EXHIBIT 10.17

 

PROMISSORY NOTE

 

U.S. $54,000,000.00

  June 25, 2003

 

FOR VALUE RECEIVED, and at the times hereinafter specified, 3301 HILLVIEW
HOLDINGS INC., a Delaware corporation (“Maker”), whose address is 3301 Hillview
Avenue, Palo Alto, California 94304, hereby promises to pay to the order of
SUNAMERICA LIFE INSURANCE COMPANY, an Arizona corporation (hereinafter referred
to, together with each subsequent holder hereof, as “Holder”), at 1999 Avenue of
the Stars, Century City, Los Angeles, California 90067-6022, or at such other
address as may be designated from time to time hereafter by any Holder, the
principal sum of FIFTY-FOUR MILLION AND NO/100THS DOLLARS ($54,000,000.00),
together with interest on the principal balance outstanding from time to time,
as hereinafter provided, in lawful money of the United States of America. By its
execution and delivery of this promissory note (this “Note”), Maker covenants
and agrees as follows:

 

1. Interest Rate and Payments.

 

(a) The balance of principal outstanding from time to time under this Note shall
bear interest at the rate of five and nine one-hundredths percent (5.09%) per
annum (the “Original Interest Rate”), computed on the basis of a three hundred
sixty (360) day year composed of twelve (12) months of thirty (30) days each.

 

(b) Interest only shall be payable on the date the loan evidenced by this Note
(the “Loan”) is funded by Holder, in advance, for the period from and including
the date of funding through and including June 30, 2003.

 

(c) Commencing on August 1, 2003 and on the first day of each month thereafter
through and including June 1, 2013 combined payments of principal and interest
shall be payable, in arrears, in the amount of $359,066.33 each (such amount
representing an amount that would be sufficient to fully amortize the original
principal amount of this Note over a twenty (20) year period (the “Amortization
Period”), if such amortization were based on a three hundred sixty (360) day
year composed of twelve (12) months of thirty (30) days each).

 

(d) The entire outstanding principal balance, together with all accrued and
unpaid interest and all other sums due hereunder, shall be due and payable in
full on July 1, 2013 (the “Original Maturity Date”).

 

2. Holder’s Extension Option; Net Operating Income.

 

(a) If Maker shall fail to pay the outstanding principal balance of this Note
and all accrued interest and other charges due hereon at the Original Maturity
Date, Holder shall have the right, at Holder’s sole option and discretion, to
extend the term of the Loan for an additional period of five (5) years (the
“Extension Term”). If Holder elects to extend the term of the Loan, Maker shall
pay all fees of Holder incurred in connection with such extension, including,
but not limited to, attorneys’ fees and title insurance premiums. Maker shall
execute all documents reasonably requested by Holder to evidence and secure the
Loan, as extended, and shall obtain and provide to Holder any title insurance
policy or endorsement requested by Holder.

 

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(b) Should Holder elect to extend the term of the Loan as provided above, Holder
shall (i) reset the interest rate borne by the then-existing principal balance
of the Loan to a rate per annum (the “New Rate”) equal to the greater of (A) the
Original Interest Rate, or (B) Holder’s (or comparable lenders’, if Holder is no
longer making such loans) then-prevailing interest rate for five (5) year loans
secured by properties similar to the Property (hereinafter defined), as
determined by Holder in its sole discretion; (ii) re-amortize the then-existing
principal balance of the Loan over the remaining portion of the Amortization
Period (the “New Amortization Period”); (iii) have the right to require Maker to
enter into modifications of the non-economic terms of the Loan Documents as
Holder may request (the “Non-Economic Modifications”); and (iv) notwithstanding
any provision set forth in the Loan Documents to the contrary, have the right to
require Maker to make monthly payments into escrow for insurance premiums and
real property taxes, assessments and similar governmental charges. Hence,
monthly principal and interest payments during the Extension Term shall be based
upon the New Rate, in an amount that would be sufficient to fully amortize the
outstanding principal balance of the Loan over the New Amortization Period, if
such amortization were based on a three hundred sixty (360) day year composed of
twelve (12) months of thirty (30) days each.

 

(c) If Holder elects to extend the term of the Loan, Holder shall advise Maker
of the New Rate on or prior to the Original Maturity Date.

