Build To Suit Lease

BUILD TO SUIT LEASE


BY AND BETWEEN


C.J. SEGERSTROM & SONS, A CALIFORNIA GENERAL PARTNERSHIP,


AS LANDLORD


AND


EMULEX CORPORATION, A CALIFORNIA CORPORATION,


AS TENANT


BUILD TO SUIT LEASE


BY AND BETWEEN


C.J. SEGERSTROM & SONS, A CALIFORNIA GENERAL PARTNERSHIP,


AS LANDLORD


AND


EMULEX CORPORATION, A CALIFORNIA CORPORATION


AS TENANT


DATED: APRIL 15, 2002


INDEX


Page
---- ARTICLE I. PREMISES..........................................................................1


Section 1.1 Premises Defined...............................................1
Section 1.2 Easements; Reservation of Oil, Gas, Mineral and Water
Rights......................................................2
Section 1.3 Title Matters..................................................2
Section 1.4 Tenant's Expansion Option; Expansion Land Use and
Related Covenants...........................................3
Section 1.5 Tenant's First Refusal Right to Lease..........................7
Section 1.6 Representations and Warranties of the Parties..................9


ARTICLE II. TERM ...........................................................................10


Section 2.1 Length of Term................................................10
Section 2.2 Lease Commencement Date and Rent Commencement Date............10
Section 2.3 Options to Extend Term........................................11


ARTICLE III. RENT ..........................................................................15


Section 3.1 Base Rent.....................................................15
Section 3.2 Determinations of Base Rent...................................17
Section 3.3 Increases in Monthly Base Rent................................19
Section 3.4 Expansion Land Rent...........................................20
Section 3.5 Rent Defined..................................................21


ARTICLE IV. TAXES ..........................................................................21


Section 4.1 Real Property Taxes...........................................21
Section 4.2 Definitions...................................................22
Section 4.3 Separate Tax Parcel...........................................22
Section 4.4 Other Taxes...................................................23
Section 4.5 Right to Contest..............................................23


ARTICLE V. CONDUCT OF BUSINESS BY TENANT....................................................24


Section 5.1 Use of Premises...............................................24
Section 5.2 Restrictions on Use...........................................25
Section 5.3 Contest of Requirements.......................................25
Section 5.4 Exterior Signs and Sign Monument(s)...........................25
Section 5.5 Other Tenant Facilities.......................................26


ARTICLE VI. MAINTENANCE, REPAIRS AND ALTERATIONS............................................27


Section 6.1 Landlord's Obligations........................................27
Section 6.2 Tenant's Obligations..........................................28


i


Section 6.3 Additions to Premises; Modifications to Obligations of
the Parties................................................29
Section 6.4 Alterations and Additions.....................................30
Section 6.5 Removal of Tenant's Property..................................32


ARTICLE VII. INSURANCE; INDEMNITY...........................................................32


Section 7.1 Liability Insurance...........................................32
Section 7.2 Fire and Earthquake Insurance - Fixtures, Equipment and
Tenant Improvements........................................33
Section 7.3 Insurance Policies............................................34
Section 7.4 Waiver of Subrogation.........................................34
Section 7.5 Indemnity.....................................................34
Section 7.6 Exemption of Landlord.........................................35
Section 7.7 Notices.......................................................35


ARTICLE VIII. DAMAGE OR DESTRUCTION.........................................................35


Section 8.1 Damage........................................................35
Section 8.2 Termination Rights............................................36
Section 8.3 Abatement of Rent.............................................37


ARTICLE IX. ASSIGNMENT AND SUBLETTING.......................................................38


Section 9.1 Landlord's Rights.............................................38
Section 9.2 No Release of Tenant..........................................42
Section 9.3 Hypothecation.................................................42


ARTICLE X. CONDEMNATION.....................................................................45


Section 10.1 Condemnation.................................................45


ARTICLE XI. UTILITY SERVICES................................................................47


Section 11.1 Utility Charges..............................................47
Section 11.2 Interruption of Service......................................47
Section 11.3 Other Tenants................................................47
Section 11.4 Availability of Utility Services.............................48


