property, and if after any such reduction under clause (A) or (B) preceding the Current AS IS Market Value of the Property is less than sixty percent (60%) of Stipulated Loss Value, then NAI shall pay BNPLC upon request the amount by which Current AS IS Market Value is less than sixty percent (60%) of Stipulated Loss Value, for application as a Qualified Prepayment. During the Term, NAI shall not cause or permit any drilling or exploration for, or extraction, removal or production of, minerals from the surface or subsurface of the Property, and NAI shall not do any act whereby the market value of the Property may reasonably be expected to be materially lessened. During the Term, if NAI receives a written notice or claim from any federal, state or other governmental entity that the Property is not in compliance in any material respect with any Applicable Law, or that any action may be taken against the owner of the Property because the Property does not comply with Applicable Law, NAI shall promptly furnish a copy of such notice or claim to BNPLC. Notwithstanding the foregoing, NAI 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 NAI shall not be deemed in default hereunder because of the violation of such Applicable Law, if NAI diligently prosecutes such contest to completion in a manner reasonably satisfactory to BNPLC, and if NAI 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 NAI and any claims asserted against BNPLC or the Property because of such violation must be paid by NAI, all prior to the earlier of (i) the date that any criminal prosecution is instituted or overtly threatened against BNPLC or any of its directors, officers or employees because of such violation, (ii) the date that any action is taken by any governmental authority against BNPLC or any property owned by BNPLC (including the Property) because of such violation, or (iii) a Designated Sale Date upon which, for any reason, NAI or an Affiliate of NAI or any Applicable Purchaser shall not purchase BNPLC's interest in the Property pursuant to the Purchase Agreement for a price to BNPLC (when taken together with any additional payments made by NAI pursuant to Paragraph 1(A)(2) of the Purchase Agreement, in the case of a purchase by an Applicable Purchaser) equal to the Break Even Price. 30 35 (c) Debts for Construction, Maintenance, Operation or Development. NAI 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, that nothing in this subparagraph will be construed to require NAI to remove Liens Removable by BNPLC. Notwithstanding the foregoing, NAI 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 NAI shall not be deemed in default under this subparagraph because of the contested lien if (1) within sixty days after being asked to do so by BNPLC, NAI bonds over to BNPLC's reasonable satisfaction all such contested liens against the Property alleged to secure an amount in excess of $500,000 (individually or in the aggregate), (2) NAI diligently prosecutes such contest to completion in a manner reasonably satisfactory to BNPLC, and (3) NAI 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 NAI prior to the earlier of (i) the date that any criminal prosecution is instituted or overtly threatened 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 against BNPLC or any property in which BNPLC has an interest because of the nonpayment thereof, or (iii) a Designated Sale Date upon which, for any reason, NAI or an Affiliate of NAI or any Applicable Purchaser shall not purchase BNPLC's interest in the Property pursuant to the Purchase Agreement for a price to BNPLC (when taken together with any additional payments made by NAI pursuant to Paragraph 1(A)(2) of the Purchase Agreement, in the case of a purchase by an Applicable Purchaser) equal to the Break Even Price. (d) Repair, Maintenance, Alterations and Additions. NAI shall keep the Property in good order, operating condition and appearance and shall cause all necessary repairs, renewals and replacements to be promptly made. NAI will not allow any of the Property to be materially misused, abused or wasted, and NAI shall promptly replace any worn-out fixtures and Personal Property with fixtures and Personal Property comparable to the replaced items when new. NAI shall not, without the prior consent of BNPLC, (i) remove from the Property any fixture or Personal Property having significant value except such as are replaced by NAI by fixtures or Personal Property of equal suitability and value, free and clear of any lien or security interest (and for purposes of this clause "significant value" will mean any fixture or Personal Property that has a value of more than $100,000 or that, when considered together with all other fixtures and Personal Property removed and not replaced by NAI by items of equal suitability and value, has an aggregate value of $500,000 or more) or (ii) make material new Improvements or alter Improvements in any material respect, except as part of the Work performed in accordance with the Construction Management Agreement. Without limiting the foregoing, NAI will notify BNPLC before making any significant alterations to the Improvements after the completion of the Construction Project. Nothing in this subparagraph, however, is intended to limit NAI's rights and obligations under other express provisions of this Improvements Lease and the Construction Management Agreement with respect to the Construction Project. 31 36 (e) Permitted Encumbrances and Development Documents. NAI shall during the Term 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 (including the Premises Lease) or the Development Documents. Without limiting the foregoing, NAI 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. Without the prior consent of BNPLC, NAI shall not enter into, initiate, approve or consent to any modification of any Permitted Encumbrance or Development Document that would create or expand or purport to create or expand obligations or restrictions which would encumber BNPLC's interest in the Property. (Whether BNPLC must give any such consent requested by NAI during the Term of this Improvements Lease shall be governed by subparagraph 3(A) of the Closing Certificate and Agreement.) (f) Books and Records Concerning the Property. NAI shall keep books and records that are accurate and complete in all material respects for the Property and, subject to Paragraph 16.