 

(d) In addition to the required monthly payments of principal and interest set
forth above, commencing on the first day of the second month following the
Original Maturity Date and continuing on the first day of each month thereafter
during the Extension Term (each an “Additional Payment Date”), Maker shall make
monthly payments to Holder in an amount equal to all Net Operating Income
(hereinafter defined) attributable to the Property for the calendar month ending
on the last day of the month that is two months preceding each such Additional
Payment Date. For example, assuming the Original Maturity Date is January 1,
then Net Operating Income for the period from January 1 through January 31 shall
be payable to Holder on March 1; Net Operating Income for the period from
February 1 through February 28 shall be payable to Holder on April 1, and so on.

 

(e) Holder shall deposit all such Net Operating Income received from Maker into
an account or accounts maintained at a financial institution chosen by Holder or
its servicer in its sole discretion (the “Deposit Account”) and all such funds
shall be invested in a manner acceptable to Holder in its sole discretion. All
interest, dividends and earnings credited to the Deposit Account shall be held
and applied in accordance with the terms hereof.

 

(f) On the third Additional Payment Date and on each third Additional Payment
Date thereafter, Holder shall apply all Excess Funds (hereinafter defined), if
any, to prepayment of amounts due under this Note, without premium or penalty.

 

(g) As security for the repayment of the Loan and the performance of all other
obligations of Maker under the Loan Documents, Maker hereby assigns, pledges,
conveys, delivers, transfers and grants to Holder a first priority security
interest in and to: all Maker’s

 

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right, title and interest in and to the Deposit Account; all rights to payment
from the Deposit Account and the money deposited therein or credited thereto
(whether then due or in the future due and whether then or in the future on
deposit); all interest thereon; any certificates, instruments and securities, if
any, representing the Deposit Account; all claims, demands, general intangibles,
choses in action and other rights or interests of Maker in respect of the
Deposit Account; any monies then or at any time thereafter deposited therein;
any increases, renewals, extensions, substitutions and replacements thereof; and
all proceeds of the foregoing.

 

(h) From time to time, but not more frequently than monthly, Maker may request a
disbursement (a “Disbursement”) from the Deposit Account for capital expenses,
tenant improvement expenses, leasing commissions and special contingency
expenses. Holder may consent to or deny any such Disbursement in its sole
discretion.

 

(i) Upon the occurrence of any Event of Default (hereinafter defined) (i) Maker
shall not be entitled to any further Disbursement from the Deposit Account; and
(ii) Holder shall be entitled to take immediate possession and control of the
Deposit Account (and all funds contained therein) and to pursue all of its
rights and remedies available to Holder under the Loan Documents, at law and in
equity.

 

(j) All of the terms and conditions of the Loan shall apply during the Extension
Term, except as expressly set forth above, and except that no further extensions
of the Loan shall be permitted.

 

(k) For the purposes of the foregoing:

 

(i) “Excess Funds” shall mean, on any Additional Payment Date, the amount of
funds then existing in the Deposit Account (including any Net Operating Income
due on the applicable Additional Payment Date), less an amount equal to the sum
of three regularly scheduled payments of principal and interest due on this
Note;

 

(ii) “Net Operating Income” shall mean, for any particular period of time, Gross
Revenue for the relevant period, less Operating Expenses for the relevant
period; provided, however, that if such amount is equal to or less than zero
(0), Net Operating Income shall equal zero (0);

 

(iii) “Gross Revenue” shall mean all payments and other revenues (exclusive,
however, of any payments attributable to sales taxes) received by or on behalf
of Maker from all sources related to the ownership or operation of the Property,
including, but not limited to, rents, room charges, parking fees, interest,
security deposits (unless required to be held in a segregated account), business
interruption insurance proceeds, operating expense pass-through revenues and
common area maintenance charges, for the relevant period for which the
calculation of Gross Revenue is being made; and

 

(iv) “Operating Expenses” shall mean the sum of all ordinary and necessary
operating expenses actually paid by Maker in connection with the operation of
the Property during the relevant period for which the calculation of Operating
Expenses is being made, including, but not limited to, (a) payments made by
Maker for taxes and

 

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insurance required under the Loan Documents, (b) monthly debt service payments
as required under this Note, and (c) all rent and other amounts payable under
the Ground Lease, as defined in the Deed of Trust.