ARTICLE XII. DEFAULTS AND REMEDIES..........................................................48


Section 12.1 Defaults.....................................................48
Section 12.2 Remedies.....................................................49
Section 12.3 Determination of Rent........................................49
Section 12.4 Default by Landlord..........................................49
Section 12.5 Expense of Litigation........................................50
Section 12.6 Holding Over.................................................50
Section 12.7 Landlord's Rights............................................50
Section 12.8 Payments and Notices.........................................51
Section 12.9 Third Party Litigation.......................................51
Section 12.10 Submission to Arbitration...................................51


ARTICLE XIII. MISCELLANEOUS.................................................................54


Section 13.1 Offset Statement.............................................54
Section 13.2 Landlord's Right of Access...................................54
Section 13.3 Transfer of Landlord's Interest..............................55
Section 13.4 Separability.................................................55
Section 13.5 Interest on Past Due Obligations.............................55
Section 13.6 Time of Essence..............................................56
Section 13.7 Hazardous Substances.........................................56
Section 13.8 Headings.....................................................58
Section 13.9 Incorporation of Prior Agreements; Amendments................59
Section 13.10 Notices.....................................................59
Section 13.11 Brokers.....................................................60
Section 13.12 Waivers.....................................................60
Section 13.13 Recording...................................................60


ii


Section 13.14 Liens.......................................................61
Section 13.15 Subordination...............................................61
Section 13.16 Force Majeure...............................................62
Section 13.17 Yield Up Premises; Quitclaim................................63
Section 13.18 Authority...................................................63
Section 13.19 Survival of Indemnities.....................................63
Section 13.20 Surrender or Cancellation...................................63
Section 13.21 Non-Disclosure of Lease Terms...............................64
Section 13.22 Security Deposit............................................64
Section 13.23 Gender; Tenants.............................................64
Section 13.24 No Option...................................................64
Section 13.25 Landlord Liability..........................................64
Section 13.26 Termination.................................................65
Section 13.27 Accord and Satisfaction.....................................66
Section 13.28 Quiet Possession............................................66
Section 13.29 Counterparts................................................66
Section 13.30 Parking for Premises........................................66
Section 13.31 Building Security...........................................67
Section 13.32 Communications Equipment....................................68
Section 13.33 Publicity...................................................69


ARTICLE XIV. IMPROVEMENT OF THE PREMISES....................................................69


Section 14.1 Landlord's Work..............................................69
Section 14.2 Standards for Performance of Landlord's Work.................71
Section 14.3 Payment for Landlord's Work..................................75
Section 14.4 Time for Completion..........................................80
Section 14.5 Warranties and Guaranties....................................81
Section 14.6 Tenant's Work................................................81
Section 14.7 Coordination, Cooperation and Change Orders..................82
Section 14.8 Expansion Building...........................................83
Section 14.9 Remediation During Construction..............................83


ARTICLE XV. TENANT'S PURCHASE RIGHTS........................................................84


Section 15.1 Tenant's Option to Purchase..................................84
Section 15.2 First Offer to Purchase......................................86


ARTICLE XVI. CONDITIONS TO EFFECTIVENESS....................................................87


Section 16.1 Conditions to Continued Effectiveness of Lease...............87


ARTICLE XVII. OTHER MATTERS.................................................................89


Section 17.1 Subdivision of Land..........................................89
Section 17.2 Common Areas.................................................89
Section 17.3 Reciprocal Easement Agreement................................90
Section 17.4 Relocation Costs.............................................91
Section 17.5 Trip Ends....................................................91
Section 17.6 Traffic Impact Fees..........................................91