(c), will 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. This subparagraph shall not be construed as requiring NAI to regularly maintain separate books and records relating exclusively to the Property; provided, however, that upon request, NAI shall construct or abstract from its regularly maintained books and records information required by this subparagraph relating to the Property. 12. FINANCIAL COVENANTS AND OTHER COVENANTS INCORPORATED BY REFERENCE TO SCHEDULE 1. Throughout the Term of this Improvements Lease, NAI shall comply with the requirements of Schedule 1 attached hereto. 13. FINANCIAL STATEMENTS AND OTHER REPORTS. (a) Financial Statements; Required Notices; Certificates. Throughout the Term of this Improvements Lease, NAI shall deliver to BNPLC and to each Participant: (i) as soon as available and in any event within one hundred twenty days after the end of each fiscal year of NAI, a consolidated balance sheet of NAI and its Consolidated Subsidiaries as of the end of such fiscal year and a consolidated income statement and statement of cash flows of NAI and its Consolidated Subsidiaries for such fiscal year, all in reasonable detail and all prepared in accordance with GAAP and accompanied by a report and opinion of accountants of national standing selected by NAI, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any qualifications or exceptions as to the scope of the audit nor to any qualification or exception which BNPLC determines, in BNPLC's reasonable discretion, is unacceptable; (ii) as soon as available and in any event within sixty days after the end of each of the first three quarters of each fiscal year of NAI, the consolidated balance sheet of NAI and its Consolidated Subsidiaries as of the end of such quarter and the consolidated income statement and the consolidated statement of cash flows of NAI and 32 37 its Consolidated Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, all in reasonable detail and all prepared in accordance with GAAP and certified by the chief financial officer or controller of NAI (subject to year-end adjustments); (iii) together with the financial statements furnished in accordance with subparagraph 13.(a)(i) and 13.(a)(ii), a certificate of the chief financial officer or controller of NAI: (i) certifying that to the knowledge of NAI no Default or Event of Default under this Improvements Lease has occurred and is continuing or, if a Default or Event of Default has occurred and is continuing, a brief statement as to the nature thereof and the action which is proposed to be taken with respect thereto, (ii) certifying that the representations of NAI set forth in the Operative Documents are true and correct in all material respects as of the date thereof as though made on and as of the date thereof or, if not then true and correct, a brief statement as to why such representations are no longer true and correct, and (iii) with computations demonstrating compliance with the financial covenants contained in Schedule 1; (iv) within five days after the end of each calendar month, a certificate of the chief financial officer or controller of NAI certifying that at the end of the preceding calendar month, NAI had sufficient cash and other assets described in Paragraph 1 of Part II of Schedule 1 to comply with the requirements of that paragraph; (v) promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports which NAI sends to NAI's stockholders, and copies of all regular, periodic and special reports, and all registration statements (other than registration statements on Form S-8 or any form substituted therefor) which NAI files with the Securities and Exchange Commission or any governmental authority which may be substituted therefor, or with any national securities exchange; (vi) upon request by BNPLC, a statement in writing certifying that the Operative Documents are unmodified and in full effect (or, if there have been modifications, that the Operative Documents are in full effect as modified, and setting forth such modifications) and the dates to which the Base Rent has been paid and either stating that to the knowledge of NAI no Default or Event of Default under this Improvements Lease has occurred and is continuing or, if a Default or Event of Default under this Improvements Lease has occurred and is continuing, a brief statement as to the nature thereof; it being intended that any such statement by NAI may be relied upon by any prospective purchaser or mortgagee of the Property and by the Participants (vii) as soon as possible after, and in any event within ten days after NAI becomes aware that, any of the following has occurred, with respect to which the potential aggregate liability to NAI relating thereto is $500,000 or more, a notice signed by a senior financial officer of NAI setting forth details of the following and the response, if any, which NAI or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to PBGC by NAI or an ERISA Affiliate with respect to any of the following or the events or conditions leading up to the following): (A) the assertion, to secure any Unfunded Benefit Liabilities, of any 33 38 Lien against the assets of NAI, against the assets of any Plan or Multiemployer Plan or against any interest of BNPLC or NAI in the Property, or (B) the taking of any action by the PBGC or any other governmental authority against NAI to terminate any Plan of NAI or any ERISA Affiliate of NAI or to cause the appointment of a trustee or receiver to administer any such Plan; and (viii) such other information respecting the condition or operations, financial or otherwise, of NAI, of any of its Subsidiaries or of the Property as BNPLC or any Participant through BNPLC 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 13.(a) to BNPLC's Parent, to the Participants and to any regulatory body having jurisdiction over BNPLC or BNPLC's Parent or any Participant that requires or requests it. 14. ASSIGNMENT AND SUBLETTING BY NAI. (a) BNPLC's Consent Required. Without the prior consent of BNPLC, NAI shall not assign, transfer, mortgage, pledge or hypothecate this Improvements Lease or any interest of NAI hereunder and shall not sublet all or any part of the Property, by operation of law or otherwise; provided, that subject to subparagraph 14.(c) below, (I) this provision shall not be construed to prohibit any Premises Lease described in the Common Definitions and Provisions Agreement (Phase IV - Improvements) or any transfer or sublease by a l