 

3. Budgets During Extension Term.

 

(a) Within fifteen (15) days following the Original Maturity Date and on or
before December 1 of each subsequent calendar year, Maker shall deliver to
Holder a proposed revenue and expense budget for the Property for the remainder
of the calendar year in which the Original Maturity Date occurs or the
immediately succeeding calendar year (as applicable). Such budget shall set
forth Maker’s projection of Gross Revenue and Operating Expenses for the
applicable calendar year, which shall be subject to Holder’s reasonable
approval. Once a proposed budget has been reviewed and approved by Holder, and
Maker has made all revisions requested by Holder, if any, the revised budget
shall be delivered to Holder and shall thereafter become the budget for the
Property hereunder (the “Budget”) for the applicable calendar year. If Maker and
Holder are unable to agree upon a Budget for any calendar year, the budgeted
Operating Expenses (excluding extraordinary items) provided in the Budget for
the Property for the preceding calendar year shall be considered the Budget for
the Property for the subject calendar year until Maker and Holder agree upon a
new Budget for such calendar year.

 

(b) During the Extension Term, Maker shall operate the Property in accordance
with the Budget for the applicable calendar year, and the total of expenditures
relating to the Property exceeding one hundred and five percent (105%) of the
aggregate of such expenses set forth in the Budget for the applicable time
period shall not be treated as Operating Expenses for the purposes of
calculating “Net Operating Income,” without the prior written consent of Holder
except for emergency expenditures which, in the Maker’s good faith judgment, are
reasonably necessary to protect, or avoid immediate danger to, life or property.

 

4. Reports During Extension Term.

 

(a) During the Extension Term, Maker shall deliver to Holder all financial
statements reasonably required by Holder to calculate Net Operating Income,
including, without limitation, a monthly statement to be delivered to Holder
concurrently with Maker’s payment of Net Operating Income that sets forth the
amount of Net Operating Income accompanying such statement and Maker’s
calculation of Net Operating Income for the relevant calendar month. Such
statements shall be certified by an executive officer of Maker or Maker’s
manager, managing member or general partner (as applicable) as having been
prepared in accordance with the terms hereof and to be true, accurate and
complete in all material respects.

 

(b) In addition, on or before February 1 of each calendar year during the
Extension Term, Maker shall submit to Holder an annual income and expense
statement for the Property which shall include the calculation of Gross Revenue,
Operating Expenses and Net Operating Income for the preceding calendar year and
shall be accompanied by Maker’s reconciliation of any difference between the
actual aggregate amount of the Net Operating Income for such calendar year and
the aggregate amount of Net Operating Income for such calendar year actually
remitted to Holder. All such statements shall be certified by an executive
officer of Maker or Maker’s manager, managing member or general partner (as
applicable) as

 

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having been prepared in accordance with the terms hereof and to be true,
accurate and complete in all material respects. If any such annual financial
statement discloses any inconsistency between the calculation of Net Operating
Income and the amount of Net Operating Income actually remitted to Holder, Maker
shall immediately remit to Holder the amount of any underpayment of Net
Operating Income for such calendar year or, in the event of an overpayment by
Maker, such amount may be withheld from any subsequent payment of Net Operating
Income required hereunder.

 

(c) Holder may notify Maker within ninety (90) days after receipt of any
statement or report required hereunder that Holder disputes any computation or
item contained in any portion of such statement or report. If Holder so notifies
Maker, Holder and Maker shall meet in good faith within twenty (20) days after
Holder’s notice to Maker to resolve such disputed items. If, despite such good
faith efforts, the parties are unable to resolve the dispute at such meeting or
within ten (10) days thereafter, the items shall be resolved by an independent
certified public accountant designated by Holder within fifteen (15) days after
such ten (10) day period. The determination of such accountant shall be final.
All fees of such accountant shall be paid by Maker. Maker shall remit to Holder
any additional amount of Net Operating Income found to be due for such periods
within ten (10) days after the resolution of such dispute by the parties or the
accountant’s determination, as applicable. The amount of any overpayment found
to have been made for such periods may be withheld from any required future
remittance of Net Operating Income.

 

(d) Maker shall at all times keep and maintain full and accurate books of
account and records adequate to reflect correctly all items required in order to
calculate Net Operating Income.