EXHIBIT A - Plot Plan of Land EXHIBIT B - Legal Description of Land EXHIBIT C - Form of Short Form Memorandum of Lease EXHIBIT D - Form of Mutual Cancellation of Lease EXHIBIT E - Schedule of Landlord Improvements EXHIBIT F - Form of Purchase and Sale Agreement EXHIBIT G - Permitted Exceptions EXHIBIT H - Allocation of Development Agreement Items EXHIBIT I - Rules and Regulations EXHIBIT J - Form of Subordination, Non-Disturbance and Attornment Agreement EXHIBIT K - Form of Tenant's Deed of Trust EXHIBIT L - Development Budget EXHIBIT M - Purchase and Sale Agreement Modifications


iii


BUILD TO SUIT LEASE


In consideration of the rents and covenants hereinafter set forth, C.J. SEGERSTROM & SONS, a California general partnership ("Landlord"), hereby leases to EMULEX CORPORATION, a California corporation ("Tenant"), and Tenant hereby rents from Landlord, the following described premises (the "Premises"), upon the following terms and conditions:


ARTICLE I.
PREMISES


Section 1.1 Premises Defined


The Premises consist of the following:


(a) That portion of that certain real property located in the City of Costa Mesa, State of California, bounded by Sunflower Avenue on the north, Susan Street on the east and South Coast Drive on the south, consisting of an area of approximately 14.158 acres, more or less, together with all easements, rights and other appurtenances thereto (collectively, the "Land") included in the Initial Premises, as defined in subsection (b) below. The Land is more particularly depicted on Exhibit "A" attached hereto and is legally described on Exhibit "B" attached hereto, each of which Exhibits is incorporated herein by this reference.


(b) All improvements now or hereafter located in, on and under the Land constructed by Landlord pursuant to Article XIV (collectively, the "Landlord Improvements"). The Landlord Improvements shall consist of a multi-building, two story concrete tilt-up (unless otherwise mutually approved) campus (collectively, the "Buildings") containing approximately 180,000 square feet of Floor Area, as defined in Section 3.2 below, together with all landscaping, lighting, parking, and other improvements constructed by Landlord pursuant to Article XIV below as a part of the "Initial Premises." As used herein, the term "Landlord Improvements" shall not include any tenant improvements constructed by Tenant pursuant to Article XIV, any alterations made or constructed by Tenant pursuant to Article VI, or any furniture, fixtures, trade fixtures, equipment and/or miscellaneous personal property of Tenant.


All references herein to the Premises shall, unless the context clearly indicates to the contrary, mean and include the Land and the Landlord Improvements. All references herein to the "Initial Premises" shall mean the Landlord Improvements initially constructed by Landlord pursuant to Article XIV prior to the Rent Commencement Date, other than the improvements to the Expansion Land, as defined in this subsection (b), plus so much of the Land as is required to:


(i) Accommodate the initial Buildings with a floor area ratio ("FAR") of approximately 0.40; and


(ii) Provide surface parking for the initial Buildings with a parking ratio of four (4) stalls per 1,000 square feet of Floor Area.


Landlord and Tenant contemplate that the portion of the Land so allocated to the Initial Premises (the "Initial Premises Land") will be approximately 10.33 acres and the parties shall use their best efforts to configure the Land allocated to the Initial Premises in order to stay as close to an 0.40 FAR as possible. The square footage of each of the Initial Premises Land and the Expansion Land, as defined below, shall be determined as provided in Section 3.2 below. That portion of the Land other than the Initial Premises Land is herein referred to as the "Expansion Land." The Expansion Land and the Expansion Building, as defined in Section 1.4, are herein referred to as the "Expansion Premises." Subject to the provision of Article XIV, Landlord and Tenant contemplate that the Initial Premises will be located on the northerly portion of the Land adjacent to Sunflower Avenue, while the Expansion Land will be the southerly portion of the Land adjacent to South Coast Drive.


(c) If Tenant ceases to be the sole tenant of the Initial Premises and/or is not or ceases to be the sole tenant of the Expansion Premises, as applicable, then from and after such


1


occurrence all references herein to the Premises shall also mean, unless the context clearly indicates to the contrary, and include the rights of Tenant and its employees, invitees, agents and guests to the non-exclusive use of the public common areas on the Expansion Land and/or the Initial Premises Land, as applicable, and in any Buildings thereon in which Tenant occupies less than all of the Floor Area thereof.