 

5. Prepayment.

 

(a) During the first four (4) years after the date of this Note, Maker shall
have no right to prepay all or any part of this Note.

 

(b) At any time from and after the fourth (4th) anniversary of the date of this
Note, Maker shall have the right to prepay the full principal amount of this
Note and all accrued but unpaid interest hereon as of the date of prepayment,
provided that (i) Maker gives not less than thirty (30) days’ prior written
notice to Holder of Maker’s election to prepay this Note, and (ii) Maker pays a
prepayment premium to Holder equal to the greater of (A) one percent (1%) of the
outstanding principal amount of this Note or (B) the Present Value of this Note
(hereinafter defined), less the amount of principal being prepaid, calculated as
of the prepayment date.

 

(c) Holder shall notify Maker of the amount and basis of determination of the
prepayment premium. Holder shall not be obligated to accept any prepayment of
the principal balance of this Note unless such prepayment is accompanied by the
applicable prepayment premium and all accrued interest and other sums due under
this Note. Maker may not prepay the Loan on a Friday or on any day preceding a
public holiday, or the equivalent for banks generally under the laws of the
State of California.

 

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(d) Except for making payments of Net Operating Income as required above, and
except for the application of insurance proceeds or condemnation awards to the
principal balance of this Note, as provided in the Deed of Trust (hereinafter
defined), in no event shall Maker be permitted to make any partial prepayments
of this Note.

 

(e) If Holder accelerates this Note for any reason upon an Event of Default,
then in addition to Maker’s obligation to pay the then outstanding principal
balance of this Note and all accrued but unpaid interest thereon, Maker shall
pay an additional amount equal to the prepayment premium that would be due to
Holder if Maker were voluntarily prepaying this Note at the time that such
acceleration occurred, or if under the terms hereof no voluntary prepayment
would be permissible on the date of such acceleration, Maker shall pay a
prepayment premium calculated as set forth in the Deed of Trust.

 

(f) For the purposes of the foregoing:

 

(i) The “Present Value of this Note” with respect to any prepayment of this
Note, as of any date, shall be determined by discounting all scheduled payments
of principal and interest remaining to maturity of this Note, attributed to the
amount being prepaid, at the Discount Rate. If prepayment occurs on a date other
than a regularly scheduled payment date, the actual number of days remaining
from the prepayment date to the next regularly scheduled payment date will be
used to discount within such period;

 

(ii) The “Discount Rate” is the rate which, when compounded monthly, is
equivalent to the Treasury Rate, when compounded semi-annually;

 

(iii) The “Treasury Rate” is the semi-annual yield on the Treasury Constant
Maturity Series with maturity equal to the remaining weighted average life of
this Note, for the week prior to the prepayment date, as reported in Federal
Reserve Statistical Release H.15 - Selected Interest Rates, conclusively
determined by Holder on the prepayment date. The rate will be determined by
linear interpolation between the yields reported in Release H.15, if necessary.
In the event Release H.15 is no longer published, Holder shall select a
comparable publication to determine the Treasury Rate.

 

(g) Holder shall not be obligated actually to reinvest the amount prepaid in any
treasury obligations as a condition precedent to receiving any prepayment
premium.

 

(h) Notwithstanding the foregoing, (i) at any time during the Extension Term,
Maker shall have the right to prepay the full principal amount of this Note and
all accrued but unpaid interest thereon as of the date of prepayment, without
prepayment premium thereon, and (ii) no prepayment premium shall be due in
connection with the application of any insurance proceeds or condemnation awards
to the principal balance of this Note, as provided in the Deed of Trust, or in
the event of any other payment of principal required by the Loan Documents or in
the event of any acceleration of the Loan (other than an acceleration on account
of an Event of Default), and (iii) no prepayment premium shall be due in
connection with a payment in full of this Note from and after May 1, 2013.

 

6. Payments. Whenever any payment to be made under this Note shall be stated to
be due on a Saturday, Sunday or public holiday or the equivalent for banks
generally under the laws of the State of California (any other day being a
“Business Day”), such payment may be made on the next succeeding Business Day.

 

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7. Default Rate.

 

(a) The entire balance of principal, interest, and other sums due upon the
maturity hereof, by acceleration or otherwise, shall bear interest from the date
due until paid at the greater of (i) eighteen percent (18%) per annum and (ii) a
per annum rate equal to five percent (5%) over the prime rate (for corporate
loans at large United States money center commercial banks) published in The
Wall Street Journal on the first business day of each month (the “Default
Rate”); provided, however, that such rate shall not exceed the maximum permitted
by applicable state or federal law. In the event The Wall Street Journal is no
longer published or no longer publishes such prime rate, Holder shall select a
comparable reference.

 

(b) If any payment under this Note is not made when due, interest shall accrue
at the Default Rate from the date such payment was due until payment is actually
made.

 

8. Late Charges. In addition to interest as set forth herein, Maker shall pay to
Holder a late charge equal to four percent (4%) of any regularly-scheduled
monthly installment due under this Note in the event any such amount is not paid
when due. Notwithstanding the foregoing, if one monthly payment in a particular
calendar year is late, Holder will waive the late charge for such monthly
payment provided that it is made within five (5) days after the due date
thereof.

 

9. Application of Payments. All payments hereunder shall be applied first to the
payment of late charges, if any, then to the payment of prepayment premiums, if
any, then to the repayment of any sums advanced by Holder for the payment of any
insurance premiums, taxes, assessments, or other charges against the property
securing this Note (together with interest thereon at the Default Rate from the
date of advance until repaid), then to the payment of accrued and unpaid
interest, and then to the reduction of principal.

 

10. Immediately Available Funds. Payments under this Note shall be payable in
immediately available funds without setoff, counterclaim or deduction of any
kind, and shall be made by electronic funds transfer from a bank account
established and maintained by Maker for such purpose.

 

11. Security. This Note is secured by a Leasehold Deed of Trust, Security
Agreement, Fixture Filing, Financing Statement and Assignment of Leases and
Rents of even date herewith granted by Maker for the benefit of the named Holder
hereof (the “Deed of Trust”) encumbering a leasehold estate in certain real
property and improvements thereon commonly known as 3301-3307 Hillview Avenue,
Palo Alto, California, as more particularly described in such Deed of Trust (the
“Property”).

 

12. Certain Definitions. Capitalized terms used herein and not otherwise defined
shall have the meanings set forth in the Deed of Trust.

 

13. Event of Default. Each of the following events will constitute an event of
default (an “Event of Default”) under this Note and under the Deed of Trust and
each other Loan

 

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Document, and any Event of Default under any Loan Document shall constitute an
Event of Default hereunder and under each of the other Loan Documents:

 

(a) any failure to pay when due any sum hereunder;

 

(b) any failure of Maker to properly perform any obligation contained herein or
in any of the other Loan Documents (other than the obligation to make payments
under this Note or the other Loan Documents) and the continuance of such failure
for a period of thirty (30) days following written notice thereof from Holder to
Maker; provided, however, that if such failure is not curable within such thirty
(30) day period, then, so long as Maker commences to cure such failure within
such thirty (30) day period and is continually and diligently attempting to cure
to completion, such failure shall not be an Event of Default unless such failure
remains uncured for ninety (90) days after such written notice to Maker; or

 

(c) if, at any time during the Extension Term, Gross Revenue for any calendar
month shall be less than ninety-three percent (93%) of the amount of projected
Gross Revenue for such month set forth in the applicable Budget.

 

14. Acceleration. If an Event of Default exists, the entire balance of
principal, accrued interest, and other sums owing hereunder shall, at the option
of Holder, become at once due and payable without notice or demand. If Event of
Default exists as described in Section 13(c) hereof, Holder shall have the
option, in its sole discretion, to either (a) exercise any remedies available to
it under the Loan Documents, at law or in equity, or (b) require Maker to submit
a new proposed budget for Holder’s approval. If Holder agrees to accept such new
proposed budget, then such budget shall become the Budget for all purposes
hereunder.

 

15. Conditions Precedent. Maker hereby certifies and declares that all acts,
conditions and things required to be done and performed and to have happened
precedent to the creation and issuance of this Note, and to constitute this Note
the legal, valid and binding obligation of Maker, enforceable in accordance with
the terms hereof, have been done and performed and happened in due and strict
compliance with all applicable laws.