Section 1.2 Easements; Reservation of Oil, Gas, Mineral and Water Rights


Landlord reserves all oil, gas, hydrocarbons, mineral and water rights in the Premises but without right of entry on the surface or within 200 feet thereof. Provided further, that no such items shall be extracted in such manner as may cause or contribute to a lessening of the support of the Land and the Improvements.


Section 1.3 Title Matters


(a) Tenant's rights under this Lease are subject to the covenants, conditions, easements, reservations, rights, rights of way and other matters disclosed on Exhibit "G" attached hereto (the "Permitted Exceptions"). The Permitted Exceptions also include the reservations in Section 1.2.


(b) In recognition of Tenant's purchase rights pursuant to Article XV, except in connection with the Permanent Financing (as defined in Section 3.1) (i.e., issuance and recordation of a deed of trust, assignment of rents and leases, etc.), in connection with Tenant's financing provided for in Section 14.3 and in connection with the Permitted Development Easements (as defined in subsection (c) below), Landlord covenants not to cause the creation of any liens, easements or other encumbrances on or affecting the Initial Premises Land, other than the Permitted Exceptions (any such unpermitted lien, easement or other encumbrance, an "Unpermitted Exception" herein), without in each case the prior written approval of Tenant, which Tenant may withhold or condition in its reasonable discretion. Without limiting any other remedy of Tenant for Landlord's breach of the foregoing covenant, the provisions of Section 13.14 shall apply to any Unpermitted Exceptions.


(c) Landlord and Tenant recognize that, in connection with obtaining the Home Ranch Master Entitlements (as defined in Section 14.3) and developing the Initial Premises for Tenant pursuant to Article XIV, Landlord may be required or may find it reasonably necessary to grant and record customary public utility, drainage and other developmental easements for the benefit of the Initial Premises and/or the Expansion Premises for the uses intended by the parties pursuant to this Lease (the "Intended Use"). Such easements, to the extent the creation or existence of same are reasonable and customary and do not adversely affect the development, use or sale of the Initial Premises, the Expansion Premises or any portion of either, shall be referred to herein as the "Permitted Development Easements." No such easement shall be a Permitted Development Easement if it runs under any Building to be constructed on the Land. In addition, Landlord shall not grant any telecommunication easements, licenses or other similar rights to install such facilities on the Land.


(d) Notwithstanding anything to the contrary contained in this Lease, the continued effectiveness of this Lease shall be subject to issuance by Chicago Title Company (the "Title Company") of a standard CLTA leasehold and option title insurance policy or binder in favor of Tenant, insuring Tenant's interest in this Lease subject only to the Permitted Exceptions with a liability amount approximating the Project Purchase Price, as defined in Section 15.1, or such lesser amount as is determined by Tenant (the "Leasehold Policy"). Tenant shall be solely responsible to obtain and pay for the Leasehold Policy, and the condition set forth in this subsection (d) shall be deemed satisfied unless, within five (5) business days after the last execution and delivery of this Lease and the memorandum of lease provided for in Section 13.13, Tenant notifies Landlord in writing that Tenant has been unable to obtain the Leasehold Policy. If Tenant timely notifies Landlord that the condition set forth in this subsection has not been satisfied, such notice shall constitute a notice of termination of this Lease. In the event of a termination of this Lease pursuant to this subsection, the provisions of clauses (i) and (ii) and the last sentence of clause (iii) of Section 16.1(c) shall apply. If Tenant exercises the Purchase Option pursuant to Section 15.1, or a right pursuant to Section 15.2, Tenant shall receive the


2


benefit of any credit or reduction in premium which Landlord receives on the title policy which Landlord is to provide to Tenant as the result of issuance of the Leasehold Policy. Such benefit shall be in the form of a credit against the purchase price otherwise payable by Tenant.