 

16. Certain Waivers and Consents. Maker and all parties now or hereafter liable
for the payment hereof, primarily or secondarily, directly or indirectly, and
whether as endorser, guarantor, surety, or otherwise, hereby severally (a) waive
presentment, demand, protest, notice of protest and/or dishonor, and all other
demands or notices of any sort whatever with respect to this Note, except as
otherwise expressly provided in this Note or in any of the Loan Documents, (b)
consent to impairment or release of collateral, extensions of time for payment,
and acceptance of partial payments before, at, or after maturity, (c) waive any
right to require Holder to proceed against any security for this Note before
proceeding hereunder, (d) waive diligence in the collection of this Note or in
filing suit on this Note, and (e) agree to pay all costs and expenses, including
reasonable attorneys’ fees, which may be incurred in the collection of this Note
or any part thereof or in preserving, securing possession of, and realizing upon
any security for this Note.

 

17. Usury Savings Clause. The provisions of this Note and of all agreements
between Maker and Holder are, whether now existing or hereinafter made, hereby
expressly limited so

 

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that in no contingency or event whatever, whether by reason of acceleration of
the maturity hereof, prepayment, demand for payment or otherwise, shall the
amount paid, or agreed to be paid, to Holder for the use, forbearance, or
detention of the principal hereof or interest hereon, which remains unpaid from
time to time, exceed the maximum amount permissible under applicable law, it
particularly being the intention of the parties hereto to conform strictly to
California and Federal law, whichever is applicable. If from any circumstance
whatever, the performance or fulfillment of any provision hereof or of any other
agreement between Maker and Holder shall, at the time performance or fulfillment
of such provision is due, involve or purport to require any payment in excess of
the limits prescribed by law, then the obligation to be performed or fulfilled
is hereby reduced to the limit of such validity, and if from any circumstance
whatever Holder should ever receive as interest an amount which would exceed the
highest lawful rate, the amount which would be excessive interest shall be
applied to the reduction of the principal balance owing hereunder without
premium (or, at Holder’s option, be paid over to Maker) and shall not be counted
as interest. To the extent permitted by applicable law, determination of the
legal maximum amount of interest shall at all times be made by amortizing,
prorating, allocating and spreading in equal parts during the period of the full
stated term of this Note, all interest at any time contracted for, charged, or
received from Maker in connection with this Note and all other agreements
between Maker and Holder, so that the actual rate of interest on account of the
indebtedness represented by this Note is uniform throughout the term hereof.

 

18. Non-Recourse; Exceptions to Non-Recourse. Except as expressly hereinafter
set forth, the recourse of Holder with respect to the obligations evidenced by
this Note shall be limited solely to foreclosure upon the Property, Chattels,
and Intangible Personalty (as such terms are defined in the Deed of Trust).
Notwithstanding anything to the contrary contained in this Note or in any Loan
Document, nothing shall be deemed in any way to impair, limit or prejudice the
rights of Holder (a) in foreclosure proceedings or in any ancillary proceedings
brought to facilitate Holder’s foreclosure on the Property or any portion
thereof; (b) to recover from Maker damages or costs (including without
limitation reasonable attorneys’ fees) incurred by Holder as a result of waste
by Maker; (c) to recover from Maker any condemnation or insurance proceeds
attributable to the Property which were not paid to Holder or used to restore
the Property in accordance with the terms of the Deed of Trust; (d) to recover
from Maker any rents, profits, security deposits, advances, rebates, prepaid
rents or other similar sums attributable to the Property collected by or for
Maker during the existence of an Event of Default under any Loan Document and
not properly applied to the reasonable fixed and operating expenses of the
Property, including payments of this Note and other sums due under the Loan
Documents; (e) to pursue the personal liability of Maker under the provisions of
Section 5.10 of the Deed of Trust, including any indemnification provisions
under such Section; (f) subject to the provisions of the first sentence of this
Section 18, to exercise any specific rights or remedies afforded Holder under
any other provisions of the Loan Documents or by law or in equity (or to recover
under any guarantee agreement given in connection with this Note); (g) to
recover from Maker the amount of any accrued taxes, assessments, and/or utility
charges affecting the Property (whether or not the same have been billed to
Maker) that are either unpaid by Maker or paid by Holder under the Deed of Trust
and to collect from Maker any sums expended by Holder in fulfilling the
obligations of Maker, as lessor, under any leases affecting the Property; (h) to
pursue any personal liability of Maker and/or Guarantor under the Environmental
Indemnity Agreement; and (i) to recover from Maker the amount of any loss
suffered by Holder (that would otherwise be covered by insurance) as a result of
Maker’s failure to maintain any insurance required under the terms of any Loan
Document.

 

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The agreement contained in this paragraph to limit the personal liability of
Maker shall become null and void and be of no further force and effect in the
event (i) that the Property or any part thereof or any interest therein, or any
interest in Maker, shall be further encumbered by a voluntary lien securing any
obligation upon which Maker or any direct or indirect general partner, manager
or managing member of Maker, any guarantor, or any principal or affiliate of
Maker shall be personally liable for repayment, whether as obligor or guarantor;
(ii) of any breach or violation of Section 5.4, 5.5 or 5.7 of the Deed of Trust;
(iii) of any fraud or misrepresentation by Maker in connection with the
Property, the Loan Documents or the application made by Maker for the Loan; (iv)
of any execution, amendment, modification or termination of any lease of any
portion of the Property without the prior written consent of Holder if such
consent is required under the terms of the Loan Documents or (v) any attempt by
Maker, any general partner of Maker, any Guarantor of the Loan, or any other
person, directly or indirectly, liable for repayment of the Maker’s obligations
under the Loan (whether as maker, endorser, guarantor, surety, general partner
or otherwise) acting on behalf of Maker to materially delay any foreclosure
against the Property, Chattels and/or Intangible Personalty or any other
exercise by Holder of its remedies under the Loan Documents, or claim that any
Loan Document is invalid or unenforceable to an extent that would preclude any
such foreclosure or other exercise of remedies, which attempts shall include,
without limitation, Maker filing a petition in bankruptcy, Maker acquiescing in
an involuntary bankruptcy proceeding, or Maker filing a petition or answer
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under the bankruptcy laws of the United States or
under any other similar federal, state or other statute relating to relief from
indebtedness (whether filed by or against Maker), or the appointment of a
receiver, trustee or liquidator with respect to Maker or the Property or any
part thereof. For purposes of the foregoing, “affiliate” shall mean any
individual, corporation, trust, partnership or any other person or entity
controlled by, controlling or under common control with Maker. A person or
entity of any nature shall be presumed to have control when it possesses the
power, directly or indirectly, to direct, or cause the direction of, the
management or policies of another person or entity, whether through ownership of
voting securities, by contract, or otherwise.

 

19. Severability. If any provision hereof or of any other document securing or
related to the indebtedness evidenced hereby is, for any reason and to any
extent, invalid or unenforceable, then neither the remainder of the document in
which such provision is contained, nor the application of the provision to other
persons, entities, or circumstances, nor any other document referred to herein,
shall be affected thereby, but instead shall be enforceable to the maximum
extent permitted by law.

 

20. Transfer of Note. Each provision of this Note shall be and remain in full
force and effect notwithstanding any negotiation or transfer hereof and any
interest herein to any other Holder or participant.

 

21. Security Interest. Maker hereby pledges and grants to Holder a security
interest in and to any money or other property which Holder may at any time have
or hold on deposit for Maker.

 

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22. Governing Law. Regardless of the place of its execution, this Note shall be
construed and enforced in accordance with the laws of the State of California.

 

23. Time of Essence. Time is of the essence of this Note.

 

24. Remedies Cumulative. Subject to Section 18 of this Note, the remedies
provided to Holder in this Note, the Deed of Trust and the other Loan Documents
are cumulative and concurrent and may be exercised singly, successively or
together against Maker, the Property, and other security, or any guarantor of
this Note, at the sole and absolute discretion of the Holder.

 

25. No Waiver. Holder shall not by any act or omission be deemed to waive any of
its rights or remedies hereunder unless such waiver is in writing and signed by
the Holder and then only to the extent specifically set forth therein. A waiver
of one event shall not be construed as continuing or as a bar to or waiver of
any right or remedy granted to Holder hereunder in connection with a subsequent
event.