Section 1.4 Tenant's Expansion Option; Expansion Land Use and Related Covenants


(a) Provided that Tenant is not in Default (as defined in Section 12.1), Tenant shall have the option (the "Expansion Option") to add to the Premises all Floor Area in an additional Building (the "Expansion Building") to be constructed by Landlord on the Expansion Land pursuant to the terms of this Lease. Tenant shall occupy and pay rent on the entire Expansion Building. The Expansion Option shall be exercised, if at all, by written notice from Tenant to Landlord given at any time after the Rent Commencement Date of this Lease for the Initial Premises, as defined in Section 2.2, and prior to the second anniversary of the Rent Commencement Date as to the Initial Premises (the "Expansion Option Period"). If Tenant is not entitled to exercise the Expansion Option, or if Tenant is entitled to exercise the Expansion Option but fails to timely and properly exercise the Expansion Option, the Expansion Option shall lapse and thereafter not be exercisable by Tenant and the provisions of subsection (j) below shall apply. If Tenant is entitled to exercise, and timely and properly exercises, the Expansion Option, then subsections (b) through (h) below shall apply.


Notwithstanding the provisions of the immediately preceding paragraph, Tenant shall be entitled to exercise the Expansion Option only if, as of the date of exercise, Tenant's financial condition is such that Landlord can reasonably obtain construction financing, if applicable, and Permanent Financing with respect to Landlord's Work with respect to the Expansion Premises in an amount at least equal to the Development Costs, as defined in Section 14.3, with respect to the Expansion Premises. In the event of a dispute between Landlord and Tenant as to whether the condition set forth in the immediately preceding sentence can be met, such dispute shall be resolved in the manner provided in Section 12.10.


(b) The Expansion Building to be constructed on the Expansion land shall be a two story concrete, tilt-up (unless otherwise mutually approved) Building with a Floor Area equal to:


(i) The maximum Floor Area entitlement approved by the City of Costa Mesa (the "City") for the Land; less


(ii) The aggregate Floor Area of all Buildings in the Initial Premises.


In no event shall the Floor Area of the Expansion Building cause the FAR for all buildings constructed or to be constructed on the Land to exceed 0.40. Based upon a FAR for the Land of 0.40 and an anticipated aggregate Floor Area of 180,000 square feet for the Buildings in the Initial Premises, the Floor Area of the Expansion Building will be approximately 66,689 square feet.


(c) Design and construction of the Expansion Building, including all parking, lighting, landscaping and related exterior Landlord Improvements on the Expansion Land, will be the responsibility of Landlord in the manner provided in Article XIV, and design and construction of all tenant improvements to the Expansion Building will be the responsibility of Tenant in the manner provided in Article XIV. For the purposes of the design and construction provided for in this subsection (c):


(i) All references in Article XIV to the Initial Premises shall mean the Expansion Premises together with all exterior Landlord Improvements to the Expansion Land.


(ii) All references in Article XIV to Tenant Improvements (as defined in Section 14.6) shall mean Tenant Improvements to the Expansion Building.


(iii) Landlord shall commence construction of the Expansion Building and related exterior Landlord Improvements promptly following receipt of the last of (A) all governmental permits required to construct such Expansion Building and related exterior Landlord Improvements, (B) all Tenant approvals required with respect to the Expansion


3


Building and related exterior Landlord Improvements and (C) a fully executed new lease as required pursuant to subsection (g) below. Landlord shall deliver the Expansion Building to Tenant upon Substantial Completion, as defined in Section 14.4, thereof.


(iv) Tenant shall construct all Tenant Improvements to the Expansion Building and shall commence the same promptly following Substantial Completion of the Core and Shell Work (as defined in Section 14.1) for the Expansion Building by Landlord.


(v) The time frame for the construction of Landlord's Improvements shall be similar to that set forth in the Schedule of Landlord's Improvements provided for in Section 14.2, but using as a starting point the exercise by Tenant of the Expansion Option.


(d) The Commencement Date of the Lease as to the Expansion Premises shall be the date upon which Landlord delivers to Tenant the Expansion Building with Landlord's Core and Shell Work Substantially Complete. The Rent Com ...