 

26. Joint and Several Obligation. If Maker is more than one person or entity,
then (a) all persons or entities comprising Maker are jointly and severally
liable for all of the Maker’s obligations hereunder; (b) all representations,
warranties, and covenants made by Maker shall be deemed representations,
warranties, and covenants of each of the persons or entities comprising Maker;
(c) any breach, Default or Event of Default by any of the persons or entities
comprising Maker hereunder shall be deemed to be a breach, Default, or Event of
Default of Maker; and (d) any reference herein contained to the knowledge or
awareness of Maker shall mean the knowledge or awareness of any of the persons
or entities comprising Maker.

 

27. WAIVER OF JURY TRIAL. MAKER AND HOLDER KNOWINGLY, IRREVOCABLY, VOLUNTARILY
AND INTENTIONALLY WAIVE ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY ACTION, PROCEEDING OR COUNTERCLAIM BASED ON THIS NOTE, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS NOTE, THE DEED OF TRUST, OR ANY OTHER LOAN
DOCUMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL
OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO OR TO ANY LOAN DOCUMENT. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR MAKER AND HOLDER TO ENTER INTO THE LOAN
TRANSACTION EVIDENCED BY THIS NOTE.

 

28. WAIVER OF PREPAYMENT RIGHT WITHOUT PREMIUM. MAKER HEREBY EXPRESSLY WAIVES
ANY RIGHT IT MAY HAVE UNDER APPLICABLE LAW TO PREPAY THIS NOTE, IN WHOLE OR IN
PART, WITHOUT PREPAYMENT PREMIUM, UPON ACCELERATION OF THE MATURITY DATE OF THIS
NOTE, AND AGREES THAT, IF FOR ANY REASON A PREPAYMENT OF ALL OR ANY PART OF THIS
NOTE IS MADE, WHETHER VOLUNTARILY OR FOLLOWING ANY ACCELERATION OF THE MATURITY
DATE OF THIS NOTE BY HOLDER ON ACCOUNT OF THE OCCURRENCE OF ANY EVENT OF DEFAULT
ARISING FOR ANY REASON, INCLUDING, WITHOUT LIMITATION, AS A RESULT OF ANY
PROHIBITED OR RESTRICTED TRANSFER, FURTHER ENCUMBRANCE OR DISPOSITION OF THE

 

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PROPERTY OR ANY PART THEREOF SECURING THIS NOTE, THEN (EXCEPT AS PROVIDED IN
SECTION 5(h)) MAKER SHALL BE OBLIGATED TO PAY, CONCURRENTLY WITH SUCH
PREPAYMENT, THE PREPAYMENT PREMIUM PROVIDED FOR IN THIS NOTE OR, IN THE EVENT OF
PREPAYMENT FOLLOWING ACCELERATION OF THE MATURITY DATE HEREOF WHEN THIS NOTE IS
CLOSED TO PREPAYMENT, AS PROVIDED IN THE DEED OF TRUST. MAKER HEREBY DECLARES
THAT HOLDER’S AGREEMENT TO MAKE THE LOAN AT THE INTEREST RATE AND FOR THE TERM
SET FORTH IN THIS NOTE CONSTITUTES ADEQUATE CONSIDERATION, GIVEN INDIVIDUAL
WEIGHT BY MAKER, FOR THIS WAIVER AND AGREEMENT.

 

29. Jurisdiction. Maker hereby submits to the jurisdiction of any federal or
state court in the State of California in connection with any action or
proceeding brought with respect to this Note, the Deed of Trust or any Loan
Document. Maker agrees that service of process upon Maker shall be complete upon
delivery thereof in any method permitted by law, including, to the extent
permitted by law, the mailing thereof to Maker in accordance with Section 9.10
of the Deed of Trust.

 

30. Venue. TO THE MAXIMUM EXTENT PERMITTED BY LAW, MAKER HEREBY AGREES THAT ALL
ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH ANY OF THE LOAN DOCUMENTS
SHALL BE TRIED AND DETERMINED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN
SANTA CLARA COUNTY, STATE OF CALIFORNIA. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
MAKER HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF
FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS
BROUGHT IN ACCORDANCE WITH THIS SECTION.

 

[Balance of Page Intentionally Left Blank; Signatures on Following Page]

 

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IN WITNESS WHEREOF and intending to be legally bound, Maker has duly executed
this Note as of the date first above written.

 

3301 HILLVIEW HOLDINGS INC., a Delaware corporation

By:  /s/    WILLIAM HUGHES

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Name:  William R. Hughes

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Title:  Vice President

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